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  • mcprison mcprison Jan 28, 2000 5:54 PM Flag

    Illegal contracts in NM? part 1

    Friday, January 28, 2000
    AG Eyes Prison

    By Loie Fecteau
    Journal Capitol
    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."

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    • <EOM>

    • 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
      business model.

      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.
      However, county
      inmates have never been jailed in the Wackenhut prisons,
      Bluestone said.
      "There may be material
      misrepresentation of fact to the prior attorney general, which may
      raise legal issues," Bluestone said.
      Cannan 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.

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