NDOC & Silver State Industries – Meet the Exploiters – Expose on Prison Labor in Nevada Pt. II

Second in a Three Part Expose on Prison Labor in Nevada Displacing Workers

(Reposted from January 11th)

By Bob Sloan – Prison Industry Consultant

SSI GarmentWorking on the “Chain-Gang” was how prisoners were punished for their crimes in days gone by – and people who had been victims of crime were happy.

Then we became “civilized” as a society and changed laws, regulations and opinions that eliminated these hard forms of punishment and degradation.  Instead of harsh working conditions we made sentences longer, believing that to be more humane.  Parole was abolished; possession of a “joint” was enough for a mandatory five years in prison.

Problem was, all this incarceration was costing taxpayers ever more in corrections costs.  Lawmakers sought ways to reduce the ever-increasing expense of incarceration.

An idea was born: create prison industries where prisoners could be put to work to “earn their keep” and reduce the incarceration costs borne by taxpayers.  Soon another idea was floated, let private manufacturers gain access to the prison run factories and further reduce the expense of housing, feeding and providing medical care to prisoners.  Inmates can be taught work ethics, products made by them will cost us less and recidivism will be reduced…and once again the people were happy.

Problem is, this program has created more opportunity for crime and exploitation – of the prisoners themselves. Instead of prison populations shrinking, they grew.  This growth was due to more laws, stiffer sentences, the war on drugs and increasing penalties.  Alongside that population the prison industries grew even faster with more inmates came more job positions.

This labor force exists in a near vacuum; no voice, no representation, disallowed from unionizing (though today an estimated six hundred thousand to one million men and women are working in prison industries nationwide), sentenced to hard labor by courts.  DOC’s assign them to jobs, and if they have existing skills needed, they are put to work in prison industries.  Industry managers seek skilled inmates with long sentences in order to quicken production, maintain shipping schedules and dependability.

Court challenges under the Fair Labor Standards Act (FLSA) about wages and deductions are mostly denied with prejudice – meaning the plaintiff is prohibited from ever filing such claims in the future.

In Florida and Nevada (just two of nearly 40 states involved), percentages of what little wages earned are taken back and given to the prison industry to help expand or create new work programs.  This aspect itself violates one of the key tenets of the federal prison industry program referred to as the “PIE Program” and there are other more critical violations resulting in our jobs being lost to prisoners.

This expose will bring to light the existence of a national network of individuals, corporations, a private association, agencies and branches of state and federal government involved in exploiting inmate labor, profiting off that exploitation and pursuing the transfer of tens of thousands of jobs from communities to prisons across the country.  Nevada ranks high on the list of states involved in violating the trust of their citizen workers, small businesses and exploiting prisoners delivered into their care.

In Nevada the prison industries are managed by Director James “Greg” Cox and Deputy Director, Brian Connett.  Previously one individual held both of those positions as prison industry programs were developing back in the last quarter of the 1900’s – Howard Skolnik.  He set the stage for what is occurring today and now, Cox and Connett carry on in his stead.
Howard Skolnik

Harold Skolnik

Running an entire state prison system is a daunting task.  Housing, medical care, work programs, staffing, budgeting, and regulatory and Legislative compliance impacting prisons.  The Director of Nevada’s Department of Corrections is James “Greg” Cox.  He has deputy directors assigned to the various divisions of the DOC, and in general I believe that Director Cox and his Deputies are doing an admirable job.  The one exception to my observation involves the DOC’s Prison Industrial Program.

One of Cox’s responsibilities is the operations of the prison industrial work programs.   His Deputy Director for Industrial Programs is Brian Connett, in charge of running Silver State Industries (SSI) Nevada’s prison industries program.  Messrs. Cox and Connett are responsible for insuring that the prison industries are operated properly under state and   federal laws.

Cox and Connett

            NDOC Director, Greg Cox  |                        Deputy Director, Brian Connett

Supervising and operating Nevada’s prison industries involves approving new products, new factories, partnerships with private companies, and compliance with all applicable state and federal laws and regulations.   These are the responsibility of the Nevada Interim Finance Committee’s Committee on Industrial Programs.

For that committee to perform its duties properly, they obviously have to know and understand the parameters of the federal PIE Program’s mandatory requirements (1) that govern the use of inmate labor used by private companies.  Before they can implement any new projects, they must, among other responsibilities, notify existing competitive businesses as well as involved labor groups—after all, how can they judge whether a new prison industry will unfairly impact local labor or unfairly disadvantage competing businesses if they do not fully understand the provisions put in place by Congress to guard against such interference to free-market forces?

Unfortunately in an interview with a member of that committee, I was told he was not fully aware of the PIE Program’s mandatory requirements, and that concerned him.  He did not know that local businesses were required to be contacted prior to operational start-ups or production of new products.  More importantly, he had not been advised by anyone within NDOC or Silver State Industries that labor groups were also to be consulted.  How then can he serve on this committee without this knowledge?  How can the committee control the federal program in which Silver State Industries is participating – and how can it possibly certify to the federal government that it is, and will remain, in compliance with rules of which the members are unaware, as is required by law? This style of “consulting” is quite obviously insufficient to ensure compliance.

The federal program of prisoner training began with the passage of 18 USC 1761 in 1979. This law is known as the Prison Industries Enhancement Certification Program (commonly called PIECP or PIE Program).  (2)

Under this program Congress allowed private companies to gain access to inmate labor in order to “train” the inmates and provide skills which they could later utilize upon release.  Congress put in place nine mandatory requirements.  Failure to comply is supposed to subject violators to federal imprisonment for up to two years and/or a fine of $50,000.00 and loss of PIECP certification.

The Department of Justice outsourced policy determinations, enforcement, compliance reviews and investigations of non-compliance to a private organization in 1995–the National Correctional Industries Association.  The NCIA, (3) which is a trade group representing prison industries, their staff, employees, vendors, suppliers and companies using prison labor.  Since this transfer of program oversight, there have been a total of -0- prosecutions for violations.  As you read the following you will be appalled at how such a zero-sum figure is possible…
Once the NCIA assumed a duty of crafting policy for this program, they began to interpret the nine mandatory requirement in the light most favorable to their corporate members, (4) adjusting annual assessment determinations to reflect alterations designed entirely by them.  The NCIA made these alterations and the entire program was changed.

The mandated prevailing wage requirement was changed to minimum wage scale computed to the 10th percentile, and allowed these prison industries to institute a pre-training program where wages could be reduced to as little as $.20 per hour. (5)

In December, 2010 the BJA (Bureau of Justice Assistance) issued a Back Wage Policy (6) that unequivocally reinforced the prevailing wage requirement and refuted the wage assumptions made by the NCIA. (7)

The claim that lower wages are fair to “competitor manufacturers” is false.  Furthermore, in Nevada a high percentage of inmates working in the industry are serving long sentences or life terms (as reported by CNN) (8), meaning that the skills they are taught will likely never be applied in the private sector.

A Florida report containing research provided to Governor Scott by his 2010 transition Law and Order team found that 28% (9) of the prison workforce was comprised of lifers or prisoners serving sentences with ten or more years remaining until release.  So what transferable skills are they learning?

Silver State Industries has set the PIE Program maximum wage for all inmate workers at the 10th percentile of the state/federal minimum wage.  Unless the “prevailing wage” is set by the state OES (10) at minimum wage for all occupations in NV, the NDOC is out of compliance with the mandatory wage requirement.

The NCIA also determined that mandatory notification to local labor groups, unions and competing private businesses about new or existing industry projects or products, could be satisfied by informing local Chambers of Commerce, or advertising in classified sections of newspapers.  Compliance review personnel were told these requirements were already on file with the NCIA and had been verified (11) and would not be a part of the annual compliance review.

These changes resulted in a substantial reduction in wages to inmate workers, creating a huge and low paid labor force used to attract business owners seeking to expand operations or reduce labor costs.  The NCIA produced a video entitled “Cutting Through The Perceptions” (12) to be used in marketing prison labor to private companies.  By neglecting to pay proper wages and neglecting to notify labor and free enterprise, prison industries began to expand and grow quickly as one would expect.

As the video shows, this prison program is not for training, it is a way to provide skilled labor to private companies to reduce labor costs, increase production and avoid typical “benefits” they would have to pay to private sector employees.

This brings us to the current situation involving Silver State Industries and Alpine Steel in Nevada, and complaints lodged with the Board of State Prison Commissioners by XL Steel and others who have also complained about unfair competition and the loss of private sector jobs to inmate labor.

This all serves to show you how the PIE program has been manipulated, changed and altered to provide the maximum savings to companies involved in prison labor, while paying the least possible wages to a truly captive workforce.

Now that you readers understand the laws which are involved, I will document the specific violations committed in Nevada involving those regulating the state DOC and Silver State Industries.

Recent reports (13) from Las Vegas reveal it recently came to the attention of companies competing with Alpine Steel in the structural steel fabrication industry, that Alpine had been using prison labor as a means of undercutting all competitors on projects requiring bids.  Labor unions were unaware of the PIECP program.  Union officials had no understanding of the PIE Program or that they were to be consulted prior to the startup of any PIE project or industry.

It defies belief that SSI could have been reviewed by the NCIA in 2011 (14) and found in full compliance…except for one little conflict-of-interest kept from the public and apparently also from the Nevada legislature and the Board of State Prison Commissioners:  NDOC Deputy Director Brian Connett is also President of the NCIA (15) with a responsibility for ensuring, enforcing and certifying full compliance of all state prison industries to the BJA.

Harder yet to comprehend is how Mr. Connett has been able to enforce and certify industry-wide compliance, when he and Director Cox claim to have not known or understood the regulations while just now admitting SSI and NDOC are in violation?

The NCIA receives a sizable grant from the BJA (out of tax dollars) to perform compliance duties, essentially receiving a subsidy for self-oversight of an industry generating annual sales of $2.4 billion dollars. (16)

Under questioning by Governor Sandoval and others at a recent meeting of the State Board of Prison Commissioners, Director Cox admitted (17)that his “agency has not been performing necessary checks to ensure inmate work programs are not taking jobs from private industry workers.”  Mr. Cox went on to say, “The process has not been followed, it should have been.”

Mr. Cox indicated that, “he will develop regulations to require that prison industry programs be approved by the Prison Commissioners Board, chaired by Gov. Brian Sandoval.”

However, new regulations are not necessary.  Existing Pie Program regulations need enforcement and true oversight provided by someone other than those participating in the program.  SSI’s inmate workers for Alpine Steel are a prime example of the lack of enforcement.  Alpine pays inmates working as structural steel fabricators the state minimum wage of $8.25 per hour (18) and no benefits.  The Nevada OES sets the mean hourly wage for such skills at $17.63. (19)

Even using the NCIA’s 10th percentile rate, these workers should be receiving no less than $11.63 per hour.  Competing companies in the structural steel industry in Las Vegas and elsewhere in Nevada pay workers the median wage of $16.91 per hour plus benefits.  Without factoring benefits, private companies are thus required to pay more than double the rate paid by Alpine.  A serious disadvantage prohibited by the PIE Program wage requirement, and contrary to congressional intent.

When you multiply this discrepancy times the number of participating states, and times the number of inmates employed in the program, you can see and understand the massive wage savings provided to companies such as Alpine Steel and those discussed below.  It also helps to understand why so many of our jobs are “going to prison” literally.

Compliance problems are no stranger to Mr. Connett.  In his previous position as the PIECP Program Manager with PRIDE Enterprises, Inc. operating Florida’s entire prison industry, Connett cut corners similarly.  In the third and final segment of this expose to be published next week, I will introduce and discuss the documented corruption to which Mr. Connett was a participant. Suffice to say, Brian Connett brought a substantial amount of baggage with him to Nevada.

The controversy involving Alpine Steel is merely the latest in a series of problems with compliance by SSI.  Former NDOC Director Howard Skolnik was involved in a scheme involving inmate wage deductions when he served as Deputy Director of Industrial Programs.

In 1990 Skolnik petitioned the BJA  (20) for a determination that would allow Nevada to deduct 5% of all inmate wages earned and use those funds to expand prison industrial programs.  He was advised there were four approved deductions and no additional deductions could be imposed by his department.

This denial should have been clear and final, but in 1991 the Nevada legislature amended NRS 209.463 to allow for the 5% deduction Skolnik requested and the BJA ruled was impermissible. (21)
In 2003 Howard Skolnik advised (22) the Legislative ASSEMBLY COMMITTEE ON JUDICIARY that there were three deductions taken out of prisoner pay – 24.5% for room and board, 5% for victim restitution fund and a 5% deduction that went to a fund for the expansion of new industry programs.

Obviously the NDOC and Silver State Industries were intent upon creating a fund whether or not the controlling authority over this federal program permitted it.  In 2011 the Legislature “swept” $948,000 from this Capital Improvement Fund. (23)

Just as obviously inmates are being misused as slave labor, underpaid on PIE projects, with a maximum amount taken back as “deductions.”  The ongoing use of unauthorized and thus illegal deductions taken from inmate PIECP wages and then used as a slush fund by the Nevada Legislature, serves as out and out theft amounting to tens of thousands of dollars  (24)

This was all covered up in reports to the BJA through reviews conducted by Mr. Connett’s - formerly Mr. Skolnik’s - NCIA organization, allowing the 5% deduction to stand and certifying to the BJA that Nevada was in full compliance.

2008 NCIA Board

Both Connett and Skolnik held positions upon the NCIA board simultaneously in 2006 when Connett was the PIE Program Manager with PRIDE Enterprises in Florida.

Previously, Connett and the CEO of PRIDE also sat side by side on the NCIA board when PRIDE was committing acts later deemed illegal.

The Alpine/SSI partnership is not the only partnership that is being operated questionably in Nevada – and paying minimum wages.  Several other companies also have been given access to inmate labor and are possibly involved in displacing local workers and/or unfairly competing in the marketplace.

Thomson Equipment Company, Inc. (now Silver Line Industries, Inc.). Silver Line is owned by entrepreneurs out of New Zealand, Malaysia, and Thailand, partnered with a company in Oregon, to use inmate labor to manufacture or refurbish heavy equipment such as water trucks.

In March of 2006 the serving Deputy Director of Industrial Programs advised (25) the NEVADA LEGISLATURE’S INTERIM FINANCE COMMITTEE’S COMMITTEE ON INDUSTRIAL PROGRAMS that Thomson had been acquired by new owners in Australia and New Zealand – and water trucks were shipped from Bangkok for inmates to renovate.  (It was cheaper to use American inmate labor plus ocean freight costs than to use Thai labor!)

By 2008 when Mr. Skolnik was serving as Director of the NDOC, he and Mr. Connett advised (26) the same committee that Thomson had changed its name to Silver Line Industries.  Skolnik further advised as part of full disclosure that his daughter worked for the parent company in New Zealand.

It is unclear if Skolnik’s daughter secured her job before the 2006 acquisition of Thomson, or if that occurred after Mr. Skolnik was elevated to the Directorship of the DOC.   In either case this should have raised an issue of ethics to the members of the Industrial Programs Committee, had they been interested, a conflict-of-interest in the relationship between the NDOC Director and a family member working for a company operating under his authority.  Silver Line Industries ultimately withdrew from the PIE Program.

Another company, Jacob’s Trading Company (27) (JTC) partnered with SSI for years, but left SSI late last year.  JTC is an inventory liquidator for Wal-Mart and other large retailers.  Inmates remove bar codes, labels and other identifiers to the retailer then repackage the items and JTC sells the products through distributors to after market retailers.  Of course Wal-Mart denies (28) that they or any of their vendors or contractors uses inmate labor – period. These products are shipped back and forth across state lines, and thus come under PIECP authorization.  JTC’s operation in Nevada (29) is substantial:

“In Nevada, the entire JTC operation is housed inside the Southern Nevada Women’s Correctional Facility (30) in North Las Vegas. Jacobs is the only private employer of female prisoners in Nevada. In 2000, a female prison laborer working 40 hours a week kept just over half of what she earns. After several deductions mandated by the state prison department, she took in about $460 per month. That’s net pay of $2.67 an hour…”

Another company operating under the PIE Program was Shelby American, manufacturer of the Shelby Cobra sports cars.  Dozens of inmates at the facility received an hourly wage of at least the federal minimum to build every part of the car except the engine.  Shelby American has also closed operations with SSI but is still listed as a PIE Program participant under SSI’s certification.

In September 2012JTC closed operations at SSI’s facilities, and Like Alpine Steel, they left owing the state $115,819.44 in unpaid leases and other expenses.  According to the October figures provided to the Interim Finance Committee, SSI’s project failures have Nevada taxpayers on the hook for more than $600 thousand dollars in unpaid operating expenses or lease payments.

 There will be much more on Howard Skolnik and Brian Connett in the third and final article that will expose Mr. Connett’s efforts to avoid complying with PIECP requirements, as well as out-and-out theft of private companies while partnered with PRIDE Enterprises.   In one particular industry, Connett deliberately failed to register the industry as a PIECP operation with the BJA, resulting in prisoners receiving as little as $.20 per hour for their labor for five years…and huge profits for PRIDE and the companies partnered with PRIDE.

Last, I will further expose the NCIA and explain why they have been so successful in advancing an agenda of using inmate labor to enrich a handful of companies, their organization – at the expense of America’s taxpayers and struggling workforce.

FOOTNOTES AND EXHIBITS:

(1)https://www.ncjrs.gov/html/bja/piecp/bja-prison-industr.html

(2) http://www.nationalcia.org/piecp-2/piecp-final-guideline

(3) http://www.nationalcia.org/

(4) http://www.nationalcia.org/wp-content/uploads/Final-PIE-2011-Assessment-Summary-Report-Nov.-2011.pdf

(5)  The Training Wage Exception to the 10th Percentile Wage Floor

“BJA determined in 2006 that wages must be set at or above the 10th percentile, as defined by the State Department of Economic Security Agency. BJA takes the position that this is a “generous interpretation of comparable, yet still fair to competitor manufacturers because of the “lack of education, training, and experience typical of the inmate labor force.” The one exception to the 10th percentile requirement is that inmate workers may be paid a training wage that falls below the 10th percentile if “their employment agency provides express written agreement of a wage less than the tenth percentile for a limited training period.”

(6)  https://www.bja.gov/Funding/PIECPBackWagePolicy.pdf

(7)  It reads in part:    Background:
“18 USC 1761 (c), the statute authorizing the Prison Industry Enhancement Certification Program (PIECP), states that PIECP inmates must “have, in connection with PIECP work, received wages at a rate which is not less than that paid for work of a similar nature in the locality in which the work was performed. The Bureau of Justice Assistance (BJA) 1999 PIECP Guideline gives the State wage setting agencies authority to make wage determinations for PIECP workers that are comparable to those in effect for similarly situated workers.” (Emphasis mine)

(8) http://archives.cnn.com/2000/LOCAL/pacific/06/27/rjo.prison.work/index.html

(9)  http://www.scribd.com/doc/46041590/FL-Governor-Elect-Team-Report-on-DOC-and-PRIDE-2010

(10) http://www.bls.gov/oes/current/oes_nv.htm#00-0000

(11)  http://www.nationalcia.org/wp-content/uploads/09-10-PIE-Assessment-Report.pdf

(12)  http://www.youtube.com/watch?v=cUJHaELZQrc

(13)  http://www.lvrj.com/news/company-complains-prison-program-prevented-private-industry-jobs-183857541.html?login=y

(14)  http://www.nationalcia.org/wp-content/uploads/Final-PIE-2011-Assessment-Summary-Report-Nov.-2011.pdf   (@pg. 4)

(15) http://www.nationalcia.org/about/board-of-directors

(16)  http://www.phewacommunity.org/images/Presentation_to_the_Congressional_Black_Congress.pdf

(17) ibid. 13

(18)  http://www.dol.gov/whd/minwage/america.htm#content

(19)  http://www.bls.gov/oes/current/oes512041.htm
BLS - occupational wages(20) https://www.ncjrs.gov/pdffiles1/Digitization/132363NCJRS.pdf

(21)   NRS 209.463  Deductions from wages earned by offender during incarceration; priority of deductions.  Except as otherwise provided in NRS 209.2475, the Director may make the following deductions, in the following order of priority, from the wages earned by an offender from any source during the offender’s incarceration:

1.  If the hourly wage of the offender is equal to or greater than the federal minimum wage:

(a) An amount the Director deems reasonable for deposit with the State Treasurer for credit to the Fund for the Compensation of Victims of Crime.

(b) An amount the Director considers reasonable to meet an existing obligation of the offender for the support of his or her family.
(c) An amount determined by the Director, with the approval of the Board, for deposit in the State Treasury for credit to the Fund for New Construction of Facilities for Prison Industries, but only if the offender is employed through a program for prison industries.

(The same deduction is taken from the wages of inmates earning less than minimum wage.  Emphasis mine)

(22) http://www.leg.state.nv.us/Session/72nd2003/Minutes/Assembly/JUD/Final/1738.html

(23)  http://www.leg.state.nv.us/Interim/76th2011/Exhibits/Industrial/E062512A.pdf

(24)  http://www.leg.state.nv.us/Interim/76th2011/Exhibits/Industrial/E092111E.pdf
NV Dept of Corrections - Prison Industries Payroll Assessment(25  http://www.leg.state.nv.us/73rd/Interim/StatCom/Industrial/Minutes/IM-Industrial-20060313-1152.html

(26)  http://www.leg.state.nv.us/74th/Interim_Agendas_Minutes_Exhibits/Minutes/Industrial/IM-Industrial-042408-10093.pdf

(27)  http://www.jacobstrading.com/index.html

(28)  http://walmartfacts.com/reports/2006/ethical_standards/documents/Wal-MartStandardsforSuppliers.pdf

(29)  http://www.huffingtonpost.com/al-norman/walmart-prison-labor_b_2224743.html

(30)  http://archives.cnn.com/2000/LOCAL/pacific/06/27/rjo.prison.work/index.html