Friday, January 28, 2000
AG Eyes Prison
By Loie Fecteau
SANTA FE -- Wackenhut Corrections Corp.'s
contracts to jail state inmates in its privately run
prisons might be illegal, Deputy Attorney General Stuart
Bluestone said Thursday.
The company also could face
civil penalties for sidestepping state procurement
rules, according to Bluestone.
"There is a question
of whether the contracts are even lawful," Bluestone
said during a meeting of a special prison advisory
group that includes eight lawmakers and Corrections
Secretary Rob Perry.
This could give the state
leverage in renegotiating the Wackenhut contracts.
Renegotiations have been recommended by a group of national
experts, Bluestone said. They could result in lower costs
to the state, better security at the private prisons
and more legal protections for the state, he said.
"The state can negotiate from a position of
strength rather than a position of weakness," Bluestone
Bluestone said the attorney general was
continuing to investigate the legality of Wackenhut's
contracts. The Florida-based Wackenhut has contracts worth
about $25 million annually to jail about 1,500 state
inmates in its prisons near Santa Rosa and Hobbs.
"The contracts were comprehensively reviewed by the
former Attorney General's Office, and they were approved
by all required state and county officials,"
Wackenhut spokesman Pat Cannan said Thursday.
the Wackenhut prisons opened, the Corrections
Department was forced to jail state inmates out of state,
mostly in Arizona and Texas.
"We would still have
over 1,000 inmates out of state were it not for these
Wackenhut prisons," Perry said Thursday in an interview.
"But we have to look at all the legal issues and take
them into consideration."
talk on the board. Our stock must have dropped
some off " the Manbok guaranteed low ".
notes on why the WCC bigwigs aren't buying stock at
these prices...they are worried about their own
salaried positions since major shakeups are in progress.
Maybe some good will come from the change, it can't get
any worse, can it??
press, whether it is in the legal arena such as
with AG's discussions with WHC's recent news in New
Mexico or the old news of CRN's in PA, these are
typically driven by either union activity, opposing
politics or "technical" issues that will be fixed with
tweeking a contract or legislation. But the bottom line is
that there is a serious prison overcrowding problem,
the gov't cannot come close to keeping up even with
the "new" inmates each year, much less fix the
current overcrowding, and the privates are a cost
effective solution for all these issues.
So while I
agree that I wouldn't use the phrase "game, set,
match", I would say that the "game will be won" for all
the privates, and not to get too worried about the
occassional bad press, because economics and the "essential"
nature of this industry will always prevail.
I often use coloful language to make a point. To
be more specific, I think in most instances,
lawsuits, or threats of lawsuits are a common occurrence
for most companies. Indeed, in the sector WHC is in,
I believe the company has made adequate
arrangements via insurance and contractual clauses to prevent
lawsuits, class-action or otherwise from becoming a
"train-wreck" for the company. In addition, in most areas, the
governing authorities are not anxious to take an active
adversarial stance against companies like WHC for the simple
reason that they do not wish to discourage private
sector participation in an area that they themseleves do
not want to manage. They also do not want to
encourage a proliferation of lawsuits from the inmate
population, that via precedent would ultimately come back to
haunt them. The real thrust of my argument is that
although this may represent negative short-term news for
the company, my belief is that these types of events
have been properly planned and reserved for in WHC's
I'm glad you post this information
to the board, all news, good or bad neeeds to be
recognized and assessed by investors. Everyone can then draw
their own conclusions and make their own decisions. My
voluntary disclosure is that I am long WHC and think it
respresents a good value at current price levels in spite of
some negatives in the current environment. I don't
mean to say that these suits mean nothing, but rather
I believe their long-term impact is discounted in
the current price and that their long-term effect on
the survival and profitability of the company is
Anyway, keep up the good work. I invest in companies to
make a profit, I don't become emotionally attached and
have no axe to grind as a cheerleader or detractor.
Time always reveals if my positions are good or bad,
and I move on accordingly. Talk to you later.
In a report issued last week, an independent
board of inquiry said the Wackenhut contracts are "in
dire need of renegotiation." The board was hired by
the special advisory group in September to
investigate recent prison violence and prison privatization
projects in New Mexico.
The inquiry board's report
said Wackenhut's contracts "may be unparalleled in
their complexity" because the state does not contract
directly with Wackenhut but with Lea and Guadalupe
counties, where the Hobbs and Santa Rosa prisons are
located. The counties then contract with Wackenhut to
house state inmates at the Hobbs and Santa Rosa
The report said the convoluted contract
process was done to get around the state procurement
code, which would have given the state more say over
the way the prisons were built and their operations.
The state code does not apply to county jails.
"If these contracts were a mere ruse to get around
the procurement code, there are some real potential
remedies that the state can pursue, including civil
penalties," Bluestone said.
The inquiry board report
said Wackenhut has "a tremendous advantage" in
negotiations with the state because the Corrections Department
does not lease the prisons and instead pays Wackenhut
$53 per inmate per day, including medical costs.
Because the contracts contain a 60-day cancellation
clause for any party, Wackenhut could kick out the state
inmates at any time.
"If the state doesn't play
ball, Wackenhut can take its facility and go home," the
report said. "This creates a dangerous situation for the
Sen. Bill Payne, R-Albuquerque, told
Bluestone he is not sure how much leverage the state has
since "we were complicit in those contracts."
Bluestone said the inquiry board report mentions two 1997
letters from the chairmen of the Lea and Guadalupe county
commissions to then-Attorney General Tom Udall's Office
"confirming their county's intent to house all of its inmates
in the proposed facilities." Udall's office and the
state Department of Finance and Administration signed
off on the Wackenhut contracts.
inmates have never been jailed in the Wackenhut prisons,
"There may be material
misrepresentation of fact to the prior attorney general, which may
raise legal issues," Bluestone said.
Wackenhut's contracts "expressly state that the counties may
place county inmates in the facilities at any time at
an agreed upon rate."
"To our knowledge there
was no misrepresentation at any time," Cannan said.