Private prison operator Serco relieved of control at Mt Eden prison

Friday 24th July 2015

Multi-national private prison operator Serco has been forced to hand back control of Auckland's Mt Eden remand prison to the Department of Corrections, which has used a 'step-in' clause in its contract with Serco following a string of increasingly serious allegations about contraband, prisoner injuries and a death.

Corrections Minister Sam Lotu-Iiga and Corrections Department chief executive Ray Smith hosted a hastily arranged press conference at Parliament this afternoon to announce the decision, which was Smith's, cauterising what had developed over the course of the last week to be a major political issue and included calls for Lotu-Iiga's resignation.

Serco will continue to earn fees under its 10-year contract to run Mt Eden and remains responsible for meeting staff wages and the operational costs of the prison, as well as becoming liable without compensation for all the additional costs of inserting what Smith called a "crack team" of as many as 20 state prison managers to "sort out" the problems at Mt Eden.

The allegations about Serco's management include prisoners being 'dropped' from balconies in initiation ceremonies at the prison, resulting in injury and one alleged death, the transfer of prisoners injured at Mt Eden to state-run prisons to get them off the remand prison's books, along with forced participation in 'fight clubs' and the presence in the prison of illicit drugs, home-brewed alcohol and mobile phones.

"Following a new allegation yesterday, I am pleased that Ray Smith has made the decision that Corrections will take over the running of the prison for the immediate future," said Lotu-Iiga.

Similar takeovers of prison management had occurred at state-run prisons that had experienced problems, the minister said, citing the replacement of management at the Spring Hill state prison after a riot in June 2013.

The Mt Eden furore has erupted just as Serco enters a period in which it renegotiates the terms of the second half of its contract for Mt Eden, with the government able to terminate the contract at any time between now and a "break date" in 2016.

Asked what the chances were of Serco still running the prison past that break date, Lotu-Iiga said: "I don't know."

The inquiry now under way into the prison's management was important to help determine the way forward. Under the contract terms, it could be broken immediately but the right course of action was an inquiry, he said.

Serco's contract to run the recently opened prison at Wiri is unaffected. Wiri was developed as a public-private partnership and houses prisoners who have been sentenced, unlike Mt Eden, where prisoners are either awaiting trial or are being held prior to transfer after sentencing to more permanent incarceration. Mt Eden has a high turnover of around 4,000 prisoners a year and is acknowledged as a "difficult" prison to manage, said Lotu-Iiga.

Smith said he had been in contact with Serco's senior executive for the Asia-Pacific region and had spoken to the global chief executive, Rupert Soames, in London, about the issues.

It was inevitable that Serco would face penalty charges relating to the incidents that had been uncovered so far. The second phase of a complete search of Mt Eden was now under way.

Hampshire-based Serco runs outsourced public services around the world in numerous sectors, employing 122,000 people in 30 countries, including Australia's mainland and Christmas Island immigration detention centres to house asylum-seekers and illegal migrants arriving by boat and air.

It reported 1.5 billion British pounds in writedowns on the value of its contracts last November and was forced to go to shareholders for an emergency 550 million pound recapitalisation through a rights issue. It announced profit downgrades at the same time.

Soames announced at the time the company would narrow the focus of its outsourced contracting to defence, transport, health, justice and immigration services for the UK, Middle East, Australia and New Zealand.

The New Zealand unit reported an annual loss of $2.6 million, including $1.5 million impairment charge on mobilisation and bid costs, in calendar 2014.

(BusinessDesk)

BusinessDesk.co.nz

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