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PLN Uncovers Secret Sweetheart Settlement Between PRIDE and Former Board Members

by David M. Reutter

In its continual effort to expose corruption within prisons, PLN has uncovered the confidential settlement between Florida?s Prison Rehabilitation Industries and Diversified Industries (PRIDE) and the corporations spawned by its former directors? corporations.

Our January 2005 cover article detailed how PRIDE corporate executives and directors had ?loaned? their newly created non-profit organizations money and given them PRIDE assets. No contracts or other arrangements were ever made to repay PRIDE the nearly $20 million. That figure came from an audit by Florida?s Office of Program Policy Analysts and Government Accountability. When PLN associate editor Alex Friedmann requested a copy of the settlement, a PRIDE spokesman told him it was confidential and PRIDE was not subject to Florida?s public records laws. A written public records request promptly resulted in the disclosure of the ?confidential? settlement.

After former Florida Governor Jeb Bush ordered an investigation, PRIDE?s top executives resigned. Under new management, PRIDE sued Industries Training Corporation (ITC), Labor Line Services, Inc. (LLS), Labor Line, Inc. (LLI) and Robert M. Smith, PRIDE?s former Chief Financial Officer and Treasurer, who also served in that capacity for each of the companies sued.

Despite PRIDE being a non-profit organization owned by the state of Florida, Smith established elaborate bank accounts that allowed it to share a ?cash pool? with ITC and LLS. The accounts for PRIDE and LLS were ?zero balance accounts,? which meant that at the end of the day all funds were swept into the ?master sweep account? of ITC.

The end result was that not only was PRIDE paying ITC, LLS, and LLI for services, it was also making systematic credit advances to cover the routine deficits of ITC and LLS. As such, ITC, LLS, and LLI owed Pride ?hundreds of thousands of dollars for the advances.?

Despite this indebtedness, LLI ?sold substantially all of its assets to a non-party, U.S. Staffing of Florida, Inc.? Then, ITC, LLS, and LLI steadfastly refused to provide PRIDE with details about that sale or to give PRIDE notice of the sale beforehand. LLI announced it intended to use the sale proceeds to pay off its other creditors and invest the remainder in a business entity known as ?Northern Outfitters.?

In August, 2006, the parties entered into a ?confidential Settlement Agreement.? That settlement netted PRIDE $537,000 of the $19 million bilked by its former board members. Initially, ITC must immediately pay PRIDE $137,000. The balance is in the form of a promissory note for $400,000, which requires ITC to pay PRIDE payments in the years of 2008, 2009, and 2010 ?the full amount of all profit expected to come from Northern Outfitters,? a company that was purchased with PRIDE monies. The upshot is Florida tax payers were swindled out of $18.5 million dollars due to inadequate and inept oversight of a corrupt PRIDE board and chair.

This entire fiasco exhibits that personal profiteering that prevails over prison rehabilitation and job training. While PRIDE?s prisoner workers continue to earn pennies an hour, its former executives and directors have a new company that is still financed on PRIDE?s dime and pays them hundreds of thousands of dollars a year in salry and benefits. The current PRIDE board is also well paid on the backs of Florida tax payers and Florida?s prison slave labor force. See: Prison Rehabilitation Industries and Diversified Enterprises v. Industries Training Corporation, Fla Sixth Judicial Circuit, Pinellas County, Case No. 05-006100CI-008.

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