Recently, a situation involving the use of prison labor in Nevada has drawn the attention of business owners and state officials alike after several steel companies discovered that one of their competitors had been using prison labor to cut costs and secure contracts.
The labor was provided by prisoners working in Silver State Industries – Nevada’s prison industry program – at the High Desert State Prison in Indian Springs. The prisoners were paid minimum wage while employees on the outside receive between $17 and $20 per hour for the same type of jobs.
With all the glitz and glimmer of Las Vegas, Nevada is still vulnerable to the current economic downturn and has an unemployment rate exceeding 10%. The discovery that prisoners were competing against local unemployed steel workers caused consternation among the local workforce. It also caught the attention of the state’s news media, which in turn attracted the attention of Nevada’s Board of State Prison Commissioners, which consists of Governor Brian Sandoval, Attorney General Catherine Cortez Masto and Secretary of State Ross Miller.
The use of prison labor surfaced when Brian Connett, the chief executive of Silver State Industries, publicly announced the Nevada Department of Corrections (NDOC) was proud to be part of the world-class 550-foot-tall “SkyVue Observation Wheel” project being built in Las Vegas. The NDOC is involved in the SkyVue project because the project’s steel contractor, Alpine Steel LLC, is using prison labor to fabricate components for what is destined to be a new “land-mark” on the Las Vegas skyline.
Other steel companies learned that Alpine was using prison labor and paying prisoners minimum wage; due to that low labor cost, Alpine had been able to outbid its competitors and secure contracts for SkyVue and other projects. Further research determined that many of those projects were developed or financed by brothers of Alpine Steel’s owner, Randy L. Bulloch.
In September 2012 it was revealed that Alpine had not paid around $78,000 in prisoners’ wages, owed the state $401,000 for unpaid facility lease payments and other expenses, had an outstanding IRS lien of over $668,000 for unpaid payroll taxes, and was embroiled in litigation for failing to pay for supplies and for non-payment of worker’s compensation premiums. Critics accused the state of subsidizing a private company by allowing it to operate with essentially a line of credit, by letting it accrue unpaid bills.
In a December 17, 2012 hearing before the Nevada State Board of Prison Commissioners (SBPC), it was revealed that there was virtually no real oversight over prison industry contracts with private companies using prisoner workers. The state is a participant in the federal Prison Industry Enhancement Certification Program (PIECP), and under 18 U.S.C. § 1761(c), state officials have a duty to comply with the program’s statutory requirements. [See: PLN, March 2010, p.1]. In Nevada many of those requirements have been ignored.
Oversight of the PIECP is provided by the National Correctional Industries Association (NCIA). The current chairman of NCIA’s board is NDOC Deputy Director Brian Connett, who, as noted above, heads Nevada’s prison industries. According to the most recent NCIA report for third-quarter 2012, six PIECP programs were operating in Nevada at that time, employing 140 prisoners.
The dual role held by Connett as both director of Silver State Industries, including its PIECP programs, and chairman of the agency responsible for PIECP oversight creates a significant conflict of interest and raises ethical concerns.
Connett is no stranger to either. He was previously employed as the PIECP manager for Prison Rehabilitative Indus-tries and Diversified Enterprises (PRIDE), the private company operating Florida’s prison industries. In that capacity he negotiated contracts with companies to use prison labor; in at least one case involving ATL Industries, Connett failed to apply for PIECP certification for a food processing program that employed prisoner workers. Under PRIDE’s contract with ATL, Florida prisoners made food products that were distributed across state lines to government agencies, including the military, but were paid only $.25 to $.50 per hour.
As chairman of the NCIA’s board of directors, head of Nevada’s Silver State Industries and a former PIECP manager for PRIDE, Connett is expected to be aware of – and comply with – the federal statutory requirements for PIECP programs. Yet based on information presented at the BSPC hearing it is apparent that he is unaware of some of those requirements, including the need to provide notice to and consult with local business and labor groups prior to commencing new prison industry programs.
Former U.S. Senator Richard H. Bryan spoke at the BSPC’s December 17, 2012 hearing to draw attention to the impact of unfair competition on private businesses due to the use of prison labor. He said two of his clients, including XL Steel, had lost contracts to Alpine due to that company’s participation in the state’s prison industry program, and suggested that more oversight was needed. Governor Sandoval said the state should not be subsidizing private companies to the detriment of other local businesses.
NDOC Director James “Greg” Cox acknowledged that the NDOC had not obtained approval from the BSPC or the legislature’s Interim Finance Committee on Industrial Programs before implementing prison industry programs, nor com-plied with state statutes related to employment programs for prisoners – including NRS 209.462(2)(c), which requires that such programs “[h]ave an insignificant effect on the number of jobs available to the residents of this State.”
“The process has not been followed,” he admitted, adding, “It is clear we should have done this in the past.”
Cox assured Governor Sandoval that by the time of the next BSPC hearing in March 2013, the NDOC will have craft-ed administrative regulations to bring the state’s prison industry programs into compliance with applicable laws. Time will tell whether those regulations will fully protect Nevada’s workers and private businesses from unfair competition resulting from the exploitive use of prison labor.
State officials have since indicated that Alpine Steel’s use of prison labor has been stopped and the company placed on a repayment plan to recover the outstanding debts it owes for prisoners’ back wages and lease obligations to the state. Meanwhile, the company’s troubles continue to mount. On February 6, 2013, the State Contractors Board found Alpine guilty of failure to establish financial responsibility, lowered the company’s license limit to $1.7 million, required it to post a $20,000 bond and placed its license on probation for one year. Every 60 days, Alpine must show it is current with its payments to the NDOC and the IRS.
Bob Sloan, a former prisoner, is a national expert on prison industry programs and Executive Director of the Voters Legislative Transparency Project (www.vltp.net). He provided this article exclusively for PLN.
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