Two top executives of the venture, which sells goods made by prisoners, are suspended amid financial questions.
By JONI JAMES
Published June 15, 2004
TALLAHASSEE - A St. Petersburg company that sells goods made by Florida prisoners is under investigation by state auditors over millions of dollars in loans to spinoff companies.
The two top executives of PRIDE Inc., a nonprofit venture founded by the late Jack Eckerd, were suspended last week while Gov. Jeb Bush's inspector general investigates the company's relationship with four spinoffs.
PRIDE board members, most of them appointed by the governor, suspended CEO Pamela Jo Davis and president John F. Bruels for 60 days last week after learning about the formal investigation.
PRIDE chairman Maria Camila Leiva said the board "did not believe that there is any basis for the allegation of wrongdoing." The board suspended the employees to "guarantee that there is not even the appearance of conflict at this time," she said.
Bruels could not be reached for comment.
Davis, whose $236,000 salary is paid by one of the spinoffs, Industries Training Corp., continues to be paid as CEO of that related company. She said Monday she is confident the governor's audit will show nothing untoward.
A legislative audit in December raised similar questions.
The loans in question are in the best interest of PRIDE's mission to provide as many jobs to inmates as possible, Davis said.
"Everything we have done has been done clearly in light of business practices, there's been nothing criminal at all," Davis added.
But questions have been brewing for months about PRIDE's decisions in 1999 and 2000 to create several independent companies, both nonprofit and for-profit.
PRIDE, which stands for Prison Rehabilitative Industries and Diversified Enterprises, was the brainchild of Eckerd, the drugstore mogul, who convinced Florida lawmakers and then-Gov. Bob Graham in 1981 that a private enterprise might better run the state's prison industries. PRIDE's primary customers are government agencies buying office furniture, copy services, shoes and uniforms.
In return for paying inmates for their work, a 50-50 split on any profits and an annual report to state officials, the Legislature granted special status for the nonprofit company that gave it limited immunity against lawsuits. It also allowed the company to buy risk management insurance at the state rate and pay nominal rent for state prison facilities.
But by 1999 PRIDE was struggling financially, Davis said, prompting the board to restructure. ITC, a nonprofit company, was created to handle administrative and other services. New for-profit spinoffs were formed under ITC to build demand for inmate labor.
The vision: Subsidiaries that weren't limited by PRIDE's mission or hampered by federal nonprofit guidelines would allow more aggressive business practices. A new PRIDE subsidiary, for example, bought a clothing company that now uses inmate labor. Federal guidelines would have barred PRIDE from buying the company, Davis said.
The goal was to increase demand for inmate labor, Davis said.
But a December 2003 legislative audit complained that PRIDE "has done a poor job of explaining its corporate restructuring."
The auditors questioned the fiscal propriety of four PRIDE board members sitting as members of ITC's board. They noted there was no written repayment schedule for $8.7-million PRIDE had spent helping launch ITC.
Auditors also suggested PRIDE had not taken appropriate steps to protect state property in ITC's possession.
"We had not been given enough information to enable us to confirm that the state's interests were being protected," audit supervisor Byron Brown said Monday.
Bush's staff says the findings weren't news to the governor. Corrections Secretary James Crosby, who is a member of the PRIDE board, expressed concerns about the restructuring almost since he took office in January 2003, said Jacob DiPietre, Bush's spokesman.
"The problem I've had as a board member is not understanding the relationships between PRIDE as clearly defined in statute and the various companies that have spun off using PRIDE money primarily," Crosby said Monday.
Public records suggest Bush's auditors first met with PRIDE staff in February, two months after the legislative audit was released.
By June 2, Foster Harbin, government relations director for PRIDE, wrote Bush an e-mail voicing concerns about Davis' leadership. Harbin wrote that "the current board of your appointees have fully abdicated their fiduciary responsibility to the state in what may be ultimately prove to be a criminal act. . . . I'm not sure anyone is paying attention."
On June 8, Bush's chief inspector general, Derry Harper, wrote Davis requesting that the board postpone a meeting scheduled for the next day in which the board was expected to sign a new agreement between PRIDE and ITC.
Instead, the board met and suspended Davis and Bruels.
