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Virginia Prison Vendors Lose Contracts to Out-of-State Supplier

Three Virginia retailers who made their money from prisoner earnings now find themselves in financial trouble. In August 2003, when the Virginia Department of Corrections (DOC) relinquished management of prison commissaries to St. Louis-based Keefe Supply Co., three Virginia vendors filed suit against the prisons in Richmond Circuit Court.

Virginia Smacks Inc., Highland Beef Farms and Lee Hartman & Sons have literally lost millions of dollars under the privatization package.

Based on their common misery the three companies brought suit against the DOC alleging that the privatization deal with Keefe is illegal in that the St. Louis Company is allowed to benefit from cheap prison labor. "You can't provide inmate labor to a private enterprise as a subsidy," said Ian Wilson, attorney for the plaintiffs.

Keefe first took over five Virginia prisons in 2002, under former Corrections Director Ron J. Angelone. Department spokesman Larry Traylor says that privatization centralizes the process, is more efficient and saves the state money. Keefe went from management of five commissaries in 2002 to thirty-seven in 2003.

Wilson points to contract documents that show that the privatization package always intended to provide Keefe with "inmate labor, at a very low cost." He argues that this practice is "inconsistent with the statute governing the department of really taints the program," he says.

However, on November 7, 2003 Chief Circuit Judge Melvin R. Hughes Jr. ruled that the plaintiff's argument lacked legal standing and dismissed the case. He agreed with Assistant Attorney General Susan Barr's contention that the plaintiffs were disgruntled because they "can't sell their products in the commissaries. That has nothing to do with whether Keefe uses inmate labor," she said.

In 2002 the annual earnings for Virginia Snacks was about $750,000. Company owner Wayne Saunders says the new contract with Keefe will cost him 90 percent of his business.

"I'm a taxpayer, just like anybody else," said Saunders. "Why should a company headquartered in another state come into this state and run small businesses like us out of business?"

John Cosgrove, correctional-sales manager for Lee Hartman & Sons complained that there was no opportunity for competitive bidding. Hartman & Sons supplied radios and electronics to Virginia prisons and will lose about $400000 in annual sales.

Jay Hersch, owner of Hightower Beef, agrees with Cosgrove and Saunders. "There is just something inherently wrong with this...They are not exploring the impact on the local economy of Virginia businesses," he said. Hersch will lose about $175,000 per year in revenue.

Hersch goes on to say, "What I want do is stop the privatization. I want it to be open so it is competitive, so companies like mine have a shot."

However, as long as Keefe is paying the DOC a 6.5 percent monthly commission Jay Hersch's argument will fall on deaf ears.

"The theoretical proposition that privatization is always better is not necessarily true," Hersch insists.

Don't feel bad Jay, PLN has been saying that about private prisons for years.

Source: Richmond Times-Dispatch

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