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Wackenhut Corrections contemplates breaking off from parent
By Marcia Heroux Pounds business writer Posted May 3 2002

Wackenhut Corrections Corp. might buy back control of its fate from the Danish firm that has agreed to acquire its parent company, WCC Vice Chairman George Zoley said Thursday.

Group 4 Falck said in March that it would purchase WCC's parent, Wackenhut Corp., for $570 million. Wackenhut shareholders will vote on that merger today. At the time, the Danish firm indicated it would consider a sale of shares it would acquire in the Palm Beach Gardens-based prison management firm.

"Maybe we can buy back the 12 million shares," or what would be Group 4 Falck's 57 percent stake in WCC, Zoley said in an interview after the company's annual meeting on Thursday.

Meanwhile, Zoley said WCC and Group 4 Falck, Wackenhut's prime international competitor, have agreed not to compete for business in the United States after the merger. WCC also would not share detailed profit-and-loss statements with Group 4 Falck.

Five board members would be independent, two would be from Group 4 Falck and two from WCC: Zoley and WCC's president Wayne Calabrese.

WCC claims a 27 percent market share nationally and 57 percent of the international market. The company manages about 43,000 prison beds worldwide. As of Dec. 30, WCC employed 10,763 workers, of which 66 are in the company's headquarters.

New prisons under its management include those in Del Rio, Texas; Winston, N.C.; and Dovegate, United Kingdom. WCC also has opened a corporate office in South Africa to manage what it hopes is a growing business there. The firm opened a 3,000-bed prison in Louis-Trichardt during the first quarter.

On Thursday, the company also announced its first-quarter earnings, an increase of 97 percent to $5.2 million from $2.6 million. The increase is attributed to improved performance in the company's U.S. correctional facilities, discontinuation of an unprofitable Arkansas prison contract, and expense reductions.

First-quarter operating income was $5.92 million compared with $2.54 million for the same quarter last year.

Revenues for the quarter were up 4 percent to $140.2 million from $135 million in the first quarter 2001. Full operation of WCC's new North Carolina and Texas prisons boosted revenues, Zoley said.

Marcia Heroux Pounds can be reached at or 561-243-6650.

Lawmaker rips for-profits.
By Andrew Halcro
(Published: May 3, 2002)
Anchoraage Daily News

Recently, my colleague Rep. Bill Hudson gave an eloquent invocation on the House floor. He implored that we "keep our words warm and tender, for someday we might have to eat them."

The passage was very truthful and moving, but at the same time it presents us with a conundrum. How do politicians keep their words warm and tender when there is no logic or fairness to their colleagues' actions? How does one stand by quietly while public policy decisions are made based on campaign donations and personal ideology?

The answer to me is clear: Sometimes the truth is neither warm nor tender. The next two weeks represent not only the end of the 2002 legislative session but the beginning of another campaign season. Traditionally this is the time of the legislative session when poorly thought-out pieces of special interest legislation suddenly start gaining momentum around the Capitol. It's not hard to track their progression if you just follow the money trail and the faux conservative spin that accompanies them.

Let's start with a bill to build a 1,000-person private prison in Whittier. Though the idea of privatization on the surface sounds good, this application is far from conservative or reasonable. In the past six years, private prison proposals have failed in three communities. The last one, just six months ago, was rejected in Kenai by 70 percent of voters.

Not only does this piece of legislation defy all common sense, it also defies fiscal sense. First, we're talking about Whittier, where up until three years ago you could access the town only via train. According to the Department of Corrections, this privatization proposal stands to cost the state an additional $18 million dollars a year vs. leaving our prisoners in existing private facilities in Arizona. The fact is that the same well-connected individuals who write campaign checks will benefit from this action.

Another bill would allow physicians to skirt antitrust laws when negotiating with insurance providers. The sponsor of this bill refuses to be deterred by the objection of nurses, hospitals, insurance providers and the Federal Trade Commission. The commission submitted both written and oral testimony that the intent of this bill violates important federal antitrust protections and could lead to increased health care costs for all Alaskans. Though this bill has been amended, the sponsor has stated on the record that he will work to return the section of the bill that stands to cost this state millions of dollars for health care. This proposal came about after a group of physicians in Fairbanks were cited and fined by the FTC for violating similar antitrust provisions.

The latest fast-moving concern is a premature $760 million-dollar tax credit for a natural gas pipeline project that hasn't even been given the green light. According to committee testimony, even the availability of this tax credit won't make the project happen for sure. By granting this tax credit at such an early juncture, the Legislature forfeits any leverage it might have to use this tax credit to gain concessions on Alaska hire and other important partnering issues. This amended proposal can be likened to giving away your paycheck and then attempting to negotiate some of it back for your own use.

Given that we're struggling to close an $800 million-dollar-plus budget gap, these ideas are poorly planned and poorly timed. During the past four years that I've served in the Legislature, there has been a noticeable lack of vision for the future of our state. Some people even insist on blaming an outgoing governor when in fact they're the ones who enjoy the exclusive power of appropriation. At a time when the Legislature is unable to make investments in critical areas because of budget constraints, it's time for legislators to stop being so warm and tender toward special interests.

Andrew Halcro represents Anchorage's Sand Lake area in the Alaska State House of Representatives.

Corrections Professional

May 3, 2002

Federal corrections employees placed on list of jobs to be privatized Unions, activists lash out at initiative

WASHINGTON - The inclusion of 7,200 federal prison employee positions on theFederal Activities Inventory Reform Act list is unfair, does not make sense and is the first step to contracting out these jobs, a union leader said.

His comments were issued at a recent meeting convened here by privatization supporters and adversaries after corrections employees were included on the list. Inclusion on the list means the jobs are considered commercial in nature and therefore, could be handled by private-sector employees.

"If the [Bush] administration believes we are operating prisons in an excellent manner, why would we be placed on this list?" asked Phil Glover, president of the American Federation of Government Employees Council of Prison Locals.

Speaking at an AFGE news conference April 17, Glover said there has been no explanation for the placement of correctional workers on the list.

"With homeland security playing such a prominent role in decision-making, why would you even consider contracting out those federal employees who are keeping communities safe now?" he asked.

Glover said federal correctional professionals undergo more training than their private counterparts.

"Bureau of Prisons' workers undergo weeks of correctional and institutional training and then work on a 'training schedule' for up to one year," he said.

Private contractors, however, do not perform extensive background checks and only train their COs, leaving other prison employees to learn on the job.

Glover and other correctional policy experts expressed concern over the expansion of private prisons in the last two decades. By mid-2001, 12 percent of federal prisoners and 7 percent of state prisoners were housed in private facilities. Judith Greene, a well-known policy analyst, said research has shown that public prisons are safer and better managed than private ones.

"Inmate assaults, drug use and escapes occur at higher rates in private prisons," she said.

Public prisons also provide better services such as medical care and education for inmates, she said.

"We compared a private prison in Minnesota to three state facilities and found superior performance across the board at the public prisons," she said.

Specifically, Greene found that the state prisons provided full-time schooling for inmates taught by licensed teachers while the private institution provided part-time classes taught by uncertified instructors. She said such research should be used to judge prisons because certification by groups like the American Correctional Association is biased.

Joshua Miller, a labor economist for the American Federation of State, County and Municipal Employees, said the ACA is heavily funded by private industry and former high-ranking BOP officials are now top executives at the ACA and some private prison companies. He said more problems occur at private prisons because the firms cut corners to save money.

"These companies pay employees low wages, under-staff facilities, under-train employees and hire unqualified staff," Miller said.

He pointed out that research by the General Accounting Office and the Justice Department shows there is no evidence that privatization does not necessarily reduce government expenditures.

The AFGE's Glover said the reverse is true: federal prisons are more cost effective than private facilities. He lamented the federal BOP's decision in 2000 to award two contracts worth 760 million to the Corrections Corporation of America. The contracts - for the construction of two massive facilities to house non-U.S. citizen inmates - saved CCA from bankruptcy.

Miller said a CCA bankruptcy would have been disastrous, since the firmmanages more than 50 percent of private prison beds in the U.S. He backed legislation designed to stop the privatization of federal prisons. Sponsored by Rep. Ted Strickland, D-Ohio, the Public Safety Act, H.R. 1764 and S. 842 also would require that federal inmates be housed in government-run prisons.

Vincent Schiraldi, executive director of the Center on Juvenile and Criminal Justice, said the legislation is critical because the federal prison population has skyrocketed in the last two decades.

"About 70 percent of these inmates are in prison for non-violent offenses,"Schiraldi said.

He also said the trend of building new prisons and incarcerating more people would likely continue under President Bush.

"The administration is giving a 300 million boost to the BOP while other important areas, such as workforce development programs, go begging," Schiraldi said.

The Bush plan is flawed because the private prison experiment has not worked he noted.

The measures to which he referred include eliminating mandatory sentences, providing judges with sentencing discretion and revising parole policies.

"Recent polls show that 75 percent of Americans favor probation and alternative sentences to imprisonment for non-violent offenders," Schiraldi said.

Are government contracts saving private prisons?

At a recent luncheon meeting in Washington D.C., various labor, religious and criminal justice groups discussed the role of government in prison privatization policy.

In recent years, government contracts have kept large private prison companies afloat.

For example, in 2000, the Federal Bureau of Prisons awarded two contracts worth 760 million to the Corrections Corporation of America. The contracts for the construction of two massive facilities to house non-U.S. citizen inmates, saved CCA from bankruptcy.

CCA manages more than 50 percent of the private prison beds in the United States.

Another private prison company, Cornell currently is under review for accounting issues. In March, a special committee recommended the company restate its earnings for 2000 and 2001. The company reduced its reported earnings after reviewing two off-balance-sheet transactions.

Cornell's auditor was the Anderson accounting firm, now under fire for blessing Enron's books.

Adding to a growing sense of destabilization within the private prison industry are reports that Wackenhut Corrections Corporation, which runs private corrections facilities on four continents, could be for sale. Danish security company Group 4 Falck announced in March that it agreed to buy WCC's parent company, Wackenhut Corporation, for 573 million in cash. Falck said it would consider selling Wackenhut's 57 percent stake in WCC.

But it's not just the financial structure of the private prison industry that concerns corrections analysts. Security issues plague the industry. For example, the Idaho Department of Corrections said the CCA is out of compliance with its agreement to provide job training programs for its inmates. The state is prepared to penalize the company by this summer to the tune of 5,000 a day. In addition, numerous states have complained that security staff members in private prisons are not properly trained.

In other states, such as Colorado, private prison beds have gone empty. In January 2001, private prisons had 1,900 empty beds even before two additional private facilities opened in the eastern part of the state later in the year.

Also of concern is the government's stated plan to initiate a 4.6 billion prison privatization plan over the next 10 years. Illinois is one of the first states to stand behind the plan. Gov. George Ryan said he is sticking with his plan to privatize hundreds of jobs at state prisons amid threats of lawsuits and pickets.

Private prison practices concern states

The rapid spread of private prisons in the past six years has created considerable confusion about what the rules and laws are for private corrections companies.

The following are a few examples that illustrate some of the concerns:

At the Houston Processing Center in Texas, two inmates climbed a fence and escaped. The minimum-security facility is designed to detain immigrants who don't have the proper paperwork to be in the country. But one inmate was sent to the center to serve his time for sexual abuse and the other was serving time for raping an 88-year-old woman. They had been shipped from Oregon to the facility to fill empty beds and the operator, Corrections Corporation of America, said it had no obligation to tell local authorities they were there.

Catching the prisoners proved easier than charging them with a crime, though. When authorities finally apprehended them - at local taxpayers' expense - authorities discovered they could not punish the men for escaping. In Texas, as in many states, it was not yet a crime to flee a private corporation. Laws are pending in several states to close both loopholes.

The New Mexico Department of Corrections has accused CCA of overcharging the state almost 2 million over the past eight years for operating the women's prison in Grants, N.M. The company fee of 95 a day per inmate includes 22 a day for debt service on the prison.

A legislative committee in Tennessee calculated that state prisons contribute almost 17.8 million each year to state agencies that provide central services for the facilities, such as printing, payroll administration and insurance. Because private prisons usually do not use state agencies for such services, states that privatize unwittingly lose money they once counted on to help pay fixed expenses.

South Carolina decided in February 2001 not to renew a one-year contract with CCA for a juvenile detention center in the state capital. Child advocates reported hearing horrific abuses at the facility, where some boys say they were hogtied and shackled together. Juvenile justice authorities said the staff were not trained properly.

Although governments remain legally responsible for inmates guarded by private companies, the firms have little trouble finding ways to skirt public oversight while pocketing public money. Instead of streamlining the system, hiring corporations to run prisons actually adds a layer of bureaucracy that can increase costs and reduce accountability. Prison companies have been known to increase prices when their contracts come up for renewal and some defer maintenance on prisons since they aren't responsible for them once their contract expires.

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