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Prison Privatization Launders Taxpayer Dollars into Political Contributions

by David M. Reutter

If you know a company is not saving you money or performing its contractual obligations, why would you continue to use that company? The normal consumer would end the relationship quickly. When it comes to contracts for privatized prison services, the answer may lie in the laundering of taxpayer money through for-profit corporations into campaign contributions.

Politicians, however, ardently deny that political graft factors into their decisions to award lucrative privatization contracts for services normally reserved to the public sector. "It's outrageous even to imply or infer a connection and absolutely not true. State contracts are fully transparent and must follow strict procurement procedures," said Pahl Shipley, spokesman for New Mexico Governor Bill Richardson (D).

While politicians are quick to justify their ethically-questionable actions, a little research and investigation usually reveals that someone is getting a raw deal. In the case of prison contracts, those who are supposed to benefit often suffer while the politically-connected companies hired to perform public services are the ones that benefit.

Buying Political Influence and Prison Contracts

The GEO Group, formerly Wackenhut Corrections, understands the connection between money in politics and procuring government contracts. The company hedges its bets both ways, but leans more towards Republicans. During the 2006 election cycle GEO contributed $114,157 to GOP state candidates and $74,725 to Democrats, according to The Institute of Money in State Politics, using July 2006 data.

During the 2006 calendar year GEO and its officers, committees and political action groups distributed more than $570,000 to political candidates nationwide. The company further gave $95,000 to the Republican Governors Association in 2005 and $30,000 to the Democratic Governors Association in March 2006.

A review of New Mexico's entry into prison privatization reveals how such political graft greases the wheel, beginning when former Gov. Gary Johnson (R) announced private companies would start managing state prisons. Wackenhut was selected to run the Guadalupe County Correctional Facility in Santa Rose and the Lea County Correctional Facility in Hobbs. Wackenhut gave Johnson $9,330 for his 1998 re-election campaign; the company also hired then-state Senate President Pro Tem Manny Aragon as a consultant. Aragon later resigned his Wackenhut-funded position after the arrangement received close scrutiny and heavy criticism.

During the 2002 gubernatorial race, candidate Bill Richardson was asked if he would continue Johnson's plan to privatize prisons if he became Governor. He didn't commit either way. Was his silence rewarded? Following his election, Richardson has received, since 2005, $42,750 of the $79,000 given by GEO to politicians running for state office. The company also donated $8,000 to his running mate, Lt. Gov. Diane Denish, for good measure.

After Gov. Richardson was re-elected in 2006, GEO was included among the sponsors in his inauguration ceremony. According to Amanda Cooper, Richardson's campaign manager, GEO donated between $5,000 and $10,000 for the event. Governor Richardson is now running for President.

Has such political largess been a good investment? Apparently so. In 2006, GEO received contracts to operate a planned 600-bed prison in Clayton and to build a $30 million replacement hospital with the help of tax-exempt bonds; a company subsidiary, GEO Care Inc., was hired to manage the Fort Bayard Medical Center. GEO receives around $38 million from New Mexico under existing private prison contracts. The state's Corrections Secretary, Joe Williams, formerly worked for GEO when it was known as Wackenhut.

When someone of interest reaches a position of political influence, GEO wastes no time in cozying up to them. After "Chain gang" Charlie Crist became Florida's governor in 2006, GEO donated $50,000 for his lavish inaugural ball. Crist later cancelled the event after he was criticized for soliciting contributions from lobbyists. GEO since has been awarded a contract to run Florida's Graceville prison, which is currently under construction and scheduled to open in September, 2007. The company operates three other facilities in Florida.

Prison Medical Care for Sale

GEO is not the only player in the game of procuring taxpayers dollars by paying political graft. Medical services have also been a hot commodity for privatization. Regular readers of PLN are familiar with the stories of inept care caused by delaying treatment, refusing medications to prisoners or substituting less effective brands, and denying medical care due to staff shortages to increase the profitability of private healthcare companies.

The often overlooked story is the payouts these companies make in order to receive those contracts. Armor Correctional Services is under scrutiny for making an $8,000 contribution to the re-election campaign of Florida's Broward County Sheriff Ken Jenne in 2004. That same year, Jenne hired Armor to provide medical care to Broward County prisoners as part of a five-year, $127 million contract. [See PLN, August 2006].

Armor's Chief Executive Officer, Doyle H. Moore, had founded Prison Health Services (PHS) in 1978. According to a 2005 New York Times article, "Prison Health proved adept at integrating itself with local politicians, hiring lobbyists, and contributing to campaigns for sheriff. Under a promise of immunity from prosecution, the nurse who founded the company, Mr. Moore, testified in a 1993 Florida corruption trial that he paid the Broward County Republican Chairman $5,000 a month - basically extortion," he said "to keep the contract there and in neighboring Palm Beach County."

Moore and four other former PHS executives are officers of Armor. Moore wrote that it was a "completely false" allegation that Armor was formed to take over PHS's Broward County contract. The connection between PHS and Armor's executives has caused Pennsylvania's Lancaster County to pause before awarding a $17 million prison medical care contract to Armor. "We just want to make sure everything is right with this company," stated Lancaster prison Warden Vincent Guarini.

PHS has become creative in masking its political contributions. To accomplish this slight of hand, PHS created a political action committee called the America Service Group, Inc. Wisconsin Attorney General candidate Kathleen Falk was criticized for accepting $1,500 from the group in 2004, because PHS had a contract with Dane County. At the time, Falk was Dane County's Executive Officer.

Then there is the Wexford Company, another private health care firm. Its parent company, The Bantry-Group, donated $10,000 to New Mexico Gov. Bill Richardson's political action committee, Moving America Forward, in 2004. In July 2004, Wexford was awarded a $27 million contract to provide medical care at nine of the state's prisons. The following month the committee, for appearances sake, returned Wexford's generous contribution. However, as with most well-intentioned gifts, it was the thought that counted.

Defending the Malefactors

Once politicians enter into private-sector contracts, they will defend the contractors even in the face of blatant evidence of wrongdoing or ineptness, at least until the political hot potato becomes too hot to handle.

Wexford's $27 million contract award came after Gov. Richardson launched his "Save Smart" initiative in 2003, which specifically targeted state prisons as the primary focus of cost cutting. In 2006, or about two years after Wexford took over medical care in New Mexico prisons, a local newspaper, the Santa Fe Reporter (SFR), began an investigation into the company's performance. Shortly after the Wexford contract was signed, Gov. Richardson issued a press release "touting a projected $7.2 million, over four years, savings for inmate medical costs and vowing that the quality of care would be maintained or improved." The SFR's investigation found that vow had been broken.

"Wexford management made it clear that it was not all about the quality of health care. It was about keeping down cost and making up for money previously spent. There were cases where I believe that care of inmates was compromised," said Wexford's former regional medical director in New Mexico, Dr. Gayla Herbel.

Dr. Herbel's concerns were never fully addressed by Wexford, and the company placed her on leave when she pressed the matter. She quit rather than return to work in a lesser capacity. Dr. Herbel began raising concerns after she found prisoner medical files were being altered.

She noticed in late 2005 that prisoner tuberculosis (TB) tests were coming back too quickly and in too large of a volume from the nursing staff. One file she randomly chose indicated the prisoner had tested negative for TB. The prisoner said he'd been tested but no one had read the results of the test. Further review of the chart revealed he had been treated for TB within the last six months. "If this truly is falsification of the tuberculosis testing and it is the norm, we are at risk for an outbreak," Herbel stated.

Prior to Wexford, there were two nurses for every 37 prisoners at New Mexico's Central New Mexico Correctional Facility. Wexford cut that ratio in half. Medical staff became so scarce that "sick calls" and "med lines" were cancelled because there were not enough healthcare workers, claimed former Wexford nurse Angela Billings.

Billings said there was a noticeable decline in the clearance process for prisoners' off-site visits to hospitals and specialists. Wexford consistently denied approval. "You were always being told that everything cost too much money," she noted. "But these are people's lives you're talking about. Inmates were suffering all the time and it was really disturbing to see them not taken care of."

Billings further observed Wexford administrators altering prisoners' medical records. "They were hiding mistakes they'd made," she said.
The handling of prescription medication became a concern for Jennifer Hand when she became Wexford's regional consulting pharmacist in July 2005. She caught a nurse filling a baggie with a 30-day supply of Zantac, an acid-reflux drug, from a stock supply to fill a prisoner's prescription that had run out.

Another nurse admitted that she dispensed insulin from one diabetic prisoner's prescription to another prisoner's prescription that needed to be refilled. Other nurses administered psychotropic medications to prisoners even after the physicians' orders had expired. The reason? To save money.

"Inmates were hoarding doses and using them as currency [because] nursing staff were not adequately controlling medication dosage," said Hand. "The nurses who did this were exceeding the scope of their licenses, breaking the law and jeopardizing patient safety."

When such stories break in the mainstream media, what is a politician to do? Send in an unqualified and inexperienced lackey to pose as your expert. Enter Devendra Singh, New Mexico Correction Department's (NMCD) quality assurance manager for health services. Singh's qualifications consisted of being licensed to practice medicine in India but not in the United States. In other words Singh is your typical prison doctor, as many physicians in American prisons are of foreign descent and education and either unlicensed to practice medicine in the US or have had their licenses suspended.

Singh said he could only monitor Wexford's administrative procedures and not oversee its clinical performance. Thus, that oversight was left to Wexford. Singh, nonetheless, stated he was unaware of any problems with Wexford's performance, and noted the company received quarterly visits and record reviews. "Through our auditing process, we have found they are doing a satisfactory job," he said.

However, staffing by Wexford had been such a problem that the company proposed refunding $35,000 to the state due to staff shortages. Singh, in his oversight capacity, admitted he was unaware of the company's shortcomings. He acknowledged that staffing posed a significant problem.

"In our line of work, this is our biggest battle. You could ask God to come down and sign a contract to run the health care, and he would have problems finding staff," said Singh. "Wexford has spent a lot of money out of their own pocket to make sure we have enough staff. That's how I'm able to sleep at night. I'm not completely satisfied, but I'm satisfied that they have satisfactory staffing on a daily basis."

Yet when SFR requested a list of all people filling the staffing positions for Wexford, NMCD was unable to provide such a list, indicating they had no clue as to what positions were being filled or how many Wexford staff entered their prisons. A similar request to Wexford resulted in objections based on privacy concerns, but netted a number of 210 company employees working at NMCD prisons.

Corrections Secretary Joe Williams, in a September 23, 2005 letter to Wexford, wrote that he had "very serious concerns that Wexford was not providing the number of work hours or FTEs [full-time employees] required by the contract for its personnel, particularly its psychiatrists."
Consequently, Wexford decided to spend some of its taxpayer-funded contract money on psychiatrists, but not much. Following in the state's footsteps, they outsourced.

Wexford entered into a contract with Lovelace Health Systems, a subsidiary of Ardent Health Services. Ardent's president and CEO, David Vandewater, is a "friend" of one of Wexford's directors, according to a lawsuit filed as a result of that contract.

The lawsuit came after Dr. Bradly Jay Keller and Dr. Jolynn Muraida were fired by Lovelace because they refused to provide "tele-psychiatry" services to prisoners. According to the suit, the contract with Wexford required the doctors to treat prisoners by "seeing them remotely for about five minutes each via a television screen," assessing and evaluating them, and prescribing medications.

"We think the factual allegations in the complaint about the proposed Wexford contract states the essentials about what the doctors were asked to do - i.e., provide substandard psychiatric care to New Mexicans," wrote Dominguez Shay, attorney for the doctors, in an August 21, 2006 e-mail to SFR. "As the Wexford contract was proposed to them, the doctors were asked to see inmates with psychiatric problems for about five minutes each. From even a layperson's perspective, this is inadequate on its face and would be merely a façade of treatment."

Still, corrections officials continued to defend Wexford's services. "Overall, Wexford is currently doing a satisfactory job meeting staffing and other contract requirements for inmate psychiatric services," wrote NMCD spokesperson Tia Bland in August 2006. "The Corrections Department has a contract monitoring team to ensure accountability." Meaning, presumably, that Singh was still covering for the company.

A Political Hot Potato

The heat from SFR's investigative reports began to warm a few seats. Those seats were in the New Mexico Legislature, causing the Courts, Corrections and Justice Committee to schedule hearings. "The issues [SFR] has raised have not come before our committee recently. Inevitably, you get a perception [of what] the management wants you to see, but we want to go beyond that," said State Rep. Joseph Cervantes.

"With the increasing outcry of healthcare in the prisons, Joe and I decided this is an issue that needs to be discussed," added State Sen. Cisco McSorley. On October 20, 2006, that discussion resulted in a unanimous recommendation to conduct an audit of prison health care. The recommendation was subsequently approved by the Legislative Finance Committee.

Wexford expressed confidence in the results of the audit. "Wexford is proud of the service we have provided to the Corrections Department as documented in these independent audits and looks forward to continuing high quality health care services in New Mexico," stated Wexford Vice President Elaine Gedman. The audits were to be conducted by the American Correctional Association (ACA) and the National Commission of Correctional Health Care, which are nothing more than dues-collecting organizations that shill for the prison industry and audit procedures rather than actual practice or performance.

Meanwhile, more SFR articles cited Wexford employees who had quit in the face of the company's neglect and indifference related to prison health care. On November 6, 2006, Lea County Correctional Facility's medical director, Dr. Don Apodaca, turned in his resignation. "Wexford was not providing timely treatment and diagnosis of inmates," he said. "There were tragic cases where patients slipped through the cracks, were not seen for inordinately long times, and suffered serious or fatal consequences."

"Wexford was simply not receptive to any information I was sending them, and I became exasperated, " Apodaca continued. "It came to the point where I felt uncomfortable with the medical and legal position I was in. There were individuals who needed health care who weren't getting it."

Apodaca informed Singh of the issues he witnessed. Singh indicated he would order Wexford to look into the matter, but Apodaca never heard anything more about it.

Apodaca's accusations caused a political furor. "We were told on our tour that nothing was wrong. And now we hear that there is a claim Wexford and the Corrections Department might have known about this [which] seems like this information was knowingly covered up," said Sen. McSorley. "We can't trust what's being told to us. This situation may require independent oversight far beyond what we have. This should be the biggest story in the state right now."

With presidential aspirations, Richardson couldn't allow the Wexford potato to keep baking on his watch. On December 8, 2006, Richardson ordered NMCD to begin searching for a new healthcare provider. "They're done. The governor's intention is to replace Wexford with a new company. We expect to have a new provider in a reasonable amount of time," said Richardson spokesman Gilbert Gallegos. As of July 1, 2007, medical care at NMCD prisons was being provided by CMS under a three-year contract.

Wexford has now lost contracts in Florida, Wyoming and New Mexico due to problems with its prison healthcare operations. "It is my sense that Wexford doesn't care what sort of facility they run. Everything is run on a bare-bones budget. They're in it to make money," said Dr. Ray Puckett, a Wexford dentist.

The question now is whether the state's new contract with CMS will net different results. "It has become a merry-go-round. One company promises a lot, gets a government contract and does not perform well and so the government hires another contractor," observed Elizabeth Alexander, director of the ACLU's National Prison Project. "States think that going to a private contractor will save them money. Instead it turns into a nightmare."

A May 27, 2007 report by a Legislative Finance Committee review team found that NMCD "has not effectively monitored the cost of medical services and has struggled to enforce key contract provisions, such as staffing requirements, despite imposing nearly $90,000 in financial penalties."

Regarding prison healthcare under Wexford, the report concluded that "the quality of the care provided is inadequate. The quality of inmate care is hampered by deficiencies in staffing, policies, protocols, record keeping, data collection, and communication systems." The state's lackadaisical oversight was also cited.

More Graft - Business as Usual

In Illinois, Wexford has paid approximately $26,000 in political contributions since 1996. "Friends of Blagojevich," a group associated with Illinois Gov. Rod Blagojevich (D), received $10,000. "Wexford does not donate money with the expectation of getting contracts, as all contracts are subject to competitive bidding requirements that are not subject to influence from politicians," said Wexford VP Elaine Gedman.
Yet one cannot help but wonder why a company so focused on profits would give away money if it did not expect a return on its "donations."

Prison food service has become another area subject to privatized contracts. Readers of PLN are familiar with Aramark, a private company that serves more than 475 prisons in North America. [See: PLN, December 2006]. About a year after Aramark renewed its contract with NMCD, it contributed $10,000 to Gov. Richardson's 2006 re-election campaign.

From 2004 to 2006, Aramark gave almost $41,000 to New Mexico politicians; the company also donated $10,000 to the New Mexico Democratic party in 2004, and $15,000 in 2004 and 2005 to the Democratic Governors Association, which Richardson chaired.

A stir resulted when it was discovered that Corrections Secretary Williams had a personal relationship with Ann E. Casey, who is registered in New Mexico as a lobbyist for both Aramark and Wexford. Casey also has another connection to corrections: She is an assistant warden at an Illinois prison. Not surprisingly, Aramark has prison food service contracts in Illinois, too.

Using his NMCD-issued cell phone, Williams made 644 calls to Casey, compiling over 91 hours of conversation, between September 24, 2005 and February 23, 2006. While on a state-paid trip to attend a January 2006 American Correctional Association conference in Nashville, Williams made a side trip to spend time with Casey. They, along with two of Williams' top managers, accepted a dinner invitation from the GEO Group, which currently houses 42% of New Mexico's prisoners at the Hobbs and Santa Rosa facilities.

The infusion of money into politics has caused the spilling of much ink over recent years as suspect campaign contributions are revealed and condemned by journalists and news reporters. Reform is a constant theme.
Meanwhile, companies continue to shower political candidates with cash. Consider the following GEO contributions in 2005 and 2006: Florida, $407,000; New Mexico, $84,700; Virginia, $34,100; California, $19,300; Texas, $14,400; Louisiana, $10,300; Illinois, $10,000. And these amounts don't include donations on the federal level.

Such contributions are made possible as a result of profits obtained from government contracts to privatize services traditionally performed by the public sector. The private prison industries only source of income is tax dollars they collect from state, local and federal governments. Profits and prisons do not mix, according to New Mexico attorney Mark Donatelli. "There's one group that's really benefited from private prison[s], and that's the politicians who've gotten enormous campaign contributions from the private prison companies," he observed.

Donatelli recalled seeing a sign hung over the guards' time clock at a private prison, which quoted the company's stock price for the day. "When you have a profit sharing option, you can't help but have that in your mind when you walk into a cell block and the prisoner asks you for toilet paper," he said.

The same goes for lawmakers. When you consider ending privatization, you also have to consider that you're losing a generous campaign contributor. One thing remains certain: The money laundry remains open, and the customers keep changing during each election cycle.

Sources: Santa Fe Reporter, Albuquerque Tribune, The Southern, The New Mexican, LA Monitor, Sun Times,, Sunday News, Intelligencer Journal, St. Petersburg Times, Associated Press, New York Times, NM Legislative Finance Committee Report ("Review of Facility Planning Efforts and Oversight of Private Prisons and Health Programs," #07-04)

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