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Insider dealing dominated early years of prison privatization

PROFIT, POLITICS, PAIN - Huge profits and sweet setups for Wall Street darlings; rape, squalor, murder in lockups - and the price for Florida taxpayers

In 1993, Charles Thomas was Florida’s go-to man on private prison issues.

While he didn’t singlehandedly write the state’s law on private prisons, “I certainly had a fairly heavy hand in it,” said the nationally known University of Florida criminology professor.

At the time, Thomas’ academic project at UF, largely favorable to the private prison industry, was partly bankrolled by prison businesses. And though Thomas didn’t own stock in a private prison company, that would change shortly.

All the while, Thomas was consulting for Florida’s private prison oversight panel, the Correctional Privatization Commission.

The CPC was Florida’s first major effort at ensuring private prisons got built and taxpayers got promised savings. And it made certain the state’s Department of Corrections, widely believed to have a bias against private prisons, didn’t exercise much control over its private-sector competition.

It was a flop.

Ultimately, it led to splitting control of private prisons between two state agencies, a two-headed beast that remains in place today. It’s a unique approach — no other state does it — and is directly traced to the failures of the CPC, which was plagued by insider dealing, wasted money, sweetheart deals for private operators and political intrigue.

The governor-appointed panel got off the ground in 1993 after lawmakers complained DOC was dragging its feet on privatizing prisons.

Turmoil followed.

Auditors found that between 1997 and 1999, Florida shelled out $263,000 to reimburse GEO for its corporate tax bill, part of its deal with the state. But GEO owed no corporate income taxes in 1997, and only $148,534 in 1998.

A state report concluded Florida lost an estimated $12.7 million because the commission did not do its job. State officials believed the two companies operating Florida prisons, Corrections Corporation of America and GEO Group Inc., owed the state millions as a result.

Among the cited problems: CCA got $645,000 a year for repairs at one prison. The actual costs averaged $140,000. GEO billed the state for non-existent employees. The company cited an accounting error. But because it appearedFlorida had underpaid GEO in other areas, the state sought no refund.

Ultimately, a GEO vice president said that state workers were “humbled and embarrassed” after GEO disproved many of the report’s criticisms.

During much of this time, Mark Hodges headed the commission. In 1997, he and his wife went to Hawaii while he was on the clock. A prison company picked up the roughly $1,800 tab for travel, food and a Maui hotel.

Hodges also conducted a side business, consulting to other governments about private prisons.

Some of Hodges’ business was done on the commission’s time, using CPC staff, employees and materials. Most notably, Hodges billed a city $7,500 for a copy of a state prison management manual that would be free to anyone under Florida’s public records laws.

Hodges stepped down in 2002. The state ethics commission fined him $10,000.

The next director embezzled more than $224,000 from the CPC, most of it to buy houses for himself and his girlfriend. Alan Brown Duffee pleaded guilty in 2006 to wire fraud, mail fraud and money laundering.

About that time, the CPC swore in four new members with a new idea: Make the private prison companies rebid for business.

The companies went on the attack, said Tallahassee businessman Bob Ryals, a former commission member.

“They were almost insulted by the fact that we would even question them,” he said. “They sent their big dog lawyers down to intervene, and they had a few speeches to make.”

They made speeches to more than the commission, said Vero Beach lawyer Sam Block, another commission member.

“They went behind the scenes,” he said. “They spent a lot of money to get the ear of the governor and then the leadership of the Legislature.”

CCA plowed $111,000 into state campaigns over the next two years. In the previous three years, it had contributed just $3,635. GEO put $250,000 into the election cycle.

The Legislature unexpectedly gave GEO and CCA 1,086 more prison beds.

That was all the more surprising because in separate years, private prisons failed three times to meet savings goals and in a fourth instance saved no money at all. Two failed to provide educational classes required by contracts. One ran afoul of state and federal laws on education and substance abuse programs.

The commission stumbled, too. Early on, GEO and CCA had won their original bids to run state prisons despite having the first and third-highest costs of a dozen bidders. Prisons weren’t monitored by the commission for months at a time, in apparent violation of state law.

That wasn’t CPC’s only trouble. Added to the scandals involving its directors was Thomas, who secured a $3 million fee from a CCA company while consulting for the CPC on private prisons. He was fined $20,000 by the state’s ethics commission, at the time the largest fine in its history.

But, Ryals said, commissioners were also asking questions about training, recidivism and of course, contracts.

In 2004, then-Gov. Jeb Bush had had enough. That January, he called for disbanding the panel, days after CCA dropped a bid protest.

Lawmakers defunded the CPC.

Both prison companies got extra beds.

Control of contracts was handed off to the Department of Management Services, even though that agency’s inspector general initially said it was not equipped to deal with prison issues. The Department of Corrections would be relegated to overseeing security, inmate transfers and cost estimates.

And the two-headed beast was born.

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