Slattery – Profiting from Troubled Youths

James Slattery wants your children. Literally.

In the early 1980’s, government privatization was in its early stages. Washington was opening up more and more industries that had been run by the government to the private sector. James Slattery, a former hotelier, was part owner of a property management company in New York City that bought up old hotels. Business was bad so he and his partners decided to explore new means of generating income from their properties. Slattery and his group realized that if they made a certain number of rooms available for welfare recipients and the homeless, they could take a piece of the anti-poverty funds available from both local and federal sources. Welfare hotels proliferated and reports of abuse grew dramatically as the mentally ill, poor, and drug addicted began to fill the empty hotels. The hotels were in deplorable condition and Slattery’s group did nothing to take care of maintenance. Buildings became rat and roach infested. Many times the heat didn’t work and there was no running water. Because of a defective elevator shaft, two men fell fifteen floors to their deaths at the Brooklyn Arms, one of Slattery’s properties. Two weeks later, four children burned to death in a fire in the same hotel. In 1989, then Mayor Koch successfully closed down most of the welfare hotels.

Of course, that didn’t stop Slattery. In 1989, Slattery and his partner, Morris Horn, founded Esmor Inc. and offered to house newly released federal prisoners in the Hotel LeMarquis, a location they owned in midtown Manhattan. They found a new, federally funded revenue stream by housing recently released convicts and undocumented immigrants.

Three years after the Esmor contract went into effect, inspectors from the Federal Board of Prisons (BOP), determined that the building was falling apart. The building was vermin infested. The staff was poorly paid and poorly trained. The plumbing leaked and electrical wires were exposed throughout the building. The food was barely edible. In 1992, the BOP was considering canceling Esmor’s contract. After repeated visits, they finally determined that conditions had improved enough for Esmor to continue in the program.

Richard Moore, a former employee of Esmor, claimed that he was severely beaten by other employees for reporting the deplorable conditions to the BOP. His assertion was that he had been assaulted under direction of the LeMarquis management. That same year four female inmates claimed they were raped by the resident advocate Esmor had onsite. Supposedly, he was there to help these women with their grievances. Esmor settled out of court.

As they looked for ways to expand their business, Slattery and Horn won bids to operate detention centers – essentially holding tanks – for undocumented aliens in New Jersey and Washington State. A year later, a riot ensued in the NJ facility in protest of constant harassment by guards, substandard food, and abominable living conditions. The guards and staff fled, even after being ordered to quell the disturbance by BOP officials on-site. It took the NJ state police and other law enforcement officials five hours to regain control of the prison. During that time, the inmates destroyed the interior of the facility. After the riot, Slattery released statements saying it was a regrettable but isolated incident and the company had handled this “local problem.”

Esmor also went into the business of juvenile delinquency. In the mid-90’s, Esmor opened its first youth detention camp outside Fort Worth, TX. At the same time, Esmor won contracts with the Florida Department of Juvenile Justice to operate two juvenile detention facilities. The contracts were originally written to address male juvenile delinquents between the ages of 14 and 19 who had been convicted as adults. After the contracts were awarded, the state realized that it had enough existing prison beds to house that population. But a contract is a contract so the state started sending youths convicted of lesser crimes to the prisons. These youths should have been put into a less restrictive environment. By then Esmor had changed its name to Corrective Services Corporation (CSC) and had gone public. It moved its corporate headquarters to Florida and was already playing the political contribution game.

In the meantime, Slattery and friends were hiring a formidable list of insiders including Richard Staley, former director of the Immigration and Naturalization Service (INS). They hired Edolphus Towns, former US Representative from Brooklyn where Esmor had set up their first halfway houses. Because CSC had big expansion plans for Texas, James Poland, a former prison official from that state was brought on board. And, in a major coup, they hired Stuart Gerson, former Attorney General of the United States. Part of Gerson’s domain at the Justice Department was to oversee the INS and the BOP. Both organizations were among Slattery’s largest customers.

In 1997, CSC opened the Pahokee Youth Detention Center in the sugar cane fields and swamps of southern Florida. Almost immediately, judges were hearing complaints of rotten food; epidemics of rats, mice, and spiders; constant harassment by staff; and maximum security prison-like conditions for boys and girls as young as fourteen. Within months, local judges and public defenders started requesting that the younger children be removed from CSC custody. A state audit determined the facility was a disaster.

Other accusations began to surface. CSC delayed the release of some of the children to keep their residency rates higher during state audits. That meant additional state funding for the facility. In 1999, as the state of Florida was reviewing the contract for the Pahokee facility, CSC abruptly canceled the agreement, closed the facility, and just walked away. In a press release, CSC officials stated the Pahokee facility was “unprofitable” and the company would continue to review the profitability of their locations to guarantee the “highest quality services for our contracting agencies and a fair return for our shareholders.”

Also in 1999, CSC bought Youth Services International (YSI), one of their largest rivals. With the purchase, they acquired five facilities in Florida in addition to new markets in the mid-Atlantic and the mid-West. Slattery, under the YSI name, was still in business in Florida. With the YSI acquisition, problems with Slattery’s facilities only increased. Reports of sexual abuse, assault, unsanitary conditions, and substandard food increased.

The problems were not just in Florida. The Charles A. Hickey School outside Baltimore, a female staff member was sexually assaulted after being left alone in an unlocked building with a 16 year old inmate. A review by the Justice Department revealed that the company had hidden a third of all assaults from official school records. The report also found that conditions at the school were in violation of “the constitutional and federal statutory rights of the youth residents.” YSI’s contract with the state of Maryland ended two weeks before the release of the report. The state took over the facility and, in time, closed it down. Slattery and company once again walked away with no punitive action taken.

Even after the investigation and closing of the Pahokee facility, Slattery’s company subsequently won $175 million in contracts to run 13 facilities in Florida. By canceling the earlier contracts themselves, CSC/YSI avoided having their contracts cancelled by the state of Florida. This gave them a “clean record,” allowing them to win new contracts in that state. In 2005, Slattery sold CSC to rival GEO. Slattery walked away with over $6 million in severance and stock options. He kept one division – YSI.

Because incarcerated children are big bucks.

In 2003, CSC was convicted of bribing Bronx Democratic Assemblywoman Gloria Davis. They were found guilty of paying her transportation costs for a number of years in return for her help securing contracts with the State of New York. They paid a $300,000 fine, the highest fine for bribery ever assessed in New York at the time. In the last 15 years, Slattery, and his wife, Diane, along with other YSI executives have donated over $400,000 to political campaigns in Florida. Of that, $276,000 went to the Florida Republican Party, the largest recipient.

Slattery and YSI are still out there, making millions from federal and state subsidies while continuing to exploit the very youths we should be trying hardest to save. Even after all the investigations, indictments, convictions, and consistent poor treatment of young juvenile offenders, James Slattery keeps taking millions of our tax dollars with total impunity.