Alpine Steel LLC

More Controversies at Nevada DOC – Director Cox Resigns

More Controversies at Nevada DOC – Director Cox Resigns

In mid-September Nevada Governor, Brian Sandoval asked for the resignation of Gregg Cox, Director of the state Department of Corrections. The action was taken by the Governor because a report about prisoner shootings and abuses by staff in the state’s prisons was late.

The report completed by the Association of State Correctional Administrators was to be presented by Cox at a Tuesday meeting of the Board of Prison Commissioners, which the Governor is a part of.

The governor felt that it was time to move the department in a new direction,” according to a statement from Gov. Brian Sandoval’s office on the departure of Greg Cox. The corrections department is facing several lawsuits due to prison shootings in the past few years.

One incident at High Desert State Prison left inmate Carlos Manuel Perez Jr. dead. Sources say Perez was handcuffed when he was shot and killed, and accuse prison guards of creating a “gladiator-like scenario” by allowing inmate fights to go on before firing into the fray. It wasn’t revealed until four months afterward that Perez died from gunfire.

Earlier in 2013 Cox’s department came under fire for allowing the DOC’s prison industry program to be used by a private company, Alpine Steel and company owner, Randy Bulloch to use inmate labor – without paying them wages.

Alpine Steel owner, Randy Bulloch

Alpine had been able to avoid paying rent, utilities, inmate or staff labor wages for more than a year, running up a tab of nearly $500,000 – while Deputy Director Brian Connett of the NDOC Prison Industry, (Silver State Industries) – turned a blind eye upon the climbing debt, allowing Bulloch’s steel fabrication operation to continue virtually free of overhead, at taxpayer expense. Connett went so far as to approve Alpines new contract with the NDOC, failing to report the back debt owed while reporting Alpine had fulfilled all requirements under the expiring contract.

The facts surrounding the Alpine case began to emerge in late 2012 when steel companies started protesting to NDOC and legislative authorities arguing they were being unfairly forced to compete against a local company using inmate labor. Business owners asserted they had lost bids on projects and thus were unable to expand their businesses or hire more workers due to interference from Nevada’s prison industry operations.

Governor Sandoval eventually stepped in and ordered the closure of the Alpine operation following those complaints. The challenges centered upon unfair competition by a private company using inmate labor to reduce labor costs and thus underbid complainants for lucrative state and private contracts involving fabricated steel materials.

Alpine quickly paid over $78,000 in back wages owed to inmate workers. The NDOC entered into an agreement with Alpine to repay the state the remaining money owed for staff wages, utilities and lease of prison facilities. Surprisingly the agreement had no provision for Mr. Bulloch to be personally responsible for any of the accrued debt owed.

Within months Bulloch defaulted on the terms of the agreement and the state secured a judgment against Alpine for more than $400,000. Alpine also incurred state and federal tax liens for non-payment of income taxes. These totaled more than an additional $680,000.

The taxpayers have been left holding the bag…. As a result of this I think there is going to be a lot more oversight,” Nevada Assemblyman James Ohrenschall said in an interview on Vegas Inc. September 21, 2013. Mr. Ohrenschall is the former chairman of the Legislature’s Interim Finance Committee on Industrial Programs. At the time of that interview, the IFC Committee was meeting to investigate facts related to Alpine Steel that prompted his concerns.

Unfortunately Mr. Ohrenschall was too optimistic in his assessment of oversight, but his claim of “taxpayers have been left holding the bag” is still accurate. To date the state has been unable or unwilling to pursue collection of the nearly half million dollar debt owed to taxpayers by Bulloch and his company.

Though Bulloch voluntarily surrendered his contracting license to the Nevada Contractors Board in October 2013, saying he was closing down his business…Alpine Steel’a website remains open for business while the company owner continues to avoid paying the state any of the money owed taxpayers under the court ordered judgment. Additionally, along with the Alpine website still showing it is an active business, Mr. Bulloch is now selling structural steel and fabricated components as Hunt Steel, also in Las Vegas. Links to fabrication, etc. on the Alpine site, takes visitors to Bulloch’s Hunt Steel site.

Director Cox managed to retain his position after the Legislature enacted new revisions to existing Nevada law to prevent potential or new industry operators from starting up without posting a surety bond to guarantee payment of leases and utilities owed to the state. Known as Senate bill 478, this law also provides that the public be notified of any potential new prison industry proposals, to date there has been no such notice given to the public or possible competitors though there have been new industries proposed to the Interim Finance Committee on Industrial Programs.

Just prior to Cox taking over as Director in 2011 he was a Deputy Director when the prison industries “wrote off” more than $800,000 in outstanding noncollectable debt owed to the Prison Industry Program. With Alpine’s additional $428,000, Nevada taxpayers have lost more than $1.2 million dollars. The now pending lawsuits against the NDOC, it’s staff and officers, could result in another $1 million or more needed to settle inmate abuse and shooting claims and/or court judgments.

It appears Director Cox avoided one serious controversy involving a lack of transparency only to succumb to another controversy involving transparency before the same Board of Prison Commissioners that again, included Governor Sandoval.

Nevada Continues to Struggle With Prison Industry Law

Nevada Continues to Struggle With Prison Industry Law

By Bob Sloan

The Nevada Board of Prison Commissioners (BPC) made up of Governor Brian Sandoval, Attorney General Catherine Masto and Secretary of State Ross Miller, met early on the morning of October 15th to discuss key issues involving the state’s Department of Corrections.  On the agenda was a “hot topic” involving the prison industrial program’s perceived unfair competition with private businesses.  Since last year controversy has surrounded the use of prisoners to compete with Nevada’s unemployed and against companies producing the same products in the private sector.

The NDOC Director presented proposed new administrative regulations for approval.  These “AR’s” covered a gamut of issues from installing trailer/RV spots at remote facilities to use of restraints on pregnant prisoners during labor, housing new hires who cannot find housing locally, and compliance with federal standards on prison rape elimination.  Not much new was learned from attending this Board meeting with one exception – withholding proposed AR 854, “Prison Industrial Program.”  Director Cox advised the Board that he was not presenting this one AR until he could confer with former Senator, Richard Bryan on language contained in the proposed regulation.

This proposed AR was in response to an ongoing controversy involving a partnership contract between Alpine Steel, LLC and the NDOC’s prison industries division.  Nearly a year ago steel companies discovered a competing business, Alpine Steel, LLC had partnered with the NDOC prison industries since 2006 to use inmate labor to manufacture or fabricate structural steel components.  This partnership included low cost facility leases, low paid inmate workers and utilities provided at reduced state rates.  In effect the NDOC was knowingly subsidizing the operations of one private company with tax dollars which provided a distinct advantage for Alpine over competing businesses.

During the investigations that followed, it was learned Alpine had been in serious default for years.  It had not been paying wages to inmates or NDOC staffers, lease and utility payments were in arrears and the state was owed nearly $500,000.  Alpine eventually agreed to a forbearance agreement to repay the money owed to the state and purportedly paid the back wages due to inmate workers.

In June of this year Alpine defaulted on that agreement and the state was awarded a summary judgment of $428,208 plus 1 ½% interest on the debt.  Alpine also surrendered its contractor’s license and is no longer bidding on projects (though their website is still advertising and offering services).  These developments came after new legislation (SB 478) was proposed to strengthen current laws on prison industry operations, providing more oversight and transparency involving prison industry operations.  Additionally wording was inserted to protect competing businesses from being disadvantaged from the use of prisoners as a cheap labor force.

Senator Bryan became involved early on, suggesting changes to the state’s law(s) pertaining to oversight, control and operation of the prison industry program that would eliminate any unfair competition with private manufacturers from the use of prison labor and protect private sector workers.  At last month’s BPC meeting Director Cox stated Senator Bryan had reservations or concerns about one section of the AR, feeling it would not provide the proper protection(s) to private sector companies if/when new prison industry projects were implemented.  Director Cox advised the Board he planned on conferring with Senator Bryan to rewrite AR 854 and present a modified version of it to the Board at the next BPC meeting on December 10th.

Cox advised the objection voiced by Senator Bryan and others was the ability of the Deputy Director to both enact and vet new programs by determining the impact – if any – upon businesses and labor.  Cox indicated Senator Bryan wanted that provision modified.

Senator Bryan is correct in objecting to or having reservations about that proviso.  These precise duties were the Deputy Director’s responsibility previously and as demonstrated by the Alpine situation, he handled them poorly.

 

TRANSPARENCY

Prior to the scheduled meeting a copy of the actual NDOC/Alpine Steel contract was received and researched.  In reviewing the contract and form submitted to the Nevada Board of Examiners several critical issues were immediately noticed.

Deputy Director Connett renewed Alpine Steel’s prison industry contract in 2011.  On the prepared form provided to the Board of Examiners, Connett informed Alpine was chosen because it had been contracting with the NDOC since 2006 with “satisfactory performance.”

There was no mention the company was in default on the old contract as the new one was submitted for official approval.  The form and contract itself were prepared and submitted by Connett – who obviously knew Alpine was in default and went forward without disclosing that fact to the Board of Examiners, the Legislature or the BPC:

 

satisfactory performance

Board of Examiners Contract Form on Alpine Contract 5/11

 

Additionally, Connett certified that the “contracting agency” (the NDOC) would not be providing worker space to Alpine, no Nevada State employees would be assisting Alpine under the contract and the state would not incur an “employment liability” if Alpine’s contract was terminated for failure to “perform.  Each provision initialed by Bulloch:”

Alpine NDOC Contract excerpt

from 2011 Alpine/NDOC Contract

In December 2012 the BPC requested the NDOC to stop all Alpine Steel operations at the High Desert State Prison and take steps to recover the outstanding money owed to the state.  On December 22nd, 2012 Director Cox officially closed the Alpine Steel fabrication operation.

Following the closure and during negotiations to recover the debt owed by Alpine it was learned that more than $438,000 was owed.  This sum included; $143,224 for past due wages to NDOC officers and another $115,270 in “rent” on agency space for workers:

forbearance excerpt 1

From Alpine Forbearance Agreement

Another important provision contained in the contract was the wage scale to be paid to the inmate workers.  The contract provided inmates were to be paid “the prevailing wage rate for the type of work performed”:

Alpine - prevailing wage requirement

2011 Alpine Contract Section 8.6

As I reported in February, Nevada’s Occupational Employment Statistics set the prevailing (median) wage for structural steel fabricators at $16.91 per hour worked:

NV OES struct steel fab

2012 NV OES Website

Yet the NDOC allowed Alpine to pay prisoners the minimum hourly wage for their labor.  From 2006 through 2012 when the operation was closed down, inmates were paid as little as $5.25 per hour to a high of $8.25 per hour regardless of knowledge, time on the job or experience.  Paying inmates less than ½ the scale paid to workers in the private sector allowed Alpine to underbid competing private sector companies for labor projections on projects.  Obviously this important contract provision was ignored by Alpine and the NDOC.

Just as obviously state employees were “assisting” Alpine in the performance of its duties by supervising the inmate workers in a facility space rented to Alpine by the NDOC – and Alpine was delinquent in paying wages to those officers.

Whether considered an “employment liability” or not, the fact that Alpine defaulted on paying officers more than $100,000 in wages meant the state had to pay those wages with tax dollars – and that is a liability.

Realizing how deeply indebted Alpine was, Legislators, Assemblymen, Interim Finance Committee on Industrial Programs members and a BPC member all voiced concerns at the amount owed by Alpine and worried about collecting the huge debt.  Official requests were made to Connett and Director Cox to secure a personal guarantee on the debt from Alpine’s owner, Randall Bulloch.

In September and October 2012 IFC members: AllenPuliz (manufacturing representative), Assemblyman John Ellison, Mike Magnani (labor representative) and Mr. Aguilera (business representative) all requested Alpine Steel’s owner provide a personal guarantee on payment of the debt owed by his company.  This request was made directly to Mr. Bulloch at the October 2012 meeting:

“Mr. Puliz asked if the pay back proposal had a personal guarantee or a guarantee from Alpine Steel. Mr. Bulloch said it was strictly a guarantee from Alpine Steel. Mr. Puliz stated he was a businessman and constantly provided personal guarantees. He asked if Mr. Bulloch was willing to do a personal guarantee on the debt owed to the state.”

Bulloch’s response was:

“…(He) was not prepared to provide a personal guarantee, but he would have further conversations with Mr. Connett to discuss other options.”

At the October meeting, Mr. Nicolas C. Anthony, Senior Principal Deputy Legislative Counsel, Legal Division, summarized the statutory authority and duties of the Committee on Industrial Programs.  In his summary the Deputy Legislative Counsel informed the Committee that their duties were “advisory” only:

”The Committee contains both members of the Legislative Branch and the Executive Branch due to separation of powers. Since the Committee only functions as advisory in nature, any recommendations made by the Committee have no official capacity…

“…Final programs and contracts, including leases of space, were established and entered into by the director of the Nevada Department of Corrections (NDOC) pursuant to statute, which was a function of the Executive Branch and not a function of this Committee…

“…Mr. Anthony indicated the recommendations of the Committee were purely advisory in nature. Mr. Anthony said its advisory recommendations can be submitted to the IFC, full legislature, or director of NDOC. If a recommendation was provided to the director of NDOC, it must pertain to new programs or the review of existing programs’ profitability within the first three years.”

In other words, the IFC Committee can only make “recommendations” to the Director or Deputy Director on new programs or review existing ones – and their recommendations carry absolutely no weight.  Neither Cox nor Connett would be bound to implement the recommendations of the Committee tasked with direct oversight of prison industry operations.

Legislative and private sector members charged with review of prison industry programs were prohibited from forcing the NDOC to seek a personal guarantee on the debt owed the state or formally request Bulloch post a personal guarantee.  The hands of the Committee were effectively tied.

With the NDOC circumventing the requirement that all industry projects be submitted to and approved by the BPC and ignoring the recommendations of the IFC, the agency was operating independently without any genuine oversight.  It appears the 2011 contract with Alpine, though provided to the Board of Examiners for approval, was never submitted to the BPC as required and the Board had no knowledge of the contract or actual operations of Alpine.

In January Connett ignored all calls for a personal guarantee from Bulloch.  Instead, he negotiated a forbearance agreement that allowed Bulloch to shirk personal responsibility for Alpine’s debt to the state.  The agreement also did not include; interest on that debt, a fine or penalty for defaulting on the contract and allowed Alpine to repay the past due money in small monthly payments over several years – and let Alpine’s owner off the hook for any debt owed.

On January 11th, 2013 Attorney General Masto’s office agreed to this proposed deal and Bulloch’s personal property and wealth were thus “officially” protected in case of any default in the future.

At the BPC meeting nine months later, the Governor and other members learned Alpine Steel had very quietly run up a tab of more than $450,000 with the NDOC’s apparent acquiescence and then defaulted on the negotiated and personally lenient repayment plan.  The Board questioned NDOC Director Greg Cox and Connett about the Alpine debt and both were forced to admit Alpine was indeed in full default.  When the Governor asked point blank the total amount owed, Connett stammered and said that though he did not have the “exact figure” he thought the amount was in the “neighborhood of $468,000.”

To anyone following this story it was readily apparent that default was more than likely in the case of Alpine Steel.  Already facing substantial IRS tax liens, litigation from creditors and outstanding state tax liens, Alpine was in dire financial straits when Connett negotiated the forbearance agreement and the Attorney General approved it.

When I forwarded questions to the NDOC and the AG’s office as to who/which agency negotiated the forbearance agreement without pursuing a personal guarantee from Bulloch, both responded the information was “attorney client privileged” refusing to answer.

On the important question as to actual ownership of the Alpine equipment seized and being held by the NDOC as collateral, both NDOC and the AG’s office again cited attorney client privilege and refused to provide any information on value or legal ownership (a third party now claims ownership of some of that property).  On the question of sale or disposal of that equipment to pay down the judgment amount, both again cited attorney client privileged information, refusing to answer.

In June of 2012 the prison industry financial records showed Alpine was $347,778.11 in arrears on payments to the NDOC.  Yet with at least this amount owing, Connett still did not call the contract in default or cease operations.  Instead he kept the operation open – over the recommendations of the IFC – and over the next six months Alpine ran up another $67,131.78 in bad debt.

In the end the taxpayers are out hundreds of thousands of dollars and any effort by lawmakers exercising oversight to attempt to fully inform and protect the taxpayers by guaranteeing the debt would be paid, were ignored by state actors at the highest levels of the NDOC – and ultimately, the Attorney General’s office.

Even when all the owed money and failures to enforce contract terms were made public, both of those agencies cite attorney client privilege in an effort to deny taxpayers any information on which agency or individual bears responsibility for negotiating away their rights or interest in recovering the money lost by the prison/Alpine operation.

Connett bears responsibility for forcing Alpine’s inmate workers to perform duties for Alpine without receiving wages – slave labor?  Bulloch and Connett admitted to the IFC that Alpine owed prisoners $78,000 in unpaid wages and only after the story became public did Bulloch finally pay those wages in September and October 2012.

If the NDOC paid the owed inmate wages out of department funds, they did so without legal authorization and in direct violation of the terms of the Alpine contract.  In either case though the inmates finally got paid, the balance of nearly half a million dollars is now the responsibility of taxpayers to reimburse.

This is why the legislature proposed, passed – and Governor Sandoval signed – SB 478 to strengthen oversight, require posting of security, bond or personal guarantees on proposed new prison industry projects; to protect inmate workers, local businesses, workers and taxpayers equally.  It is also why Senator Bryan had reservations concerning the wording of proposed AR 854.

CONFLICT OF INTEREST?

After the last BPC meeting concluded, several questions remained unanswered.  One is why Deputy Director Connett continued to allow Alpine steel to default from 2009 through 2012 without taking any steps to cure the default or stop the operation as allowed under the agreenent?  The contract has specific actions to be taken within 30 days of any default yet Connett failed to initiate any of the provisions called for in the contract when a default was triggered.  This lack of action led to more and more debt piling up that ultimately has cost the state.

Some have conjectured that possibly there was some form of corruption involved in the relationship between Bulloch and Connett, suggesting a possible “quid pro quo” situation.  There is no evidence to support this theory, no document or verifiable statements made by third parties have surfaced to sustain such a speculation so it remains just that – an unfounded speculation.

However, what isn’t speculation is the fact that Nevada’s prison industry program has been operating like an uncontrolled private venture with company executives avoiding any accountability or responsibility to shareholders for their actions.  Only in this case the “venture” had access to unlimited funding with tax dollars and the “shareholders” are Nevada taxpayers.

One of the worst elements of this default was the forcing of prisoners to work for a private company without wages – especially at a scale below that required under the contract.  Cox and Connett not only have a duty to the taxpayers to not waste the department’s appropriations, it also has a duty to not exploit prisoners in their care, custody and control.  Inmates have no choice in their work assignments and cannot simply walk off the job when not paid.  These NDOC officials made a conscious decision to force prisoners to work for this private manufacturer without pay which financially benefited Alpine substantially

None of the concerns voiced by the legislature, administration and media address the fact that prisoners in state custody were made to work for a private company without pay.  This wasn’t working in the laundry; kitchen or cleaning up the prison…this work was for a private company that profited from that forced labor.

Since Connett’s appointment as Deputy Director, several key and important changes began to take effect.  One was an immediate increase in debt owed to the NDOC.  Contractors such as Alpine began falling behind on lease and other payments indicating a failure by the NDOC to enforce contract provisions and cure such defaults.  The industry’s accounts receivable (outstanding or uncollected accounts due) rose sharply to nearly $1 million dollars in uncollected income and in 2010 Connett turned over $800,000 of that outstanding debt to a collection agency to attempt to recover.

When Connett assumed control of the prison industry it had a “contingency fund” of $1.5 million dollars to work with.  Since 2008 this fund has been used to the extent it now contains only $500,000.

With the Nevada prison industry oversight authority limited to nothing more than an “advisory” body, the NDOC continuously ignored the Committee’s recommendations and operated as it wished.  The agency began to successfully bypass the legislative requirement that the BPC review all new or proposed industries, further hiding industry operations.  This led to the NDOC operating the prison industry program without oversight, legislative controls or interference.

Contributing to this portrayal of the state’s faltering prison industry program is the real possibility that Deputy Director Connett’s duties to the people of Nevada and the NDOC have been compromised due to a concurrent position he holds with the National Correctional Industries Association (NCIA).

The NCIA is a trade association that actively lobbies at the federal, state, and local levels for continued funding for the expansion and effective administration of prison industry programs and conversely, opposes legislation that would adversely impact correctional industries programs.[i]

Collectively this group represents the largest and most active advocacy in support of continued use (and expansion) of prisoner labor and maintaining inmate wages below the fair minimum wage – as shown in the below “Resolution” adopted by the NCIA in 2010:

NCIA Minimum Wage Resolution

From NCIA Library – Last Accessed 3/10

Compliance with this resolution is demonstrated by Connett’s establishing actual wages paid to Alpine’s inmate workers at or below the minimum wage, in direct violation to the terms of the NDOC contract’s prevailing wage provision.

Individual citizens, companies and others in opposition to prison labor used by private companies find themselves face to face with this large and influential group operating as a trade/lobby organization with more than forty state prison industry administrators sitting upon the NCIA Board.

Connett NCIA position

From NCIA website: http://www.nationalcia.org/

Connett is the current Chairman of the NCIA Board while also serving as Deputy Director of Silver State Industries and as such he has one foot in each camp.  As Chairman of the NCIA Connett has a duty to expand prison industry operations, keep companies partnered with each state prison industry operation and limit the wages paid to inmate workers.  It would be detrimental to the NCIA to have to disclose that in his own state Connett had to pay inmates a prevailing wage or had to close a prison industry.  This could be one reason Connett failed to act responsibly, refusing to take any curative actions when Alpine first began to default.

There may be other theories as to why Connett failed to enforce the terms of the Alpine contract and spent time and energy attending Committee meetings and legislative hearings in an attempt to keep the Alpine operation open – in spite of numerous calls to close it down and the growing debt to the state.  Unfortunately to date, no one has been able to secure any response on the “why” from Connett or Director Cox, who continue to cite attorney client privilege on all questions posed on this topic.  Though the media has posed those questions, the BPC, IFC and legislature has not.

Several requests for documents and information have been made to the NDOC and Director Cox in an attempt to gather information necessary to establish precisely the reason for Connett’s actions.  As this article goes to publication, there has been no response from the NDOC – other than citing attorney client privilege – from Director Cox or Deputy Director Connett (who is also the NDOC Public Information Officer).

NDOC public relations officer

As the Deputy Director, Public Information Officer and the Chairman of the NCIA, Connett has a vast amount of power and influence.  He is able to choose new industry programs, decide the material released to the public about proposed or existing programs…and he holds a key position in the private agency overseeing, determining and enforcing policies and standards involving all prison labor and industries in the U.S.

As the DD, Connett failed to enforce compliance to protect the agency and taxpayers when Alpine began to default and in the end he attempted to withhold public information about Alpine’s failures while publicly applauding  the use of prison labor to manufacture steel components for the SkyVue Observation Wheel.

Responses to questions sent to Director Cox come from Connett as the PIO.  Each official response to queries for this article has come via email without Connett’s name or signature affixed.

The BPC, IFC Committee, Board of Examiners and lawmakers rely upon data, compliance certifications and other information provided to them by the NDOC Deputy Director.  The DD has a duty to advise these Committees, Boards and lawmakers with full, factual information for those bodies to use when making critical decisions regarding prison industries; new projects, status of existing operations and contract compliance.  Connett has demonstrated he is willing to withhold critical information and facts from these official bodies when it benefits his operations.  Under his authority there has been little transparency in prison industry operations.

As shown, Connett simply has “too many dogs” in the hunt to remain the sole authority selecting new programs, or determining the impact upon private sector workers and businesses from his industry operations.  Those important determinations should be made by others with no personal involvement riding on the outcome.

Failing to provide full facts to Boards and Committees, or withholding important information that is significant when considering prison industry expansions is negligent and as demonstrated can result in a huge loss to the state and taxpayers.  It also can result in underpaid inmate workers being used to lower operating expenses by one company to the detriment of his/her competitors – even working them without pay for extended periods.

NCIA Bylaws require any company partnered with a prison industry using inmate labor to become a member of their organization.  This may explain DD Connett’s continued support of an NCIA member company by his attending numerous meetings and hearings where he urged administrators and lawmakers to continue to allow Alpine to operate once the company’s defaults became public.

Hopefully the language of AR 854 will contain sections allowing for a committee or board to make determinations as to the impact upon competing businesses and labor when new industries are proposed or considered.  Having those important tasks in the hands of the one individual – or agency – seeking to implement any new contract or anticipated new industry truly is a case of the “fox guarding the hen-house…”

To avoid any appearance of impropriety the NDOC should operate under joint authority of the BPC, IFC and legislature.  The prison industry has to operate within the parameters set by those state bodies without deviation and under tight oversight provisions.  Continuing to allow the NDOC and prison industries to operate without requiring adherence to recommendations made by responsible legislative and control authorities, makes another Alpine-styled situation a real possibility.

It is now generally known and accepted that the SkyVue wheel is a stalled project that may never be completed.  Bulloch’s claim that he had this contract sewn up and would pay back his outstanding debt to the state once the project started in earnest was a promise he would not have been able to fulfill.  It is likely that if the BPC allowed Alpine’s prison industry operation to remain open as Connett suggested, the state could now be on the hook for millions more in unpaid debt from Alpine as prisoners manufactured components for the SkyVue project.

In this case it was half a million lost through the NDOC Deputy Director’s failure to apply available cures to a single contract’s defaults.  It could easily have been millions more if local business had not raised the alarm last year and organized labor had not joined forces with them.

As the Alpine story has shown us all, a lack of adequate oversight will result in Nevada’s workers, businesses and prisoners to suffer.  Taxpayers bear the burden of making up losses that accrue in the absence of true oversight and firm controls.  Without proper oversight the NDOC and its programs can operate in a fiscally irresponsible manner without fear of consequences.

Next month Director Cox will present the BPC with new finalized Administrative Regulations pertaining to operating the state’s prison industry program(s).  It is hoped that those regulations will provide genuine safeguards to protect everyone (staff, inmate workers, private businesses, unemployed workers and taxpayers) from exploitation such as that which occurred with Alpine Steel.


Labor and Business Win Prison Industry Battle

Labor and Business Win Prison Industry Battle

By Bob Sloan

Today prison industries are booming with hundreds of thousands of prisoners employed in factories manufacturing a myriad assortment of products and providing services such as call centers, customer service, marketing, reservations and manual labor for municipalities.  Thousands of American workers have been displaced by companies choosing low paid prisoners as a labor force.  Many of these companies realize additional profits from subsidized leases for state manufacturing facilities within prison compounds.  This has been the trend since 1999 but today, as a Burl Ives lyric proclaims, “times, they are a changin’…”

Nevada represents the latest resistance to prison programs taking jobs out of the private sector and allowing unfair competition between private businesses where one company has access to low paid prisoners for their private workforce.

On May 29th legislation reining in control of Nevada’s prison industry program, passed the state Senate and was sent to the desk of Governor Brian Sandoval.  On June 1 the Governor signed the new legislation and it becomes law in Nevada on July1, 2013.  The introduction, passage and signing into law of this necessary legislation is a huge victory for opponents of prison industry programs in the U.S. – and signals to other states the need for similar vigilance of prison industrial programs.

Sen Smith 4-29

Senator Debbie Smith

Known as Senate Bill (SB) 478, the Nevada legislation was introduced and sponsored by the Senate’s Interim Finance Committee as a means of tightening controls over Nevada’s prison industry partnerships. Author of the bill was Senator Debbie Smith, Chair of the Senate Finance and Interim Finance Committees.

Private companies (union and non-union) joined ranks with union leaders in support of changing state laws regarding prison industry operations in Nevada.  

Sen. Richard Bryan

Sen. Richard Bryan

Former Nevada Governor and U.S. Senator, Richard Bryan, met several times with the state Board of Prison Commissioners and appeared before both Senate and Assembly committee meetings where he argued that necessary changes must be made to the existing prison industry regulations.

Senator Bryan was not involved in the actual writing or introduction of this measure (Senate Bill 478), but in interviews he stated he supported the proposed original legislation as it would open the program to needed transparency that would limit unfair competition complained of by workers and businesses in Nevada.  The Senator has not spoken publicly since the legislation was amended and passed, so it is unknown if he continues to fully support the amended language of SB 478.

Danny Thompson

AFLCIO Exec. Sec. Treasurer, Danny Thompson

sb 478 hearing conway

Ironworkers Local 433 Bus. Agent, Robbie Conway

Support also came from the AFLCIO, the local Ironworkers union and several law enforcement unions.  The AFLCIO’s Executive Secretary Treasurer, Danny Thompson and Ironworkers Local 433 Business Agent, Robbie Conway were the most vocal and outspoken union representatives on the prison industry issue.  Both made appearances before the Board of Prison Commissioners, the Nevada Senate and Assembly at hearings and meetings to object to the use of inmate labor to openly compete for the jobs of unemployed Nevada workers.

While both Thompson and Conway objected to prisoners being used by private companies to compete against other private businesses and workers, they were very concerned about the safety of Nevadans from projects built using prisoners in a “training program”.  One such project was the bridge over Interstate 15 in North Las Vegas.  Another is the Wet ‘N Wild water park project being built in Summerlin.  A third is the SkyVue Wheel on the Las Vegas strip.

wet n wild

SkyVue pic

All of these projects were scheduled to be built with structural steel components manufactured by prisoners working in a prison industry training program located at High Desert State Prison.  That was the intent until the public became informed about the use of prisoners manufacturing key structural components for such projects and in response the Governor ordered the closure of the prison industry where the steel was made.

This state action in Nevada follows similar legislative amending in Texas in 2009-2010 after businesses complained of unfair competition from prison industry operations there.  The Texas circumstances are nearly identical with a situation that consequently evolved in Nevada just three years later.

Lufkin Industry’s trailer division was shut down due to an undisclosed operation by a prison company making the same products and selling them competitively in Lufkin’s market.  Following this discovery, the Texas legislature enacted laws to protect workers and competitors from prison operated industries using inmate labor.

This legislative session, Nevada was forced to take similar steps to protect workers and business owners from suffering the same fate as workers in Texas.

Silver State Industries (SSI), operated by the Nevada Department of Corrections (NDOC) enters into contracts with private companies to allow the use of inmates as a labor force for manufacturing goods.  Previously these partnerships were developed quietly with a total lack of transparency or notice to competing companies regarding any possible impact upon private business or Nevada’s unemployed workers competing for business or jobs.

Cox-listens-to-testimony-cropDirector Cox of the Nevada Department of Corrections candidly admitted earlier this year that he and his department had not been following requirements and protocols called for by state law and department regulations.  Besides the undisclosed competition using inmate labor, there is an issue of lost money from possible mismanagement of the NDOC.

One of more of these “industry” operations using prisoners as a labor force for select private companies resulted in substantial dollars lost to the state due to non-payment of leases, wages, utility costs and other expenses advanced to companies in an effort of keeping them operating and prisoners employed.  SSI’s current account receivables are in excess of $600,000 and previously in 2010 $800,000 was sent to collectors to try and recover.

As a result of poor business practices, SSI has lost hundreds of thousands of dollars and nearly exhausted a $1.5 million dollar contingency fund.  The industry closed by order of the Governor was a metal/steel fabrication plant at the High Desert State Prison.  This single operation is at the center of the controversy surrounding prison labor and unfair competition that formed the basis for the new legislation.

Silver State Industries had a long standing contract with Alpine Steel, LLC that allowed inmates to manufacture structural steel used in public and private projects secured through standard industry bid procedures.  Alpine used the cheap labor they paid to inmate workers as a means to secure numerous competitive contracts utilizing low labor projections/costs.  Other companies protested they were losing work and thus unable to hire more unemployed steel workers due to unfair competition from Alpine using state prisoners as the company’s “private workforce”.

When it was discovered Alpine was not paying the lower wages owed to the inmate workers or salaries of NDOC supervisory staffers, the story elicited strong reactions from taxpayers and lawmakers alike.  In addition to these payroll defaults, Alpine was behind on agreed lease and utility payments and had failed to reimburse the state for worker comp premiums on the inmate workers – for a period of approximately four years.  The state paid the wages of staffers, the work comp premiums and utility costs which mean the “taxpayers” were subsidizing a substantial amount of Alpine’s operation.

Under media and public pressure, the Governor became involved in December of last year.  Almost immediatelyAlpine’s prison industry operation was ordered closed.  Following the closure Alpine and the NDOC negotiated a repayment agreement with the Attorney General’s office that was very favorable to Alpine’s owner.  The agreement allows Randy Bulloch to make monthly payments to the state over a period of another four years until the debt is paid.  Surprisingly, this agreement does not provide for any interest, fine or penalty for the huge debt from the default(s).  Ultimately the state wound up on the hook for $438,000+ owed by Bulloch.

DD Connett

NDOC Deputy Director, Brian Connett

These default(s) were known to NDOC Director Cox and Deputy Director Brian Connett (Deputy Director of the Prison Industry) but neither took any positive steps to recover the money owed and bring Alpine current.

As originally proposed, SB 478, subsection 7 required notices and an opportunity to be consulted about proposed new prison industry projects be provided to private companies and labor organizations.  It further required the NDOC Director and Deputy Director of Prison Industries to provide the Senate Interim Finance Committee (IFC) on Industrial Programs with information on possible impacts upon labor or sales from proposed new prison industries.

Instead of requiring the NDOC to consult directly with businesses that may be affected by new or proposed industries, the amended legislation (subsections #7 in the amended text) calls for other state agencies or departments to conduct studies and submit reports of possible conflicts involving labor or market sales.

Though the legislation as passed does not contain all the provisions hoped for by supporters, necessary key provisions calls for more transparency and oversight over prison industries – and their competition against private companies having to compete against low prison wages.

Two key provisions of SB 478 are the provision that the NDOC must provide documentation to the IFC for approval of new programs and then if approved there, any proposed program must be considered by the Board of Prison Commissioners (composed of the Governor, AG and Secretary of State) for final approval.  Though this provision was already in place, these were circumvented previously.  The second change is the addition of a second union representative added to the IFC Industrial Program Committee.  This will help ensure Nevada workers are protected from unfair prison labor displacing them or taking jobs from a constantly dwindling job market.

Provisions that the NDOC seek approval for new industry projects from the Bureau of Prison Commissioners, provide notice to the private sector, consultation with businesses and labor on proposed new industries and that any industry have an “insignificant” impact upon displacement of workers; were requirements that were not followed.  These actions – or lack of action – were behind the need for this new legislation in the first place.  Ironically this failure to inform or consult directly with competing companies and unions necessitated SB 478…yet as passed, that critical component has been removed from the final language of the bill.

Cox originally took the position of “neutral” on the proposed legislation…then changed that to “opposed” to the bill.  Finally after negotiating out the requirement to provide direct notice to labor or competing companies, Cox and the NDOC came out in “support” of the measure.  This manipulation gives the appearance that the NDOC wants to avoid any direct notice or contact with the very businesses the prison industry program will be competing against.

The default by one company resulted in complaints against the NDOC for using inmate labor to compete unfairly against private companies.  Everyone involved realized the potential for lost jobs in the private sector along with lost sales to competing companies and led to hearings and meetings before the Board of Prison Commissioners and several Senate and Assembly Committee meetings in 2012 and early this year.

Ultimately information that came out in those hearings and through the media revealed that the NDOC’s prison industry program was “off the chain” (to use the vernacular) and being operated without any true oversight – by the NDOC or other government authorities.  In the end Alpine Steel did Nevadans a favor by their defaulting across the board.  The action of this one company is what angered the public and led to a quick response from lawmakers and the Executive branch.

Unexpectedly, the NDOC continued to use Randy Bulloch as a spokesman for continuing prison industry operations as they were.  Bulloch appeared at nearly every Committee hearing; before the Interim Finance Committee on Industrial Programs, the Board of Prison Commissioners, the Senate Judiciary Committee and before the General Assembly – side by side with SSI Deputy Director, Connett – speaking in support of continuing the prisoner “training program” and arguing that using such labor was really not unfair competition.  At one point he argued if he and other companies using inmate labor had to pay prisoners fair or comparable wages, it would result in closing prison industries altogether.  In advancing that argument he failed to realize that while the low wages and cheap lease of state owned industry facilities to his company provided increased profits, such came at the expense of workers displaced by the prisoners and businesses that lost contracts to Alpine due to the use of prison labor.

This was the “unfair competition” businesses, the public and organized labor protested against and the legislature agreed with them on.  That’s why it was unexpected to see Bulloch, Cox and Connett continue to confer and present arguments against reform of the prison industry in the face of widespread calls demanding reform by everyone else.

SB 478 surprised everyone – lawmakers and public alike – by how quickly it advanced through the Senate and then Assembly once introduced.  Historically proposed legislation takes a substantial amount of time being discussed, amended and again discussed before ever getting to the point of a vote.  This bill introduced on March 25th passed in just over 60 days and will become law approximately 90 days after submission.

The NDOC and the department’s head of SSI will remain in charge of the state’s prison industry program.  Even after demonstrating the agency and top administrators violated the state laws and administrative regulations, the NDOC has been able to successfully maintain overall control.

I weighed in on this issue in Nevada as soon as the issue became public.  As the Executive Director of the Voters Legislative Transparency Project (VLTP), I provided research, a “white paper” report with documentation to Governor Sandoval, AG Cortez-Masto, Secretary of State Miller, members of the state Assembly, the IFC on Industrial Programs, the Senate and personally to Director Cox.

VLTP Directors and staff traveled to Nevada to be in attendance at some of those meetings and spoke directly with Mr. Bulloch and others on the issues.  Many of the tough questions posed to Cox and Bulloch in subsequent hearings or meetings originated from the VLTP analysis and report.

VLTP has publicly supported the legislative efforts to bring the prison industry program in Nevada under control and force it to operate in a transparent manner.  I’m gladdened that all the effort put into solving this issue has been successful and will benefit workers and businesses moving forward.

The final version of SB 478 came as a result of compromise between lawmakers, businesses, union leaders, workers and the NDOC.  None of those involved got everything they wanted but that’s how “compromise” works.  It’s a needed step in the right direction and now new SSI industry programs or projects will come under intense scrutiny and vetting prior to implementation.  Such scrutiny was absent previously.

Expecting the same government bodies; the Legislature’s IFC and the Board of Examiners to protect the interests of workers and competing business owners is difficult.  Oversight and transparency will be the key ingredients to keeping the prison industry program from once again getting out of control.  This new legislation appears to provide both.

Prison Industry Bill Clears Nevada’s Senate Judiciary Committee

Prison Industry Bill Clears Nevada’s Senate Judiciary Committee

Senators move quickly to rein in runaway prison program

By Bob Sloan

On Wednesday a proposed bill amending Nevada’s Prison Industries was debated before the state Senate Judiciary Committee.  The bill, SB 478 was sponsored by the Senate Finance Committee, which is chaired by former Assemblywoman and now Senator Debbie Smith (D-13).  Senator Smith explained the bill to the Committee and why a revision to NRS 209.461 is needed to protect workers, private businesses and taxpayers from being unfairly compromised by prison industry operations.

Attending the hearing in support of the legislation, former U.S. Senator (and Nevada Governor) Richard Bryan outlined a proposal he’d submitted to the Board of Prison Commissioners last month that would help protect Nevada’s businesses and workers.  Proposed revisions to NRS 209 within SB 478 language would serve that purpose.

Sen BryanSuggested language includes requirements that the NDOC provide adequate notice and consult with private businesses and unions prior to entering into new contracts or developing new prison industries.  This would help protect Nevada’s workers from displacement and private businesses from unfair competition arising from the use of prison labor by private companies or state sponsored industry programs.

These requirements are already mandatory and annunciated under federal guidelines controlling prison-made products introduced into interstate commerce.  This is to protect workers and businesses in states receiving such goods.

Senator Bryan explained the reason such policy changes were necessary to first protect Nevada’s business and workers.  He stated that these protections were at the core of the proposal made to the BPC in March.

SB 478 includes a requirement that any private company applying to participate in prison industrial programs be required to provide a guarantee that operational expenses will be paid to the NDOC.  This provision requires the posting of a surety bond or personal guarantee:

“7. Before entering into any contract with a private employer for the employment of offenders pursuant to subsection
1, the Director shall obtain from the private employer:
   (a) A personal guarantee, surety bond in the sum of $1,000,000 made payable to the State of Nevada or security
agreement to secure any debt, obligation or other liability of the private employer under the contract including, without limitation, lease payments, wages earned by offenders and compensation earned by personnel of the Department.”

This clause seemed to draw the most concern and discussion from the Committee as they attempted to ascertain whether such a high bond was necessary.

Danny Thompsonsb 478 hearing conway

Other revisions require the NDOC Director to secure documentation pertaining to the impact upon private industry and labor in Nevada.  Before submitting such projects or new industries to the Interim Finance Committee’s Committee on Industrial Programs for recommendations or Board of Prison Commissioners for approval, these studies must be completed.

Also speaking in support of SB 478’s changes to policy requiring notice and consultation with labor, was Nevada’s AFLCIO Executive Secretary Treasurer, Danny Thompson and Robbie Conway of Ironworkers Local 433.

The Union Representatives spoke on behalf of unemployed union workers being displaced or unable to find employment because of prisoners used by Alpine Steel, LLC.  Alpine has been accused of using cheap prison labor to reduce labor costs and secure bids on projects, reducing the ability of other companies to compete fairly for the same jobs. One of those projects is the high profile construction of the Sky Vue Ferris Wheel on the Las Vegas strip.

SkyVue pic

Thompson raised issues of public safety due to using inmate labor to fabricate steel components used in building a public bridge over I-15 and the Wet ‘N’ Wild theme park in Summerlin. Thompson mentioned he’d made repeated requests for proof of required certification of the prison shop and inmate welders but Alpine and NDOC continues to withhold those documents.

Time for discussion opposing SB 478 was consumed by Alpine Steel owner, Randy Bulloch.  He vehemently opposed any requirement of posting a surety bond or consulting with unions, labor or competing businesses before starting up new prison industries.  He advised his company had been using inmates as a workforce for seven years before the operation was stopped early this year.

His argument was that requiring a bond would be cost prohibitive and “catastrophic” to prison industry operations.  Bulloch also claimed that noticing and consulting with unions and competing businesses and requiring approval of both would be impossible, “they’ll never agree to such projects.”  Presumably Bulloch’s persistent advocacy on behalf of prison industries demonstrates a desire to reopen the prison industry’s metal shop to Alpine Steel and regain access to that less costly workforce.

The proposed revisions do not include a requirement of “approval” by unions or competing businesses.  It only requires notice and an opportunity to participate in any discussion prior to submission of proposed new industries for approval. In addition until Bulloch repays nearly half a million dollars owed to the state it is unlikely authorities will consider allowing his company back onto prison property.

It’s interesting that Mr. Bulloch’s company was at the root of a controversy that ultimately resulted in the necessity of this legislative review of prison industries.  Actions of Bulloch and Alpine Steel placed the entire program in jeopardy by his refusing to pay incurred operational expenses owed to the NDOC.

Rather than open discussions of new industry operations to transparency, Bulloch seems intent upon keeping any new or proposed contracts shrouded in secrecy, and decisions regarding use of inmate labor made outside the view of obviously interested parties.

Alpine ran up a huge bill with the prison industries by failing to pay inmate and NDOC staff wages, utility costs, workers compensation or lease payments for nearly four years, accumulating a debt of $438,000 to the state.  After the story broke in the media is when officials closed Alpine’s operation at High Desert State Prison and forced Bulloch to agree to repay the state over the next four years.  Though Bulloch no longer has any inmates working for him in the prison shop and the facilities are closed to him, he continues to be the lone voice advocating for operating Nevada’s prison industries without any policy changes to ensure other companies are not able to operate with taxpayers footing the bill.

Competing steel companies protested lost business through unfair practices exercised by Alpine to secure contracts due to low-paid prison wages.  They also voiced concern that the state was unfairly subsidizing Alpine’s operations through a sweetheart lease agreement for prison facilities and a failure to collect the debts owed.  Both gave Alpine Steel a substantial advantage over all competitors in the steel industry there in Nevada.

NDOC Director Cox and Deputy Director Connett were present and stated they and the department was “neutral” on the legislation and will be submitting written statements to that effect.  Several former inmates attempted to speak in opposition, but time was short due to Bulloch’s lengthy statements in opposition and their discussion limited.

The following day, the Judiciary Committee voted unanimously to move the bill to the full Senate for discussion and vote.  It is unknown at this time how much support this legislation will get from the Nevada Assembly and full Senate.