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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.


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