In what amounts to a vast social experiment, government is retreating from its historic role of caring for orphaned and delinquent children and is parceling them out to an expanding private industry of youth jails and foster programs.
The reliance on private entrepreneurs has quietly created one of the most fundamental shifts in the way America handles troubled youth since the introduction of juvenile courts a century ago.
But the lucrative private programs, which were touted as an antidote to the wretched conditions found in state institutions, are rife with corruption and abuse, and are scantly monitored, a Tribune investigation has found.
At a for-profit Florida prison that reaped $9 million a year, guards staged gladiator matches called “The Main Event” in which 13- and 14-year-olds pummeled each other as fellow inmates watched. The prison held some juveniles beyond their release dates to increase the company’s state income.
In a violence-plagued South Carolina youth prison that garnered $8.6 million in one year, a 14-year-old inmate was hogtied, doused with Mace or pepper spray and beaten by guards, according to court records.
Given $2,895 a month to find a loving family for a Chicago infant, a local foster agency instead held the boy for three years in a series of ill-kempt South Side group homes where he developed tuberculosis, ringworm and a combative personality.
“The more kids they can get and the longer they can keep them, the more money they can make, and thats a dangerous thing, said former Massachusetts child welfare administrator Jerome G. Miller.
Once the exclusive province of local charities, small churches and child advocates, the youth services industry of the 1990s ranges from a handful of multistate corporations that dominate the market to smaller start-ups that win million-dollar contracts with little more than a shabby bungalow and a few empty cots.
The seven largest publicly traded companies saw their income from government youth contracts soar to $645 million from $75 million six years ago. Four of those seven companies did not exist or did not handle youth before 1990.
The burgeoning market attracted corporate executives whose careers were checkered by accusations of swindling and fraud. Using public funds, some administrators treated themselves to luxury car allowances, country club memberships and million dollar management fees, records and interviews show.
Some non-profits were every bit as avaricious as their profit-making counterparts. As the stakes rose, many were bought up or squeezed out by the new competition, and some collapsed under their growing responsibilities, with devastating results for their young wards.
Children’s case files examined by the Tribune point to a fundamental collision between the traditional mission of child work–to normalize youth and move them out of the system–and the profit motive, which seeks to keep them in. Even in the non-profit sector, many fee-per-child contracts give private companies no incentive to discharge children or reduce their level of care or confinement as functioning improves, because doing so would cut revenues, government studies found.
Once states subcontracted these children to the private sector, they left the new caretakers largely to their own devices. State officials gave fledgling companies some of governments most far-reaching responsibilities, putting them in charge of licensing and policing other firms and making crucial choices about young wards.
Many state agencies were ill-prepared for their new role as watchdog.
“The function of the state agency is different now: it is quality control, and some states are having a hard time doing that,” said David Altschuler, principal researcher at the Johns Hopkins University Institute for Policy Studies.
In the best of circumstances, private detention and foster care programs offer a host of potential benefits. The free market has produced innovators who pioneered influential treatment methods and the competition for contracts spurs some providers to maintain their highest standards.
But while some children unquestionably have fared better in private hands, there is no conclusive evidence that those sent to private programs are as a whole better off, or that taxpayers saved money, as the companies promised. Audits and independent studies present a mixed and murky picture.
Private companies gained such a toehold in large part because some government agencies failed spectacularly to protect the children in their care during the 1990s. The Justice Department is handling six investigations into state-run youth prisons, suing the State of Louisiana over alleged civil rights violations in its juvenile corrections facilities and monitoring consent decrees in Kentucky, New Jersey and Puerto Rico.
And the government-managed child welfare systems of Illinois and 11 other states are operating under court-ordered consent decrees because of class action lawsuits alleging systemwide abuse of wards.
“It is not as if the public sector has lived up to its mission,” said Ira M. Schwartz, dean of the University of Pennsylvanias School of Social Work. But in the private sector, there have been a number of cases where greed and lack of concern for children have come to the forefront.
When University of South Carolina psychiatrist Dr. Donald W. Morgan walked into a for-profit South Carolina youth prison to interview William Pacetti, he found the boy “hogtied on a bare concrete floor in a small room … overcome by fear,” Morgan said in court papers.
Pacetti was 13 when he arrived at Correctional Corporation of America’s facility in July 1996 after he accumulated charges of disrupting school, threatening a school bus driver and truancy. After eight months in the company’s Columbia Training Center, he was admitted to the state Department of Mental Health covered in bruises and in need of acute psychiatric care.
His treating psychiatrist, Dr. Elin Berg, said in a court filing that Pacettis long-term mental illnesses “stem directly” from abuses he endured and witnessed at Columbia.
Correctional Corporation of America, or CCA, has denied in court papers that its employees hogtied youth or used any improper force. “Hogtying,” or chaining a youth’s wrists to his ankles in a way that does not allow him to straighten his legs, is forbidden as a form of punishment in South Carolina.
Pacetti’s lawsuit was one of 12 alleging similar abuses at the facility. In June 1997, after a series of state reports said CCA failed to meet performance standards, then-South Carolina Gov. David Beasley canceled the companys $8.6 million-a-year contract. Pacetti has since been placed in a small therapeutic treatment center, also run privately, and appears to be thriving.
Earlier this month, when Hurricane Floyd hit the area and some staff members couldn’t make it to work, Pacetti and another resident took it upon themselves to keep the kitchen running and feed the other 50 residents.
CCA, which in January underwent a corporate restructuring and merged into a real estate investment trust, has continued pushing into the youth market. Today, the company has contracts to house 973 youth in four states, a fourfold increase from 1993.
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A lovely dinner
The growth of both the detention and foster-care markets is fueled by a single, sad fact: Even as the American economy built to a steady hum during the 1990s, growing numbers of children filed into the nations juvenile courts.
In 1998, some 520,000 children were removed from their homes because of reported abuse or neglect, up from 340,000 a decade earlier.
When the U.S. Justice Department’s last census of children in confinement was taken, in October 1997, 126,000 youth sat in detention facilities, up from 94,000 six years before. About 40 percent are now in private institutions. Some of those youth were being held as potential runaways or criminal suspects, and were not charged with crimes.
While the violent crime arrest rate for youth under 15 has declined since peaking in 1994, tougher laws and longer sentences have put more children in prisons than ever before and kept them there longer.
In addition, the country’s youth population is growing. The U.S. Census Bureau says the number of adolescents could increase 21 percent, to 21 million, by 2005.
The private youth services industry and critical policy questions surrounding it have remained obscure in large part because pertinent records are tightly held by corporations or because some government departments refuse to release them.
The U.S. Department of Justice takes a biennial census of children in confinement, for example, but justice officials will not make public even basic statistical data on the private facilities(not equal)such as their names, locations and the number of youth housed in each of them. Justice lawyers claim any data on the private companies is protected by a provision of federal law that allows individual citizens to keep some parts of their criminal records confidential.
No single, Solomon-like agency is charged with making decisions about these young lives. The wards are meted out to public agencies or private companies through a complex network of social workers, juvenile court judges and government officers who follow protocols that vary from state to state and child to child.
In most states, juvenile delinquents and foster children are served by separate court systems and government agencies. But those two populations overlap and link, and the funding streams and programs that serve them also blend in complex ways. Todays market-leading companies offer the full spectrum of services, from youth jails to foster programs.
To garner the wards, some companies funnel campaign contributions to public officials while others deploy elaborate marketing schemes, enticing social workers and judges with lavish dinners and compelling promises.
“The kids become a fungible item. There’s money behind them,” said Cook County Public Guardian Patrick Murphy.
Thumbing cellular phones and stacks of bright brochures, marketers from Century HealthCare Corp. trolled the corridors of Cook County Juvenile Court. They sought violent and abused children who came with lucrative government funding.
The children “were seen as bodies that we got $300 a day for,” said Florence Simcoe, who served as clinical director of Century’s Westbridge Treatment Center in Phoenix until 1996 and marketed that facility to Illinois officials.
On the promise that Westbridge’s intensive treatment programs would salvage violent and disturbed wards who had failed in every other setting, Illinois paid the company $15 million during the 1990s.
Forging relationships with the government bureaucrats who parceled out troubled children to private companies, the marketers paved the way by being relentlessly helpful, said former county probation supervisor Sheila Nicolai, who retired in November 1997.
“The kid needs a medical card, some kind of form is needed, they’ll say, “I’ll do it. Lets save you some time,” Nicolai said.
On visits to Century’s Westbridge facility in sun-soaked Phoenix, beleaguered Cook County child workers were treated to sumptuous meals in the petunia-laced courtyard of Lon’s restaurant, then offered after-dinner drinks and cigars.
“We took them out to a lovely dinner. The next day, breakfast at their hotel,” Simcoe said.
Simcoe said she resigned when she realized her marketing promises were hollow.
“Instead of two kids to a room, we had three,” she said. “Violent kids were mixed with psychiatric patients. And Westbridge made a lot of money.”
Illinois withdrew its children from Westbridge in 1996 after a series of state inspections revealed unsanitary conditions and a pattern of aggressive and sexual acting out by the young residents. A 13-year-old sexual predator had been placed in the children’s unit, where he bullied smaller youth into a sex ring, Phoenix police records show. A 10-year-old told Phoenix police he was molested repeatedly.
Unknown to the Illinois bureaucrats who placed more than 40 children there, a $25 million bank debt was threatening Century HealthCare, Westbridge’s parent company, and driving down the conditions of care.
Century founder Jerry David Dillon testified at a May 1995 Manhattan federal court hearing that cost-cutting bankers forced him to dismiss crucial supervisory and clinical staff:
“We will do nothing but deteriorate because our product is providing clinical treatment,” Dillon said he told the bankers. “We are not selling nuts and bolts here, we are treating highly disturbed adolescents who are a menace to society. The bank did not listen to that.”
In June 1992, a company related to Columbia/HCA Health Care Corp. agreed to manage Century’s facilities as part of a deal that gave Dillon $1.3 million in cash, employment and consulting agreements and 50 percent of the sale revenues of some properties, court records and interviews show.
Although he still owned Century’s stock, Dillon no longer controlled the day-to-day operations and Westbridge has since been sold.
In a darkened room
In Illinois–one of several states where child welfare laws limit the involvement of profit-making foster care companies–a league of community-based non-profits handle three-quarters of the state’s wards, taking contracts worth more than $500 million a year.
But as 4-year-old Aisha’s story shows, this new marketplace operates with little government oversight and is riddled with incompetence and fraud.
Taken from her cocaine-addicted mother a week after she was born in a Chicago hospital in 1994, Aisha passed through seven foster homes overseen by seven different agencies and 13 caseworkers. Each time one private agency was shuttered, her case(not equal)and the dollars that came with it(not equal)was transferred to a new firm, as Aisha and other children drifted through months of bureaucratic limbo.
In late 1997, after Aisha’s case was shuffled through three failed or faltering agencies, she and her brother were placed in the care of a non-profit called Child’s Needs First. That company could not account for the children for three months, a report in her case file shows.
In February 1998, Child’s Needs First placed Aisha in the South Side home of foster parents Vandeliea and Edward Evans. The girl rarely was seen by caseworkers, as the agency began to spiral into disarray. In April 1998, four caseworkers quit in one week. By late summer of that year, the three who remained handled at least 46 children apiece, nearly twice the mandated caseload.
Child’s Needs First was shut down by the state amid complaints that children went months without critical services and case managers missed home visits and court dates, juvenile court files show.
Aisha’s case was transferred to Aunt Martha’s Youth Service Center Inc., one of the state’s largest private foster agencies. But this $34-million-a-year non-profit failed for months to see its ward in person. Vandeliea Evans gave Aunt Martha workers spurious excuses that kept them out of her house, and she began working to replace that agency with another one, court records and interviews show. In January, at Evans’ insistence, responsibility for Aisha’s case was transferred to a foster agency called ChildServ.
Amid the transfer, Aunt Martha’s workers concede that no one checked on Aisha for two months. Still, an Aunt Martha’s supervisor told ChildServ workers “the Evanses were great foster parents” and the children “were bonded” to them, a Jan. 15 ChildServ memo said.
After several blocked attempts to visit the Evans home, on Jan. 21 ChildServ caseworker Therese McCleary finally got in to see Aisha.
The 4-year-old sat nearly motionless on a bedroom floor, police records and interviews show. Her distended stomach bulged, hiding internal wounds. Her left arm hung sore and useless, betraying a fractured bone. Dried blood caked on the tip of her nose. Old scars and fresh scratches stitched her expressionless face.
In the darkened room, she slowly turned a single block over and over in one hand.
At La Rabida Children’s Hospital and Medical Center, a doctor characterized her condition as “one of the worst cases of abuse and malnutrition” she had ever seen.
After failing a police polygraph test, Vandeliea Evans admitted to strapping the naked preschooler to a bed with a necktie and beating her with a belt, jamming the arm of the girl’s Betsy Wetsy doll up her vagina “to teach her a lesson,” and dragging her up the stairs so violently by her arm that it broke, police records show.
In interviews with the Tribune from Cook County Jail, where they remain locked on charges of attempted first degree murder, aggravated battery and unlawful restraint, the Evanses now deny harming Aisha.
“(A caseworker) said she was going to help me with these kids,” Vandeliea Evans said. “I told her, `I have no training for this. But nobody stepped in to help me. Nobody.”
The Evanses said they took Aisha in part because the $706 monthly foster payments on behalf of the girl and her brother would supplement Edward Evans job as a security guard.
Today, Aisha is in a specialized foster home, placed with a south suburban couple who have cared for other disturbed children. ChildServ–the agency that pulled her out of trouble–still handles her case.
“The foster mother asked me, `Is she going to be all right for the rest of her life?” said Cook Counmty assistant public guardian Julie Gerber Sollinger. “I don’t think we know.”
An improbable partner
A barren industrial park behind an interstate truck stop some 90 miles northeast of Denver was the setting for one of the emerging juvenile detention industry’s bellwether dramas.
Built in 1987, Rebound Corp.’s High Plains Youth Center stood as a bright emblem of private industry’s promise to rehabilitate delinquent wards more cheaply and effectively than government bureaucrats ever could.
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Well-trained and caring staff members were equipped with radios linking them to a 24-hour communications control center, the company said, and rigorous work and exercise schedules would occupy more than 99 percent of the boys waking hours.
Today, a sagging, 14-foot-high chain-link fence guards the empty campus of sleet-gray bungalows.
Rebound’s owners and staff didn’t deliver on their promise to protect and rehabilitate children, who instead suffered abuses. State juvenile corrections officials never really knew who they were dealing with: a set of entrepreneurs whose previous business dealings had come under law enforcement scrutiny. In the end, the problem spilled beyond the borders of Colorado.
Illinois and some 20 other states sent troubled youth to the 180-bed compound, enabling High Plains to report income of more than $9 million a year. Illinois spent $8 million there during the 1990s.
In lawsuits that spread from Colorado to Illinois and Massachusetts, company investors have accused Rebound’s directors of improperly extracting personal gain from the High Plains operation.
Chairman Marshall S. Sterman has denied impropriety and said in an interview that High Plains was shuttered last year by powerful government bureaucrats who had a vested interest in placing the youth in state-run facilities.
“We’re competing with those people” in the government sector, Sterman said. “There’s a lot of animosity, jealousy, what can I tell you?”
He said: “I don’t think anything went wrong, quite frankly. I think the motivations behind its closing were political and personal.”
Sterman is a Harvard University trained investment adviser who had been indicted and acquitted of allegations that he had taken part in a 1980 tax shelter swindle. In 1987, he got involved in the youth services industry.
A privately managed project to build and operate an adult prison in Brush, Colo., had fallen apart, and the tax-exempt municipal bonds that financed the facility were available for the deeply discounted price of $1.8 million.
Sterman gathered $1.5 million from a nightclub and amusement park owner named Henry D. Vara Jr.(not equal)in some ways an improbable partner in the field of youth services. Two years earlier, in 1985, Vara had been acquitted of tax fraud charges brought by the Justice Departments Organized Crime Strike Force, and controversy would continue to surround him.
Citing allegations that profits were being skimmed from Vara’s bars, the Nevada Gaming Commission in 1989 forced an investment group to cut all ties with him before allowing the group to make a bid for the Las Vegas Sands hotel. “This is a rigidly regulated industry,” State Gaming Control Board member Gerald H. Cunningham told the Sands investors during a hearing.
In an unrelated case involving Vara’s racetrack interests, then-Massachusetts Gov. Michael Dukakis told several state lawmakers that his administration would not do business with Mr. Vara.
Vara filed court papers saying he was not associated with organized crime and was being unfairly treated.
His investment in High Plains was never put in writing, court records and interviews show. Illinois and Colorado officials said in interviews that they were not aware of Vara’s stake in the company.
Sterman devised an elaborate structure of related companies to operate the Colorado facility.
In 1993, Vara filed a lawsuit saying Sterman fraudulently diverted facility funds for his own benefit and engaged in “four years of lootings.” Sterman says he did nothing wrong, and Vara’s suit was settled in 1996 with a stock redistribution that gave Vara a greater share of the facility.
In June 1993, two subsidiaries of Xerox Financial Services won judgments totaling $5.8 million against Sterman in court cases that stemmed from complex bond deals involving the facility. Xerox alleged Sterman was funneling High Plains funds to himself and business associates “under the guise of management or consulting fees,” then transferring the funds through other corporations in order to evade creditors. A Sterman-directed company ultimately used the money to pay Stermans membership dues at the Harvard Club, as well as indulgences such as $732 worth of cigars from the L.J. Peritti Co., court filings say.
Sterman said in court pleadings that his were legitimate business expenses, and their disclosure was an effort “to harass and embarrass him.”
The Colorado Department of Human Services, which licensed High Plains, never tried to sort out the facility’s intricate finances, spokesman Dwight Eisnach said.
“In terms of tracing where the money goes, we’re not very good at that, frankly,” Eisnach said. “We’re not sure we fully understand what they were doing.”
The oversight of conditions for children seemed little more stringent. Despite high numbers of abuse allegations and other violent incidents, the state renewed Rebound’s contract every year, adding no provisions to improve performance.
A December 1995 review by Illinois inspectors found a pattern of violence and clinical malpractice at the facility, and contained this note: “One frightened resident, pounding on the door for help, was reportedly told by staff to just get back in bed…There is substantive evidence that this youth had been serially raped for months on this unit while staff deliberately ignored his plight.”
Illinois did not take the state inspector’s recommendation to remove all children from the facility, but decided to stop sending new cases to High Plains. To serve the two-dozen-or-so youth who remained and resolve old bills, the state paid Rebound more than $2 million after July 1996.
Finally in April 1998, after a Colorado investigation into a 13-year-old Utah boy’s suicide at the facility turned up evidence of pervasive brutality and improper sexual relations between youth and staff members, Colorado moved to suspend Rebound’s license.
Rebound sued the state, saying the license suspension was improper. The suit is pending, but High Plains stands empty.
Vara said the facility fell victim to unfair press reports, and was no worse than state-run institutions.
“I thought we were going to be able to return youth to society, and we were going to make a contribution,” Vara said.
“I had brochures and things like that.”