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Florida Utilities Commission Refunds Phone Kickbacks

The June, 1996, issue of PLN reported that the contract to provide phone services to Florida state prisoners was awarded without competitive bidding in circumstances strongly suggesting corruption. Since 1987 Florida prisoners have been allowed to make collect calls to friends and families, providing the proverbial captive market to phone companies holding the contracts to provide such services. The state, i.e., the DOC, gets kickbacks in the form of commissions.

An investigation by the Florida Public Service Commission determined that North American Intelecom Inc. (NAI), of San Antonio, Texas, had fraudulently overbilled consumers who accepted collect calls from Florida prisoners. In one case a woman was billed for calls from 200 miles away even though they were made from a prison 26 miles away. When PSC investigators made test calls from prisons they found the charges were inflated by as much as 30%. A 34 second call was billed as three minutes! NAI agreed with the PSC to refund $400,000 to consumers who accepted calls from Florida prisoners in recent years.

A 1992 PSC memorandum indicated this problem was likely to arise because phone companies could not afford to pay big kickbacks to the state, now averaging 50% of their contracts, without overcharging. This is generating about $8 million in kickbacks to the Florida DOC. NAI still runs prison phone systems in 33 other states despite losing its contract for 35 Florida prisons.

After MCI lost on a bid for the Florida DOC phone monopoly and complained, an investigation determined that the DOC violated its own rules in awarding NAI the contract in 1995, after MCI was recommended. Another phone contract was awarded to LDDS Inc., of Jackson, MS in 1989 without being submitted to a competitive bid. In getting the contract renewed in 1994, LDDS offered the state 32 cents on the dollar in kickbacks while MCI offered 53 cents on the dollar. One reason the contract may not have been competitively bid is because LDDS's Tallahassee representative is Liddon Woodard, a former DOC official and a personal friend of William Thurber, the department's deputy secretary. While no illegality has yet been found, the state inspector general acknowledged that "an appearance of impropriety" existed and recommended that the contract be competitively bid when it expires in February, 1997.

Source: Wall Street Journal, 4/24/96

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