Some may say that Gov. Rick Perry is dredging up some pretty old dirt to throw at U.S. Sen. Kay Bailey Hutchinson. But the “N-Group” scandal (Jay Root, "Perry swings back hard during final campaign week," AP, February 23rd) Perry is trying to hang around her neck is actually the playbook from which other private prison development scams appear to have been run – most recently, the infamous, outrageous saga that unfolded last year in Hardin, Montana, where local officials got bilked by a development consortium from Texas that convinced them to build a prison on speculation that a contract would soon follow. No contract ever materialized, but the developers collected their fees and moved on.
Sen. Hutchison denies any direct involvement, but the record clearly shows that her husband Ray was deeply enmeshed in a private prison development scheme that wreaked financial mayhem across six Texas counties. “N-Group Securities” was the brainchild of Patrick and Michael Graham, two brothers from Houston. The enterprising Graham brothers jumped into the private corrections field in the midst of the massive prison population boom in Texas.
The N-Group was launched in 1987, at the start of Texas Governor William Clements’ second term. The Grahams recruited a stellar set of important and politically influential Texans as business associates, including ex-Governor Mark White and Ray Hutchison, a former state senator and Texas Republican Party chairman. With these connections to the Texas political elite, the Grahams were able to persuade six county boards to float almost $75 million in revenue bonds to finance construction of the N-Group’s rent-a-cell prisons on speculation.
County officials eagerly signed up for the development schemes after being assured that contracts to house prisoners would be forthcoming from the Texas Department of Criminal Justice. Hutchison helped the counties establish development corporations to float the bonds, and he served as counsel for the their issuance. Drexel Burnham Lambert, the notorious (now defunct) Wall Street junk-bond house, underwrote the bonds.
By the time the six prisons were constructed, however, Ann Richards had been elected Governor. After she took office, TDCJ managers decided that the dormitory-style facilities did not to pass muster with agency standards. They refused to provide contracts to house prisoners.
By 1994 the Grahams were nearly buried in lawsuits filed by angry junk-bondholders, and Patrick Graham was under indictment in one Texas county on charges of criminal anti-trust violations. Yet the brothers were able to link up with Fred Hofheintz, ex-Mayor of Huston, and extend the reach of their business into Louisiana. The long version of the story about their failed prison development scheme in Jena, LA remains for telling another day. But the tangled web in Louisiana snagged another high-placed Texas official, TDCJ director Andy Collins, who Patrick Graham had recruited to join the development scheme as a prospective manager of the Jena prison.
The Jena development deal quickly unraveled, however. In January 1996, four days after Collins resigned from his post as head of TDCJ under pressure from the head of the prison board, Patrick Graham was arrested in Houston by the FBI. The indictment charged that he had agreed to accept $150,000 as a down-payment on a $750,000 fee he had solicited to engineer a prison escape for a former computer executive serving a 75-year sentence in Huntsville for the murder of his wife.
Graham had claimed he could use his connections with Andy Collins to have the prisoner assigned as a low-security trusty at a prison in Galveston where he could easily escape. Graham, a pilot, promised to arrange false identification documents for the prisoner, and fly him to Costa Rica, a country with no extradition agreement with the U.S. Patrick Graham pleaded guilty in 1997 for the foiled prison escape. He received a prison sentence of ten years.
In a big ruling today, the Texas Attorney General's office has ruled that County Sheriffs cannot accept salary enhancements from private prison corporations. The ruling, in response to a query by Yvonne Davis, chair of the House Committee on Urban Affairs, is summarized:
Neither the Texas Constitution nor Texas statutes authorize the person holding the office of county sheriff to be paid an administrative fee by a private organization.
Read the full ruling here. The ruling will specifically affect the financial relationships that private prison corporation CEC has with several Texas sheriffs. As we've reported (in our #4 Private Prison Story of 2009),
For years CEC has been paying McLennan County Sheriff Larry Lynch (and his precedessors) a "stipend" for the nominal oversight of additional prisoners in the company's downtown facility. According to state law, Sheriffs must authorize a private detention company's presence in the county under its jurisdiction. In 2008, Waco Sheriff Larry Lynch continued to receive the kickback despite a contentious debate over whether to build a new CEC facility in McLennan County. Former State Representative Kevin Bailey, then Chair of the Committee on Urban Affairs, requested an opinion of the Attorney General, and a bill was filed in 2009 (though ultimately wasn't successful) to outlaw the practice. Debate flared once again this September, when Tommy Witherspoon at the Waco Tribune reported that long-standing payment practice of the Sheriff by CEC would not expand despite a new CEC lock-up opening in McLennan. Witherspoon's investigative reporting also uncovered that Limestone County Sheriff Dennis Wilson, whose county annual salary is $49,457, is paid a $24,000 stipend yearly by the county in its contract with CEC.
The ruling will certainly be seen as a victory by the McLennan County Sheriffs Officers Association and CLEAT, who fought vigorously against private jail expansion in Waco. We'll keep you updated on the responses of today's decision.
Last month, a briefing was held on the Private Prison Information Act (HR 2450). The measure was introduced by Texas Congresswoman Sheila Jackson Lee. Our own Judy Greene presented at the briefing along with Joshua Miller of AFSCME, David Shapiro of the ACLU's National Prison Project, Tom Barry of the TransBorder Project, and Alex Friedman of the Private Corrections Institute. The briefing was hosted by Corrections USA and moderated by Eric Milman.
During the briefing, presenters like Judy made the case for expanding the Freedom of Information Act (FOIA) to all facilities detaining persons under federal jurisdiction. This would include immigrant detention centers in addition to private prison facilities.
According to Tom Barry's presentation, the problems with the current system include a lack of effective oversight.
A near-total absence of committed oversight has allowed the prison industry to flourish in the shadows. Requests for the most basic information about the functioning of these prisons and detention centers routinely lead nowhere.
Private operators like GEO Group bounce back media requests and questions from advocacy organizations to local government prison owners and to the federal outsources. In turn, local government entities [Inter Government Agreement] IGA's refer inquiries to their contracts and subcontractors knowing that this will lead to another dead end....
Judy Greene cited several specific examples of her experience with with the lack of oversight among private prison facilities including:
In June of 2000 the BOP awarded a contract to CCA for a 2,304-bed prison they had built on speculation in California City. Seeking to understand how CCA could acquire the legal power to operate this prison, including the power to use deadly force, in California -- a state which had not enacted legislation conferring such authority on private corporations, a colleague and I submitted a FOIA request for this critical information from [the Bureau of Prisons] BOP. After several months time, we sere notified that under federal regulations pertaining business information, the information I was seeking was exempt from FOIA because the company had deemed it to be a trade secret.
HR 2450 specifically addresses these issues by extending FOIA to all federally contracted prisons and detention centers. Jackson Lee's bill has garnered fifteen Congressional co-sponsors to date.
And the bill has also drawn opposition from companies with private prison interests -- most notably from the Corrections Corporation of America (CCA). Congressman Tim Holden (D-PA) is a current co-sponsor of HR 2450 and introduced a similar measure in the last Congress that also garnered opposition. At the time Rep. Holden stated:
In recent weeks, opposition to this bill has mobilized. Although I cannot testify on their behalf, I can reiterate my concern that opposition to this bill is opposition to reporting transparency...
According to recent reports, CCA has paid a lot of money to lobby agains HR 2450 and similar measures. This appears to be significant since current CCA director Charles Overby is also CEO of the Freedom Forum an organization that champions the freedom of the press. HR 2450 is still in committee in the House. We will keep y'all posted of any developments related to the measure.
Another year has passed here at Texas Prison Bid'ness, and what an exciting year it has been. As we have done in the past, the bloggers here at TPB would like to recap our favorite or perhaps the most memorable stories/topics over the past year. Over the next few days, we'll be posting 2009's top five stories related to private prisons.
We would like to thank the loyal and casual readers who gather their information from our website. We have great plans for 2010, including a new interactive Texas map that has information on each private prison facility and we are looking into the plausibility of branching out in to video podcasting. We would like to wish all our readers a happy new year in 2010, and good fortune in the days to come.
-- Judy, Bob, Nick, Nicole, and Andrew
#5 - The 81st Legislative Session ends without increased oversight of private lock-ups
Despite several bills filed that would have provided some much-needed oversight to the private jail and detention systems in Texas, the 81st legislative session ended without much in the way of increased accountability of the private prison industry. We chronicled the role that private prison lobbyists most likely played in killing a number of these bills. Here's the run-down.
HB 1714: This bill filed by Rep. Harold Dutton would have prohibited counties from contracting with private prisons. The bill did not get a hearing this session and died in committee.
HB 3903: Filed by Rep. Solomon Ortiz, Jr, the bill subjected private jails to the same open records laws as public facilities, mandated public hearings before privatization of county jails, and made it illegal for a public servant such as a Sheriffs to be paid by a private prison corporations in addition to their regular salaries. The bill was voted out of the County Affairs committee only to be killed on the House floor by Rep. Tracy King, whose district includes several private jails and detention centers, Rep. Jim McReynods, chair of the House Corrections Committee, and Rep. Jerry Madden former chair of the House corrections committee.
SB 1680: This bill filed by Sen. Juan "Chuy" Hinojosa would have required voters to approve bonds used in the financing of constructed correctional facilities. This bill did not receive a hearing and died in committee.
SB 1690: Also filed by Sen. Hinojosa, this bill which died in committee as well. The bill would have exteneded oversight to the Texas Commission on Jail Standards to monitor county jails that only house federal prisoners, a reversal of 2003's HB 3517, a bill that stripped the Commission from such authority.
We'll be back with Top Private Prison Story #4 soon.