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More Businesses Victimized by Nevada Prison Industries

More Businesses Victimized by Nevada Prison Industries

By Bob Sloan

– Other Business owners complain of unfair competition –

When researching material for the Study of Nevada’s Prison Industry Program (released in January), I discovered that in addition to several steel fabrication companies, several other industries and manufacturers have come forward saying they’ve also been compromised by Nevada’s prison industry.  These businesses include; embroidery (Carson City), truck manufacturing (water trucks for construction use), auto restoration and repairing (classic cars) and companies involved in repackaging and/or resale of returned or refurbished goods.

In addition to those industries being victimized, any Nevadan that registers a motor vehicle, trailer or semi that requires a license plate is also being forced to contribute to the profits of the prison industry.

Under a contract with the Bureau of Motor Vehicles, the prison industry receives $.50 for every license plate “manufactured” and distributed in Nevada.  This fee appears to be in addition to the current contract between the NDOC prison industries and the BMV that sets pricing for the production of license plates.  Wording of AB 473 makes the payment mandatory and the money deposited to a dedicated Prison Industry Fund.  Vehicles requiring two plates (front and back) are charged an additional $1.00 per vehicle per year.

Sounds like small change for each vehicle owner – $.50 or $1.00 but with an estimated 2 million vehicles registered annually in Nevada the prison industries is expecting to receive a continuing windfall from this amended legislation.  When added to debts owed by private companies partnered with prison industries (2012 Accounts Payable and Outstanding were in excess of $600,000) the state owned and controlled “company” Silver State Industries continues to reap benefits from taxpayers.  They claim that SSI is self-sufficient and relies upon no tax dollars or appropriations for their operations, but what’s been discovered refutes that claim.  Could it be the license plate fees paid to the prison industries will be used to offset industry losses – at the expense of taxpayers who register their vehicles?

An unanswered question…since most consider registering their cars and paying for licensing a state “tax” for owning a vehicle, are Nevadans actually paying a $.50 cent tax per plate to the Prison Industries?

History

The story of Alpine Steel, LLC and their partnership contract with Nevada’s NDOC industries – Silver State Industries – has been in the news for months now.  When competing companies discovered Alpine had been using prison labor provided at or below minimum wages, they complained to the Governor and members of Nevada’s legislature about unfair competition.

Alpine had been contracting with the NDOC since 2006 to use inmates as a workforce in fabricating structural steel used in private sector construction jobs performed by the company. Due to the low labor costs, Alpine was able to respond to RFP’s and underbid all others for projects.

As the story evolved other issues began to rise to the surface identifying separate but factual concerns; unpaid wages to inmates and NDOC staff, unpaid utilities, unpaid taxes and unpaid lease payments by Alpine Steel.  In the end it was determined that Alpine owed the state nearly half a million dollars in unpaid operating costs.  Under the contract between NDOC and Alpine, there were no requirements for the posting of a performance bond or personal guarantee of payment should the corporation default.

The additional public admittance by NDOC Deputy Director Brian Connett that Alpine Steel had not been vetted for past financial or business practices prior to or during the contract(s) period brought to light that his prison industry operation had bypassed standard business practices when developing contracts with Alpine.

Hearings were held before Nevada’s Ways and Means Committee and the Board of Prison Commissioners (BPC) on the matter.  NDOC Director Greg Cox and Deputy Director Connett were questioned about the debt owed to the state by Alpine, on entry into the Alpine contract without any approval from the BPC and failures of consulting with private businesses and labor groups prior to initiating the steel industry operation.

Former Nevada U.S. Senator Richard Bryan came to the table at these meetings and proposed changes to protect Nevada’s workers, private businesses and protect inmate workers from further exploitation.

Proposed changes to Prison Industry Statute(s)

Apparently In response to concerns voiced by Governor Sandoval and his BPC and the proposal by Bryan, the Nevada Senate has proposed amending the state’s statute on prison industries through SB 478, filed on March 25th.  A hearing before the Senate Judiciary Committee is scheduled for Wednesday April 10th to discuss the proposed changes to NRS 209.

One important change to the statute would require any company wishing to participate in prison industry work programs post a bond to ensure situations such as that with Alpine do not reoccur with the state owed hundreds of thousands of dollars.

Other changes tighten the requirements for consulting private businesses that would be impacted by proposed industry products or services – and for consulting with unions and labor that may be adversely impacted by the labor of inmates. Costs associated with these consultations are borne by the company and not paid for with tax dollars and all new proposed industry or products will vetted by the Interim Finance Committee on Prison Industrial Programs.  Once that committee makes a recommendation, the proposed project is sent to the BPC where the Governor, Attorney General and Secretary of State will make the final decision.

Necessity for these changes

Thomson Water TruckIn addition to the Alpine prison operation, investigation revealed that a previous industry run in partnership between SSI and a private company resulted in the closure of at least one competing private manufacturer.  This was a project involving Thomson Equipment Company and SSI.  Thomson imported tanks and pumping equipment from foreign manufacturers and brought the materials to their prison industry facility where inmates assembled the Water Trucks.

Everyone has seen these trucks along highways and large construction sites where they’re used to spray water to keep dust down during construction.  A company that built the same trucks there in Nevada was forced to close those operations in 2006 due to the Thomson products being distributed through auctions and other outlets for as much as 30% less than the competing company’s pricing.  Workers were laid off and the company closed the division that manufactured the same products Thomson had begun selling for less.

“I either had to pay my workers much less or stop my operation to be competitive,” the company owner told me during an interview.  “I chose to close the operation down and not make any more water trucks.  With so many Thomson products dumped on the markets, I could ill afford to pay prevailing wages to my employees and continue to be competitive.

“I had no idea that those Thomson products were made using inmate labor.  I heard they were importing components from Asia and attributed the lower pricing to that.  If I had known at that time that I was forced to close and lay off good workers because prisoners paid minimum wages were used to undercut my pricing, I would have protested to state authorities.  I don’t know if protesting would have stopped it because from what I’ve read in the paper, the state is promoting prison industries.”

According to minutes of the Prison Industry Finance Committee, Thomson was bought out by a foreign conglomerate out of New Zealand and Australia.  They changed the name of the company to Silver Line Industries and began to import a huge number of tanks and other equipment from Hong Kong and elsewhere which the inmates of Nevada would transform into new truck products.  They stopped the prison operation a few years ago, but not before that operation caused the closure of competing Nevada businesses and put several workers on unemployment.  While the company put out of business by the prison industry paid prevailing wages to their workers, Thomson/Silver Line paid inmates minimum wage.

Shelby AmericanI interviewed owners of several car restoration companies in Nevada over the past couple of months.  They advised they were basically unaware of the car restoration industry run by SSI and had no idea they were competing against prisoners doing the same work on privately owned vehicles.  When I asked them about Shelby American’s use of inmate labor on the Shelby Mustang products, none of those interviewed had any inkling inmates were involved in that operation.  One said he had several acquaintances working for Shelby out by the race track in Las Vegas who assembled the Shelby line – and thought they were also manufacturing the parts used in the production.  A 2000 CNN article on Shelby American and a Wall Street Journal article about the restoration of a number of cars owned by private collectors was shown to one restorer.  The Shelby article revealed:

“Shelby American, manufacturer of the Shelby Cobra sports cars, pays Deere and a dozen other inmates at the facility an hourly wage to build every part of the car except the engine. Other workers at the Indian Springs penitentiary work for other private companies or the state restoring cars, beveling and staining glass windows, upholstering chairs and making bed mattresses.

”After five years of loyal service to his employer, the 63-year-old Deere earns less than $8,000 a year in his full-time job, gets no vacation or sick pay and is unlikely to ever be promoted.”

The WSJ story contained this information:

“The cases in question are cars—very cool vintage cars. They come in rough and battered, and inmates restore them to their original glory. It may be the penal system’s most unusual workshop…

“The auto shop’s present inventory includes 32 cars in some stage of restoration. Among them: two 1960s-era Corvettes, two 1960s Mustangs, a 1959 Thunderbird, a 1965 Malibu, a 1935 Chevy pickup and two 1969 GTOs.

“All kinds of customers bring their cars in. Barry Becker, a Las Vegas realtor, has had nearly a dozen cars restored by prisoners.

‘I just keep buying stuff I don’t need,’ he says. Among his prison-rescued treasures are a 1937 Dodge sedan convertible, a 1937 Dodge “Woody” wagon, a 1956 Nash Metropolitan and a 1941 Plymouth pickup truck

“A Las Vegas couple recently agreed to pay the prison $19,000 for a re-do of a 1973 Datsun 240Z, with a V8 engine installed. “Mom’s going to go to the store really fast,” says the shop’s director, Carl Korsgaard.

“Inmates, including a few murderers and lifers, have been trained to do everything from sanding steel bodies down to sewing upholstery. One upholsterer was born in Cuba, where Mr. Korsgaard believes he absorbed his countrymen’s talent for keeping vintage U.S. vehicles on the road.”

Corvette restored by SSIThe business owner exclaimed, “How can the state openly promote a program such as that?  By using inmates to restore or repair privately owned vehicles, they are taking work away from hard working business owners and our employees.  I haven’t committed a crime…my workers aren’t criminals and we need work to put food on the table and pay our bills, raise our kids.  How can the state justify doing something like this that they know hurts business owners like me and dozens of others trying to make a living restoring cars?”

I couldn’t honestly answer his questions.

In 2011 the owner of Billow’s Embroidery in Carson City, Nevada began protesting to the NDOC, SSI and ultimately to Governor Sandoval that his company was losing business due to direct competition with a prison industry doing embroidery.  His complaints included the fact that he had to pay fair wages, benefits and provide insurance for his workers, while the prison industry paid no benefits, insurance and only paid minimum wage.  This made their products and service pricing substantially less than Mr. Billow was able to compete against.

Mr. Billow was invited out to the SSI Embroidery operation and given a tour of the prison industries located at the prison.  He was asked to stop complaining about unfair competition as training of prisoners was important and necessary.

During the tour Mr. Billow described as a “dog and pony show” he was shown the prison’s printing industry shop.  Mr. Billow observed that inmates were being trained on and using antiquated AB Dick offset printing equipment.  He stated, “I learned printing while in school on that equipment decades ago.  I couldn’t understand how training inmates on such old equipment would prepare them for employment in the printing industry upon release, when they would know nothing about the digital and advanced printing machinery used in the private sector.”

Mr. Billow felt that the “tour” he was given was conducted as a way of demonstrating that he was up against a huge industry run by the state and that to continue to complain would be useless.  He said he felt that it was an effort into intimidating him into silence.

Jacobs Trading Company

bigjacobsAn ongoing industry run at the women’s prison facility operated by SSI, is a partnership with Jacobs Trading Company.  Jacobs is a national company that specializes in buying, refurbishing and repackaging returned or damaged products from retailer such as Wal-Mart and Best Buy.  Female prisoners are paid minimum wage for their labor.

The Great Recession was a boon for Jacobs Trading Co., the liquidation company in Hopkins MN. that bears the name of Irwin Jacobs, one of the state’s best-known businessmen. The company deals in overstocks, scratch-and-dents and returned merchandise and saw operating income rocket to $14 million in 2009 from $5 million in 2008.  Jacobs relies heavily upon prison labor for their repackaging operations.

Inmate workers receive the materials and repair if necessary and then remove all labeling, advertising and UPC coding that identifies the original manufacturer or retailer.  They then repackage and ship the refurbished products all over the country.  Recently Jacobs demanded SSI provide the money to expand their prison operation at the women’s prison.  Jacobs said they need another loading dock in order to put on a third shift and employ another eighteen female prisoners.

Rather than “request” the NDOC or SSI provide the new construction, Jacobs demanded that they do so, and threatened to reduce their operation to a single shift and lay off inmate workers if the state run department did not meet their demands.  Some refer to this as sharp negotiating others would call it a form of extortion.

Research revealed that Jacobs Trading Company has created an “empire” within the repackaging industry in the U.S.  Currently they operate in prison industry operations in at least six states.  Consider the following discussion that occurred fifteen years ago in reference to Jacobs Trading’s operation in Minneapolis – and legislation proposed to favor Jacobs’ use of inmate labor:

“Corrections officials are quick to cite a statewide labor shortage to justify deals such as the Jacobs bill. Employersare having trouble finding people to work, they point out.

But Neuenfeldt shoots back: “If Jacobs wants to bring 50 jobs to Wisconsin, it would be good to open up an operation in central-city Milwaukee or somewhere else in the state where we have high unemployment.

“And I would think that the business community, especially small business, would have some concern over businesses set up using prison labor, because if this guy pays a dollar an hour it’s pretty hard to compete with that,” he adds.

If the Jacobs legislation passes as currently written, Jacobs will indeed pay inmates $1 per hour, skirting a federal interstate commerce law that requires that prisoners working for commercial ventures be paid prevailing wage.

Federal law only applies to the production or manufacturing of a product,” says Steve Kronzer, director of Badger State Industries. “If they started repairing then it would be considered manufacturing, and then it would come under the federal law.”[1]

The Jacobs plan demonstrates the enthusiasm with which the Department of Corrections is expanding into the private sector–even at the expense of profits. “The whole reason for doing this thing is so the state gets money back to cover its losses for boarding these people,” says Neuenfeldt.

But, the labor rep says, some basic math shows that the savings would be minimal, possibly nonexistent.

The 50 inmates involved would be paid $1 per hour for 1,950 hours. This would cost Jacobs $97,500 a year in wages. Thus, each inmate would be paid about $2,000 a year. Fifteen percent of that would go to the corrections system, and another 5% would go to the victim-restitution fund. The state’s 15% comes to $14,625, plus an estimated $8,000 savings from wages the state would no longer pay the inmates who would otherwise be employed in other ventures. So the state gain would be around $27,525.

But the state would also have to pay for a supervisor, which the AFL-CIO estimates will cost $17,800. This brings the state’s take down to $9,725. Subtract the costs of facility adjustments and security measures, and “the Jacobs bill could even be a money-losing proposition,” says Neuenfeldt.

So why do it?

“You have to understand the mentality that goes on within the prison industries itself,” says Nick George, director of government relations for Wisconsin Manufacturers and Commerce. George served on a prison industries advisory committee that discussed the governor’s budget proposals.

“In prison industries, there is a mentality, and this is not unique to Wisconsin, of wanting to see their industries grow,” he explains. “They have a number of advantages over private industry, and a lot of the individuals who run these prison industries have an empire-building attitude.”

Several of these operations are identified as participating in the federal Prison Industries Enhancement Certification Program (PIE Program).  This program allows companies to use inmate labor to manufacture products sold and shipped across state lines – but only where the company pays prevailing wages to the inmates, consults with private companies performing the same manufacturing or services and with labor unions, prior to start-up of the industry.

While the Jacobs operation in Nevada is listed as a PIE Program participant, the inmates are not paid comparable wages.  They receive minimum wage or less for all job descriptions, regardless of years of experience or skill.

In other states Jacobs has failed to register these operations as PIE though the products received at those facilities cross state lines and finished products are shipped back across state lines.  Here is a listing of some of those current or former Jacobs operations:

  1. Nevada – Southern Nevada Correctional Center.

  2. Oklahoma – Eddie Warrior Correctional Center (not listed as PIE).

  3. Idaho

  4. North Dakota

  5. Indiana –  Bunker Hill,  and Rockville, Indiana

  6. Minnesota

Currently Nevada is the only “PIE” operation listed for Jacobs…yet as shown, they are operating in Oklahoma without listing it as a PIE industry.  In each of the foregoing states inmates are used as the sole workforce for Jacobs’ repackaging operations.  Jacobs does not use non-inmate labor in their repackaging operations.  Looking at the map of distribution centers operated by Jacobs, one finds that they are placed in areas where the prison industries are operating.  In a couple of those industry operations, Jacobs has acquired exclusive contracts with Corrections Corporation of America to use inmate labor and facilities under control of this private prison company.

Jacobs Trading and its owner, Irwin Jacobs have been in the news in a similar manner to Alpine Steel and owner Randy Bulloch over questionable business practices.  In 1997 Jacobs retail operations were sold to Petters Group Worldwide.  After failing to make payments for their purchase, the stores were ultimately shut down.

(It is interesting to note that Tom Petters, whose company had purchased the retail operations from Jacobs Trading, was recently convicted of multiple felony counts as part of a $3.65 Billion Ponzi scheme.)

In 2010 Irwin Jacobs came under intense scrutiny over investments made in a top boat company, Genmar.  It appears Jacobs urged investors to put money into Genmar before the company wound up in bankruptcy.  In the two years preceding that collapse, Jacobs and some of his investors received substantial “dividends” from Genmar as it was financially foundering.

Once the bankruptcy was final, Jacobs and one of his investor friends began buying Genmar back for pennies on the dollar, vowing to make it one of Jacob’s “best acquisitions ever.”

Corruption in Prison Industries

I mention Jacobs and the appearance of manipulating businesses and use of inmate labor, because a means of capitalizing off cheap labor permeates all the companies involved in prison industries.  Alpine Steel revealed that aspect to Nevadans recently.  Previously I wrote about U.S. Technologies that was formed for the specific purpose of using inmate labor in the PIE Program to provide a labor advantage to numerous companies acquired by U.S. Technologies.

Like Jacobs, UST formed exclusive contracts with CCA and/or Geo Group to allow them to operate at all facilities owned or managed by these private prison companies that have prison industry operations.

Board members of UST included many top names of the politically and financially powerful in Washington; George J. Mitchell, William Webster, General Alexander J. Haig Jr., etc.  In 2006 UST went belly up after the Chairman was indicted for embezzling over $20 million in investor funds.  The SEC devalued UST stock and the high profile Board members ran from any connectivity to UST as quickly as possible.

In Florida the prison industry corporation PRIDE came under fire for creating nine spin-off corporations to take advantage of the PIE Program and turn huge profits.  The entire executive staff was forced to retire once the scandal broke but that didn’t save four private companies that had been taken over entirely by PRIDE, putting the legal business owners into bankruptcy.

Beyond the cheap low cost labor, is the ability to secure equally cheap leases on state owned manufacturing facilities and as in Nevada, avoid paying the Modified Business Tax on employees.  Alpine secured a lease of 20,000 square feet of manufacturing space from the NDOC.  The contract charged Alpine $.26 cents per square foot for that property.  The average cost per square foot for comparable space in the private sector is $.68 cents a square foot.  Which means Alpine enjoyed a savings of $95,000 in operational expenses every year.

This “savings” to Alpine Steel reduced the potential revenue stream to taxpayers – for the lease of public owned facilities – to the tune of that same $95,000.  When we calculate savings realized by Alpine over the past 7 years that this contract with SSI existed, we easily determine that taxpayers lost more than $665,000 in potential revenue.  Between this loss of potential income and the actual amount owed to the state by Alpine Steel in unpaid debt and unpaid taxes, Nevada is out more than $1 million dollars.  Over the next four years Alpine’s owner has agreed to repay $438,000 owed in the unpaid debt without additional penalties or interest…but the income lost under the leases is gone and there is no provision for Alpine to repay the additional $38,000 owed to the Dept of Revenue for unpaid state taxes.

That $1 million dollars represents a huge loss to a state with high unemployment rates, a declining tax base and increasing government costs.  Nevada in effect subsidized one company’s operations to the tune of a million dollars over half a decade while the competing companies lost income and the ability to hire new workers due to that subsidization.  To me this is beyond unfair, it borders on the very definition of corruption.

Additionally, Jacobs Trading, JT Wholesale, the Embroidery industry and other companies that have left SSI; Shelby American, Thomson Equipment, etc. all have/had similar sweetheart leases on publicly owned facility spaces and inmate wage rates.  How much more in revenue was denied to Nevada’s taxpayers from these leases?  How many more Nevada workers were not hired because inmates were used instead?

So there is a lot of incentive for companies to partner with state run prison industries.  The temptation to realize huge savings off cheap labor, low cost leases, tax breaks, and no requirement to pay worker benefits is too attractive to companies already looking desperately for an “edge” in their respective markets.

When government administrators “help” by increasing the incentives for companies to bring their manufacturing and labor needs to prison industries, it further depresses the normal employment and sales markets.  Leases to the likes of Alpine Steel were made without approval or even review by the Legislature or the Executive branch of government.  The wage rates paid to inmates are likewise without review or question…all leading to the current situation in Nevada.

When we realize the numbers of industries, businesses and unemployed workers who continue to be harmed because of prison industry operation we begin to understand why Nevada jobs are becoming scarce, why private business sales are suffering and why new businesses are finding it more difficult to compete against a captive workforce supported by state subsidized operations.

The Senate Judiciary Committee is scheduled to discuss the proposed changes to Nevada’s prison industries this coming Wednesday.  I would encourage those who think they are or may be adversely affected by competition in your industry by prison labor, to attend and use this opportunity to voice your opinion.



[1] This is the loophole that Senator Bryan’s proposal to Governor Sandoval would close.  This would protect Nevada employers and workers before protecting workers and businesses in other states.  When SSI’s prison made goods are sold in Nevada, there is no protection to business or workers, requirements to consult with labor or competitors.  Only when SSI products leave the state, are workers and businesses in receiving states getting protection by requiring the inmates are paid comparable wages and consultation with labor was fulfilled.

Voters Legislative Transparency Project Presents First 2013 “Transparency Award”

Voters Legislative Transparency Project Presents First 2013 “Transparency Award”

Assembly Speaker Marilyn Kirkpatrick

On March 19th VLTP issued the organization’s first ever Transparency Award to Nevada Assembly Speaker, Marilyn Kirkpatrick (D-Clark Co.).  This award was presented to Speaker Kirkpatrick by one of VLTP’s Nevada members last week.

1st VLTP Transparency Award to NV. Speaker, Marilyn Kirkpatrick

These awards are reserved for individuals who help make proposed or existing legislation transparent to their constituents.  Speaker Kirkpatrick has questioned the use of inmate labor by Nevada’s prison industries (Silver State Industries), asking probing questions as to whether the inmates are in fact being “trained” or whether the program is being operated as a means of exploiting prisoners for their labor on behalf of private companies.  VLTP was honored to issue the very first of these Transparency Awards to the Nevada Speaker in response to her efforts of protecting the workers and private businesses in Nevada from unfair prison labor practices.

Several companies have signed petitions to the Nevada Board of Prison Commissioners objecting to unfair practices involving the use of prison labor and NDOC facilities to manufacture products used in the private sector to allow certain companies the ability to underbid and secure lucrative contracts.  The companies operating out of the NDOC’s prison industries pay minimum wage or less to the inmate workers, an hourly rate far below that of what is paid by competing companies for labor in the private sector.  Additionally the complaints included a provision allowing leasing of state owned facilities to these prison based companies that are far below the Nevada average for lease of comparable manufacturing space.

Currently the BPC is investigating all actions involving Silver State Industries and the NDOC for non-compliance with state requirements of contact and consultation with private companies and labor groups and unions prior to initiating new industries, contracts or development of new product lines.  The BPC review includes current leases and industry contracts to determine what impact those may have upon workers, unions and Nevada’s unemployed.

Pictured below as she exited from one of several hearings, Speaker Kirkpatrick,  holding the VLTP Award, stated that receiving it,”was a bright point is her otherwise hectic day.”

Speaker Kirkpatrick with VLTP award (2)

We at VLTP look forward to presenting more such awards throughout the remainder of 2013 and beyond, as we and those deserving such awards continue to pursue full disclosure of legislation and laws that are/were written and proposed on behalf of special interest groups and lobbyists in pursuit of profiting at the expense of taxpayers and the general public.

 

Casinos & Prison Labor – Strange Bedfellows

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.

Will Your Job Be Reshored To A Federal Prisoner?

By Justin Rohrlich Mar 12, 2013 1:21 pm

From Minyanville…

“The good news for the jobless? US industry is now in the throes of a “reshoring” trend…

“The bad news? The Bureau of Prisons is angling to have as many reshored jobs as possible filled by federal prisoners.”

Journalist Justin Rohrlich and VLTP Executive Director, Bob Sloan have begun a project to fully expose the “new” face of prison industries and exploitation of prisoners, America’s workers and “genuine” small businesses.

images (7)

   PI workers, folsom state prison Oregon Prison Ind. Photo Inmate-Labor

 

This article presents the dilemma of a President and part of his administration working to put Americans back to work, while another part of that same administration is actively working to remove jobs from those who still have them, and put them in prison – the jobs, that is.

Unfortunately we are not describing the plot in a Grisham novel…or providing readers with a Roddenberry style “America in 2525” sci-fi mini-series…no, what is occurring now – right now in America – is a push by manufacturers and service providers for a workforce that can be made to work for pennies on the dollar, has no collective bargaining rights by law, is prohibited from unionization and requires no health or medical insurance, no paid vacations, has no representation in government and most importantly, the rest of working America has no sympathy for.  This workforce consists of the more than 2 million men and women incarcerated in state and federal prisons.

Unbelievably it is our Congress and a Federal Prison Industries board appointed by the President who recently opened up federal prison facilities and the labor of prisoners to well connected business owners.  Production lines will be assembled, prisoners assigned to work in newly built factories constructed by a private corporation wholly owned by the United States government.

We’re told by our Lawmakers and government officials that the purpose of these factories is for training of the incarcerated to make them better Americans, give them skills so they can leave prison and secure employment that lessens their desire to return to prison.  We’ll also be assured that these prisoners are not really taking jobs from our communities…the products they make will only represent a tiny segment of any consumer market.  Problem is we heard all this before thirty years ago when there were fewer than 5,000 prisoners working in less than 100 factories across the U.S.

Today there are more than 1,000 factories – and according to Professor Noah Zatz – between 600,000 and 1 million prisoners toiling away inside, making the goods we consumers purchase.  Yes, this is an entirely new era and in the future, this will be remembered as a sad benchmark in our history…when our government swung open the squeaking doors to America’s federal prisons and welcomed the corporate elite to march in and take over this slave-labor operation so each could enrich themselves even further…

…America’s workers…union leaders…don’t ever say you weren’t warned, and this could be the last opportunity you have to stop this exploitation and theft of YOUR jobs.  Please awaken to this danger, join the fight and help us save ourselves and our jobs.

Read the full Rohrlich/Minyanville article here

Nevada Ways and Means Committee Weighs in on Prison Industry Battle

The Result of Bureaucrats’ Operating as Businessmen

By VLTP Executive Director, Bob Sloan

In the continuing saga of Nevada’s Silver State Industries (SSI), the Legislature’s Ways and Means Committee held a hearing this past Friday, March 8th to discuss the budget of the Nevada DOC which includes state prison industry operations.

Critics of the industry program have found traction with the discovery that Alpine Steel, a private company, had access to inmate labor, subsidized facility leases and even with those subsidized benefits owed the state more than $400,000 in accrued debt.  In late 2012 when this story first broke, it was discovered that Alpine also owed inmate workers back wages to the tune of $78,000.  Because inmates are “assigned” to industry jobs by the NDOC, they were prohibited from simply quitting or asking for a reassignment due to not being paid.  They worked for an extended period without receiving any compensation for their labor – or if they were paid the wages did not come from their employer, Alpine Steel.

Connett and Cox pix

On Friday morning Committee members had an opportunity to question two top NDOC officials, Director Cox and his Deputy Director in charge of prison industries, Brian Connett.  Those in attendance described the meeting as tense between lawmakers and corrections officials.

Once this story broke in the media, Alpine made the necessary back wage payments to the inmate workers – but continues to owe the state for delinquent lease payments and NDOC staff salaries.  One Assemblyman asked the Deputy Director if the state had paid those salaries, and if so had Alpine repaid the outstanding wages.  The response was a half-truth, with Connett responding, “The back wages have all been paid.”  In fact those wages are part of the total $415,000 owed by Alpine.  The wages already paid are those owed to inmate workers – not NDOC staffers, which remain outstanding.

At times lawmakers displayed exasperation as they attempted to extract factual answers from Cox and Connett, who had difficulty answering direct questions related to prison industry operations; failing industry programs, financial losses and low cost leases of public facilities to private companies.

Cox and Connett were even less open about the situation involving Alpine Steel’s use of inmate labor to compete against other businesses in Southern Nevada, or the huge sum owed by Alpine to the NDOC for back lease and DOC staff payments.

Though lawmakers voiced concerns of the impact upon workers in the private sector and competing businesses, Cox and Connett did not seem to share those concerns, instead advocating that inmates need training while incarcerated to help reduce recidivism.  The irony of turning prisoner training over to a company with a history of questionable business practices – IRS tax liens ($668,000+), $415,000 in back lease and DOC staff salary obligations, unpaid state taxes (new Nevada Dept. of Taxation lien for $37,000 filed within the past month against Alpine’s owner, Randy Bulloch), lawsuits for money owed to creditors (F&M Steel and Pierce Aluminum) and is in litigation over unpaid worker’s compensation claims ($84,716 owed to Explorer Insurance Co.) – was apparently lost on Director Cox.

After all the controversy, debt owed to the state and concerns of both Nevada’s organized labor, workers and private businesses, Cox appeared openly insensitive to both issues by advising Committee members if Alpine’s business picked up, he would reopen the metal fabrication shop at High Desert State Prison to the company! This is indicative of a bureaucrat who genuinely believes he can make such decisions without consulting higher government or legislative authorities.

The general attitude of both was that inmate training was more important than the possible loss of jobs to Nevada’s unemployed steel workers, the potential for lost tax dollars or the impact upon businesses competing with Alpine Steel – or any of the half dozen other companies operating under joint venture contracts with Silver State Industries.

At one point Connett indicated that some of those complaining had been offered a chance to “partner” with the prison industry and had declined, seeming to suggest those businesses shared responsibility for any damage resulting from competition from prison industry operations…because they didn’t take him up on the offer.

Some answers provided to the Committee were enlightening, if incomplete.  Director Cox stated,”the cold hard facts are now that we have to aggressively look at what industries are not turning a profit.”

In addition to losses sustained by prison industry operations, the administrative office is operating in the red ($165,000+ over past two years), the industries’ furniture and metal, auto, upholstery and drapery shops have lost hundreds of thousands of dollars during the past few years.  Collectively Silver State Industries lost $81,597 in 2011 and $237,793 last year overall.

In 2010 the prison industries turned over more than $800,000 in accounts receivable to a collection agency and currently SSI’s past due AR account is in excess of $600,000.  In the budget discussion it was disclosed that the prison industry arm of the NDOC had a reserve fund of $1.5 million which due to continuous losses has been reduced to half a million.  If forced to absorb Alpine’s debt, the reserve fund will be exhausted.

David Bobzien, D-RenoIn response to the dwindling reserve, Assemblyman David Bobzien, D-Reno voiced concern that when that reserve is exhausted, the prison industry would begin to dip into the general revenue fund, saying, “This is a clear track into the dirt, and without substantial retooling, it’ll be in the hole”

 

 

Catherine Cortez Masto, Michael Sprinkle, John Hambrick

Bobzien and Assemblyman Michael Sprinkle, D-Sparks, questioned Cox about whether industry programs would be cut and what the department would do to get its industry program on a sustainable track.

Cox said he’s “very pessimistic” about future revenues and that “when resources go, of course programs will go.”  They were unable to get Cox to provide them with definitive responses or propose solutions to cure the industry’s financial woes.

Assembly Speaker Marilyn Kirkpatrick

“It appears that at some point the reserves are going to run out, but in the meantime, it’s a loss-loss across the state,” Assembly Speaker Marilyn Kirkpatrick, D-North Las Vegas, said, weighing in.  Kirkpatrick also had difficulty getting straight answers to some of her questions on business management issues and as to whether the prison industry program is really about training or rather a work program, putting inmates to work for privately owned companies at the expense of non-inmate workers.

Big House ChoppersIn supporting the prison industry operations, Connett pointed to the “Big House Chopper” program.  An industry created by Howard Skolnik when he was in Connett’s position.  While using that program as an indicator of the work inmates were capable of and alluding that this industry was successful, he failed to advise the Committee that he closed that program two years previously:

 

“Mr. Magnani said some time ago the motorcycle production was shut down, there was some motorcycles that Prison Industries was attempting to sell online. Mr. Magnani requested an update to the status of the built motorcycles. Mr. Connett informed the Committee that three motorcycles were for sale. Prison Industries was looking at reducing the price based on the current market. The motorcycle operation has been discontinued.”

Prison Industries manufactured a total of five motorcycles.  Two of those were sold in a “sweetheart deal” to one of Connett’s other prison industry companies, Thomson Equipment.  Despite vigorous advertising on eBay and other outlets, the remaining three have now sat for several years without any interest shown by potential buyers.  Another example of funds wasted to advance a prison project that has eaten away at the profits generated by other industries – both in dollars spent for materials as well as advertising.

Clearly referring to the motorcycle industry, the Deputy Director exhibited these half-truths to the Ways and Means Committee in an attempt to justify the need and usefulness of continued “training” of prisoners – whether the industry providing the training is viable or not.  In the case of Big House Choppers, it is long gone.

Examinations of the financial statement(s) for SSI for 2011-12 reflect that traditional prison industries such as farming, ranching, license plates, prison garment(s) and printing were all profitable.  It is the industries operating in partnership with private companies that are failing; metal shop (Alpine), drapery, automotive and upholstery for example.

Not only are these failing industries losing money, they are the ones negatively impacting upon private workers, potential workers and suppressing expansion of competing Nevada businesses.  These are also the industries that have been receiving substantial tax and lease benefits that are denied to competing businesses, resulting in an unfair advantage.  Companies using inmate labor do not appear to be paying Nevada’s Modified Business Tax, which further depletes the tax base while increasing potential corporate profits and disadvantaging their competitors.

Another issue of contention was the lease agreement between SSI and Alpine.  In 2011 Alpine was in arrears yet Connett authorized a lease contract that provided 19,000 square feet of manufacturing space at the unbelievable rate of $.26 cents per square foot ($5,000 per month).  The Nevada average for such space has been depressed due to the recession, but is currently at $.68 cents per square foot.  For the same square footage a private company would pay $12,990 per month in the “free world.”  This saved Alpine as much as $95,000 a year in operating expenses.  Assemblyman Bobzien called the Alpine lease an “unfair subsidy”.  There was no question as to how many of the other companies partnered with SSI were receiving similar low cost leases.

All of the losses described above, lead to more than an “appearance” of total mismanagement.  It is assumed that Greg Cox was chosen as the Director of the NDOC based upon an ongoing career in corrections.  He wasn’t chosen for his business acumen.  Putting him in charge of overseeing contracts, leasing arrangements and other commercial business decisions appears to be well outside his expertise.  Between them, Cox and Connett have made decisions that have negatively impacted taxpayers, private businesses and Nevada’s workers – yet when called before a legislative body to explain those decisions, they exhibited their lack of actual knowledge and experience in business practices.  Making matters worse they demonstrated they were willing to blunder through and by making statements claiming they would reopen the prison metal industry to Alpine Steel…and claiming Alpine Steel deserved a lower lease rate because of the difficulties of getting materials in and out of the prison and transportation logistics.

Again it needs to be said that those are matters for someone higher along the government chain to consider and make the final decision on.  It is unrealistic to allow a Deputy Director or Director to enter into binding contracts and leases that reduce the revenue streams from leasing state owned property or facilities.  It is also unrealistic to give Cox or Connett the authority to waive payments owed for leases, salaries or materials owed to the state.  By assuming these duties, these bureaucrats were gambling with taxpayer money, betting on Alpine Steel and similar companies to ultimately become viable and repay debts owed – debts they allowed to accrue and are now having difficulty justifying.  All can now see they lost that wager, with Alpine Steel and other companies owing NDOC more than $600,000 collectively.

 

Danny ThompsonIn the public discussion period following the questioning of Cox and Connett, Danny Thompson, executive secretary treasurer of the Nevada AFL-CIO discussed the impact upon non-inmate workers on the outside from contracts such as that between SSI and Alpine.  He brought up the issue of safety to Nevada citizens that travel over or under a bridge spanning Interstate 15 that was constructed using prisoners in a “training program”. He said Alpine Steel produced steel girders for the construction project at the North Fifth Street Bridge in North Las Vegas and he questioned whether strict certification requirements for such projects were complied with in the training of inmate workers.

Thompson also called into question whether the materials used in the project met strict industry, state and federal specifications as to stress, weight and other factors involving materials used in the project – and wanted to know if inspections were conducted properly.  He also expressed concerns over the Wet ‘N’ Wild theme park project where Alpine was the structural steel contractor, saying he worried about the safety of children and families who would be visiting the park where inmates in training made many of the steel components.

CONWAY ROBERT PDA member of the Iron Workers Union, Local 433, Robert Conway also spoke, stating he had three hundred and fifty qualified iron workers without jobs, while the state was helping provide inmate welders for Alpine at wages far below the prevailing wage.  He also voiced concerns over the safety issues raised by allowing inmate steel workers to fabricate steel components used in public projects.

In response to criticism from Committee members and the public, Alpine owner, Randy Bulloch appeared via teleconference from Las Vegas and issued a statement in response to Thompson’s concerns, claiming that inmate workers were in fact certified as required.  He denied the use of structural steel components manufactured by Alpine in the bridge project and added that he had copies of material inspections and specs.  Bulloch spoke about his company in general terms but made no effort to defend the use of prison labor in the manufacture of structural steel used in his business.  It should be noted that Alpine Steel makes no mention on their website of the use of prison labor in manufacturing steel components, or that the company is involved in helping train prisoners.  That factoid is noticeably absent – as it is with TJ Wholesale and Jacob’s Trading, two other companies partnered with SSI and leasing facilities from the NDOC.

What wasn’t posed to Connett and Cox in the questioning by the Assembly Committee was the issue of a potential conflict of interest involving Nevada’s prison industry and compliance oversight.

The trade group, National Correctional Industries Association (NCIA) provides oversight over all prison industries in the U.S. and of late, internationally.  The NCIA does this under a grant from the Bureau of Justice Assistance.

This trade group advocates and lobbies on behalf of companies, corporations and organizations involved in prison industry operations, supplying those operations or benefiting from the labor of inmates.  Connett is currently serving as the  Chairman of the NCIA and thus able to make determinations as to whether his actions and thus SSI are in compliance with prevailing laws.

Many of the questions posed to Cox and Connett by the Committee members arose due to a comprehensive study I conducted for the non-profit Voters Legislative Transparency Project (VLTP) organization. As Executive Director with an interest in prison industries, I have been involved in researching and investigating prison industry programs for more than a decade.  In January VLTP submitted the study of Nevada’s prison industries to members of the Nevada legislature, Governor Sandoval, AG Masto and Secretary of State, Ross Miller.

In that report many of the deficiencies and issues discussed Friday were presented along with documentation supporting the conclusions and recommendations made.  The questions posed by Committee members indicates they had all read the study and wanted answers to the questions raised by the research.

One observation made during the research phase of compiling the study, is that it appears that Cox, Connett and the NDOC are attempting to run the state department of corrections as a “business” rather than a state agency.  Partnering with businessmen and women who deal daily in matters of profit/loss and market share, the NDOC is woefully unprepared, as the accounts receivable and low-cost lease to Alpine demonstrate.  Director Cox, Connett and the NDOC seem not to understand that any losses arising from these partnerships between SSI and private companies are ultimately borne by Nevada’s taxpayers.  This already happened in 2010 when Cox’s predecessor, Howard Skolnik applied for a Supplemental appropriation from the Legislature due to losses incurred from recession and reductions in prison industry income.

With more than a million in uncollected debt since 2010 and lost streams of revenue due to sub-par leases, industries losing hundreds of thousands of dollars annually, the NDOC is being critically mismanaged.  As a state agency, it is the taxpayer who will be left making up the lost revenue from this lack of management.

One recommendation made directly to the Governor was that Nevada adopts the in-place mandatory guidelines of the Prison Industries Enhancement Certification Program (Pie Program).  This program allows joint ventures between private companies and state prison industries.  It provides a way for private enterprise to have access to inmate labor and to distribute products across state lines, sell to the U.S. government in amounts exceeding $10,000 and to sell those goods in consumer markets.

The Pie Program has nine mandatory requirements and four of those developed by Congress for this program include:

  • Wages. Authority to pay wages at a rate not less than that paid for work of a similar nature in the locality in which the work is performed.
  • Non-inmate worker displacement. Written assurances that PIECP will not result in the displacement of employed workers; be applied in skills, crafts, or trades in which there is a surplus of available gainful labor in the locality; or significantly impair existing contracts.
  • Consultation with organized labor. Written proof of consultation with organized labor prior to program startup.
  • Consultation with local private industry. Written proof of consultation with local private industry prior to program startup.

Nevada is already participating in this program and has Pie Program operations running in the prison industry.  Those businesses appear to be operating without financial losses to the state or SSI, in compliance with the mandatory requirements and thus, not exhibiting any of the problems the non-Pie Program involving Alpine is.

Adopting these regulations would ensure consultation with competing businesses, labor groups, and unions ensuring inmates are paid the required prevailing wage.  Since the NDOC deducts 24.5% of the gross wages paid to inmate workers, the amount taken through this deduction would increase and those funds would be used to offset the costs of incarceration. Combine adopting these guidelines with genuine oversight provided by the Nevada Board of Prison Commissioners, chaired by Governor Sandoval and I believe this is a solution to the existing problems experienced by the NDOC.

Continuing to allow a private non-profit trade association to oversee the state’s prison industries in the face of the controversy that has erupted while they had such oversight duties, is asking for more trouble.  As the head of the NCIA Connett has demonstrated he lacks the desire to enforce compliance and he is willing to put the interests of that organization above his responsibilities to the state.

Rape of America’s Workers: Crime Victims – Now Prisoners Given Their Jobs

Today Nevada Workers Lose Jobs to Inmates – Next it Could be your Turn

Third and final segment of the series on Nevada’s situation involving unfair competition by use of prisoner labor

by Bob Sloan, Executive Director, VLTP.net

PRIDE logoBJA logoNCIA logo

“Insourcing”..: there is no current definition for this word in our Urban Dictionary or Websters. I plan to change that by defining in detail the concept of insourcing and who is responsible for the practice of it. First we must compare the word to its cousin, Outsourcing.

Society today is familiar the term “Outsourcing.”  When used in connection with manufacturing it means a company sending work outside the business and having it performed utilizing the labor or expertise of others.  Since the mid ‘80’s most realize to American workers, it really meant sending millions of our jobs overseas where foreign labor was cheap and plentiful

Not so well understood is the term “Insourcing” – Insourcing is is widely used in production to reduce costs of taxes, labor and More →

New Report From ALEC–Jobs, Innovation, and Opportunity in the States

“About the American Legislative Exchange Council

“Jobs, Innovation, and Opportunity in the States has been published by the American Legislative Exchange Council (ALEC) as part of its mission to discuss, develop, and disseminate public policies which expand free markets, promote economic growth and limit the size of government. ALEC is the nation’s largest nonpartisan, voluntary membership organization of state legislators, with more than 2,000 members across the nation. ALEC is governed by a Board of Directors of state legislators, which is advised by a Private Enterprise Board representing major corporate and foundation sponsors.  ALEC is classified by the Internal Revenue Service as a 501(c)(3) nonprofit, public policy and educational organization.  Individuals, philanthropic foundations, corporations, companies, or associations are eligible to support ALEC’s work through tax-deductible gifts.      ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Jobs, Innovation, and Opportunity in the States
Twenty Five Proposals to Put the States Back to Work

With unemployment remaining stubbornly high, and most Americans worrying about pocketbook issues like jobs, energy costs, retirement security, and health care affordability – ALEC releases its plan for Jobs, Innovation, and Opportunity.  State lawmakers today face very difficult economic challenges. Since 1973, ALEC has focused on providing solutions to America’s biggest problems. State lawmakers can conquer today’s economic challenges by refocusing on our nation’s founding principles of limited government and free markets. The states, not Washington, D.C., must take the lead in restarting America’s economic engine and putting people back to work.

This book contains information on 25 pieces of model legislation in the following nine subject areas: More →

Does the USPS have Ties to ALEC?

Here at vltp.net we pay attention to the searches made by those who visit our site to see what interests our readers.

Last night the top search was  does the usps have ties to alec? which, in different iterations, is a common question.

The USPS is under attack by ALEC, which has been working for almost 10 years to have it privatized and essentially sold to ALEC members FedEX and UPS.  Please read Bob Sloan’s groudbreaking report on ALEC/Koch Cabal Pursuing Privatization of the US Postal Service for UPS and FedEx, which you can find at http://www.vltp.net/alec/aleckoch-cabal-pursuing-privatization-postal-service-ups-fedex

Politics Threaten Kansas’ Wind Energy Market

What would happen if wind power had a success story?  After all, alternative energy development is a key Obama goal, as well as the goal of millions of Americans looking to get away from polluting fossil fuels for a variety of good reasons.  Would opponents still try to kill the programs anyway.  If you live in Kansas, the answer is, unfortunately, ‘yes’. (all words in italics are mine)

According to the American Wind Energy Association (AWEA), Kansas is leading the U.S. in new wind farm installations this year. By the end of the year, eight new utility-scale wind projects will come online – representing approximately $3 billion in new investment – and the state will have more than doubled its installed wind power by adding 1.489 GW of new wind power capacity.

Sixty percent of the nearly 1.5 GW that will be placed in service this year will be exported. The balance will remain in state to fulfill the state’s renewable portfolio standard (RPS) objectives. (Kansas’ RPS is 20% of peak demand capacity by 2020.) Of the existing 1.076 GW of wind power, the vast majority is used in state, and roughly 8% is exported to nearby Missouri. Power from the new projects will be exported to Missouri Electric Cooperative and Tennessee Valley Authority customers.

For example, TradeWind Energy, a Kansas-based wind developer, is sending wind power from a project developed in Oklahoma to customers of Southern Company. Meanwhile, BP Wind is constructing the 479 MW Flat Ridge 2 wind farm as major oil and gas developers are fracking the ground below. And Siemens’ wind turbine nacelles, manufactured in Hutchinson, Kan., are being deployed across many new Kansas wind farms.

Wow!  That’s pretty damn good.  But…

Stormy political clouds
However, all of this progress is threatened by the looming expiration of the production tax credit (PTC) – despite the backing of such staunch conservatives as Gov. Brownback, among others.

Statewide, the political attitude toward wind energy has also changed. Kansas’ congressional delegation has traditionally been supportive of an “all of the above” energy policy and transmission development, but that changed when these representatives were ousted in Kansas’ recent primary elections.

In the August primary elections, the State Senate moved decidedly conservative, and the State House may have tilted further to the right as well, placing further uncertainty on the short-term prospects for wind energy in the state.

Therefore, the future of wind energy development in Kansas faces a confounding future, and the 2013 legislative session will be very telling.

Two prominent state legislators vying for House and Senate positions are also currently on the board of directors for the American Legislative Exchange Council (ALEC), a conservative-oriented policy forum for state legislators. Moreover ALEC’s board of directors is contemplating model legislation to encourage legislators to repeal all state RPS programs.

Despite policy uncertainty at both the state and federal level, however, there is one constant: Kansas still has a rich and plentiful supply of high-capacity wind that can provide low-cost, renewable energy.

And the far-out radical right and the corporations who pay ALEC to write and promote legislation so that climate change will continue to be denied and the use of polluting fossil fuels will continue ad nauseum are undercutting the benefits to their own state, their own constituents, to push a radical agenda.

Wake up Kansas!

To read all about how Kansas politicians want to snatch defeat from the jaws of victory at the expense of a politically uninformed electorate, please click here

Take it from this business owner: Tax cuts for rich don’t help

If anyone tells you that ending the Bush tax cuts for the richest 2 percent would hurt job creation, tell them to talk with me

In 1993, we lost much of our business as a result of the supposedly job-creating NAFTA trade agreement as large brands sought out the cheapest labor costs they could in Mexico.

We decided to stick it out and keep good jobs right here in North Carolina. We invested in new technologies that reduced our energy and waste costs. We found new markets for our t-shirts. (and they have been very successful with this approach).

You’d think the economic meltdown and large budget deficit would have shown that giving tax breaks for the best-off Americans makes them richer – it doesn’t pay for itself, it doesn’t trickle down and it doesn’t create jobs, at least not in America.

I know firsthand that investment is the key to keeping my business healthy. I know that the taxes I pay allow the government to reinvest in teachers, roads, clean water and other infrastructure and services that my business depends on to succeed.

As a small business owner, taking money from the budgets of families struggling to make ends meet and giving it to the most prosperous families won’t help my business or our economy. Instead it will continue us down the path of subsidizing the already well off instead of making the investments in our economy and our people that truly strengthen our nation and our homegrown jobs.

To read this entire article, written by a successful small businessman who recognizes the conservatives’ economic plan as a bunch of hooey, please click here.