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Private Prison Companies Bilk Florida Taxpayers Out of Millions

by David M. Reutter

From its inception, privatization of Florida prisons has been touted as a way to save taxpayers money. Yet, a 2005 audit by Florida's Office of Program Policy Analysis and Government Accountability (OPPAGA) revealed that private prison vendors bilked taxpayers for $13 million. To add insult to injury, Florida's Department of Management Services (DMS) entered into a settlement with one of the companies to receive only pennies on the dollar in return.

Two private companies operate five Florida prisons. The GEO Group operates prisons in South Bay and Moorehaven while Corrections Corporation of America (CCA) runs prisons in Lake City, Panama City, and Quincy. GEO also has a contract to run the Graceville prison, which is under construction.

OPPAGA's audit revealed that over an eight-year period the companies received $4.5 million for unfilled jobs. GEO received an additional $5 million in cost-of-living salary adjustments that were never paid to employees. At its Quincy prison, CCA received $2.9 million more for facility maintenance than it spent.

The bulk of the blame for the overpayments has been laid at the feet of the Correctional Privatization Commission (CPC). From its inception, CPC was infiltrated by persons that were cozy with the private prison industry. This allowed the companies to receive favorable contract concessions.

Those concessions are now blamed for DMS being unable to receive more of the overpayments than it settled for. In January 2007, GEO agreed to pay the State of Florida $402,501 for the overpayments made to it. That settlement, however, only consists of a $290,000 refund for overpayments. The remainder is a partial reimbursement of legal fees incurred by the state in court challenges to the property-tax exemption of the state-owned, privately operated prisons.

The Florida Legislature abolished the CPC in 2004. It seems to be a good move, for its contracts are faulted for the miniscule refund. "The Contract was so poorly written and so poorly conceived that we were only able to verify $400,000 in over payments even though we know there were huge abuses through the auditing procedures," said Florida Chief Financial Officer Alex Sink. "We had virtually no legal standing to go back and get back for the taxpayers the dollars that we deserved."

State officials, however, do have standing under the contracts to terminate with notice. That would be the step any business or person would take when bilked by their contractor. Part of GEO's business practice is to grease the squeaky wheel, which staves off such action.

After Charlie "Chain gang Charlie" Crist was elected Governor, GEO gave $50,000 for his inaugural ball. Crist, a former state senator, is a big advocate of privatization. GEO also provided $25,000 to the Committee for Florida Justice Reform, which purports to be furthering civil litigation reform, but it siphons money to candidates the state senators who formed the committee support.

DMS is currently in negotiations with CCA to determine how much of a refund it will it provide the state. Past results and CCA's stand probably means the return will be minimal. "We feel we accurately followed our contractual obligations," said CCA Spokeswoman Louise Grant.

At least one lawmaker is upset about the GEO settlement. "If it was an honest mistake and $4.5 million was overpaid, they ought to write a check and clear it up," said Sen. Victor Crist. "They (CCA and GEO) took more than $4 million for positions that didn't exist and it just sticks in my craw that we would be getting $400,000 for it."

"It was not an honest mistake," says Ken Kopczynski, a lobbyist for the Police Benevolent Association. "I don't think it takes a rocket scientist to know that if a bank teller gives you $100 more than you are legally liable to receive, you need to give the money back."

While privatization is supposed to save money, it is unclear if that happens. "We keep saying we want the state to act like a business, but yet we had no business plan," said state Sen. Nancy Argenziano. "I've never gotten a real answer whether we've saved money or not. We'd get mumbo-jumbo in return."

The public outcry caused Gov. Crist to order to Florida Department of Law Enforcement to "conduct a preliminary investigation to determine whether any criminal violations have occurred" in relation to the contracts.

Considering the cozy relationship between state officials, legislators, and their privatization partners, one can only wonder if action will really occur to punish for wasting taxpayer dollars for services not performed. To do that, however, would cease the flow of campaign dollars from the private vendors, which can really be viewed as the laundering of taxpayer money.

Sources: Gannett News Service; Associated Press; St. Petersburg Times; Palm Beach Post.

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