California Demands $1.6 Million In Diverted Telephone Revenues
From Private Prison Contractor

by John E. Dannenberg

The California Department of Corrections (CDC) has charged private prison contractor Marantha Corrections LLC with "misappropriating" more than $1 million in telephone revenues at its 500 bed prison in Adelanto, California, and ordered CDC's contract with Marantha terminated "for cause," effective September 30, 2004.

CDC Director Jeanne Woodford stated in a June 29, 2004 letter to Marantha that Marantha was "either unwilling or unable" to account for the phone funds, and as a result, was in breach of its $8.1 million contract with CDC. CDC spokesperson Margot Bach noted the squabble was not over performance, safety or security issues, but solely with their contract. The disputed funds are the commissions from phone calls that are collected by Marantha which are supposed, to be turned over to the state's Inmate Telephone Revenue Fund.

According to CDC documents obtained by the Sacramento Bee , Marantha's Chief Executive Terry Moreland had blocked the state from auditing Marantha's phone fund account. Moreland argued that they were insulated from audit because the phone service had been provided by Marantha's "landlord." CDC found out that that "landlord" was just another company controlled by Moreland, who retorted that this "made no difference." "The issue is who owns the fund," he said.

Statewide, the fund collects over $28 million per year from CDC's 32 state and community correctional facilities. The money is supposed to defray overall costs of incarceration. Moreland insisted that there is no provision in their contract to capture these commissions at Adelanto and give them to the state. He hotly denies owing CDC $1.6 million, claiming his firm is not "an agent for the state." Moreland opined that "you have somebody new who has come into office [an apparent reference to Woodford] and is trying to fix a lot of problems, and certain people from the old guard put some things in front of them to sign." Bach admits that other than the phone dispute, Marantha is "doing a great job" running Adelanto, especially noting a vegetarian diet it offers.

After an August 20, 2004 meeting with Moreland, CDC granted Marantha a one month extension on the state's notice to close the Adelanto prison, while they continued to negotiate the issue and the Office of the Inspector General investigated. CDC currently has six private prisons under contract housing 2,280 prisoners, in addition to deals with six cities and counties to run community correctional facilities. A recent study by former Governor George Deukmejian recommended greater use of such private prison contractors.

In January 2005, Moreland announced he would lease the Adelanto prison to San Bernadino County Jail officials for $3.8 million a year.