Las Vegas: Prison Labor Used to Beat the Odds

Part one of a three part Expose on Prison Labor in Nevada and Beyond

(Reposted from January 11th)

By Bob Sloan – Prison Industry Consultant

lv strip 2Thousands of tourists, businessmen, CEO’s and executives from all over the world mix with citizens of Nevada in the luxury and splendor of Las Vegas’ many hotels and casinos.  Most come to this beautiful city for the gambling and incredible shows found everywhere one turns.  Inside the cool confines of casinos visitors can trust that every slot machine, roulette table and blackjack shoe is checked and monitored to guarantee fair play – no magnets under the roulette table, no dealer manipulating the cards or slots rigged to never pay out. Those trying to shave the odds are not welcome and at the first hint of cheating, find themselves on the sidewalk, banned or worse.

Each casino has a multitude of surveillance cameras to guarantee play is fair and the odds are understood by all who play the quarter slots or sit down at the high roller poker table.  To ensure such fairness, the Nevada Gaming Commission regulates every aspect of gambling in the entire state.  Strict penalties for violation of gaming regulations by casino operators keep each in line and playing by the rules.

Outside the casinos, locals find the guarantees of fair play and manipulation of odds are not so well regulated. State agencies responsible for overseeing and enforcing specific state laws and regulations have lost their vigilance.  In at least one case a state regulation involving the Nevada Department of Corrections is providing one company an unfair advantage over competitors. The prize sought isn’t a hundred dollar hit on quarter slots, its millions in profits. This is will be a big success with the prison labour as now playing poker online is legalised in NJ, New Jersey as stated in this NJ poker sites. An important aspect of this advantage provided to a single company, is an increase in Nevada’s already high 10.8% unemployment rate.

Pl Mazda insert 1The issue is an ongoing battle being waged over the use of inmate labor by a private company, Alpine Steel operating out of Las Vegas, NV.  Alpine is competing directly against other Nevada companies in the field of structural steel fabrication.  Alpine’s competitors pay fair wages, benefits, provide unemployment insurance and vacation pay, while Alpine avoids all those costs.

It is not illegal for companies to be allowed to use prison labor under current laws but there are strict state and federal regulations involved that must be met before allowing direct competition with prison made products:

Mandatory Criteria for Program Participation

Corrections departments that apply to participate in PIECP must meet all nine of the following criteria:

1. Eligibility. Authority to involve the private sector in the production and sale of inmate-made goods on the open market.

2. 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.

3. Non-inmate worker displacementWritten 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.

4. Benefits. Authority to provide inmate workers with benefits comparable to those made available by the federal or state government to similarly situated private-sector employees, including workers’ compensation and, in some circumstances, Social Security.

5. Deductions. Corrections departments may opt to take deductions from inmate worker wages. Permissible deductions are limited to taxes, room and board, family support, and victims’ compensation. If victims’ compensation deductions are taken, written assurances that the deductions will be not less than 5 percent and not more than 20 percent of gross wages and that all deductions will not total more than 80 percent of gross wages.

6. Voluntary participation. Written assurances that inmate participation is voluntary.

7. Consultation with organized labor. Written proof of consultation with organized labor prior to program startup. 8. Consultation with local private industry. Written proof of consultation with local private industry prior to program startup. 9. National Environmental Policy Act (NEPA). Written proof of compliance with NEPA requirements prior to program startup. (emphasis mine, source BJA PIECP program overview).

In the instant case, most of the above mandatory regulations are being ignored – entirely. Prevailing wages paid by most in the steel fabrication industry in Las Vegas are in excess of $17.00 per hour.  The inmates manufacturing components for Alpine are paid less than half that scale at minimum wage or less. By having access to and using inmate labor provided by Nevada’s Silver State Industries (SSI), Alpine Steel, is able to underbid competitors for structural steel construction projects.  This company is just one of several businesses in Nevada (and 150 others nationwide) enjoying increased benefits and profits derived from inmate labor.  Other Nevada companies enjoying similar access to inmate labor include; Vinyl Products, Inc., (vinyl waterbeds), Thomson Equipment Company (Silver Line Industries trailer manufacture and remanufacturing) and Jacobs Trading Company (repackaging). Alpine Steel is currently manufacturing and installing prison made structural steel components at three locations in Las Vegas; the SkyVue (Ferris Wheel developed by Howard Bulloch), Staluppi Automotive Group’s Planet Mazda and Wet ‘n’ Wild Las Vegas (financed by Andre Agassi; his wife, Steffi Graf; Dr. Steven and Karen Thomas, members of the Thomas family of Thomas & Mack Center fame; and Roger and Scott Bulloch, of SPB Capital Partners).  Companies competing with Alpine Steel for these contracts, were totally unaware they were competing against a company with such a distinct and hidden advantage. While the Staluppi and water park projects are actively being constructed, the Sky Vue job appears to be abandoned, though developer Howard Bulloch assures the absence of activity is due to plan revisions – and not a lack of funding.

 SkyVue pic   wet n wild   Planet Mazda pic

Typically owners, investors and general contractors of projects such as the Mazda dealership and Wet ‘n’ Wild are not informed of manufacturers of materials used by sub-contractors working on such large jobs.  It is thus highly unlikely that Agassi, Graf, the Thomas’, John R.Staluppi, Jr. or GC’s such as Johnson Carlier are aware that through Alpine Steel, their facilities are being built using products made by state prisoners earning minimum wage or less – and much of that taken back to pay for the cost of their incarceration. This cannot be said of the family Bulloch.  Apparently none of the Bulloch brothers have any objections to making or saving huge sums of money by using construction materials manufactured by prisoners.  No it appears jobs involving structural steel components involving the Bulloch’s as investors or developers are steered to brother Randy and his company (which has been using inmate labor since 2005). Some might think there was some manipulation of bids going on when the brother of project developers seemed to be awarded bids on each of those projects. However, no need to rig bids when: your labor costs are 30-50% below the costs of your competitors and the state advances you a credit line exceeding $400,000; you are allowed to default on even the meager wages owed to the inmates ($78,000); you fail to pay $668,000+ owed in payroll taxes to the IRS, and; you refuse to pay your workers compensation insurance premiums to Explorer Insurance ($84,000+) or your suppliers (F&M Steel, Utah – $15,000 and Pierce Aluminum Co, $12,500) for raw materials used in construction projects. The end result is more work for inmates, fewer jobs for workers in Nevada with similar skills, reduced sales to competing private companies and depressed wages for the industry as a whole – with increased profits for Alpine Steel’s owner.  Mr. Cox, Director of NDOC and the Deputy Director of Silver State Industries are of the belief that if 20 or so Nevada workers are denied employment due to inmate labor, that’s an “insignificant” impact upon local employment.  Maybe they and members of the Nevada Legislature’s Interim Finance Committee on Industrial Programs should ask potential workers if losing a job to prison labor is insignificant. Unfortunately this is not an isolated incident. The transfer of jobs to prisoners is something that has been happening all across the country for more than a decade: private companies folding operations due to competition from prison industry operations that are making the same or similar products or services. Union and non-union workers laid off or terminated due to lost sales or unfavorable market swings caused by prison industry operations: Lufkin Industries, Trailer Division: http://lufkindailynews.com/news/article_e0f43731-71c0-5933-803d-9da6f9ae351e.html Cañon City, Co.: http://www.minyanville.com/mvpremium/2011/05/25/is-whole-foods-prison-tilapia/: Pensacola Naval Air Station in Pensacola, FL: http://www.goiam.org/index.php/imail/latest/10489-workers-pay-the-price-for-prison-labor American Apparel and Tennier Industries in AL. and MS.: http://www.businessinsider.com/corporate-prison-labor-is-forcing-small-businesses-to-close-factories-2012-9 South Carolina: http://www.fitsnews.com/2012/06/28/inmate-labor-scandal-could-spread/

PRIDE Print Shop Calhoun CI

In mid 2004 while involved on a prison reform project, I received letters from inmates working in the PRIDE industry where I had briefly been years before. They were posing questions about PRIDE’s PIE program. Prisoners were manufacturing goods for the private sector under this program and wanted to know what the rules were. They also wanted to know if their work was legal and if it affected jobs on the outside. These were good questions and I began to research this PIE program and an entire story of unseen and until then, unknown exploitation was exposed.  It all began with the discovery of 18 USC 1761(c), the Prison Industries Enhancement Certification Program (PIECP). I documented how: PIECP was being used to allow prison industries to partner with private companies, providing access to inmate labor; how private sector companies were urged to close operations and re-open them behind prison fences, using inmates in place of American workers; the huge sums of money being made off prison labor; laws written by corporations and passed by lawmakers they contribute to allowing the exploitation of prisoners; government regulations ignored in the pursuit of profits; entire companies partnered with prison industries under PIECP were “seized” by prison operators along with their proprietary technologies and all equipment taken and used to increase profits to state prison operations and; how taxpayers were paying for much of this without even knowing it. Huge complex corporations had been formed to take advantage of cheap prison labor. One – and possibly more – of these corporations, U.S. Technologies, Inc., bought up other companies through their wholly owned subsidiary, Labor-to-Industry, Inc., closing private sector operations and moving production operations into prison industries nationwide. Below are excerpts from the SEC filings of UST:

“U.S. Technologies Inc. (the “Company”), is engaged directly and indirectly through its wholly owned subsidiary, Labor-to-Industry Inc. (“LTI”), in the operation of industrial facilities located within both private and state prisons, which are staffed principally with inmate labor. These prison-based operations are conducted under the guidelines of the 1979 Prison Industry Enhancement (PIE) program. “The Company is an “outsourcing company” soliciting manufacturing, assembly, repair, kitting and fulfillment services from Fortune 1000 and other select businesses. The Company performs its services utilizing prison labor under the Prison Industry Enhancement Program (“PIE”). Congress created the PIE program in 1979 to encourage states and local units of government to establish employment opportunities for prisoners that approximate private sector work opportunities. The program is designed to place inmates in a realistic working environment, pay them the local prevailing wage for similar work, and enable them to acquire marketable skills to increase their potential for successful rehabilitation and meaningful employment upon release…”

Today more than a dozen years after UST began to exploit prison labor for corporate profit, Nevada finds itself in the grip of a controversy involving the use of prisoners as a cheap labor force made available to “select businesses.” As shown above, Nevada’s private manufacturers are simply the latest victims in this ongoing – and relatively hidden – program taking jobs from neighborhoods and putting them behind bars. This private organization representing all prison industries and the vendors, suppliers and corporate partners using inmate labor, now has responsibility for ensuring compliance with all applicable laws pertaining to prison industry programs. In effect this is the proverbial “fox guarding the henhouse” scenario where program operators are allowed to determine if they are in compliance with government regulations – and their assurances of compliance are accepted without further review by the BJA. This oversight organization has an influential “inside man” in Silver State Industries in a position of power, influence and the ability to allow Randy Bulloch’s company to operate freely.  He is also personally responsible for the unauthorized half-million dollar “line of credit” advanced by the state to Bulloch – and for falsely assuring the federal government that Silver State Industries is in full compliance with federal regulations.  At the core of the current prison labor issues in Nevada this same individual, previously involved in a PRIDE prison industry corruption scandal is once more embroiled in the controversy involving the use of inmate labor. In the following segment we’ll introduce this individual, the organization he belongs to and explain the prison industry PIE Program and how it is being used to remove jobs from American workers.