Casinos & Prison Labor – Strange Bedfellows

By Bob Sloan

On Tuesday March 19th, the Nevada Board of Prison Commissioners (BPC) met in Carson City to discuss an assortment of prison related issues.  Members of the BPC are: Governor Brian Sandoval, Attorney General, Catherine Cortez-Masto and Secretary of State, Ross Miller.

Issues of: (a) realignment of state Parole and Probation responsibilities with the Nevada Department of Corrections (NDOC; (b) compliance with the federal Rape Elimination Act; (c) certifying the Nevada State Prison as a Historical Site was on the agenda.  However, the topic which generated the most heated public discussion was listed on the agenda was: (d) a review of the prison industries program run by the NDOC.

As I’ve reported over the past two or three months, there has been an increasing amount of criticism of NDOC Director Greg Cox and Deputy Director Brian Connett over the operation of the state’s prison industry program.  This program operates under the name “Silver State Industries” and employs hundreds of inmates in various industrial programs.  Many of those prison workers are actually “employed “by private corporations and companies.

The need for discussion of prison industries during this meeting of the BPC came about due to a total lack of transparency surrounding the program.  The NDOC is reluctant to pull the veil of secrecy from prison industry operations that has hidden it from public and legislative view for years.  This was demonstrated in the meeting on the 19th by Secretary of State Miller when he was forced once again to request a list of industries being run by SSI.  AG Masto made the same request at the previous meeting in December and was assured by Deputy Director Connett that one would be provided at the following meeting.  At this time, no such list has been provided to the BPC by Cox or Connett.

Additionally, for more than two years SSI successfully hid from the BPC and Legislature the fact that Alpine Steel was not paying inmate and staff wages, lease payments, utilities or workers compensation payments owed to the state.  The NDOC also hid their lack of compliance with state statutes requiring notification to private businesses and labor before initiating new industries and took that one step further, by not even apprising the BPC in 2006 of the Alpine contract and creation of the steel fabrication industry.

SSI is operating at least half a dozen industries under the federal PIE Program – yet the Interim Finance Committee on Prison Industrial Programs was never made aware of the mandatory requirements of that program – or that those requirements also called for consulting private businesses and union officials.  They have not paid the inmate workers in the program comparable wages as mandated and have kept that secret from both the BPC and the Committee.

On March 8th the Agenda for the NDOC Budget hearing before the Ways and Means Committee listed several of the prison industries the NDOC claim were operating – but at least one of those was closed back in 2011.  So those excluded by this blanket of secrecy surrounding SSI operations includes the Nevada Assembly.  Unbelievably the one industry that has been closed for nearly two years is still being presented to the BPC as viable and operating and was mentioned as a positive in last week’s discussion.

The need for a review by the BPC in the first place was necessitated by this ongoing secrecy and lack of transparency exhibited by the NDOC, the Director and Deputy Director of Prison Industries.  It was this that caused several Nevada companies to complain the prison industry operation was being used to drive down wages in the private sector, reduce the number of available jobs for unemployed workers and argue prison based companies are competing unfairly against others in the marketplace.

At first it was a handful of steel fabrication companies that complained prison-based companies are competing unfairly against others in the marketplace by using – illegally underpaid – inmate labor to underbid on contracts.  But by the day of the meeting, another business owner named BIllow in an entirely different industry was identified as having notified the Governor and the NDOC for more than two years that his embroidery business had been compromised due to direct competition from prison industries.  This complaint had no impact upon that competition that continues to harm that man’s business in the private sector.

Responding on behalf of those complaining, former Senator Richard Bryan (D NV) proposed to the BPC that Nevada adopt the federal Prison Industry Enhancement Certification Program’s (PIE Program) mandatory requirements as prison industry regulations.  The PIE regulations require prison industries to contact and consult with labor groups, unions and private businesses to determine if there will be a negative impact upon sales, displacement of workers or jobs lost prior to commencing any new product line or industry.  They also require inmate wages set at the same rate as those performing identical jobs on the outside.

The state takes back most of the inmate’s earnings to offset the costs of incarceration, healthcare, feeding and clothing of inmates and for victim restitution and to repay fines or fees owed by the prisoner.  Senator Bryan’s proposed solution is simple and easily adopted since Nevada currently holds a PIECP Certificate issued by the U.S. Department of Justice and has six industries participating in the PIE Program.  These SSI industries already have to abide by the mandatory requirements in more than 50% of their operations. Making it applicable to remaining industry operations, would be easily accomplished and resolve the current issues.  This proposal had the support of many of those who spoke to the BPC last Tuesday on this and other issues. Prison industry operations nationwide have been increasingly scrutinized and widely reported.

Strangely, however, most labor groups and unions have remained silent about the impact – if any – upon their members or workers from competition with prison industries.  The meeting Tuesday broke that ongoing silence, with both the Nevada Executive Secretary Treasurer of the AFLCIO, Danny Thompson and Robbie Conway, Business Agent of Ironworkers Local 433 sitting down with the BPC and objecting to the ongoing competition from prison labor.  Others representing Nevada Law Enforcement, Parole and Probation workers and NDOC employees, also stated their support for the proposed adoption of PIE regulations.

To be fair, the one member of the Committee representing labor is Mr. Magnani of the Teamsters who is totally outnumbered by NDOC, legislative and business members.  His single voice and vote is constantly outweighed by the two members representing the NDOC (Director Cox and NDOC purchasing agent, Greg Smith) and seven more representing business and the legislature. Time and again the minutes reflect Magnani asked for materials, lists of industries in operation and on occasion voiced his opposition to suggested actions advanced by the NDOC (such as the current proposal for a recycling industry).  None of his requests resulted in Connett or the NDOC providing what he’d requested and his vote opposing actions proposed by the NDOC or SSI went against a majority of votes favoring the proposals.

Some members of the Committee would be absent for several meetings then return and cast a vote without any real understanding of what they were voting on – just that the proposals were favored by the NDOC.  So the suggestion presented by Connett last week to the BPC that the “advisory Committee” was a good representation for labor and businesses alike, was disingenuous and misleading at best.

Joining Union voices in opposition of making inmate labor available to private companies were a number of non-union businesses in a rare demonstration of solidarity.  Nearly a dozen union and non-union steel companies signed petitions to the BOPC objecting to the use of prison labor by Alpine Steel, Inc. as a means of underbidding them for steel construction projects in Nevada.  Alpine had been using inmate labor as a means of gaining an advantage over competitors since 2006.

The three petitions stated:

“Honorable Governor Sandoval, Attorney General Masto and Secretary of State Miller; We the undersigned owners of steel businesses in Nevada wish to voice our objection to competing against state subsidized prison industries in Southern Nevada.  Competing against prison labor reduces the number of jobs available in our industry and hampers our businesses from expanding.”

Signatories included; Southwest Steel, Tandem Industries, Vegas Steel, Inc., Southern Nevada Welding, A & N Custom Fabricators, XL Steel and Imperial Iron, Inc. The letter from Southwest Steel outlined the objection(s) best:

“Honorable Governor Sandoval, Attorney General Masto & Secretary of State Miller; As you all know too well, the construction industry in the Las Vegas valley is as competitive as it’s been in 20 years. With that being said, companies large and small have had to make radical changes; be it cutback of manpower, chase work in different markets or revisit our business model in its entirety, to maintain existence over the last 3 – 4 years has been a challenge. “As the Vice President of Operations for one of the larger steel companies in Nevada, I wish to voice our Company’s objection to competing against state subsidized prison industries in Southern Nevada. Competing against prison labor reduces the number of jobs available in our industry and hampers our businesses from expanding. Tom Morgan Vice President, Operations Southwest Steel”

The references to “state subsidized prison industries” come from the unpaid debt outlined above.  For several years Alpine was able to continue operations at the High Desert State Prison, working approximately fifty inmates for several years without paying any of the costs associated with keeping the industry operating. The state of Nevada has had to pay supervisory staff’s salaries, cover the utility costs of Alpine Steel and absorb the lost lease payments.  The total cost to Nevada’s Taxpayers? $438,000+ according to the forbearance agreement between the Attorney General’s office, NDOC and Alpine Steel:

forbearance excerpt

Only after complaints against Alpine Steel’s use of inmate labor was it discovered that the company had been operating basically without covering the costs of operations – which were ultimately passed on to Nevada taxpayers.   Silver State Industries had curiously authorized the steel fabricating prison industry to remain open and available to Alpine even as SSI was losing money throughout 2011 and 2012, essentially “doubling down” in the hope of recovering its losses.  Once the “debt” and gambling was made public, SSI was forced to close the steel fabrication industry and deny further inmate labor to Alpine.

The foregoing debt is to be paid off over another four year period, very surprisingly given the circumstances, without any interest going forward, unless Alpine defaults on monthly payments of $5,000.  An additional state tax lien was placed against Alpine Steel in January of this year for another $38,000 plus owed to the Nevada Department of Taxation.

The Alpine Steel story reveals that this company is responsible for the current problems and full media attention now focused upon Nevada’s prison industry program after the Associated Press, Bloomberg Business, Yahoo Finance and California media picked up this story and spread it as far as New Zealand and Australia.  The entire program and indeed, prisoner labor has now come under intense international scrutiny because of the complaints brought against Alpine Steel and the subsidization of its business using Nevadans’ tax dollars.

This has now resulted in the prison industry program being publicly brought to its knees while state regulations and statutes are under review for amendment because of the actions of Alpine Steel and the NDOC – which occurred without proper oversight.  With the steel fabrication industry shut down, Randy Bulloch has been transformed from a “partner” in the prison industrial program, to a “debtor” forced by the state to repay a huge sum owed to the NDOC.  He has not melted into obscurity with the stigma of having bilked taxpayers out of nearly half a million dollars, instead coming to every meeting involving prison industries and doing his best to fight on behalf of access to inmate labor.

Bulloch and Alpine are out of the prison industry program and business, yet surprisingly, Bulloch is now the “Poster Child” for prisoner labor.  He is now being used by the NDOC to argue on behalf of continuing the program!  Bulloch and NDOC Deputy Director Connett have been seen conferring and whispering before and after budget hearings and meetings – like co-defendants instead of partners in a failed business relationship – a weird sort of relationship with one owing the other nearly a half a million dollars and both continuing to work together.

Mr. Bulloch confided to me in an exclusive interview that he would once again use prisoners to fabricate his steel components…as long as he did not have to pay “comparable wages” to inmates, as was suggested by Senator Bryan’s proposal.  Yet there he was on Tuesday, arguing fiercely in support of the prison industry program, his lone voice supporting prison industries and opposing the views presented by unions, unemployed workers and private businesses.  One has to wonder – why?

Curiously, Director Cox and Deputy Director Connett assign no blame for their current circumstances to Bulloch or Alpine – perhaps that is why Bulloch continues to act as a spokesman on behalf of prison industries.  It will be interesting to see if Randy Bulloch continues his advocacy on behalf of prison labor in future meetings or hearings in the absence of any official business relationship with prison industries.

Nevada companies argue that aside from being forced to compete against already low wages paid to prisoners by Alpine Steel, they have had to pay proper taxes, utilities, leases and workers compensation…or be closed down by the state of Nevada.  This creates a situation whereby the State of Nevada is subsidizing an unfair advantage to Alpine. Now you can play online casino if you are from NJ, have a look at this casino site to view the licensed USA casino sites. This not only hampers any business expansion by free enterprise companies, it also reduces the number of jobs available to unemployed steel workers in Nevada.

Critics of the prison industry programs operated by SSI point to the Legislature’s Interim Finance Committee (the Committee) on Industrial Programs as failing in their duties of oversight.  They blame the committee for failing to protect businesses and workers against prison industry operations.

This committee is made up of Assembly members, Legislators, business owners or representatives and the one member representing labor (Mr. Magnani):

Members Assemblyman James Ohrenschall,

Chair Senator David R. Parks,

Vice Chair Senator Dean A. Rhoads

Assemblyman John Ellison

Bruce Aguilera, Las Vegas – (Vice President/General Counsel, Bellagio)

Michael Mackenzie, Las Vegas – (Principal, Operations Improvement Company)

Mike Magnani, Las Vegas – (Teamster/Union Representative)

Allen J. Puliz, Las Vegas – (Moving and Storage Co.)

James “Greg” Cox, Director, Department of Corrections

Greg Smith, Purchasing Division

Alternate Members

Debra Miller, Las Vegas

Scott Stolberg, Las Vegas

Richard Serlin, Las Vegas

While the arguments of a lack of protecting some businesses from unfair competition appear factual, other businesses represented on this Committee have profited handsomely from prison labor and industries.  In this undated article, NDOC Deputy Director, Howard Skolnik (who preceded Brian Connett) bragged about the prison industry, saying:

 “Skolnik explained, ‘I suspect that most people don’t know that anything they are using is made by inmates. More and more of it is. If you have been in many of our major properties you have seen a stained glass window, you have seen something that is manufactured in one of our institutions.’

Excalibur stained glass 2

They built all the original stained glass in the Excalibur; make casino mattresses, chairs for attorneys, and exclusive lines of clothing for airport retailers. They make award plaques, reupholster cars and rebuild water trucks for a local water company…”

Clothing - mattress pic

Those involved in the Casino industry in Nevada appear to have profited off of prison labor due to the manufacture of mattresses and custom stained glass products – as have clothing retailers selling to travelers and tourists passing through Nevada’s airports.

This “Committee” has been overseeing prison industries since the late 1980’s and every industry, product, contract with a private company and for determining the impact upon competing companies and workers, comes under their responsibility.  They had to approve the prison industry manufacture of the stained glass for the Excalibur and for the mattresses for casino/resorts…and the manufacture of clothing for sale to tourists.

Once the Committee makes their decision on new products or a new industry, that decision is supposed to then go to the Board of Prison Commissioners for final review and approval or denial.  In the recent case involving Alpine Steel, the BPC stated publicly that this was “an isolated incident when a contract was enacted without clearance from the prison board.”  Whether this was indeed an “isolated incident” or a practice of the Committee that became the standard over the years, is unknown.  Certainly the experience of Mr. Billow makes claims of Alpine Steel being an “isolated” incident difficult to swallow.

Throughout this story the elephant in the room remains the total lack of transparency and absence of independent oversight.  The Committee does not pursue any review of programs or industries submitted to them by the NDOC’s Deputy Director of Prison Industries.  Connett brings them a proposal for a new industry or product line and informs that he has determined this would be a viable industry or contract.  The only information obtained by the Committee is a one-sided presentation from the NDOC.  They perform no independent analysis, provide no notice to the public, labor unions of competing private businesses.  No opportunity is provided to any of these affected groups to attend a subsequent meeting where the proposal would be discussed.

Instead, as we now understand from both the NDOC Director and the BPC, the Committee has been operating as the final word on approving new industries.  The requirement of forwarding Committee recommendations to the BPC for final review and approval has been somehow eliminated.  The skipping of this important step results in the NDOC securing approval of an “interim” legislative body for new programs without notice or conference with the executive department.  The BPC has overall authority over the NDOC but in this manner they are kept out of the loop and the only safeguards provided to the public is a small Committee that has never performed their duties as required.

Even if the chain of review operated as required, this Committee would end up stamping proposals with their recommendation and forwarding it to the BPC – with a recommendation that was determined in the absence of any actual review, public input or notice.  Their determinations would be based solely upon the presentation made by the NDOC accompanied by a departmental analysis indicating the program and contract with a private company would be successful.

But, if as the BPC claims, the approval for the manufacture of products for the casinos, resorts and clothing retailers, water trucks, limousines and restoring classic cars, were ultimately not approved by them, they would still share responsibility with the Committee for lost jobs or contracts resulting from those operations.  They too have a duty to perform final reviews and failed to notice that new proposals were not being submitted.

The fact that the BPC is now attempting to address the issue and make corrections to ensure no more Nevadans lose jobs and businesses aren’t faced with unfair competition, is a benchmark.  It also highlights that the Committee has been shirking their duties for decades, approving whatever plans the NDOC and SSI put before them without vetting the company’s or the industries proposed by SSI.  They performed no independent or impartial reviews of such proposals, failed to determine factually the impact upon labor and other businesses before stamping each submission “approved”.  Again, one has to ask – why?

The proposal made by Senator Bryan makes good sense to most.  The argument against it came from NDOC Deputy Director Connett and Alpine’s owner, Randy Bulloch.  Both voiced their opposition to installing the PIE regulations as Nevada law or regulation, claiming that paying prisoners wages comparable to that paid on the outside, would remove the key incentive that attract businesses that exploit inmates  – and ultimately result in the loss of jobs to Nevadans.

Connett told the BPC, “I can’t pay prevailing wages.  If I have to pay prisoners prevailing wages, it would mean closing the industry program completely.”  That statement was more revealing than most who heard it realized.  In the PIE Program industries operated by SSI, prisoners are paid “minimum wage”, not “comparable” or “prevailing” wages as required.  SSI is required to consult with outside businesses and labor unions and groups prior to commencing any new PIE operation…and has not complied with these requirements either.

This explains why Director Cox and Connett have refused to mention or discuss the PIE Program when defending Nevada’s prison industries.  Nor has Connett explained his conflict of interest as head of the NCIA – which promotes prison industries and is tasked with ensuring compliance on behalf of the U.S. Department of Justice. Another duty Deputy Director Connett has failed to fulfill.

Apparently the NDOC and top officials fear the BPC or general public looking at the PIE Program’s requirements, will find that the federal mandates have been ignored as well as existing state statutory requirements. Regardless of whether Governor Sandoval and the BPC adopt the proposed PIE Program regulations as state reg’s, the Governor stated, “”Under no circumstances would I want prison labor displacing private sector jobs,” Sandoval said. “I don’t want a situation where private contractors are underbidding by subsidizing with prison labor.” This statement combined with assurances that no further prison industries will be opened without approval from the Board, indicates business owners and unemployed Nevadans are being offered at least a modicum of protection by the Governor and other members of the Board of Prison Commissioners.

In the next article I will report on my exclusive interview with Randy Bulloch and other interviews obtained while I was in Nevada for the BPC meeting.  I’ll also introduce Jacob’s Trading Company and owner Irwin Jacob and how both have attempted to build a unique empire using prison labor and factories.  JTC operates another of SSI’s prison industries in Nevada using female prisoners as a unique labor force and SSI has applied for funding to expand the facilities for JTC to put on a third shift and employ an additional 18 workers.  This discussion continues, while Nevada’s unemployed remains at near record levels and Governor Sandoval continues to inform that creating jobs is his number one priority.