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Company Owes Nevada Prison Industries $428,000

Nevada’s state-run prison industry program, Silver State Industries, came under attack from citizens and business owners in 2014. One criticism of the program involved the loss of jobs to non-incarcerated workers and fewer jobs available to the unemployed. Another complaint was that select private companies had contracts with the Nevada Department of Corrections (NDOC) that provided reduced lease rates on manufacturing space and allowed the use of prisoners as a low-paid workforce. Competitors of those companies protested that this amounted to the state subsidizing private businesses and giving them an unfair advantage. [See: PLN, March 2013, p.14].

The discovery that NDOC authorities had in effect subsidized private businesses, allowing for direct competition against other companies, raised eyebrows in the media and attracted the attention of organized labor leaders, state lawmakers and eventually Governor Brian Sandoval. Labor officials, legislators and the governor all voiced concerns over the displacement of Nevada workers by prisoners, and were critical of the way in which the NDOC was operating prison industry programs with inadequate oversight.

The result was several hearings in the Nevada Assembly and Senate. During those committee meetings and hearings it was discovered that one of the private companies contracting with the NDOC, Alpine Steel, was in arrears on lease and utility payments and wages to NDOC staff and prisoner workers. Alpine had not been paying workers, staff or the NDOC for more than 3 years and had been allowed to continue operations through a 2011 lease renewal while deeply in debt to the state.

In all, the NDOC was owed around $428,000 – with no assurance or guarantee that the debt would be paid. Ultimately the prison industry operation involving Alpine Steel was shuttered and the state entered into a forbearance agreement with the company’s owner to recover the nearly half-a-million dollars owed.

A new Senate bill was proposed to amend NRS 209.461, and after negotiations between the NDOC and the legislature, the bill passed and was signed into law by Governor Sandoval.

Amendments to the existing law add a new organized labor member to the Interim Finance Committee on Industrial Programs, and require all new or proposed prison industries to be approved by the committee and then submitted to the Board of Prison Commissioners for final determinations. A third change was the requirement that companies contracting with the NDOC’s Silver State Industries provide a surety bond or personal guarantee to ensure that the state will be promptly paid for leases, salaries, wages and utility costs.

An uneasy “truce” now seems to exist between critics of the state’s prison industry program and NDOC officials, as citizens and business owners assume a posture of monitoring rather than criticizing the program. Some continue to believe that prison industries should be operated in a manner that does not openly compete against other businesses providing the same products or materials. Those critics cite the loss of jobs in the private sector as an indicator that NDOC authorities and the Board of Prison Commissioners failed to properly oversee prison industry operations to protect workers and private employers.

Others have voiced the opinion that prison industry programs should be shuttered due to the displacement of freeworld workers and the sweetheart deals that allowed some companies to operate with an unfair advantage over other businesses. They point to Alpine Steel, the company at the center of the controversy involving non-payment of wages to prisoners and staff, as an example. Alpine received a facility lease of approximately $0.23 per square foot from the NDOC. Comparable average lease rates on similar property in Nevada run nearly $0.70 per square foot. The lower rate allowed the company to realize an annual savings of about $85,000.

Such a reduction in overhead, combined with the low wages paid to prison workers, enabled Alpine Steel to outbid competitors on several lucrative contracts. The fact that Alpine was able to operate without paying rent, utilities or labor costs for several years bolsters critics’ claims that the company enjoyed a truly sweetheart deal.

One critical issue remains unaddressed: the exploitation of Nevada’s prisoner workers. As discussed previously, state officials and critics protested the unfair competition of companies using prison labor and the impact upon competing businesses and private sector workers from that low-cost labor.

While the new legislation was enacted to protect private workers and businesses competing directly against prison industry programs, nothing in that legislation protects prisoner workers from continued exploitation by the NDOC and Silver State Industries. As an earlier report issued by the Voters Legislative Transparency Project revealed, incarcerated workers in Prison Industry Enhancement Certification Programs (PIECP) are supposed to receive prevailing wages for their labor as required under 18 U.S.C. § 1761(c). [See: PLN, March 2010, p.1]. Additionally, Alpine Steel’s contract with the NDOC specified that prisoners were to be paid at the “prevailing wage rate for the locality and type of work being performed...,” yet workers in the prison industry program never received prevailing wages.

Prisoners working for Alpine received minimum wage or less, which is the typical practice for most PIECP industries – and those wages are subject to a number of mandatory deductions, including for “room and board.” Although the failure to comply with prevailing wage requirements was presented to the legislature and members of the Nevada Board of Prison Commissioners and Interim Finance Committee on Industrial Programs, no investigation or review resulted. Ultimately, while the new legislation protects the payment of wages to NDOC employees along with lease, utility and other payments to the state, underpayment of wages to prisoner workers in the state’s prison industry program was not addressed.

Another form of exploitation is the perhaps illegal deductions from all prisoner workers’ wages by the NDOC to fund expansion of new or existing prison industries. Under Nevada law, 5% of all earned wages are taken from prisoner workers and put in a fund to be used by the NDOC to expand prison industry operations. In the case of PIECP programs, this deduction is apparently illegal under 18 U.S.C. § 1761, et seq., and Nevada was informed of such by the U.S. Department of Justice in 1990. To date, millions of dollars in prisoner-earned wages have been deducted and used by prison officials to offset the costs of operating or expanding prison industries.

It is hoped the new law and administrative regulations pertaining to prison industry programs will stop the unfair competition that was the subject of criticism by local businesses in Nevada. Only time and continued vigilance will tell.

It is also hoped that organized labor leaders will pressure the state to recognize the prevailing wage requirements in state contracts and PIECP programs, and pursue enforcement of those mandates. This will keep private sector wages up, and will deter new prison industry contracts with companies that are merely trying to save on labor costs.

As for the $428,000 owed by Alpine Steel, it seems that state officials are mostly out of luck. According to an October 9, 2015 news report, the company has gone out of business. Although the state obtained a court order against Alpine, it was unable to collect any funds from the firm or its owner, Randy Bulloch.

“Alpine Steel has closed its doors. The chance of getting the money is zero,” said NDOC deputy corrections director Brian Connett, who currently chairs the board of directors for the National Correctional Industries Association. The NDOC is holding steel and equipment that Alpine left at the prison industry program at the High Desert State Prison, and plans to sell it to satisfy some of the company’s debt.

Only 4.1% of Nevada state prisoners were employed in prison industry programs in fiscal year 2015, and Connett said he hopes to increase that percentage.


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