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Florida's Private Prison Industry Corporation Under Siege
by David M. Reutter
As early as 1980, drugstore mogul Jack Eckerd was convinced a private company could provide higher profits to Florida if it ran the state's Prison Industries. After Eckerd's lobbying of the Florida Legislature, that Legislature enacted laws to create Prison Rehabilitative Industries and Diversified Enterprises (PRIDE) as a private, non-profit corporation to lease and manage the state prison industries program. A December 2003 special report by the Florida Legislature's Office of Program Policy Analysis and Government Accountability (OPPAGA) concluded PRIDE has failed to explain its corporate structure or protect state interests while PRIDE's Directors appear intent on ensuring they personally profit.
Florida Law establishes that PRIDE's mission is to: provide education, training and post-release job placement to prisoners to help reduce recommitment; enhance security by reducing prisoner idleness and providing an incentive for good behavior in prison; reduce costs to the state by operating enterprises primarily with prisoner labor while not unreasonably competing with private enterprise; and rehabilitate prisoners by duplicating, as nearly as possible, the activities of a profit-making enterprise.
Ostensibly to help PRIDE carry out its stated mission, it was granted sovereign immunity, which shields it from liability in the same manner as the state, and it is not required to pay unemployment compensation or workers' compensation, in most cases, to prisoner workers. Moreover, PRIDE is not subject to the authority of any state agency, except the auditing and investigatory powers of the Legislature and Governor.
Anatomy of a Prison Industry
In fiscal year 2002-03, PRIDE operated 38 industries in 21 of Florida's 121 prisons and facilities. Those industries included, among others, raising dairy calves, building office furniture, heavy vehicle refurbishing, printing, digital information services, and citrus processing. In 1994, PRIDE provided 2,934 prisoner jobs. By 2003, PRIDE's workstations had decreased by 33% providing only 1,995 prisoner jobs to Florida's 80,000 prisoners. Still, PRIDE generated $60.9 million in sales.
Prisoners are not placed in PRIDE jobs unless they are free of disciplinary reports for six months prior to placement, and they are removed from that job if they receive a disciplinary report, for any offense. In return for their labor, prisoners are paid between 20 cents and 55 cents per hour, depending on their skill level and length of service. These low-paying jobs are highly coveted in Florida's bread and butter style prisons, which aims to have prisoners live no better than the state's poorest resident. The only other paying jobs are canteen operators or staff barbers.
PRIDE is also certified under the Federal Prison Industries Enhancement (P.I.E.) program, which was enacted in 1979. PRIDE reports 10 active PIE programs that employ 249 prisoners. The PIE program is a federally certified program created to encourage state and local governments to create prisoner employment opportunities that approximate private work sector opportunities. Under the certification program, deductions cannot exceed 80 percent of prisoner gross wages and permissible deductions are limited to: crime victim compensation fund, taxes required under federal law, costs of incarceration, and family support. Additional deductions may be made for a savings account for release purposes. Under PIE, private, for profit businesses are allowed to directly employ prisoner labor provided the prisoners are nominally paid the minimum wage or prevailing wage for the work they perform, whichever is higher.
While PRIDE's normal operations provided only $249,991 to victim restitution for fiscal 2002-03, its PIE program, with only about 15% of PRIDE's prisoner workforce but much higher wages, generated $125,043 in total deductions from prisoner wages. Those deductions amounted to $28,785 for victim restitution, $18,624 in taxes, $73,353 room and board, and $4,282 in family support. To the extent that restitution and similar deductions rely on the prisoners' meager wages it is obvious that the less the prisoners are paid, the lower the deductions. However, the low prisoner wages do not translate into lower prices for the products sold by PRIDE nor lower profit margins for the private businesses using the PIE program.
The state is entitled to a 50% share of PRIDE's profits, but that provision of state law has not been exercised in years. PRIDE has opted to use proceeds for capital improvements and expansion. If PRIDE fails, the state is the beneficiary.
A Declining Industry
Over the last five years, PRIDE's sales have fallen by 25%. A number of factors have contributed to this decline, including federal limitations on the sale of interstate goods manufactured by prisoners, general economic conditions and state spending, state agency resistance to using PRIDE products and services, and private sector concerns about using products manufactured by prisoner labor. PRIDE has taken steps to increase its sales in recent years, but its effects have had limited success.
In 1934, Congress enacted the Ashurst-Summers Act, which banned the interstate transportation of prison manufactured goods. See: 18 U.S.C. § 1761. The law applies only to manufactured goods, and PRIDE has established industries such as data entry, calf-raising, and vehicle restoration that are exempt from the ban. Through industries such as these, PRIDE sidesteps federal law and generates clients such as the one in Puerto Rico that PRIDE produces eyeglasses for. Nonetheless, federal law restricts PRIDE's potential markets.
Florida law requires state agencies to buy PRIDE's products when they are of similar quality and price to those offered by outside vendors. In 1995, state agency purchases accounted for 83% of PRIDE sales. By 2002, state agencies only provided 55% of sales. Despite the low wages to prisoners, many items can be bought on the open market from non prison based vendors offering lower prices and higher quality. While state agencies have held off on purchases of office furniture because of budget cuts, privatization has also had an effect.
When the Florida Department of Corrections (FDOC) entered in a contract with Aramark effective July 1, 2001, to privatize prison food services, PRIDE took a large hit to sales. PRIDE's contract with FDOC was cancelled because PRIDE lacked the capacity to produce, warehouse, and deliver the quantity of goods Aramark desired. The next year, PRIDE's revenue dropped $30 million.
Although privatization has affected PRIDE, many state agencies complain about "delivery times and quality of PRIDE goods and a belief by agencies that they could obtain lower prices or higher quality products from other sources." Florida's Department of Management Services reports that the statutory preference clause to purchase from PRIDE has generated resentment and some agencies do not comply with the requirement. This is not unique to Florida. PLN has frequently reported on similar complaints made by federal agencies and other states.
The private sector has resisted PRIDE's efforts to do business with it. Fearing negative public reactions, private companies and industries are often reluctant to accept goods produced by prisoners. Coca-Cola and Wal-Mart, for example, prohibit using goods produced by forced or prison labor. The public relations factor is significant in that few companies want to be linked in the public mind with prison slave labor. PLN has in the past frequently reported on companies using prison labor to manufacture, package or market their products. Private companies often resist PRIDE's efforts to expand operations into new industries, asserting PRIDE has an unfair competitive advantage due to the low wages it pays prisoners.
When a federal prison industry won over a bid to produce missile-shipping containers, Tim Graves' 18 year-old company in Marietta, Georgia, was driven out of business. "It's hard for me to accept that the government would put the welfare and benefit of convicted felons above the interests of its taxpayers," said Graves.
Mike Harrell, Vice President of Business Development for PRIDE, says PRIDE "will not enter into a relationship with a company if there's a displacement of workers." With sales declining and its market limited, PRIDE had to take action to survive.
In order to increase its revenue, PRIDE has become a conglomerate that easily masks its industries and encroachment into the private sector.
Expanding PRIDE's Umbrella
"We knew looking down the road that PRIDE couldn't continue to do business the way it always had, relying on state agencies as its primary customer," said PRIDE CEO Pamela Jo Davis, a former jail warden in Miami-Dade County and former deputy state corrections secretary.
PRIDE's new way of doing business was to create spin-off companies, some of which are non-profit and others that are for-profit. The purpose of the spin-off companies was to allow more aggressive business practices that are not limited by PRIDE's mission or hampered by federal wage and non profit guidelines.
From its creation in 1981 and until 1999, PRIDE provided a number of prisoner services including prison work, training, and assistance in finding post-release housing and employment. In 1999, with the assistance of a business consultant, PRIDE created Industries Training Corporation (ITC), a non-profit corporation.
ITC in turn created Labor Line Services; Labor Line, Inc.; and Global Outsourcing and formed private partnerships to create Florida Citrus Partners and Diversified Supply Management.
ITC's purpose is to manage prison work programs for PRIDE by entering into various business relationships and providing administrative and managerial support. ITC's fee is based on PRIDE's budget, and the services contracted to ITC have not been placed out for bid on a regular basis to determine if another contractor could provide PRIDE with the same services at a lower cost. PRIDE and ITC have common managers, common board members, and use the same offices. The phones are answered "ITC/PRIDE." Corporate nepotism is readily apparent; as all of ITC's current board members are either current or former board members of PRIDE. The two companies appear to be one.
ITC wholly owns Labor Line Services (LLS), a non-profit corporation. LLS offers transitional support and job training to PRIDE prisoners upon their release from prison. PRIDE pays LLS to assist released prisoners, at no charge, with finding housing, transportation, and employment, as well as general encouragement and support.
Another company ITC owns is Labor Line, Inc., (LLI), a for-profit corporation. LLI is a temp-to-hire staffing company that provides jobs for former PRIDE prisoners and other underemployed individuals. LLI provides labor to several companies throughout Florida.
Global Outsourcing (Global) is a for-profit corporation wholly owned by ITC. It creates partnerships with private business, with the primary purpose of creating jobs for PRIDE prisoners. In 1999, Global created a most peculiar business for Florida when it paid $2.5 million to purchase Northern Outfitters, a for-profit corporation. Northern Outfitters produces boots tough enough for the Arctic, with matching hats and gloves, fleece pull-overs and high-country bibs, Avalanche pants, thermal socks, and hand-warmer muffs. The cost for this set: $989.
The most peculiar fact about this Florida prison rehabilitation program is that no Florida prisoner has ever stitched one stitch of a Northern Outfitter outfit. This PRIDE subsidy uses the labor of prisoners at the Utah State Prison near Salt Lake City under a certified PIE program.
Global also does business as Global Digital Services, a company that uses PRIDE labor to provide various digital services to the private sector. Many government agencies have an excess of records in need of electronic storage and retrieval. Prisoners at Florida's Liberty Correctional digitally scan records to help alleviate this problem, and then index them.
PRIDE and/or ITC created two other entities. One, Diversified Supply Management (Diversified) was to cut PRIDE's purchasing costs by pooling orders from it and other customers. This venture ultimately failed and was shut down.
The other, Florida Citrus Partners, is a limited liability corporation, 50% owned by ITC and 50% owned by South Florida Citrus grower, Bernard Egan. Egan said he had two inventions to revolutionize the citrus market. The first would allow easy sectioning of citrus fruit to compete with the cut melon market. The second was a way to kill bacteria in orange juice at far lower temperatures than pasteurization, keeping that fresh-juice taste longer.
To make the revolution occur, ITC used PRIDE money to build a factory at Okeechobee Correctional Institution. Egan was to market the product. The deal was a failure and is mired in litigation. ITC owes PRIDE $3.5 million in operating costs, supposedly to be paid from future ITC revenue. For those who believe in free markets, Egan should have been able to find private capital willing to take the risk of promoting his venture.
Corporate Nepotism at Work
To create and fund these spin-off entities, PRIDE invested more than $10 million in loans to its fledgling companies. As of December 31, 2002, the corporation owed PRIDE $9.7 million. According to PRIDE officials, the debt has been reduced to $8.7 million as of December 1, 2003. At that time, PRIDE had not established the terms for repayment of these loans.
It is questionable if repayment was ever expected. PRIDE's 2002 Annual Report noted that PRIDE had advanced funds to "certain parties," but did not disclose who the recipients were, why they would not benefit from the funding, why PRIDE assumed the cost of the initiatives, and why over $5 million was forgiven from the related parties.
When Diversified Supply Management was created, ITC did so with three partners, who contributed $2,000 each: PRIDE's CEO Davis, former PRIDE board member and former President of Florida A & M University Fredrick Humpries, and the husband of PRIDE board member Maria Camila Leiva. Davis also serves as ITC's President.
The bylaws of ITC provided that if it closed, PRIDE would inherit its assets. A future ITC board, however, could change the bylaws and sever its relationship with PRIDE. Not only is there no contract governing the terms of repayment of loans PRIDE made to ITC, PRIDE gave a cold storage facility to ITC that was valued at $2.5 million. If ITC decided to change its operation, PRIDE would have no recourse to regain the value of that asset.
While PRIDE's prisoners earn pennies an hour, Davis is paid $236,000 a year to be ITC's CEO. Davis' salary has increased 35% since 2000. That salary is more than double what Florida's Secretary of Corrections earns to run the entire prison system, which houses 80,000 prisoners with a $1.7 billion yearly budget. Thus low wages and payroll deductions for the prison slaves, high wages and lavish living for the corporate CEOs. The state of Florida has succeeded in creating a "for profit business" atmosphere to prepare prisoners for wage slavery upon release. PRIDE's prisoner workers are prohibited from unionizing or otherwise seeking better wages or work conditions.
Investigating the PRIDE Conglomerate
To prepare its 2002 Annual Review of matters pertaining to Corrections, Florida's Corrections Commission (FCC) requested additional financial information from PRIDE after it disclosed the existence of ITC and its related corporations. PRIDE refused to provide information that was requested, challenging the authority of the FCC to review PRIDE. The FCC, as a result, reported PRIDE's unwillingness to report its activities and recommended a review by the Auditor General or OPPAGA. OPPAGA then conducted its special review of PRIDE.
The OPPAGA was highly critical of the cozy relationship it found within the conglomerate that PRIDE has become. The OPPAGA said PRIDE has failed to communicate clearly with its key stakeholders, namely, the taxpayers of Florida.
PRIDE is required under Florida Law to report annually the status of proposed profit use, amount of non-prisoner labor, work subcontracted to other vendors, use of consultants, finished goods purchased for resale, and the number of prisoners it currently employs.
The OPPAGA said PRIDE's reports provide only cursory information about its evolving structure, and refers to ITC and other corporations as "related parties" without further identification or explanation. PRIDE's reports also fail to include information about profit use, the amount of work subcontracted to ITC and Labor Line Services, Inc., and the amount of finished goods purchased for resale. The failure to provide financial and performance information prevents effective evaluation of the program.
The Auditor's report recommended that PRIDE's reports specifically detail the relationship between its corporations, "including the amount and status of loans and the nature and rational for gifts." Its reports should also describe costs the state incurs to support PRIDE. "In 2001-02, the Division of Risk Management reported that the state paid 12 liability claims related to PRIDE for a total of $128,888." The state pays the medical bills of prisoners injured on the job. There have been a few major accidents, including a prisoner who lost a portion of a leg and several who have lost fingers.
When PRIDE was created, the state donated property to ITC because Florida law does not speak to the state's interest in this property, or PRIDE's liabilities should it fail. The OPPAGA recommended state law be clarified to define the state's interest in PRIDE.
As for PRIDE's failure to be transparent in its operations, the OPPAGA said, "PRIDE needs to recognize that as a state created entity it has a fundamental responsibility to provide accountability information on its operations, including those conducted by closely related corporations."
After the OPPAGA's report was issued in December 2003, Governor Bush tried to shake up PRIDE. The minutes of PRIDE's April 2004 Board meeting show that Bush's senior staff wanted PRIDE's board to voluntarily resign and apply for reappointment. Bush also wanted PRIDE's bylaws changed so that the Governor, not the Board, picks the Chairman.
PRIDE's 14 member Board refused the overtures. While most of PRIDE's Board members are appointed by the Governor, each was vetted by PRIDE's CEO Davis before their name was submitted to Bush.
By June 2, 2004, Foster Narbin, governmental relations director for PRIDE, wrote Bush an e-mail voicing concerns about Davis' leadership. Narbin wrote that "the current Board of your appointees have fully abdicted their fiduciary responsibility to the state in what may be ultimately prove[d] to be a criminal act&I'm not sure anyone is paying attention."
Bush then called in his inspector general. His Chief Inspector, Perry Harper, wrote Davis on June 8, 2004, requesting the Board postpone a meeting scheduled for the next day, which had on the agenda a new agreement between PRIDE and ITC.
The Board held its meeting, but it suspended for 60 days Davis and President John F. Bruels. That decision did not affect Davis' position as CEO of ITC. Moreover, it had no financial impact on Davis, as her PRIDE post was unpaid and she earns her $236,000 yearly ITC salary.
On July 22, 2004, PRIDE requested Davis and Bruels to resign. In the interim of the suspensions and resignations, a consultant hired by PRIDE found nothing amiss between PRIDE and its spin-offs. "There is no wrong doing," said Leiva. "There was just a feeling that people needed new leadership." PRIDE has launched a national search to replace Bruels and Davis. "They were not working well together and neither could take the full load," Leiva said. "We will look for one person to do both jobs. Davis, meanwhile, remains as ITC's CEO.
Defining PRIDE's Mission
Despite its problems, PRIDE has it supporters. "In juvenile justice we have so many programs that absolutely do not work, yet we spend millions on them," says Daniel Webster, a former speaker of the Florida House and Chairman of the state's governmental oversight and productivity committee. "PRIDE is working, and we're not even paying for it. I would be willing to do it even if we had to pay for it."
"The benefit to the public is awesome because those people are not going back to the Correctional facility, or causing more havoc _ whether its murder, rape, burglary, destroying property. Those things cost the private sector lots of money. If you look at the recidivism statistics _ even over an extended period of time _ those prisoners in PRIDE usually don't come back. They have a skill that is marketable, and their supervisors know what they can do. We have employers who are signed up to hire them," said Webster.
At first glance, PRIDE's recidivism statistics are impressive. The OPPAGA report, however, said "PRIDE's effect on recidivism cannot be confirmed." PRIDE reports a recidivism rate of 18.1% for prisoner workers released in the fiscal year 2001, which compares favorably to FDOC's reported recidivism rate of 33.8% for all prisoners since 1993.
PRIDE's analysis does not take into account the fact that it uses prisoners who tend to be older, to have been incarcerated longer, to be more likely to be white, and to be more educated. As well as prisoners serving life or otherwise lengthy sentences that makes their release from prison unlikely. These factors make PRIDE's prisoner workers less likely to return to prison even before they enter the program, assuming they get out. Once those factors were removed, the OPPAGA found no net impact on recidivism by PRIDE.
"You've got the question of, what is the mission of PRIDE?" Governor Bush said he sees PRIDE's mission as training Florida's prisoners "to have a skill so they can live a productive life beyond when they're finished." Going beyond that "may not be appropriate," says Bush. While much has been made lately about PRIDE's structure, Davis and her cronies are still in positions to make the most money. Significantly, no one has demanded PRIDE's structure be altered, only that it be more transparent in its actions.
As a successful business man, Jack Eckerd knew where the money was. His predecessors at PRIDE have learned how to put Florida's prison industry money into their own pockets. After all, that's what private business is all about, isn't it?
Sources: OPPAGA Report No. 03-68, available on the web at: www.oppaga.state.fl.us.; Naples Daily News; FCC 2000 Annual Report; http://gtalumni.org, fall 99 magazine; St. Petersburg Times.
As early as 1980, drugstore mogul Jack Eckerd was convinced a private company could provide higher profits to Florida if it ran the state's Prison Industries. After Eckerd's lobbying of the Florida Legislature, that Legislature enacted laws to create Prison Rehabilitative Industries and Diversified Enterprises (PRIDE) as a private, non-profit corporation to lease and manage the state prison industries program. A December 2003 special report by the Florida Legislature's Office of Program Policy Analysis and Government Accountability (OPPAGA) concluded PRIDE has failed to explain its corporate structure or protect state interests while PRIDE's Directors appear intent on ensuring they personally profit.
Florida Law establishes that PRIDE's mission is to: provide education, training and post-release job placement to prisoners to help reduce recommitment; enhance security by reducing prisoner idleness and providing an incentive for good behavior in prison; reduce costs to the state by operating enterprises primarily with prisoner labor while not unreasonably competing with private enterprise; and rehabilitate prisoners by duplicating, as nearly as possible, the activities of a profit-making enterprise.
Ostensibly to help PRIDE carry out its stated mission, it was granted sovereign immunity, which shields it from liability in the same manner as the state, and it is not required to pay unemployment compensation or workers' compensation, in most cases, to prisoner workers. Moreover, PRIDE is not subject to the authority of any state agency, except the auditing and investigatory powers of the Legislature and Governor.
Anatomy of a Prison Industry
In fiscal year 2002-03, PRIDE operated 38 industries in 21 of Florida's 121 prisons and facilities. Those industries included, among others, raising dairy calves, building office furniture, heavy vehicle refurbishing, printing, digital information services, and citrus processing. In 1994, PRIDE provided 2,934 prisoner jobs. By 2003, PRIDE's workstations had decreased by 33% providing only 1,995 prisoner jobs to Florida's 80,000 prisoners. Still, PRIDE generated $60.9 million in sales.
Prisoners are not placed in PRIDE jobs unless they are free of disciplinary reports for six months prior to placement, and they are removed from that job if they receive a disciplinary report, for any offense. In return for their labor, prisoners are paid between 20 cents and 55 cents per hour, depending on their skill level and length of service. These low-paying jobs are highly coveted in Florida's bread and butter style prisons, which aims to have prisoners live no better than the state's poorest resident. The only other paying jobs are canteen operators or staff barbers.
PRIDE is also certified under the Federal Prison Industries Enhancement (P.I.E.) program, which was enacted in 1979. PRIDE reports 10 active PIE programs that employ 249 prisoners. The PIE program is a federally certified program created to encourage state and local governments to create prisoner employment opportunities that approximate private work sector opportunities. Under the certification program, deductions cannot exceed 80 percent of prisoner gross wages and permissible deductions are limited to: crime victim compensation fund, taxes required under federal law, costs of incarceration, and family support. Additional deductions may be made for a savings account for release purposes. Under PIE, private, for profit businesses are allowed to directly employ prisoner labor provided the prisoners are nominally paid the minimum wage or prevailing wage for the work they perform, whichever is higher.
While PRIDE's normal operations provided only $249,991 to victim restitution for fiscal 2002-03, its PIE program, with only about 15% of PRIDE's prisoner workforce but much higher wages, generated $125,043 in total deductions from prisoner wages. Those deductions amounted to $28,785 for victim restitution, $18,624 in taxes, $73,353 room and board, and $4,282 in family support. To the extent that restitution and similar deductions rely on the prisoners' meager wages it is obvious that the less the prisoners are paid, the lower the deductions. However, the low prisoner wages do not translate into lower prices for the products sold by PRIDE nor lower profit margins for the private businesses using the PIE program.
The state is entitled to a 50% share of PRIDE's profits, but that provision of state law has not been exercised in years. PRIDE has opted to use proceeds for capital improvements and expansion. If PRIDE fails, the state is the beneficiary.
A Declining Industry
Over the last five years, PRIDE's sales have fallen by 25%. A number of factors have contributed to this decline, including federal limitations on the sale of interstate goods manufactured by prisoners, general economic conditions and state spending, state agency resistance to using PRIDE products and services, and private sector concerns about using products manufactured by prisoner labor. PRIDE has taken steps to increase its sales in recent years, but its effects have had limited success.
In 1934, Congress enacted the Ashurst-Summers Act, which banned the interstate transportation of prison manufactured goods. See: 18 U.S.C. § 1761. The law applies only to manufactured goods, and PRIDE has established industries such as data entry, calf-raising, and vehicle restoration that are exempt from the ban. Through industries such as these, PRIDE sidesteps federal law and generates clients such as the one in Puerto Rico that PRIDE produces eyeglasses for. Nonetheless, federal law restricts PRIDE's potential markets.
Florida law requires state agencies to buy PRIDE's products when they are of similar quality and price to those offered by outside vendors. In 1995, state agency purchases accounted for 83% of PRIDE sales. By 2002, state agencies only provided 55% of sales. Despite the low wages to prisoners, many items can be bought on the open market from non prison based vendors offering lower prices and higher quality. While state agencies have held off on purchases of office furniture because of budget cuts, privatization has also had an effect.
When the Florida Department of Corrections (FDOC) entered in a contract with Aramark effective July 1, 2001, to privatize prison food services, PRIDE took a large hit to sales. PRIDE's contract with FDOC was cancelled because PRIDE lacked the capacity to produce, warehouse, and deliver the quantity of goods Aramark desired. The next year, PRIDE's revenue dropped $30 million.
Although privatization has affected PRIDE, many state agencies complain about "delivery times and quality of PRIDE goods and a belief by agencies that they could obtain lower prices or higher quality products from other sources." Florida's Department of Management Services reports that the statutory preference clause to purchase from PRIDE has generated resentment and some agencies do not comply with the requirement. This is not unique to Florida. PLN has frequently reported on similar complaints made by federal agencies and other states.
The private sector has resisted PRIDE's efforts to do business with it. Fearing negative public reactions, private companies and industries are often reluctant to accept goods produced by prisoners. Coca-Cola and Wal-Mart, for example, prohibit using goods produced by forced or prison labor. The public relations factor is significant in that few companies want to be linked in the public mind with prison slave labor. PLN has in the past frequently reported on companies using prison labor to manufacture, package or market their products. Private companies often resist PRIDE's efforts to expand operations into new industries, asserting PRIDE has an unfair competitive advantage due to the low wages it pays prisoners.
When a federal prison industry won over a bid to produce missile-shipping containers, Tim Graves' 18 year-old company in Marietta, Georgia, was driven out of business. "It's hard for me to accept that the government would put the welfare and benefit of convicted felons above the interests of its taxpayers," said Graves.
Mike Harrell, Vice President of Business Development for PRIDE, says PRIDE "will not enter into a relationship with a company if there's a displacement of workers." With sales declining and its market limited, PRIDE had to take action to survive.
In order to increase its revenue, PRIDE has become a conglomerate that easily masks its industries and encroachment into the private sector.
Expanding PRIDE's Umbrella
"We knew looking down the road that PRIDE couldn't continue to do business the way it always had, relying on state agencies as its primary customer," said PRIDE CEO Pamela Jo Davis, a former jail warden in Miami-Dade County and former deputy state corrections secretary.
PRIDE's new way of doing business was to create spin-off companies, some of which are non-profit and others that are for-profit. The purpose of the spin-off companies was to allow more aggressive business practices that are not limited by PRIDE's mission or hampered by federal wage and non profit guidelines.
From its creation in 1981 and until 1999, PRIDE provided a number of prisoner services including prison work, training, and assistance in finding post-release housing and employment. In 1999, with the assistance of a business consultant, PRIDE created Industries Training Corporation (ITC), a non-profit corporation.
ITC in turn created Labor Line Services; Labor Line, Inc.; and Global Outsourcing and formed private partnerships to create Florida Citrus Partners and Diversified Supply Management.
ITC's purpose is to manage prison work programs for PRIDE by entering into various business relationships and providing administrative and managerial support. ITC's fee is based on PRIDE's budget, and the services contracted to ITC have not been placed out for bid on a regular basis to determine if another contractor could provide PRIDE with the same services at a lower cost. PRIDE and ITC have common managers, common board members, and use the same offices. The phones are answered "ITC/PRIDE." Corporate nepotism is readily apparent; as all of ITC's current board members are either current or former board members of PRIDE. The two companies appear to be one.
ITC wholly owns Labor Line Services (LLS), a non-profit corporation. LLS offers transitional support and job training to PRIDE prisoners upon their release from prison. PRIDE pays LLS to assist released prisoners, at no charge, with finding housing, transportation, and employment, as well as general encouragement and support.
Another company ITC owns is Labor Line, Inc., (LLI), a for-profit corporation. LLI is a temp-to-hire staffing company that provides jobs for former PRIDE prisoners and other underemployed individuals. LLI provides labor to several companies throughout Florida.
Global Outsourcing (Global) is a for-profit corporation wholly owned by ITC. It creates partnerships with private business, with the primary purpose of creating jobs for PRIDE prisoners. In 1999, Global created a most peculiar business for Florida when it paid $2.5 million to purchase Northern Outfitters, a for-profit corporation. Northern Outfitters produces boots tough enough for the Arctic, with matching hats and gloves, fleece pull-overs and high-country bibs, Avalanche pants, thermal socks, and hand-warmer muffs. The cost for this set: $989.
The most peculiar fact about this Florida prison rehabilitation program is that no Florida prisoner has ever stitched one stitch of a Northern Outfitter outfit. This PRIDE subsidy uses the labor of prisoners at the Utah State Prison near Salt Lake City under a certified PIE program.
Global also does business as Global Digital Services, a company that uses PRIDE labor to provide various digital services to the private sector. Many government agencies have an excess of records in need of electronic storage and retrieval. Prisoners at Florida's Liberty Correctional digitally scan records to help alleviate this problem, and then index them.
PRIDE and/or ITC created two other entities. One, Diversified Supply Management (Diversified) was to cut PRIDE's purchasing costs by pooling orders from it and other customers. This venture ultimately failed and was shut down.
The other, Florida Citrus Partners, is a limited liability corporation, 50% owned by ITC and 50% owned by South Florida Citrus grower, Bernard Egan. Egan said he had two inventions to revolutionize the citrus market. The first would allow easy sectioning of citrus fruit to compete with the cut melon market. The second was a way to kill bacteria in orange juice at far lower temperatures than pasteurization, keeping that fresh-juice taste longer.
To make the revolution occur, ITC used PRIDE money to build a factory at Okeechobee Correctional Institution. Egan was to market the product. The deal was a failure and is mired in litigation. ITC owes PRIDE $3.5 million in operating costs, supposedly to be paid from future ITC revenue. For those who believe in free markets, Egan should have been able to find private capital willing to take the risk of promoting his venture.
Corporate Nepotism at Work
To create and fund these spin-off entities, PRIDE invested more than $10 million in loans to its fledgling companies. As of December 31, 2002, the corporation owed PRIDE $9.7 million. According to PRIDE officials, the debt has been reduced to $8.7 million as of December 1, 2003. At that time, PRIDE had not established the terms for repayment of these loans.
It is questionable if repayment was ever expected. PRIDE's 2002 Annual Report noted that PRIDE had advanced funds to "certain parties," but did not disclose who the recipients were, why they would not benefit from the funding, why PRIDE assumed the cost of the initiatives, and why over $5 million was forgiven from the related parties.
When Diversified Supply Management was created, ITC did so with three partners, who contributed $2,000 each: PRIDE's CEO Davis, former PRIDE board member and former President of Florida A & M University Fredrick Humpries, and the husband of PRIDE board member Maria Camila Leiva. Davis also serves as ITC's President.
The bylaws of ITC provided that if it closed, PRIDE would inherit its assets. A future ITC board, however, could change the bylaws and sever its relationship with PRIDE. Not only is there no contract governing the terms of repayment of loans PRIDE made to ITC, PRIDE gave a cold storage facility to ITC that was valued at $2.5 million. If ITC decided to change its operation, PRIDE would have no recourse to regain the value of that asset.
While PRIDE's prisoners earn pennies an hour, Davis is paid $236,000 a year to be ITC's CEO. Davis' salary has increased 35% since 2000. That salary is more than double what Florida's Secretary of Corrections earns to run the entire prison system, which houses 80,000 prisoners with a $1.7 billion yearly budget. Thus low wages and payroll deductions for the prison slaves, high wages and lavish living for the corporate CEOs. The state of Florida has succeeded in creating a "for profit business" atmosphere to prepare prisoners for wage slavery upon release. PRIDE's prisoner workers are prohibited from unionizing or otherwise seeking better wages or work conditions.
Investigating the PRIDE Conglomerate
To prepare its 2002 Annual Review of matters pertaining to Corrections, Florida's Corrections Commission (FCC) requested additional financial information from PRIDE after it disclosed the existence of ITC and its related corporations. PRIDE refused to provide information that was requested, challenging the authority of the FCC to review PRIDE. The FCC, as a result, reported PRIDE's unwillingness to report its activities and recommended a review by the Auditor General or OPPAGA. OPPAGA then conducted its special review of PRIDE.
The OPPAGA was highly critical of the cozy relationship it found within the conglomerate that PRIDE has become. The OPPAGA said PRIDE has failed to communicate clearly with its key stakeholders, namely, the taxpayers of Florida.
PRIDE is required under Florida Law to report annually the status of proposed profit use, amount of non-prisoner labor, work subcontracted to other vendors, use of consultants, finished goods purchased for resale, and the number of prisoners it currently employs.
The OPPAGA said PRIDE's reports provide only cursory information about its evolving structure, and refers to ITC and other corporations as "related parties" without further identification or explanation. PRIDE's reports also fail to include information about profit use, the amount of work subcontracted to ITC and Labor Line Services, Inc., and the amount of finished goods purchased for resale. The failure to provide financial and performance information prevents effective evaluation of the program.
The Auditor's report recommended that PRIDE's reports specifically detail the relationship between its corporations, "including the amount and status of loans and the nature and rational for gifts." Its reports should also describe costs the state incurs to support PRIDE. "In 2001-02, the Division of Risk Management reported that the state paid 12 liability claims related to PRIDE for a total of $128,888." The state pays the medical bills of prisoners injured on the job. There have been a few major accidents, including a prisoner who lost a portion of a leg and several who have lost fingers.
When PRIDE was created, the state donated property to ITC because Florida law does not speak to the state's interest in this property, or PRIDE's liabilities should it fail. The OPPAGA recommended state law be clarified to define the state's interest in PRIDE.
As for PRIDE's failure to be transparent in its operations, the OPPAGA said, "PRIDE needs to recognize that as a state created entity it has a fundamental responsibility to provide accountability information on its operations, including those conducted by closely related corporations."
After the OPPAGA's report was issued in December 2003, Governor Bush tried to shake up PRIDE. The minutes of PRIDE's April 2004 Board meeting show that Bush's senior staff wanted PRIDE's board to voluntarily resign and apply for reappointment. Bush also wanted PRIDE's bylaws changed so that the Governor, not the Board, picks the Chairman.
PRIDE's 14 member Board refused the overtures. While most of PRIDE's Board members are appointed by the Governor, each was vetted by PRIDE's CEO Davis before their name was submitted to Bush.
By June 2, 2004, Foster Narbin, governmental relations director for PRIDE, wrote Bush an e-mail voicing concerns about Davis' leadership. Narbin wrote that "the current Board of your appointees have fully abdicted their fiduciary responsibility to the state in what may be ultimately prove[d] to be a criminal act&I'm not sure anyone is paying attention."
Bush then called in his inspector general. His Chief Inspector, Perry Harper, wrote Davis on June 8, 2004, requesting the Board postpone a meeting scheduled for the next day, which had on the agenda a new agreement between PRIDE and ITC.
The Board held its meeting, but it suspended for 60 days Davis and President John F. Bruels. That decision did not affect Davis' position as CEO of ITC. Moreover, it had no financial impact on Davis, as her PRIDE post was unpaid and she earns her $236,000 yearly ITC salary.
On July 22, 2004, PRIDE requested Davis and Bruels to resign. In the interim of the suspensions and resignations, a consultant hired by PRIDE found nothing amiss between PRIDE and its spin-offs. "There is no wrong doing," said Leiva. "There was just a feeling that people needed new leadership." PRIDE has launched a national search to replace Bruels and Davis. "They were not working well together and neither could take the full load," Leiva said. "We will look for one person to do both jobs. Davis, meanwhile, remains as ITC's CEO.
Defining PRIDE's Mission
Despite its problems, PRIDE has it supporters. "In juvenile justice we have so many programs that absolutely do not work, yet we spend millions on them," says Daniel Webster, a former speaker of the Florida House and Chairman of the state's governmental oversight and productivity committee. "PRIDE is working, and we're not even paying for it. I would be willing to do it even if we had to pay for it."
"The benefit to the public is awesome because those people are not going back to the Correctional facility, or causing more havoc _ whether its murder, rape, burglary, destroying property. Those things cost the private sector lots of money. If you look at the recidivism statistics _ even over an extended period of time _ those prisoners in PRIDE usually don't come back. They have a skill that is marketable, and their supervisors know what they can do. We have employers who are signed up to hire them," said Webster.
At first glance, PRIDE's recidivism statistics are impressive. The OPPAGA report, however, said "PRIDE's effect on recidivism cannot be confirmed." PRIDE reports a recidivism rate of 18.1% for prisoner workers released in the fiscal year 2001, which compares favorably to FDOC's reported recidivism rate of 33.8% for all prisoners since 1993.
PRIDE's analysis does not take into account the fact that it uses prisoners who tend to be older, to have been incarcerated longer, to be more likely to be white, and to be more educated. As well as prisoners serving life or otherwise lengthy sentences that makes their release from prison unlikely. These factors make PRIDE's prisoner workers less likely to return to prison even before they enter the program, assuming they get out. Once those factors were removed, the OPPAGA found no net impact on recidivism by PRIDE.
"You've got the question of, what is the mission of PRIDE?" Governor Bush said he sees PRIDE's mission as training Florida's prisoners "to have a skill so they can live a productive life beyond when they're finished." Going beyond that "may not be appropriate," says Bush. While much has been made lately about PRIDE's structure, Davis and her cronies are still in positions to make the most money. Significantly, no one has demanded PRIDE's structure be altered, only that it be more transparent in its actions.
As a successful business man, Jack Eckerd knew where the money was. His predecessors at PRIDE have learned how to put Florida's prison industry money into their own pockets. After all, that's what private business is all about, isn't it?
Sources: OPPAGA Report No. 03-68, available on the web at: www.oppaga.state.fl.us.; Naples Daily News; FCC 2000 Annual Report; http://gtalumni.org, fall 99 magazine; St. Petersburg Times.
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