Private prison firm hit by fraud inquiry

THE Florida-based private security company which manages Britain's biggest and most controversial private jail is being investigated in the United States for the alleged misuse of public money.

The inquiries by Texan police into the Wackenhut Corrections Corporation - which could result in fraud charges - are being taken so seriously in the expanding global market for private jails that Canadian prison officials have suspended negotiations with the company. A contract for Wackenhut to build and manage a jail for young offenders has been frozen, and the government of the Canadian province of New Brunswick has appointed a team of accountants to investigate the company's background.

But the British Prison Service said yesterday that it would not reconsider Wackenhut's pounds 66m contract to run Doncaster prison and saw no reason for concern. Prison reformers accused ministers of having an ideological commitment to privatisation.

Since opening last summer, Doncaster (which has been nicknamed Doncatraz by its inmates) has seen two suicides in its cells. A confidential civil service report condemned its medical services last year. Last month a third man Anthony Bashforth, a 40-year-old drug dealer, collapsed and died allegedly after taking drugs which had been smuggled into the prison.

In the United States, Wackenhut's biggest problem is its alleged misuse of $700,000 of funds in Texas where it runs drug treatment programmes along with other penal corporations. All the state's money is meant to be spent on addicts and, the state government alleges, the companies are obliged to break even, not take profits.

The alarm was raised in July when auditors found that managers for another private company were using public money from the drug programme to buy a rare book collection and antique furniture for themselves. A wider investigation was ordered and Wackenhut officials were allegedly found to have used $700,000 on what the Texas Rangers investigators describe as "unallowable petty cash expenses". The money went on mobile phones and trips to Britain. The state has suspended payments to the firm while the inquiries continue.

The chairman of the Texas investigating task force, Senator John Montford, has said that two-thirds of the drug programme operators could face fraud charges. Wackenhut denies any impropriety saying that it had agreed to carry out the work with addicts for a fixed price and there was nothing wrong in keeping any savings made. "We carried out all the programmes successfully at that fixed price and we are convinced that all the costs were incurred properly," said a spokesman.

Wackenhut's board is dominated by ex-FBI and US military officers. Its services include helping employers break strikes and running undercover operations to unveil moles in multinational corporations.

The US Congress has been highly critical of one of its "stings" which involved agents posing as environmentalists to find where a leading green activist was getting his information about American oil firms.

The Texas investigation has caused a political storm in New Brunswick. The state's premier, Frank McKenna strongly supported Wackenhut's bid to run the eastern province's youth jail.

But a leaked memo from the province's solicitor general department showed that his own officials had strong doubts about the company. In language which echoed the doubts of British prison service and probation officers, they said Wackenhut was "weak in working with youth" and "basically, have missed the factor that they would be working with adolescents".

The company was planning to spend more on telephones and faxes than staff training, the officials found.

At the beginning of this month, Mr McKenna was forced to back down. He hired the KPMG management consultant group to look at Wackenhut's corporate history, hiring and employment practices and staff training.

Criticisms of the quality of the firm's employees have been raised elsewhere. An investigation in Florida found that Wackenhut had hired guards without checking their records. Among its guards were former police officers fired for incompetence, for being unfit to work with inmates and for stealing from suspects.

The same pattern has been found in Britain. In a confidential report to the Home Office's Prisons Board last year, Dr Rosemary Wool, the Government's director of prison health services, said she was concerned that there were no medical staff with experience in state prisons at Doncaster.

The one nurse with a background in prison care was sacked when it was found he had a criminal record.

"These allegations once again question the suitability of allowing the private sector into the criminal justice system," said Stephen Shaw, director of the Prison Reform Trust. "The Government cannot honestly face the question because it is committed to the dogma of privatisation."