Prison Labor Program in Shambles

By Tim Reiterman and Jenifer Warren, LA Times Staff Writers

SACRAMENTO — Fourteen years ago, California voters put convicts to work for private companies behind prison walls. Businesses were granted cheap rent and other perks, while inmate workers earned real-world wages and shared them with victims.

Created by a statewide ballot measure, the program took off and became a national model. Its director traveled the country, touting her winning formula, and graduates of the program seldom returned to prison.

But now, as Gov. Arnold Schwarzenegger seeks to better prepare inmates for release, the joint venture program is a shambles.

Once dubbed the future of corrections and expected to employ thousands of felons throughout the state, the program has withered to less than half its size several years ago. Today, with fewer than 150 of California's 163,000 prisoners taking part, it is dwarfed by similar ventures in much smaller states.

The program's decline, said state Sen. Jackie Speier (D-Hillsborough), represents a squandered opportunity to slow the tide of repeat offenders crowding state prisons at an ever-rising cost.

"Without skills, without jobs, you'll see these people end up right back in prison," said Speier, who has held hearings on the troubled correctional system. "This is the kind of program that we should be expanding."

California Department of Corrections officials blame the program's woes on a slowing economy, a dearth of industrial space on prison grounds and competition from more business-friendly states, especially those with lower minimum wages.

It's startling, even for a cynic like me, to think that there are corporations in America who think prison labor is too expensive, and even more startling to think that they would make a decision about where to put their company's resources based opn whether a state's minimum wage is $5.15 or $5.20 /hr.

'If it's $5.15, we build our factory in your state. But if it's an outrageous $5.20, we go to Mississippi!'

If that's really how they think, it's bizarre.

California's is one of three dozen federally sanctioned prison joint venture programs run by states. Businesses get an abundant workforce, low rents and other incentives. Inmates with good disciplinary records receive the prevailing wage, far more than the nine cents an hour for most prison jobs.

Society, meanwhile, benefits because most earnings — up to 80% — go to support inmate families, compensate crime victims, pay taxes and reimburse the state for incarceration costs. Joint ventures also help keep jobs from flowing offshore.

Voters approved the program in 1990 over opposition from the California Labor Federation, AFL-CIO, which condemned it as unfair to "free labor and free business." The joint venture program grew within eight years to involve 15 companies and several hundred inmates. Optimistic leaders hoped to have at least one venture in every prison.

Today, however, there are ventures at only six of the 32 state lockups. Budget cuts have reduced the staff to one full-time position and a consultant. Marketing has virtually ceased. The few convicts lucky enough to land a spot are packaging laboratory supplies, raising alfalfa and making computer circuit boards, display racks and brewery tanks.

What happened? One story is particularly instructive concerning both the kinds of promises the state made and the underhanded tactics one corporation involved tried to use to take advantage of the situation.

Operating inside San Diego's J.R. Donovan State Prison, the T-shirt factory was growing into a multimillion-dollar enterprise that newspapers would portray as a success story. Then trouble struck.

One of the sweeteners in owner Pierre Sleiman's state contract was that inmate trainees could work for free so long as they were not producing items for sale. However, the state labor commissioner ruled otherwise.

'Not producing items for sale' is an...interesting phrase for inclusion in a labor contract. How would it be defined? If you're packing items and shipping them, then you're not technically 'producing them'. Does that mean the state promised Sleiman an unpaid workforce for every area of his business not directly involved in actually making the garments? Why would it even be included? Maybe because of this:

Then a local television station aired allegations by two inmates that they were required to sew "Made in U.S.A." labels in shirts from Honduras. The inmates were placed in solitary confinement, accused of sabotaging the venture.

Aha. Now the reason begins to come into focus. Sleiman was ripping off the state for free prison labor in order to defraud consumers by mislabeling a product he purchased overseas as 'Made in the USA'. If those shirts were 'produced' in Honduras, then Sleiman's prison labor deal could have meant that he wasn't paying any of the inmates he employed in CA, both sleezy tricks that he couldn't have gotten away with--or even tried--if he were employing union laborers.

The Bottom Line trumps every other consideration: health, honesty, even--and maybe especially, in Sleiman's case--the law. Having been caught with his hand in the cash drawer, Sleiman is now suing the state for the damage to his fingers when the drawer got shut.

Though the allegations of phony labeling and sabotage were not proven, the episode led the inmates and the textile workers union to sue the company and the state. The suit alleged retaliation against the two inmates, and failure to pay prevailing wages and to compensate trainees as required.

On the first day of trial in 2002, San Diego County Superior Court Judge William C. Pate ruled that CMT Blues owed more than $840,000 in back wages and penalties, plus attorney fees of $500,000.

The first day? The evidence must have been overwhelming.

After he shut down operations, Sleiman filed for arbitration, claiming that the state's misrepresentations and negligence cost him his business and at least $7 million. State officials deny the allegations.

Sleiman's attorney, Robert Shipley, said his client figured that having the state as a partner would spare him from labor grief.

Yeah, the 'grief' of having to pay them.

I should add that if you read the article there are a couple of good examples of companies that do NOT appear to have taken advantage of the program, and kudos should go to them. They're providing a service potentially valuable to society while also making a reasonable profit, so Hats Off, Ladies and Gentlemen!

But the total failure of the program suggests that they were in the minority; when the corporations who began in the program under the impression that it would provide them with a lot of goodies, including ultra-cheap labor, discovered that it wouldn't, they pulled out. When it became difficult to keep companies in the program without giving away the state store, the program administrators gave up bothering with it.

It's a sad end to a promising story, but given corporate priorities in today's culture of unbridled greed and their wholesale rejection of any social value that hurts their profits in any way, I'm not sure it could have ended any differently.