No. 25 Nov/Dec 1998 ISSN 1363-9552
Published in London by the Prison Reform Trust
ON OTHER PAGES
In 1997 Congress mandated the Attorney General to “conduct a study of
correctional privatisation, including a review of relevant research and legal
issues, and comparative analysis of the cost effectiveness and feasibility of
private sector and Federal, State and local governmental operation of prisons
and corrections programmes at all security levels...”
The National Institute of Corrections issued a co-operative
agreement to Abt Associates to carry out the study. The 200 page report was
published in October 1998.
In a letter to the Committee on Appropriations
of the US House of Representatives, the Acting Assistant Attorney General
describes the report as a “careful and thorough review of prior research” and
“consistent with a Government Accounting Office report published in 1996” (see PPRI # 4).
He also notes: “The Abt study is selective in scope to maximise
the use of time allotted ... the report also provides a valuable framework for
the additional research needed on the comparative cost and quality of private
versus public prison operations.”
Private Prisons in the
US: privatisation benefits still unproven
“Some proponents
[of privatisation] argue that evidence exists of substantial savings as a
result of privatisation. Indeed, one asserts that a typical American jurisdiction
can obtain economies in the range of 10-20 per cent. Our analysis of the
existing data does not support such an optimistic view.”
“Few studies
have been conducted to compare the relative performance of privately and
publicly operated prisons. Most are affected by a variety of methodological
problems ... given these shortcomings and the paucity of systematic
comparisons, one cannot conclude whether the performance of privately managed
prisons is different from or similar to public operated ones.”
“With respect to
public safety and inmate programming, the available data do not support
definite conclusions.”
“The available
surveys of either privately or publicly operated facilities do not provide the
information needed to compare the quality of such programs or the extent of
prisoners’ engagement with them.”
“Bureau of
Prisons officials assert that the private sector’s experience in operating
higher security prisons or managing inmate populations with higher security
needs is too limited to warrant the privatisation of such facilities within the
federal system.”
Due to time constraints, the
study did not provide an analysis of contracting by some 3,000 local government
agencies or immigration, juvenile, remand or pre-release facilities.
For the survey, 55 government agencies were contacted
and 53 responded. Only
As at
n Eighty per cent of adult
prisoners in private facilities were sent there by the agencies studied.
n The number of adults in
privately run prisons, jails and
immigration detention centres reached about 64,000 or less than three
per cent of the total adult prisoner population.
nThere were approximately 140
private facilities.
n The industry’s revenues
probably approached $1bn.
n The Federal Bureau of
Prisons, twenty three states, the
n Two other states placed
prisoners in out-of-state private facilities through inter-governmental agency
agreements.
n Twenty eight jurisdictions
reported 91 active contracts with 84 different facilities holding 37,651
prisoners.
n CCA (41) and Wackenhut (20)
had 61 of the 91contracts.
n Agencies also reported having
active contracts with 529 community based facilities such as work-release or
educational-release facilities and halfway houses.
n In addition to the 84
privately run secure facilities that received prisoners under contract, others
held these jurisdictions’ prisoners by a more circuitous route, eg, a state or
federal agency sent prisoners to a local government agency which, in turn,
contracted with private companies.
n All surveyed jurisdictions
reported a total of 52,370 prisoners housed in private facilities.
n Ten correctional agencies
were responsible for placing the vast majority of prisoners (41,965) in private
facilities:
| Federal Bureau of Prisons | 9,951 |
| Texas | 7,223 |
| Oklahoma | 4,588 |
| Floro | 3,877 |
|
|
3,581 |
| Tennessee | 2,958 |
| California | 2,948 |
| Mississippi | 2,522 |
| Colarado | 2,390 |
| District of Columbia | 1,927 |
n The most commonly reported
reason for contracting out was not cost containment but alleviating overcrowding in the public
system.
n In most cases, the decision
to contract out was not the initiative of the agency, but
mandated by the legislature or the governor.
n Twenty five jurisdictions
reported no contracts with the private sector. Reasons cited included:
sufficient bed space; legal prohibitions; concerns about labour relations
and/or opposition; not convinced that cost savings would result; concerns about
accountability and quality; lack of funding; and in two cases, the issue was
being studied and/or a decision was pending.
Costs
In arriving at their conclusions about costs, the
authors
The authors deal
with issues such as: “is there any evidence that contracting has ... improved
prison operations or more broadly the performance of prisons? Or does it appear
that the increased attention to cost containment has resulted in reduced service
quality?”
They discuss different approaches to defining quality
and admitted that gauging success and
defining appropriate outcomes “has been difficult.” But they conclude that:
“Only a few of the more than a hundred privately operated facilities in
existence have been studied, and these studies do not offer compelling evidence
of superiority.”
Legal issues
The study deals with a number of legal issues
including: the legality of delegating correctional services to private
contractors generally; liability for conditions; employment and labour
relations; prisoner labour; and interjurisdictional contracting.
“... It now
appears that objections to prison privatisation on constitutional delegation
grounds have little force. Unless a government has absolutely no persuasive
statutory authority for entering into private prison contracts, courts will be
reluctant to invalidate contracts on delegation grounds.” However, “no clear
case law has been developed to define with precision how general due process
standards will be applied to private prisons.”
Bankruptcy amongst prison operators “has not yet been a problem in the industry ... but public
correctional agencies should nonetheless seek to protect themselves against the
untoward consequences of bankruptcy by means of proper monitoring and careful
contracting.”
Regarding the
use of force “... the major legal issue is whether [it is ] properly mandated by
the relevant laws of the jurisdiction. Without proper enabling legislation or
contractual provisions authorising the use of force by designated private prison
officials, it is possible that such persons and their firms could face civil and
criminal liability.”
Sending prisoners from one jurisdiction to privately
run prisons in another [eg, out of state] poses “special legal questions”.
Previous research criticised
The study analyses and criticises virtually all
previous research on comparable costs and performance.
n “Some of the more extravagant
claims made on behalf of prison privatisation can be traced to inappropriate
handling of these issues.”
n On Archambeault and Deis’s
study of Louisiana (1996), which found that publicly run prisons are 12-14 per
cent more expensive to operate than private sector prisons, the authors state:
“the aggregate nature of the data presented and a variety of analytical quirks
call into question the strength of [their] conclusion.”
n The 1995 Fiscal Review
Committee comparative report on two
public and one CCA-run facility in Tennessee
is described as: “ ... unique in attention to detail ...there are
nevertheless several limitations ... it covers a single year, it excludes medical expenses incurred by the
private contractor and it does not directly address the question of whether or
not privatisation actually saves money for the taxpayers of Tennessee.”
Suggestions are made for further research on
questions such as: “do the differences in reported public and private overhead
rates reflect the overhead costs actually avoided through privatisation?” But
the authors also ask: “is privatisation necessary for cost savings or does the
mere threat of privatisation suffice?”
Previous research comparing the performance of private and public prisons in
Massachusetts, Kentucky, California, Tennessee, Arizona, Louisiana, New Mexico
and Florida, as well as Washington State’s 1996 review of literature, are all
reviewed in this study.
The authors state that: “For the most part, those who
have evaluated private corrections in comparison to public corrections have
concluded that the private ... performed as well or better than the public
institutions. However, in our assessment ... we find that most of these studies
are fundamentally flawed, and we generally agree with the 1996 GAO Report that
there is little information that is widely applicable to various correctional
settings.”
“The most significant problem ... is that they fail
to develop a coherent model of institution performance in terms of cost and
quality of operations.”
In their summary, they also say: “It appears to us
... the private sector’s approach to corrections has been to build upon
correctional practices that already exist in well-run public prisons. The
private sector does not appear to argue that they run prisons in a dramatically
different way based on different philosophies of managing inmates. However,
there has been little attention given to documenting the private sector
approach to innovation or to the impact of competition from the private sector
on the practices of the public sector.”
The authors propose a research model “designed to
address many of the problems we have noted...”
Port Phillip’s fine and failures
Victoria’s Minister for Police and Correctional
Services, Mr Bill McGrath, has stated that Group 4 faces a “significant” fine for contract failures at
Port Phillip Prison, near Melbourne. He also said that serious concerns had
been raised with the company (see PPRI
#15-24).
On 30 October 1998 the prison was locked down again following fights amongst
prisoners.
Government monitoring documents for the prison leaked
to the Age and also seen by PPRI reveal:
n “Thorough assessment and
observations of prisoners at risk is not fully in place ... audits of
observations from July and August [1998] were at less than 50 per cent for the
first two weeks ...”
n “The level of attempted
suicides/self mutilation ... at 24.68 per cent (as at March 1998) was more than
100 per cent above the required outcomes specified in Annexure Q [of the PSA]
and higher than any other male prison in Victoria in 1997/98.”
n “Group 4's implementation of
the prison’s safety standards ... have failed to deliver acceptable outputs.”
n “The level of self mutilation
was recorded below the target of 11 per cent for the period June to August
1998, however the issue is not considered cured as monitoring does not confirm
that [Group 4] are fully implementing all provisions of their Operating Manual
in relation to the management of prisoner safety.”
n “Clearly their performance is
unacceptable and demonstrably fails to determine the level of safety
commensurate with that prevailing in Victorian prisons prior to the
introduction of Group 4.”
n“The failure by Group 4 to
comply fully with self harm procedures has been measured as part of the agreed
monitoring program implemented since 1 July 1998: week 1 - 50 per cent
compliance; week 2 - 50 per cent; week 3 - 58 per cent; week 4 - 83 per cent;
week 5 - 81 per cent; week 6 - 96 per cent; week 7 - 96 per cent; week 8 - 92
per cent.”
n “The facility has the highest
number of deaths in any Victorian prison since 1988/89 during the first 11
months of its operation. This clearly demonstrates that the implementation of
the prisoner safety standards by Group 4 has failed to deliver an acceptable
output for prisoner safety.”
Some of the documents seen by PPRI include the Government’s comments relating to Group 4’s
‘Response Reduction Certificate Issued June 1998’ and the company’s further
response dated 10 August 1998.
n Regarding deaths of
prisoners, Group 4 claimed that it “has consistently managed the facility in
accordance with the Operating Manual ... clearly at the time of their initial
response dated 12 June and request for arbitration on 10 August 1998 Group 4
was aware that this statement is not correct.”
n Group 4 said that “there have
been few official complaints which allege that the management of the facility
has not been humane and just. No such
complaint has been proven.” However, “ ... It is not clear what Group 4 means by
official complaints but numerous letters have been forwarded to Group 4 seeking
their response”.
Other points raised include:
n “Staff retraining [is] being
assessed as part of Coopers & Lybrand audit report available by 14
September 1998.”
n “Monitoring in place since
September 1997 has reviewed Group 4 compliance with the self harm provisions of
the Operating Manual ... all reviews have confirmed that the prison has not
fully complied with the Operating Manual. Nor with the standards as specified
in Annexure T of the PSA ...”
n “... the prison is not fully
complying with its requirements under the Occupational Health and Safety Act.”
n “Monitoring reports provided to Group 4 from November 1997 indicate that the prison is not always safe and secure.”
Freedom of Information case
The Civil and Administrative Tribunal hearing
into Coburg . Brunswick Community Legal
Centre’s application under the Freedom of Information Act (FOI) for documents
relating to Victoria’s three private prisons came to an abrupt halt on 27
October 1998 (see PPRI #13 and 23).
Corrections Corporation of Australia and Group 4 both
withdrew as parties to the case. The Victoria Government and Australian
Correctional Management (Wackenhut) continued their objections to full
disclosure but did not introduce any evidence.
Following further submissions, the Tribunal is
expected to reach a decision by January 1999, some two and a half years after
the first FOI request was made.
Prior to the hearing, the applicants obtained the
Operating Manuals (minus some security details) for Port Phillip, Metropolitan
Women’s Correctional Centre and Fulham Correctional Centre. Initially, the
entire manuals were deemed to be secret. Such documents for publicly run
prisons have been almost fully available without FOI application.
Also made available were: the Prison Service
Agreement (PSA) for the three prisons minus some 55 exemptions in each
contract; the incident breakdown schedule for the MWCC for March and April
1997; one third of the contract monitor’s reports for MWCC December 1996- March
1997; partial access to the contract monitor’s audit of CCA’s prisoner
transport and court security services in 1994/95.
Contact: Coburg.Brunswick CLFCC,
PO Box 353, Coburg, Victoria, 3058, Australia.
Tel: ++613 9 350 4555.
Fax:++613 9 354 2433.
n Recent High Court decisions
on free speech could end the use of commercial confidentiality surrounding
Commonwealth and State Government contracts for public services. Obtaining information under the Freedom of
Information Act could also become easier. These opinions are yet to be tested in the courts, Mr
Tom Brennan of Canberra-based law firm Chambers Westgarth told a recent
conference on administrative law. But, for example, the recent case of Lange v the ABC found that the implied
right to freedom of communication placed a limitation not only on legislative
power but also on executive power.
According to Mr Brennan, this limits the power to create enforceable obligations prohibiting the disclosure of political or governmental material.
Tasmania says no
Tasmania’s new Attorney-General and Justice Minister, Mr Peter Patmore, has spoken out against prison privatisation. “This is absolutely not on the agenda ... I think prisons are something that the Tasmanian public has to maintain control over, like it or not.”
Prior to his appointment, there had been speculation
that Risdon Prison would be privatised (see PPRI
# 21).
Going west
The Government of Western Australia has short listed Australasian Correctional Services, Corrections Corporation of Australia, Group 4 and Correctional Services Corporation (formerly Esmor, see PPRI #3,14, 21 & 22 ) to be considered for a contract to build and run a 750 bed medium security prison for men at Perth.
The original bidders also included three new groups entering the Australian market: Management & Training Corp (of the US)/John Holland Construction (John Holland was the former construction partner to CCA); The Patron Consortium and Western Australian Custodial Services Consortium.
This is the first time Correctional Services Corporation has been short listed for a contract in Australia.
ACT’s new prison
The Australian Capital Territory is to commission a 300 bed prison for male and female convicted and remand prisoners. A site has not yet been chosen. Expressions of interest are scheduled for release next year. Construction expected to begin early in 2000.
No decision has been taken on whether an in-house bid
will be allowed, but other Australian states such as Queensland, New South
Wales and Victoria could be competing with the private sector.
Victoria prison up for grabs?
The Victoria Government has passed the Public Correctional
Services Authority Act which corporatises the Public Correctional Enterprise,
CORE (see PPRI #20).
The corporatisation process will be followed by a
performance review of all prisons.
This has fuelled speculation over the future of
existing jails such as the 1863-built Bendigo Prison. The Commonwealth and
Public Sector Union believes that it is “extraordinary” that privatisation is
being considered, given the experience with the State’s private prisons to
date.
More to come
The Government of New Zealand has started the
tendering process for its new prisons (see
PPRI #23).
In October it held a conference in Wellington to
provide potential bidders for the Auckland Central Remand Prison with “full
information” about the Corrections Department’s policies. There will be an
in-house bid against the private sector for this and the other two prisons.
The new Auckland Remand Prison has been designed by
Opus International and a US design consultant and will hold 252 prisoners with
a capacity of 360 if necessary.
n Chubb (NZ) started its
prisoner escort contract in Northland and Auckland in October. The Government
“will clearly review whether prisoner escort services elsewhere should also be
tendered. The [Corrections] Department could be required in the future ... to
look at other options for contracting such as periodic detention centre
activity. We also know, for example, that overseas the management of some
existing prisons has either been tendered or reshaped into a more business-like
form.”
New semi-private
contracts
France’s Ministry of Justice is to organise a
tendering process in line with European Community regulations for the existing
10 year contracts for non-custodial services
which expire at 21 prisons between November 2000 and March 2001.
Non-custodial services at new prisons will also be
contracted out. Full privatisation has not been on the Government’s agenda.
Currently, Lyonnaise des Eaux and Sodexho (through
subsidiaries) operate in clusters of prisons on a regional basis.
The Government is
drawing up new specifications. But to help prepare for the tendering process,
the four companies have jointly commissioned research (as yet unpublished) from
the University of Paris to evaluate performance to date and recommend
improvements.
Under the new contracts, overall responsibility for the prisons and custody will, as now, remain in the public sector. The services to be contracted out will be building maintenance, catering and the canteen, prisoners’ training and work, transport and health care.
Ontario goes public again
The Government of Ontario will not be contracting out
the management of its second 1,600 bed super-jail at Maplehurst (see PPRI 15-23). Ministerial statements to the media in
October 1998 confirmed that the facility will be publicly run.
“There are a whole range of issues around
privatisation that have not been properly addressed, and public safety is
number one. There were some issues raised in the United States recently
regarding private operations that raised a number of concerns,” said Solicitor
General, Mr Bob Runciman.
The Ontario Public Service Employees Union (OPSEU)
had been highlighting recent problems at Corrections Corporation of America’s
Youngstown facility as part of their campaign to stop privatisation.
OPSEU was also largely responsible for a decision by
the Government earlier this year not to contract out the management of its
first super-jail, which is due to be built at Penetanguishene. A C$84.8m design
and construct contract has been awarded to Ellis Don Design Build Inc.
But privatisation of future facilities has not been
ruled out. The Government is due to start a selection process for a design
contractor for a 560 bed jail and mental health facility at Brockville. This
will be a publicly financed project but, so far, there has been no decision
about public or private management.
Over the next two years a number of publicly run corrections facilities in the province will close to be replaced by the super-jails and other new facilities.
New Brunswick deal costs more
The Province of New Brunswick’s contract with
Wackenhut to finance, build and maintain the Miramichi Youth Facility costs
taxpayers more than if the project had been publicly financed (see PPRI #2, 7 and 16).
The Auditor-General, Mr Daryl Wilson, has found that the Wackenhut deal carries an overall extra cost of C$404,379 rather than a Government-claimed saving of C$2.8m. It costs an extra $700,000 to have the project financed through Wackenhut rather than with Government borrowing, although construction costs are cheaper.
Thomas gets $3m consultancy
Dr Charles Thomas, the University of Florida
professor under investigation by the Florida Ethics Commission for an alleged
conflict of interest (see PPRI #13
and 21) is receiving $3m in consulting fees from CCA/Prison Realty Trust.
According to Prison Realty Corp. document S4A filed
with the Securities and Exchange Commission (SEC) on 16 October 1998, “Charles
W. Thomas, a member of the Prison Realty Board and a director of New Prison
Realty, has performed and will continue to perform, certain consulting services
in connection with the merger [between CCA and Prison Realty Trust] for a fee
of $3m.”
Dr Thomas and the Assistant Attorney General of Florida have failed to negotiate a settlement of the conflict case. A spokesperson for the Attorney General’s Office told PPRI that the matter is being referred to the Division of Administrative Hearings.
Rebound rebounds
In April 1998, the State of Colorado revoked Rebound
Corp’s licence to run the High Plains youth facility at Brush, Colorado (see PPRI #9, 18 and 20). Staffing was
inadequate and insufficiently trained; control was lost; children were abused
by staff; youngsters with mental problems were admitted despite staff having no
expertise. Education, counselling and medical services were also lacking. The
State closed the facility.
Following an appeal by Rebound, in June 1998 a judge
upheld the State’s decision to suspend the licence. But permanent revocation
has still not been finalised.
A new company, Youth Education Corp, has applied to
the State for a licence to reopen the prison. The company has the same address,
chief executive and chief operating officer as Rebound and intends to use the
same treatment system - the Positive
Peer Culture, which was considered inadequate by Colorado - with the same
psychiatrist, psychologist and doctor as used at High Plains.
Youth Education Corp’s proposal includes taking only
juveniles from outside of Colorado and renaming the facility as Salt Creek
School.
Ohio’s damning report
After five days of hearings, interviews with 51
witnesses and an unannounced tour of
CCA’s Northeast Ohio Correctional
Center (NOCC), Ohio’s Correctional Institution Inspection Committee has
published its report (see PPRI
#18,19, 23 and 24).
Since the medium security prison opened, there has
been an intake of high security prisoners, two murders and 17 stabbings. On 25 July 1998, six prisoners
escaped.
The Committee’s preliminary findings include:
n NOCC’s history of violence
was directly attributable to CCA “improperly housing and co-mingling prisoners who comprised at least
three different levels of security classification”.
nThe District of Columbia
Department of Corrections was “responsible for creating this improper and
volatile mix of prisoners” and CCA staff were “operating in the dark”.
n “Six inmates were able to
escape ... in broad daylight without prompt attention” despite CCA’s Internet
Web Site assuring investors that: “typical security features for a medium
security institution include electronic video surveillance and exit/entrance
controls, touch sensitive fencing topped with multiple strands of coiled razor
wire, armed officers on a 24-hour-a-day patrol around the facility’s perimeter,
a highly trained emergency response (SORT) team and an in house armoury.”
n Contributory factors to the
escape included: the suspicion that prison staff may have provided prisoners
with a wire cutting tool; inadequate supervision of prisoners in the recreation
yard; the misalignment of a high-tech motion detector; inadequate fence alarm
testing procedures; and the prisoners’ [but not CCA staff] awareness of an
eight foot ‘blind spot’ in the inner perimeter fence.
The Committee recommend to the Ohio General Assembly
that for existing and future contracts:
n the Attorney General must
review any contract and no private prison should “receive or house any out of
state prisoner without first obtaining a written opinion ... acknowledging
statutory conformity and compliance”;
n private prisons be prohibited
from accepting any out of state prisoner classified higher than medium
security.
The Committee also suggest that contractors must:
n use a prisoner classification
system identical to Ohio’s;
n meet Ohio state prison
standards;
n pay all costs of the State
conducting annual security, programme and prisoner classification audits;
n show proof of insurance;
n not accept prisoners with a
record of violence;
n not employ or promote any
employee who has not been trained to the Ohio curriculum;
nforego tax relief for
financing, constructing or operating a prison.
The Ohio legislature has yet to consider the report. Meanwhile, legal cases brought by a number of prisoners and their families against CCA are continuing. Correctional Institution Inspection Committee, 122nd General Assembly, Report on the Northeast Ohio Correctional Center, Submitted 7 October 1998.
Dispute in Oklahoma
In September
1998, the Oklahoma Corrections Board decided to terminate a contract with
Corrections Corporation of America (CCA).
This followed
a dispute over the daily rate the State
paid for 700 prisoners at the company’s North Fork Correctional Center.
The Board felt that it had overpaid some $858,000 a year.
The State Governor, Frank Keating, asked the Board to reconsider its decision.
But some Board members found the
Governor’s intervention inappropriate since
CCA’ s president Doctor C. Crants and
Patrick McCoy, who acts as CCA’s liaison with the State, each
contributed $5,000 to Mr Keating’s 1997 election campaign.
A spokesperson for CCA has denied that the company
asked Governor Keating to intervene on its behalf or that the donations had
anything to do with the current situation. Oklahoma’s
Corrections Board still has other contracts with CCA.
CCA drowning in business
Corrections Corporation of America (CCA) and
Wackenhut Corrections Corp (WCC), still the two largest private prison
operators in the US and abroad, continue to report record revenues and profits.
Forbes
magazine recently named WCC one of America’s 200 best small companies for the
fourth year running. Meanwhile, CCA’s Doctor C. Crants said “We’re simply
drowning in business. We can’t get it off the drawing board as fast as it is
coming in to us.”
In the three months ended 30 September 1998, CCA’s
revenues were $179.1m, a 41 per cent increase over the same period in 1997. Net
profit (after tax) for the quarter was $21.1m, up 54 per cent from the third
quarter in 1997. Total revenues for the first nine months of the year were $484.5m with net profit (after tax) of $60.6m
compared with $325.m and £37.3m for the same period in 1997.
CCA reported 64,956 beds in 78 facilities under
contract in the US, Puerto Rico, Australia and the UK, but only 46,886 beds
were in operation at the end of September 1998.
WCC’s revenues for the three months ended 27
September 1998 were $78.17m ($55.10m in 1997), a 42 per cent increase over the
same period in 1997. Net profit (after tax) was $4.46m ($3.19m in 1997). Total
revenues for the first nine months of the year were $224.1m compared with
$147.8m for the same period in 1997, a 52 per cent increase.
The company had contracts/awards to manage 23,031
beds in operation at 30 September 1998 compared with 15,738 in 1997.
As at 26 October 1998, WCC had contracts and awards
to manage 47 facilities in North America, England, Scotland and Australia with
a total of 32,353 beds, as well as contracts for prisoner transportation,
correctional health care and mental health services, facility design and
construction. WCC is also negotiating a contract for a 1,500 bed prison in
South Africa (see PPRI #23).
WCC’s non-US
operations comprise around 25 per cent of the company’s business while
CCA’s non-US operations account for just four per cent.
In the family (1)
Ahead of the proposed January 1999 merger between CCA
and Prison Realty Trust, various documents have been filed with the SEC.
According to one Prison Realty Trust document (S4) 14 October 1998:
Existing Conflicts Of Interest Which May Have An Effect On The Company
“Several conflicts of interest
currently exist on the part of the Company [Prison Realty Corp] and its
trustees and officers, and on the part of CCA and its directors and officers.
The following description sets forth the principal conflicts of interest,
including the relationships through which they arise, and the policies and
procedures implemented by the Company to address those conflicts.
Existing Relationships Which May Give Rise to Conflicts of
Interest.
Doctor R. Crants is the Chairman of the Board of
Directors, President and Chief Executive Officer of CCA and the Chairman of the
Board of Trustees of the Company. D. Robert Crants, III, President of the
Company, is the son of Doctor R. Crants.
Doctor R. Crants and D. Robert Crants, III, as well
as certain other trustees and officers of the Company and directors or officers
of CCA, also own, directly or indirectly, shares in both companies.
D. Robert Crants, III and Michael W. Devlin, Chief
Operating Officer of the Company, are principals of DC Investment Partners,
LLC, a limited liability company which serves as the general partner of various
private investment partnerships. DC Investment Partners, LLC, is owned by D.
Robert Crants, III, Michael W. Devlin, Stephens Group, Inc., an affiliate of
Stephens Inc., the financial adviser to CCA in connection with the Merger, and
Lucius E. Burch, III, a member of the Board of Directors of CCA.
Doctor R. Crants and three other directors of CCA are
investors in one or more of the private investment partnerships managed by DC
Investment Partners, LLC. Rusty L. Moore, a trustee of the Company, is the
spouse of a shareholder of Stokes & Bartholomew, P.A., tax and securities
counsel to the Company. Stokes & Bartholomew, P.A. also provides certain
legal services to CCA. Samuel W. Bartholomew, Jr., a shareholder of Stokes
& Bartholomew, P.A., is also a director of CCA. J. Michael Quinlan, Chief Executive Officer of the
Company, is a former employee of CCA.
C. Ray Bell, a trustee of the Company, is the
principal of a construction company which, as a part of its business, builds
correctional and detention facilities, including facilities for CCA. Because of
Mr. Bell's experience in building correctional and detention facilities, it is
anticipated that Mr. Bell's company may in the future build correctional and
detention facilities for or on behalf of the Company or CCA.
Potential for Future Conflicts.
Because of the ongoing relationship between CCA and
the Company, the companies may be in situations where they have differing
interests. Such situations include the fact that: (I) CCA leases facilities
from the Company; (ii) the Company has an exclusive option to acquire the
Option Facilities, a right to purchase and a right of first refusal to purchase
any correctional or detention facility acquired or developed and owned by CCA
or its subsidiaries in the future, and to provide mortgage financing for any
correctional or detention facilities financed in excess of 90 per cent of their
cost by CCA or its subsidiaries in the future; and (iii) CCA has a right of
first refusal to acquire the facilities it leases from the Company and, if
acquired, the Option Facilities.
Accordingly, the potential exists for disagreements
as to the compliance with the leases between the two entities or the values of
the facilities acquired or lease payments therefore in the future pursuant to
the Right to Purchase Agreement.
Additionally, the possible need by the Company, from
time to time, to finance, refinance or effect a sale of any of the properties
managed by CCA may result in a need to modify the lease with CCA with respect
to such property. Any such modification will require the consent of CCA, and
the lack of consent from CCA could adversely affect the Company's ability to
complete such financings or sale. Because of the relationships described above,
there exists the risk that the Company will not achieve the same results in its
dealings with CCA that it might achieve if such relationships did not exist.
In the family (2)
Wackenhut Corrections Corp. directors and officers
have been adding to their already substantial salaries by making profits from
trading shares in the company. Details from 5 November 1997 to 2
November 1998 include:
n George Zoley sold 10,000
shares worth $297,100 on 5 November 1997 and planned to sell a further 7,900
valued at $192,944 on 2 November 1998.
n Charles Jones exercised his
right to buy 28,500 shares at between $21.50 and $26.06 per share on 10 March
1998 and sold them the same day at $30 each.
n Wayne Calabrese planned to
sell 15,000 shares valued at $317,469 on 1 October 1998.
n David Watson exercised his
right to buy 2,000 shares at $11.88 per share on 3 March 1998 and sold them the same day for $28 per share.
n Anthony Travisono exercised
his right to buy 4,000 shares on 24 February 1998 at between $13.75 and $22.63
and sold 1,000 shares the same day at $29.25.
Abuse at CCA prison
Some 20 prisoners at a CCA prison at Whiteville,
Tennessee, were allegedly abused in an incident on 5 August 1998.
One CCA staff member was also seriously hurt. CCA has
since fired seven staff including the prison’s chief of security.
State politicians and officials are to inspect the
prison on a fact finding mission before 1 December 1998. The FBI is also
carrying out an investigation.
Wisconsin’s Corrections Secretary, Michael Sullivan,
called in the FBI after State officials allegedly found evidence of a cover up
into the August incident.
Since June 1998, the State of Wisconsin has been
paying CCA to house 1,000 prisoners to ease its own overcrowded facilities. Up
to 1,200 prisoners will eventually be sent there at a cost of $18.4m per year.
The State has yet to appoint four staff to monitor the treatment of the 3,000
prisoners sent to out-of-state prisons.
n Tommy G. Thompson, Governor of Wisconsin, received a $2,500 contribution towards his re-election campaign from CCA’s Doctor C. Crants on 2 September 1998. An aide to the Governor has stated that the contribution has not influenced the administration in any way.
Praise indeed
Doctor C. Crants, CCA’s Chairman, President and Chief
Executive Officer has been voted ‘1998 National Ernst & Young Service
Entrepreneur of the Year’.
“Entrepreneurs
such as Doc Crants ... ultimately improve the quality of life in America and
beyond by proving that exceptional ideas are forever worthy of pursuit,” said
Gregory K. Ericksen of Ernst & Young.
Texas not so profitable for CCA
CCA is terminating its contract with the Texas
Department of Criminal Justice (TDCJ) for the pre-release center in Liberty
County.
The company will also not
renew two other contracts as they expire this year and is “seriously
re-evaluating” whether to renew three that expire in 1999.
This follows CCA’s loss of one contract in a
rebidding process this year and the TDCJ introducing new performance guidelines
and reducing the profit element of new contracts.
More Avalon promises
Oklahoma-based Avalon Correctional Services Inc (see PPRI #16) is “positioned to grow through acquisition by
consolidating the fragmented $4bn nationwide community corrections industry
[aka halfway houses]” according to a recent company press release.
Avalon concentrates primarily in the south west of
the US and its “potential acquisition universe is about $320m of the industry’s
$4bn in annual revenue”.
nAvalon reported revenues of
$5.58m for the nine months to 30 September 1998, a 39 per cent increase over
the same period in 1997. The company made a net loss of $166,000. As at 16
November 1998, the company had 14 contracts with a total of 1,110 beds in four
states.
n In late 1997, Avalon
predicted that its revenues would be over $30m by the end of 1998 (see PPRI #16).
CUSA campaign intensifies
Corrections USA (CUSA), a coalition of correctional
officers from the US and Canada committed to fighting prison privatisation,
held a demonstration at Corrections Corporation of America’s (CCA) headquarters
in Nashville, Tennessee on 16 October 1998.
Over 125 officers
marched from the state capitol to the offices of the world’s largest
prison corporation. CUSA had personal representation from 22 states and letters
and press releases of support from a further eleven.
CCA spokesperson Sharon Johnson Rion dismissed CUSA’s
demonstration as “a publicity stunt”. But just three days earlier, four
prisoners escaped from the company’s South Central Correctional Facility in
Clifton, Tennessee, providing what Brian Dawe, CUSA’s Director of Operations,
called “the perfect backdrop” for their action.
At the time of the demonstration, three of the escapees
were still on Tennessee Bureau of Investigation’s Ten Most Wanted List.
Last September, on hearing of CUSA’s plans, Doctor C.
Crants, CCA’s Chairman, Chief Executive Officer and President, invited CUSA to
meet with the company’s senior management hoping that CUSA’s view would be
“significantly altered by a reasonable review of the facts.”
CUSA declined, with Mr Dawe writing to Mr Crants,
saying: “ ... even if CCA were the epitome of management excellence, we are
philosophically at opposite ends of the spectrum on this issue. Experiments in
prison privatisation have historically been abysmal failures laced with
corruption, abuse and neglect. Recent events clearly indicate that this trend
is continuing.”
Mr Dawe added: “Although I must refuse your offer to
meet at CCA headquarters, I invite you to meet us in the halls of Congress, on
the floors of every state legislature ... at our county seats and in our
nation’s town halls. Wherever you plan to operate a private prison we will
gladly meet you.”
CUSA is enlisting the support of other law
enforcement organisations, academics and public opinion groups. “It comes down
to education,” Mr Dawe told PPRI. “If
we can network quickly and effectively by getting our version out to the
states, counties, cities and towns that are being courted by the privateers, we
can beat them.”
His also urges organisations outside of the US to
join CUSA.
“We must organise in the same manner as the
companies. We must lobby our politicians and the public alike and provide them
with information before they make a decision. The information and philosophy
behind stopping this public safety disaster is the same whether you are in
Australia, Canada, Britain or the US,” said Mr Dawe.
From 4-6 February 1999, CUSA will holding its next
national conference in Miami and will be demonstrating at Wackenhut’s
headquarters. Contact: CUSA, PO Box 394, Newton, NH 03858; Tel: ++1 603 382 9707.
Fax: ++1 603 382 1502. Web: www.cusa.org
Rhode Island campaign success
The Rhode Island Brotherhood of Correctional Officers
has forced the State to withdraw the threat of privatisation from the terms of
a proposed collective agreement. A revised contract is being negotiated.
The union rejected a new contract offering a 13 per
cent pay increase in exchange for agreeing to contracting out food and medical
care programmes at adult correctional institutions. The contract also raised
the possibility of privatising other services in the future.
Services being considered for privatisation included
health, food, and commissary services, out of state transfers and community
corrections such as halfway houses.
In September 1998, hundreds of correctional officers,
their families, friends and colleagues from California, New York, and New
Hampshire held a rally in Providence to coincide with the State Governor’s
election.
Health firm faces State inquiries
Correctional Medical Service Inc (CMS), the largest
private correctional health care company in the US, is being investigated by
the Missouri Department of Corrections for alleged cost-cutting practices.
The Appropriations Committee on Social Services and
Corrections is also to begin separate hearings in December.
This follows a five month investigation into prison
health care by the St Louis
Post-Dispatch, which found more than 20 cases nationwide in which prisoners
died as a result of alleged negligence, indifference, understaffing, inadequate
training or cost cutting by private health care companies. Many of those cases
involved CMS.
CMS is a Spectrum Healthcare Services company. Until
January 1997, Spectrum was a subsidiary of ARAmark Corp. of Philadelphia.
CMS has more than 40 per cent of the private
correctional health care market, providing services to more than 268,000
prisoners at 341 facilities in 30 states.
Other extracts from the St Louis Post-Dispatch investigation include:
nCMS, Wexford Health Sources
Inc, EMSA Correctional Care and Prison Health Services Inc. have become key
players in the American justice system;
n CMS’s performance “has been
criticised by the US Department of Justice, judges, court-appointed monitors,
experts on correctional health care, state and county officials and others...”
n By the Spring of 1997, CMS
had 500 lawsuits pending.
n “What emerged was a picture of an industry that, at best, is still trying to find its way through the complex problems posed by health care in a prison environment. At worst, it was a picture of an industry that takes advantage of the public’s ill will towards inmates to give poor care while making a profit.” Source: Health Care Behind Bars: Death, Neglect and the Bottom Line, St Louis Post-Dispatch, 27 September 1998.
Critical Resistance report
More than seven hundred activists, advocates, former
prisoners, academics, students and others met on 25-27 September 1998 at the
University of California, Berkeley, to launch a large-scale campaign to combat
the growth of the prison industrial complex worldwide.
Among the almost 200 panels, workshops, plenary
sessions, and cultural events, was a session providing practical strategies for
resisting prison privatisation. Linda
McCarty, Executive Director of the Tennessee State Employees’ Association and
Harmon Wray, Co-ordinator for Ministries with the Poor and Marginalised,
Tennessee Conference of the United Methodist Church, spoke about the battle in
Tennessee to prevent CCA from taking over the entire state prison system. They
emphasised the need to organise state workers, the importance of coalition
building and educating the media.
Judith Green, Programme Director for the State Partnership for Criminal Justice, talked about the fight against privatisation in Florida