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Questionable New Jersey Halfway House Funding Benefits CEC

by Matt Clarke

Republican New Jersey Governor Chris Christie insisted on budget cuts in 2010, except when it came to funding treatment centers, formerly called halfway houses. Gov. Christie wanted to increase funding for treatment centers by $3.1 million, from $61.5 million to $64.6 million, which would benefit prisoners after they were released.

Coincidentally, the increased funding would also benefit the governor’s close friend and political advisor William J. Palatucci, who is a senior vice president and general counsel for Community Education Centers (CEC) – a for-profit company that operates treatment centers in New Jersey as well as secure facilities and in-patient treatment programs in other states.

Palatucci has a decades-long relationship with Christie, during which he has helped run Christie’s election campaign and served as co-chair of Christie’s inaugural committee. He has also personally contributed $26,650 to the Republican Party. John C. Clancy, CEC’s chairman, contributed $138,525 and CEC has contributed $372,350 to both parties.

The donations seem to have paid off. CEC provides 1,687 of the 3,029 treatment center beds under contract from the New Jersey Department of Corrections (DOC).

Eight vendors have DOC contracts for treatment center beds but CEC is not one of them.
CEC “does not hold any state contracts,” according to its spokesperson. So how does the company provide the majority of the state’s treatment center beds? It does so through a non-profit corporation, Education and Health Centers of America (EHC). EHC has the state contracts while CEC supplies the treatment center beds.

Why have a non-profit “buffer” company between the DOC and CEC? Under New Jersey’s pay-to-play laws, a business receiving $50,000 or more in government contracts has to file annual disclosures of its political contributions with the election commission.
Since 2008, non-profits have been exempted from the pay-to-play laws. EHC doesn’t make political contributions and CEC doesn’t (directly) hold state contracts, thus no political donations have to be reported.

Who runs EHC? Clancy, the chairman and CEO of CEC, is EHC’s salaried president according to EHC’s 2009 IRS tax report. Palatucci, senior vice president and general counsel for CEC, is EHC’s director of development.

There are two kinds of treatment centers in New Jersey – assessment centers and treatment programs. Soon-to-be-released prisoners are first sent to an assessment center for evaluation. From there, those with substance abuse or behavioral problems may be referred to appropriate treatment programs. The DOC pays $62 per prisoner per day for beds in treatment centers and between $70-$75 per prisoner per day for assessment center beds.

So why is the treatment center budget being increased? DOC Commissioner Gary M. Lanigan said it was due to legislation passed in 2009 that requires 100% occupancy of the treatment center beds under DOC contract, an increase from the 95% occupancy rate previously mandated. Hence the requested $3.1 million budget increase. Not everyone buys that explanation, though.

“Why is this portion of the budget going up when so many things are being slashed?” asked Joseph Marbach, dean of the Seaton Hall College of Arts and Sciences. “What is the underlying reason? Anything that might benefit Mr. Christie’s friend, Mr. Palatucci? ... The governor has been very vocal in criticizing these kinds of relationships. For consistency’s sake, you’d think Mr. Palatucci would take a leave of absence or recuse himself while Mr. Christie is in office.”

Palatucci responded that he had resigned from acting as a lobbyist for CEC, stating he is “an advocate for alternatives to incarceration, and none of that requires me to lobby for CEC.”

“I told the governor in January, ‘I’m not going to talk to you about my company,’” Palatucci added. Apparently he believes this excuses the fact that his company – CEC – stands to make millions more from its contracts with the New Jersey DOC due to the budget increase.

Commissioner Lanigan remarked that Palatucci’s relationship with Christie “in no way influences the process. My job is to keep up a firewall, to make sure the process has not been tainted.” Yet Governor Christie is Lanigan’s boss, and even if no one orders Lanigan to send more business to EHC, and thus to CEC, he undoubtedly knows that his failure to do so will displease Christie.

The New Jersey legislature approved the state’s $29.4 billion budget on June 29, 2010. Three weeks earlier, the New Jersey Republican State Committee elected Palatucci as one of the state’s representatives on the Republican National Committee, with Gov. Christie’s blessing.


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