Tilting his portly frame back in a boardroom chair, Joseph F. Johnson Jr. ticks off a well-rehearsed pitch about the merits of private prisons. Perched five floors above Connecticut Avenue in his plush office conference room, Johnson is sales personified: The way Johnson tells it, he is not selling prisons; he’s selling freedom. “No state should ever build another prison. You have the private sector that will put up all the capital and take all the risks,” he says. “The government should invest in schools and infrastructure.”
Impeccably dressed, with spit-shined shoes and linked cuffs, Johnson is the District front man for the Correctional Corporation of America (CCA), the nation’s largest private prison company. He trades in concepts, “pieces” of deals that promise government nirvanazero budget impact, low risk, better services.
Johnson’s private-sector magic bullet is a timely one in a cash-strapped city like D.C. and has proved nearly irresistible to those in charge of finding a way to get from one day to the next. Under pressure from Congress to balance the budget, D.C.’s elected officials who once eschewed privatization as a betrayal of city employees and an abrogation of government power have now embraced the concept as a two-fer: saving money and improving services at the same time.
With all sorts of city services up for sale, large private companies have been circling the District, hoping to get a piece of the action. The corrections component of local government is particularly attractive: It’s a growth industry that the District spends $240 million on annually. Thanks to Johnson, CCA was first in line when the District decided that turning over significant parts of its corrections portfolio was one way to get out of the hole.
On March 16, the District officially gave CCA the keys to its newest jail, the Correctional Treatment Facility (CTF), to run as a private contractor. CTF opened in 1992 as a state-of-the-art facility that was supposed to be the system’s main drug-treatment and mental health facility. The budget crisis forced the District to use the building to house women inmates in CTF’s mental health wing and to forgo most of the treatment programs for the other male prisoners, and now the facility is basically another 900-bed jail.
Johnson claims credit for coming up with the idea of privatizing CTF and bringing that deal to fruition, but he is more than a dealmaker. CCA has pledged to the city that it will subcontract all medical and drug-treatment services at the facility to Johnson’s new company, the National Corrections and Rehabilitation Corp. (NCRC). The deal has left Johnson sitting pretty, and thanks to his help, CCA apparently has an inside line on a few more huge deals, including a proposal to send D.C. prisoners to CCA’s out-of-state prisons, and maybe even construction of a new prison in Ward 8.
Johnson’s competitors in the lobbying industry grudgingly acknowledge his ability to lock in city business. CCA’s main competitor, Wackenhut, has signed on a battery of high-profile lobbyistsincluding former Corrections Department Director Hallem Williams, former D.C. Councilmembers Jim Nathanson and Betty Ann Kane, and former Redevelopment Land Agency head Michelle Bernardbut they have gotten nowhere with the city. CCA has Johnson, who has put them all to shame. He not only plays to win, he plays with the confidence of a man who knows he’s going to come out on top.
Johnson’s business with the District government isn’t limited to corrections, however. He’s also got his eye on the troubled D.C. mental health commission, which is also under the gun to privatize many of its services and to close mammoth St. Elizabeths Hospital. Johnson’s own firm, D.C. Acute Care Associates, recently beat out a major-league Boston-based management firm to win a contract from D.C. General Hospital to open an acute psychiatric care facility at the hospital that could be worth up to $75 million over five years.
While Johnson is a ubiquitous presence behind the scenes of some of the District’s major privatization efforts, he’s still something of an unknown in D.C. political circles. Even the city’s full-time busybodies don’t have a bead on him. D.C. watchdog Dorothy Brizill says she’s never heard of him, as does Ward 8 activist Sandra Seegars. And those who have encountered Johnson in the hallways of the District Building don’t seem to know where he gets his juice in District government.
Former D.C. Councilmember William Lightfoot, who oversaw the corrections department as chairman of the council’s Judiciary Committee, says he knows Johnson ran John Ray’s 1994 mayoral campaign, but other than that, he says, “I don’t really know much about him.”
Wackenhut’s Kane, also a former councilmember, says she only knows Johnson as CCA’s local broker. “He clearly has an in with the Barry administration,” she adds.
Former Councilmember Nathanson remembers Johnson working for former council Chairman Dave Clarke in the late 1980s, but says Johnson disappeared for a while and then returned a couple of years ago working for CCA. Nathanson says Johnson is doing a phenomenal job for his client, but adds, “My recollection was that when he showed up on the scene that he had some baggage.”
Nathanson’s recollection of the specifics may be fuzzy, but he’s right about the baggage. Beneath Johnson’s shiny corporate veneer is a man with a checkered history. Over the years, Johnson has had brushes with the law that include accusations of bribery, embezzlement, fraud, and racketeering. None of those allegations resulted in convictions, but his integrity has been questioned in a number of his previous incarnations. And not all the trouble is in the distant past. The U.S. Department of Housing and Urban Development (HUD)’s general counsel is currently reviewing a HUD inspector general’s audit that found that Johnson’s health care management firm had misused nearly half a million dollars in funds from a tiny, bankrupt charitable hospital in Newport News, Va.
Some of his recent deals are raising new questions about Johnson’s business approach. Much of the city business he has brokered has come through the same old spongy contracting process the District is famous for. Johnson also comes to the bargaining table with a host of associates who are longtime cronies of none other than Marion Barry. His deals suggest that privatization may have brought some new money and different faces to the table, but the District is still running business as usual.
Johnson has avoided the limelight since coming to the District in 1988 to work as chief of staff for Clarke. But last May, Johnson got his 15 minutes of District fame after publicly announcing that CCA had signed a deal with the city to take over management of the city’s new jail.
As CCA’s local broker, Johnson had been pitching a privatization deal to the District since 1994, but former Mayor Sharon Pratt Kelly refused to bite. In 1995, though, things changed in the District, and Johnson’s luck changed with them. Barry returned to office, and the District’s financial situation deteriorated to the point that Johnson’s idea suddenly became an attractive one. In February 1995, almost as soon as Barry had settled back into his old job, Johnson presented the city with an unsolicited proposal from CCA offering to buy CTF and run it as a contractor.
The deal was a sale/lease-back arrangement in which CCA would pay the District $52 million to buy CTF, and it would invest $3.8 million in sprucing up the building. The District would then lease it back from CCA for $2.8 million a year. After 20 years, the facility would revert back to District ownership. On top of the annual lease payments, CCA would also get a management fee of more than $20 million a year, depending on the number of inmates in the facility. It was a complicated arrangement, but basically CCA was offering the broke District government a $52-million interest-free loan and promising to take the management of another troubled facility off the city’s hands.
Barry championed the proposal, claiming that CCA’s proposal would save the District $3 million a year in addition to the $52-million loan. At his request, the council put the contract on the fast track and allowed the city to move forward without competitive bidding. Even given the accelerated pace, Johnson’s announcement last spring was somewhat premature. The city was still negotiating with CCA, and Johnson’s announcement prompted a huge outcry from Wackenhut, which complained that it had been shut out of the bidding process.
After protests from Wackenhut, the city reluctantly ran an ad in the Washington Times to invite other firms to bid on the CTF privatization. Wackenhut was the only firm to respond, and the city quickly rejected its proposal on the grounds that, among other things, CCA had committed to subcontracting with “local small & disadvantaged business enterprise[s],” according to publicity materials from the mayor’s office.
At an October council hearing, Wayne Calabrese, Wackenhut’s executive vice president, testified that the city initially gave his company only two weeks to prepare its proposal and refused to let company staff tour CTF beforehand. Calabrese also told the council that the District was not forthcoming with information the company needed to submit a competitive proposal, such as accurate numbers of staff working at the treatment facility.
Given the squishiness of some of the numbers, the savings trumpeted by CCA and the city were greeted with skepticism by prisoners’ advocates and the city’s correctional officers’ union. Jonathan Smith, executive director of D.C. Prisoners’ Legal Services, was privy to many of the negotiations with CCA and the council over the CTF contract, as his group lobbied for better medical and other services for inmates. He testified at the council hearing that the city seemed to have grossly inflated its estimate of how much it currently costs the Corrections Department to house inmates at CTF when it assessed CCA’s offer. The vice chairman of the D.C. Medical Society’s task force on correctional health, Dr. Michael Michaelson, testified at the same hearing that the CCA contract did not adequately provide for medical services at CTF, which houses the correctional system’s only infirmary. He also testified that he had never heard of Johnson’s company, which was supposed to be providing those medical services.
Nonetheless, any reservations councilmembers or the control board may have had were quickly eclipsed by CCA’s proffered $52 million, a windfall that the council had already earmarked for debt reduction and public schools. The deal was signed in November and blessed by the control board shortly thereafter.
“The CTF deal was wired before it ever hit the street,” laments Nathanson.
If CCA’s deal with the city looked wired, it’s most likely because Johnson was its electrician. Johnson has brokered most of CCA’s business with the District, submitting unsolicited business proposals to city officials, according to CCA documents, council materials, and Johnson himself. While Wackenhut and the Lorton Relocation Group Corp., another private firm, have also been urging privatization on the District government, the Barry administration has only responded favorably to CCA’s overtures. The company now has a near monopoly on city corrections business.
CCA’s success shouldn’t come as much of a surprise to longtime District observers. One of Barry’s first tricks as mayor was to start making big outside firms wishing to do business in the District partner up with small, local companiesusually those with political connections. Later, the city dispensed with the corporate sponsor and simply gave contracts to those local companies directly. As a result, so many political hacks have gotten city contracts over the years that no one even bothers to ask anymore why the District does business with marginally qualified firms. But the city’s overseers might have wondered why a Wall Street firm like CCA would risk partnering up with an untested company like Johnson’s. The answer is a simple one. CCA is adhering to a tried and true paradigm as old as home rule: In the District, expertise is handy, but connections are priceless.
Back at the October council hearing, CCA founder Doctor Crants pledged that his company would be subcontracting 35 percent of CTF services to Johnson’s firm, with which he said CCA has had a long relationship. However, records at the Department of Consumer and Regulatory Affairs show that Johnson’s NCRC wasn’t even incorporated in the District until the day before that hearing. Johnson says the firm was incorporated in Texas three years ago to work with CCA in Dallas, but he admits that it has yet to run a single prison drug-treatment or medical services program.
Johnson’s arrangement with CCA seems all the stranger considering that the gigantic prison firm already runs its own substance-abuse and medical programs in its other institutions. Since the March 16 takeover, the doctors at CTF have actually been working for CCA, which has very lucrative stock options as part of its benefits package. Theoretically, Johnson’s firm is supposed to take over management of the medical facilities, and the doctors would convert to Johnson’s payroll. But given the sweet deal they currently get from CCA, why would they want to work for Johnson?
Well, in fact, they probably won’t have to. Johnson says that his company’s role has changed temporarily. He says NCRC will now be working only in “an advisory capacity” for a year because of “liability issues.”
“NCRC made a decision to take a year to work with CCA to work on this program before we move into direct supervision,” says Johnson, who adds that he hopes that the CCA employees will be transferring over to NCRC sometime next year.
Smith says that Johnson’s role with CCA has been clear from the start. “The notion that there would be any subcontracting was gone early on,” he explains. “In a sense, [Johnson’s firm] was a front. They need him to get the contract. They want him when they negotiate contracts and they need a minority partner.”
Johnson disputes this characterization and says CCA won the CTF contract solely on the basis of cost. Still, by promising to subcontract with Johnson’s firm, CCA not only got a minority partner, but a pipeline to the mayor’s office. NCRC is basically a coalition of recycled former corrections officials and Barry confidants. Chalfrantz “Chuck” Perry is NCRC’s general counsel and a board member. Perry is a former legal counsel to Barry and he also worked as a special assistant to the mayor under the late Herb O. Reid, Barry’s close friend and adviser. Perry is also the lawyer of record for David Rivers in an ongoing sexual harassment suit. When he was D.C. Department of Human Services director, Rivers was tried three times for conspiracy and bribery charges alleging that he had steered contracts to a company owned by another friend of Barry’s. (Rivers’ trials all ended in either mistrials or acquittals.)
NCRC seems a curious choice to straighten out the mess at corrections, given that the company’s president, Arthur Graves, is a former corrections department official who oversaw halfway house management. Graves resigned after the Washington Post wrote a scathing article showing that several hundred prisoners had escaped from District halfway houses under his management, and that in many cases Graves’ office had failed to even look for the escapees.
NCRC also has on board Dr. Vincent Roux, associate dean of the Howard University Medical School and Barry’s personal physician during the years when the mayor was a heavy drug user. Johnson credits Roux with helping him develop his connections in the District. “I have been able to make my pitch through his entrees,” says Johnson. He has also signed a memorandum of understanding to do business with the Doctor’s Council, the union that represents doctors who work for the city. The Doctor’s Council has historically strong ties to the mayor.
The real ace in Johnson’s circle, though, appears to be Walter Ridley, the former head of the corrections department. In 1994, after four years as director, Ridley was forced out after female correctional officers filed a sexual harassment class action against his department. They ultimately won a multimillion judgment in the case. During Ridley’s tenure the District also paid $90,000 to settle a harassment suit filed against Ridley personally. In December 1994, Ridley incorporated a criminal justice consulting firm in Maryland called WBGR Inc., with his wife Barbara, a former D.C. Parole Board chairwoman. Ridley is not an official member of NCRC, but apparently he has been working as a consultant to Johnson and CCA.
Ridley could not be reached for comment. But Michelle Bernard, a lawyer at the lobbying firm of Patton Boggs, says that last July, Johnson and Ridley came to her office together to give a presentation on behalf of CCA to Jamaican Minister of National Security and Justice K.D. Knight, whom Bernard had flown in for the meeting. At that time, Bernard was trying to get CCA to hire her as its lobbyist in Jamaica; she later went to work for Wackenhut instead. Bernard says Johnson and Ridley both tried to sell the Jamaican minister on CCA’s drug-treatment programs and other benefits of prison privatization. Afterward Ridley left a business card that was not from CCA but from his own consulting firm. Bernard gave the card to Washington City Paper, and while Ridley’s office phone number is in Fort Washington, Md., the fax number on his card is the same as the fax number for Johnson’s D.C. office.
Former Councilmember Lightfoot, who chaired the Judiciary Committee when the CTF legislation was under consideration, said he was aware that Ridley was working with Johnson, but says, “We were told he wasn’t getting paid.”
Margaret Moore, director of the D.C. Department of Corrections, says she is unaware of any work Ridley is doing with the city, but insists he is not working with corrections. And in an interview on April 2, Johnson claimed Ridley is very happily employed with one of the country’s largest black churches and as an auditor for the American Correctional Association. Johnson said, “He has never worked with CCA or me. I wish he would.” He took a few swipes at the correctional officers’ union, which he believes is spreading rumors about Ridley, but then added, “If he did have a contract with us, so what? What is the issue?”
Well, it’s worth mentioning that Johnson got CCA a big chunk of city business by promising to bring both cash and the brightest minds in the private sector to the city’s corrections problems. But so far, behind the rhetoric are many of the same old faces that oversaw the system on the way to its current state of collapse.
Johnson’s office reflects his understanding of the importance of appearances. In addition to the leather couch and Southwestern art, the office is lined with conspicuously autographed photos of Johnson’s high-profile former clients, employers, and associatesall African-American luminaries testifying to Johnson’s insider status. There’s former Councilmember Ray, who is now also registered as a CCA lobbyist. Johnson’s wall touts former Green Bay Packer and NFL Hall of Famer Willie Wood, who’s now working as an electrical contractor with one of Johnson’s companies. There’s Marion Barry and former Virginia Gov. Doug Wilder, whose 1992 presidential campaign Johnson ran. And there’s a framed 1987 Albuquerque Journal article about Johnson helping launch New Mexico’s Martin Luther King Jr. holiday.
However, Johnson’s personal history is much more complicated than the glam shots let on. Much of his story lies between the lines, in gaps that mirror lapses in judgment that have gotten Johnson into a great deal of trouble over the years, as he has sought to cash in on his political connections.
Johnson is a guy who never, ever lets you forget that he is black. Every story he tells about his paststarting with his birthis laden with references to the pernicious effects of racism. Raised in Arkansas, he still vividly remembers drinking out of segregated fountains. His father’s military job eventually took Johnson to New Mexico, but not even the more egalitarian West could erase the scars of the South entirely. As a student at New Mexico State University in Las Cruces in the 1970s, he became active with the local chapter of the National Association for the Advancement of Colored People (NAACP). Johnson says his mentor was Albert Johnson, the first black mayor of Las Cruces. Johnson worked on the elder Johnson’s campaign as a college student, working his way up from phone banker to deputy campaign manager, where he helped propel the mayor to his first electoral victory.
After graduating from New Mexico State in the late ’70s, Johnson’s political ties landed him a job at a regional council of governments as a health planner. After a stint at the State Health Planning Agency, he became deputy director of Southwest Community Health Center, a large mental health facility in Carlsbad. In the early ’80s, with a recommendation from the NAACP, Gov. Toney Anaya plucked Johnson to become deputy secretary of health and environment and the highest ranking black in the administration.
At 33, Johnson was a rising star as New Mexico’s deputy secretary of health and environment, where he oversaw millions of state dollars for mental health and substance-abuse programs. At the same time, though, Johnson got involved with two men who ran a Carlsbad mental health center that contracted with the state. The Carlsbad Area Counseling and Resource Center was run by John Thacker and employed a bookkeeper named George Gregorywhich was actually a pseudonym for George Clifford Walcoff, a fugitive who had violated probation in Texas after being convicted of a felony for writing bad checks.
In 1984, after getting passed over for promotion to the secretary’s job several times, Johnson was casting about for another job when he hooked up with Thacker and Gregory and allegedly formed two businesses with them to sell cleaning products to the businesses that contracted with Johnson’s state agency. According to the Albuquerque Journal, the three also formed another business with former Carlsbad Mayor Adair Gossett to get a state contract to monitor radiation at the federal Waste Isolation Pilot Project (WIPP), 35 miles outside of Carlsbad. The radiation monitoring contracts fell under Johnson’s purview as a state official. The businesses never really took off, though. Nu-Mex Chemical, the company on whose board Johnson sat briefly, only grossed $2,600, according to the Albuquerque Journal.
The businesses may not have taken off, but along the way, Johnson allegedly received some other perks from his business partners. In 1984, Thacker and Gregory bought Johnson a 1981 Cadillac. The next year, after state officials questioned him about the car, Johnson got a bank loan to pay for it, according to the Albuquerque Journal. While overseeing state behavioral health programs, Johnson also allegedly helped Gregory write a $10,000 state-funded feasibility study that recommended consolidating many state mental health services in Thacker’s counseling center. Johnson’s activities with the mental health center didn’t go unnoticed. Dr. Fitzhugh Mullan, a U.S. Public Health Service doctor who was the state secretary of health and environment, removed Johnson from overseeing the center’s business. Shortly thereafter, Gov. Anaya fired Mullan and named Johnson to replace him.
Meanwhile, the mental health center started by Thacker had collapsed in late 1985, deeply in debt. According to Carlsbad District Attorney Tom Rutledge, government investigators discovered that Thacker and Gregory had been padding the center’s bills to the state, bilking the government out of thousands of dollars, and diverting the money for personal use. In news reports about the case, Johnson, who had oversight of the state payments to the center, claimed he hadn’t known. But in 1986, Thacker and Gregory pleaded guilty to bribing him, and Johnson resigned from his post the day before his confirmation hearings were slated to begin. Johnson was later charged by the state’s attorney with 11 felony counts of bribery, fraud, conspiracy, taking illegal kickbacks, and racketeering, according to Rutledge, who prosecuted the case, and to the Albuquerque Journal.
Prosecutors charged that Thacker and Gregory gave Johnson two cars worth nearly $30,000, cash, several thousand dollars’ worth of jewelry from the ex-mayor’s jewelry store, and interest in the three companies that were potential state contractors. In return, Rutledge says, Johnson was to treat the men’s businesses with special favor when they dealt with his office. And when the health center started failing, Johnson allegedly guaranteed a $120,000 loan to them in his capacity as a state official, according to Rutledge and accounts of the case in the Albuquerque Journal.
Gregory was sentenced to five years in prison; Thacker got three. They both testified for the prosecution in a preliminary hearing on the case against Johnson. However, on the stand, despite his guilty plea, Gregory recanted his initial confession, and the judge eventually dismissed the charges against Johnson.
Rutledge says the judge told prosecutors that he could not find any “meeting of the minds”no “magic words” that would allow him to find probable cause and hold the case over for trial. “What made this particularly frustrating was that two of the principals pleaded guilty,” says Rutledge.
After the case was dismissed, Johnson told the Albuquerque Journal that he had been “blindsided,” and blamed his own naiveté and politics for his troubles. Today, all Johnson has to say about the New Mexico matter is that it amounted to nothing. He says he has no secrets; he says he discussed the “non-issue” fully with Dave Clarke when he first came to the District.
Johnson points out that after he was cleared of all charges in the New Mexico case, he immediately went back to work for the governor as chief of staff. Johnson also sent City Paper a 1993 letter of recommendation from Anaya in which Anaya outlines Johnson’s achievements during his administration, particularly his role in promoting blacks and other minorities within government. Anaya also explains that the charges filed against Johnson were politically motivated because of his administration’s “aggressiveness in breaking new ground on so many fronts, and empowering many who had been disenfranchised in the past.” Anaya states that Johnson resigned from the department of health and environment in order to spare the governor embarrassment, not because he had done anything wrong.
“Nothing happened,” Johnson says, dismissing the subject. “There’s nothing to talk about. It has nothing to do with what I’m doing now.”
Today, at 46, Johnson comports himself during an interview with the reserve of someone who’s seen some bad press. His hair is tinged with a distinguished spray of gray, but the curve of his mouth and lively step betray a sense of humor, as does the model of Darth Vader in his office that bellows, “You’re not a Jedi yet, Luke.”
Johnson rebounded from the New Mexico fiasco and went on to run Jesse Jackson’s 1988 presidential campaign in New Mexico. A year later, he became executive director of Jackson’s Rainbow Coalition in D.C. Johnson gets high marks for his two-year tenure there. Craig Kirby, a former special assistant to Jackson who now does advance work for the vice president, says Johnson did an “exemplary job” of coalition building and bringing together disparate parties to work toward common goals. “Joe was also stupendous at grass-roots organizing,” he adds.
Since leaving the Rainbow Coalition, Johnson has gone from working inside the political process to working the process on behalf of others, including his own company. The sign on his office door reads, “The Johnson Companies,” reflecting his many business interests. However, Johnson doesn’t fancy himself an entrepreneur. “I think I’ve gone beyond entrepreneurship,” he says. “Presently, I’m a member of the board of directors for the Correctional Corporation of Americathe first African-American ever elected to the board,” he explains formally. He has been working with CCA on and off since 1986, but just joined the board last year.
The leap in Johnson’s résumé from a honcho at the Rainbow Coalition to D.C. point man for the nation’s largest prison company is an unusual one, considering his long career of working on behalf of black political leaders who cut their teeth on the civil rights movement. CCA is a company run by a bunch of white West Point grads in Nashville who got rich off this country’s mass incarceration of black men. Johnson’s job as their front man is deeply at odds with the mission of the Rainbow Coalition, whose founder, Jesse Jackson, has made passionate speeches against the prison industryprivate and publicwhich he argues, rightly, is disproportionately filled with black men. Jackson has called on the black community to shut down the prison industry. Even the Archdiocese of Washington has opposed CCA’s takeover of District prisons on the grounds that it amounts to another form of slavery.
Not only does Johnson see no moral conflict in his job, he touts his connection to the rapidly expanding Wall Street firm. “The fact is that I am very sorry to see not just African-American men but all people in prison, but the truth is they do bad things to people.” CCA has the ability to help states keep people out of prison by accrediting facilities, making sure they provide education and drug treatment so that people are genuinely rehabilitated, Johnson says emphatically. “Our business is not built on repeat customers,” he insists.
Johnson may be sold on his product, but questions still remain as to whether CCA’s book of business is really good for the city. Critics like D.C. Prisoners’ Legal Services’ Smith suggest that by taking CCA’s $52-million interest-free loan the District gave away all its bargaining power to ensure that CCA lives up to its promises. Johnson insists the market will keep CCA honest; otherwise, he says, “the city will pull our contract.” Indeed, the city can cancel the CTF contract at any timeall it has to do is pay back the $52 million.
The city has its moneywhich, incidentally, all went into the black hole of debt reduction rather than to the public schoolsbut things haven’t gotten much better at CTF so far. Most of the experienced correctional officers who had worked there for the District left, according to Carlton Butler, head of the correctional officers’ union. Johnson confirms that CCA has brought in many new recruits to fill in the voidincluding many University of the District of Columbia grads. Smith also says his attorneys have had trouble reaching clients at CTF.
Corrections Department Director Moore admits that the transfer of CTF to the private company has been a little bumpy. “We are experiencing what I consider to be normal transition quirks and problems,” says Moore. “Nothing that would pose a threat to public safetyjust basic transitional problems.”
It’s worth mentioning, too, that the $52-million loan the District got for privatizing CTF is a windfall only if CCA doesn’t recoup the interest somewhere elselike in another contract. The issue came up at the October council hearing. CCA President Crants, who flew in from Nashville for the appearance, claimed that his firm was making the loan for PR purposes. He said running a jail in the nation’s capital would help the company’s image. Crants assured the council that CCA had no other deals in the works with the District, and City Administrator Michael Rogers and Moore concurred that the CTF deal was a stand-alone.
It sounded as if everything was on the table, but in fact, parts of CCA’s “best and final offer” were not made public during the debate over CTF on the grounds that it contained “proprietary information.” Wackenhut and D.C. Prisoners’ Legal Services demanded more data, and CCA later released documents that contradicted Crants’ October council testimony. The financial proposal CCA gave the city last August contained a clear indication that CCA had other deals under way with the District: “We have also committed 1,500 beds at our Youngstown Correctional Facility in Youngstown, Ohio, exclusively for the use of the District of Columbia. These beds will be available in the second quarter of 1997.”
The ink was barely dry on CCA’s contract for the treatment facility before Moore declared an emergency situation and insisted that the District move 1,000 prisoners to CCA’s new facility in Ohio. Smith says CCA’s incredible sweetheart deal for CTF and the out-of-state facilities “certainly raises some suspicions. Whether there is any procurement issue, I don’t know, but [the deal] was structured so that it favored CCA.”
A little suspicious about the coincidence as well, members of the D.C. Council referred the Youngstown contract to the control board for closer scrutiny. Mark Goldstein, deputy executive director of the control board, wrote a letter to Rogers saying the sole-source $172-million contract bore an “appearance of impropriety” and that “the integrity of the contracting process had been compromised.” Goldstein also noted that CCA would charge the city $142 million if it decided to cancel at some point, a fee that the board found a bit excessive. In light of the control board’s concerns, the Barry administration had little choice but to pull the contract from consideration.
There’s one other project in the works, too, that raises questions about CCA’s claims last fall that it hadn’t cut any other deals with the city. The company has purchased a swath of land just over the District line in Prince George’s County that it has gotten congressional approval to swap with the U.S. Park Service for a smaller piece of federal parkland near the Blue Plains Sewage Treatment plant. CCA is considering using the spot to build a women’s prison or a juvenile detention facility, says Johnson, but the specifics haven’t been decided. Johnson insists, “We have absolutely no commitments from D.C. government officials to proceed.”
CCA has shelled out a hell of a lot of money for what Johnson says is mere speculation. Johnson says CCA paid “10 or 20 times” what the land in P.G. County is worth to get its hands on land suitable to trade with the park service. Coincidentally, the mayor’s office has just sent legislation to the council to allow the administration to lease the city’s old nursing home, D.C. Village, and the surrounding land for economic development.
Moore says she knows of no plans to build a new prison on the D.C. Village site, but Wackenhut has made no secret of its desire to build a prison there. And the property just happens to bump right up against the park service land CCA will soon own. Johnson claims he doesn’t know anything about the D.C. Village bill. “We’ve not lobbied anybody on that. We’ve been very upfront about our project. It’s in the congressional record,” he says.
It’s easy to see why Johnson is doing well in the connections business. He’s a talkerseemingly earnest, with an open and friendly manner sprinkled with name-dropping and shameless self-promotion. His shtick sellsor perhaps oversellshis accomplishments and his connections. His delivery is so smooth that even after people such as Councilmember Kathy Patterson questioned Johnson’s role in the CTF deal at last fall’s hearing, no one has bothered to check him out further. Had Patterson and her colleagues probed a little more, they would have discovered that the New Mexico fiasco is only the first place Johnson has run into trouble crossing politics with business.
After leaving the Rainbow Coalition in 1991, Johnson opened a political consulting firm in Washington. One of his biggest clients was Virginia Gov. Wilder. After hitching his wagon to Wilder as a political consultant, Johnson turned his attention from the District to Virginia, where he lobbied the state government on behalf of CCA. Then, just before the end of Wilder’s term, Johnson’s firm, Healthcare Affiliates, landed a contract with Newport News General Hospital.
The hospital was founded in 1914 as Whittaker Memorial Hospital, serving blacks in the days of segregation. It has been a nonprofit hospital dedicated to serving poor residents in Newport News ever since. In 1990, the 126-bed hospital went bankrupt. HUD helped bail out the hospital with a loan, and in June 1993, the hospital’s board of trustees hired Johnson’s firm to manage the hospital.
A big part of Johnson’s cachet seems to lie in his Democratic campaign connections, so he found himself out of the loop in 1993 when Virginia elected a Republican governor. While he was a lifelong Democrat, Johnson quickly adapted and set to work establishing inroads into Gov. George Allen’s new administration.
In 1994, Johnson wrote two $3,500 checks to become a sponsor of two of Allen’s inaugural parties. Johnson’s consulting firm, Johnson & Associates, got credited on one of the event programs for the generous donation. However, Johnson then turned around and had Newport News General reimburse him for the donations and about $300 in hotel bills related to the event, according to a HUD source and reports in the Norfolk Virginian-Pilot. When the contributions were discovered, one of the hospital’s board members, Dr. Alvin Bryant, also the hospital’s medical director, swore out a warrant for embezzlement charges against Johnson. The York County commonwealth attorney investigated but declined to prosecute on the grounds that Johnson had gotten approval from two other board members.
However, concerned community members sent news of the embezzlement allegations to the HUD officials overseeing the hospital’s mortgage and bankruptcy proceeding. Those regulators then alerted the HUD inspector general and requested an audit of the hospital. According to an audit released in December by the HUD inspector general, political contributions weren’t the only thing the hospital was paying for.
According to the audit, during the two years that Healthcare Affiliates ran Newport News General, Johnson’s firm inappropriately spent nearly half a million dollars of the hospital’s scarce operating funds to pay for questionable contracts, board member compensation, and such things as country-club dues, travel, entertainment, and housing unrelated to the hospital’s operation. It also indicated that after signing the management contract on behalf of the company, which was worth $30,000 a month, the president of Healthcare Affiliates also executed a retainer agreement with the hospital as a consultant, to the tune of $151,394. Another member of Johnson’s Washington consulting firm got a consulting deal from the hospital for $43,100.
According to the audit, along with the consulting arrangements, the tiny, bankrupt hospital was paying Johnson’s long-distance cellular phone bills, his rent in a corporate apartment complex, some nights at the local Days Inn, plus hotel, airline, and other administrative expenses. The audit indicated that the hospital picked up the tab for $22,367 in travel, phone, and miscellaneous expenses for Healthcare Affiliates, plus the $5,807 lease of a copy machine that was in one of Johnson’s own offices. The audit also raised questions about two loans Healthcare Affiliates made with hospital funds for $31,500, which at the time of the audit were still outstanding. The audit says the board of trustees was not aware of the loans, and HUD officials won’t say to whom the loans were made because of the ongoing investigation.
As some of the troubles at the hospital came to light, a long-dormant community group that was empowered to keep tabs on the hospital got organized and lobbied to oust Johnson’s firm, whose contract was terminated in November 1995. Oscar Blayton, the lawyer who represented the community group, says that Johnson seemed to be using the hospital to pay many of the expenses for his Washington consulting firm. Blayton, who saw the hospital’s financial records and canceled checks, said the travel expenses were for plane tickets to Tennessee, where CCA has its headquarters. “He worked in Washington and didn’t come down [to Newport News] a lot,” says Blayton.
According the HUD audit, three of the hospital’s board members charged with approving Johnson’s expenses were hospital employees and may have compromised themselves through lucrative consulting arrangements with the hospital in violation of the hospital’s own bylaws. That practice began before Johnson’s tenure, but according to Blayton and a HUD source, Johnson worked those angles for his own benefit.
Johnson disputes the results of the audit and says he is merely the victim of a larger controversy swirling around the ailing hospital. “I’d be very cautious about how you use that audit,” he says. “The HUD audit says things that are not true. Our company did a very good job. We left the hospital with a $1.6-million surplus. When I walked in there, there was $600,000 in the bank.”
Johnson says the conflict began when he tried to affiliate the hospital with a stronger institution. Some doctors at the hospital were not qualified to make the move and tried to derail the process, he explains, adding that critics also accused him of selling out the historically black institution to a hospital that some in the community felt had a rather racist history. He says he was unfairly targeted because he was an agent of change, and that the hospital needed to be connected to a larger institution or it would close down altogether.
“People came to me to pull the hospital together,” he says. “We took it and got it into managed care, affiliated it with Blue Cross. The mental health unit we did was booming while I was there.” (HUD sources agree that the mental health unit thrived under Johnson’s watch.) Johnson says that all the fees paid to his firm were approved by the board of trustees.
As for the other questionable expenses noted in the audit, such as the allegation that his firm used hospital money to pay country-club dues, he says, “That’s just not true. We had a Christmas party and a meeting room there.” He says the firm never spent more than $10,000 in two years, and $5,000 was for the Christmas party. (The HUD audit says that the $10,000 was an inappropriate expense.)
Johnson says his firm is preparing a response to the audit, which he says is a preliminary one, and that “[w]e have already been vindicated.” He adds, “No one ever said we didn’t work for the money.”
However, Irving Guss, assistant district inspector general for audit at HUD, and other HUD officials say the audit is indeed a final report, and that Johnson was interviewed and given an opportunity to respond to the office’s preliminary findings.
HUD auditors have recommended that the hospital try to recoup the money HUD says was improperly paid to Johnson’s firm, and hospital board Chairman William Betts III says the hospital is considering taking legal action. “The hospital has to look at all of the issues. We’re taking some actions to start the process to legally and legitimately recoup some of the funds,” he says. Meanwhile, staffers from the HUD Hospital Mortgage Insurance program have asked the Office of the Inspector General and lawyers from HUD to review the audit and to consider it for further investigation and possible prosecution, according to a HUD source.
The defenestration of Johnson’s firm in Newport News didn’t put the company out of business. It has just moved on to D.C.’s greener pastures. In addition to all his work on behalf of CCA, Johnson has also been working on a project in the District for his own health care firm. On Jan. 24, the control board approved a contract with Johnson’s D.C. Acute Care Associates to open a 100-bed acute-care psychiatric facility at D.C. General Hospital. Johnson sells the deal as a cost savings for the city, but critics say the deal could cost the city’s Medicaid budget as much as $15 million annually.
The D.C. Council and mental health advocates have been kicking around a similar idea for a long time. Because federal law bars Medicaid payments to free-standing public psychiatric hospitals, St. Elizabeths can’t receive federal Medicaid payments from indigent clients. As a result, various commissions and studies have recommended closing some beds at St. E’s and opening acute-care beds for the mentally ill at D.C. General so the city can recoup some federal money. After languishing for years, the idea finally took wing in 1995, when D.C. General issued a request for qualifications (RFQ) to find contractors who might be able to open the psych wing at the hospital.
It’s unclear whether the RFQ was ever advertised; none of the bidders say they responded to an ad. In the end, though, only four groups were considered: Choate Health Management Inc., a large Massachusetts-based firm; Mental Health Management of McLean, Va.; the doctors’ union; and Healthcare Affiliates, Johnson’s firm, which is headed up by James Arieno, who was the administrator at Newport News General.
After receiving information from the four companies, the hospital set up interviews with a review panel chosen by hospital CEO John Fairman. According to a source who attended the presentation, Arieno, Johnson, and Roux pitched their plan, hyping Johnson’s experience as a former New Mexico state official and talking in glowing terms about the firm’s work at Newport News.
Out of the six people on the panel that reviewed the potential contractors, only two had clinical expertise in managing mental health programs. The others were administrative folks, and one was a head nurse. The two with backgrounds in mental health management, Dr. Richard Lopez, head of the substance-abuse program, and Dr. Robert Keisling, then chair of the psychiatry department, named Choate their top choice. Choate is a nationally recognized management firm that specializes in these kinds of projects and has published relevant clinical articles.
The other members of the panel weren’t as impressed with Choate’s substantial corporate résumé. One of the panel members was Fairman’s chief of staff Patrice Dickerson, who, according to a former Barry campaign staffer, is a friend of Cora Barry’s who worked on Barry’s 1994 mayoral campaign. Dickerson gave Johnson’s group a score of 95 out of 100 pointsthe highest score the group receivedwhile giving Choate just 60. Healthcare Affiliates won out (and the doctors’ union, which Johnson has pledged to do business with, came in dead last).
After the panel review, Keisling wrote Fairman a memo objecting to the makeup of the panel and to the disparity of rankings between the clinical and administrative staff. In the memo, Keisling protested strongly to Fairman, writing, “It is apparent that you intend to award this contract to Health Care Affiliates….My advice and recommendations have been ignored. I do not feel a fair, impartial, and objective decision has been reached. If you continue with the present process the project will not be successful.”
Fairman fired back with a memo of his own, threatening Keisling, the hospital’s chairman of psychiatry, with disciplinary action. “Be assured that if such unprofessional behavior and slanderous comments continue that you will be personally required to address your conduct in a court of law,” he wrote.
In an interview this week, Fairman said the hospital review panel found Choate and Healthcare Affiliates equally qualified. Given that, he said, the panel merely chose to give the contract to a local firm. “Nobody lobbied us. Our position is straightforward,” Fairman says. “The contract was submitted per the procedures of the District.” To suggest otherwise is, he says, “just a bunch of foolishness.”
Despite Fairman’s outrage, Keisling was not alone in his assessment of the hospital’s contracting process. Other mental health firms interviewed by D.C. General indicate that the panel didn’t base its decision solely on qualifications or cost. In fact, none of the firms considered by the hospital ever submitted any financial bids. Steve Wheeler, vice president of operations for Mental Health Management, says his firm sent the city information about the company (all that the RFQ asked for) but never got any response and never got an interview.
Stuart Koman, president of Choate, tells a similar story. “It was never quite clear what the scope of the service may be,” he says. Nonetheless, he says his company was eager to get involved with D.C. General. “We actually brought in D.C. consultants; it was exciting,” he says. Choate made it to an interview with the hospital administration, and then, Koman says, “It just sort of died. We had a sense that something strange was going on, but we felt that it would take up a tremendous amount of our time. We just sort of said, ‘It’s more trouble than it’s worth.’”
When word got out that D.C. General had signed a contract with Johnson’s firm, Donna Mauch, the court-appointed special master who oversees the District’s mental health system, refused to approve the contract without more information from the hospital. At that point, the proposal seemed to fade away, until this January, when city mental health officials discovered that the control board had signed off on a contract with D.C. Acute Care AssociatesJohnson’s old firm, Healthcare Affiliates, under a different name. Documents from D.C. General describing the contract award say Acute Care Associates is a D.C.-based firm; however, no such company is incorporated in the District. Control board staff would not comment on the record on how the contract got past what people assume is a much less political body.
“All of us had thought it was dead in the water,” says Robert Moon, a staffer at the Bazelon Center for Mental Health Law. Moon says he was surprised to see the plan resurrected, especially at a time when the District’s private hospitals have a surplus of acute psych beds that they can’t fill.
The D.C. Hospital Association has joined Moon and Mauch in expressing concern with the new contract with the control board. Moon says D.C. Acute Care’s contract allows the company to take patients for its new wing right out of the emergency room, and no beds at St. E’s would be closed. Consequently, Moon says, the project won’t save the city a dime, because it will only be adding new patients to the system, and those patients will most likely have to be sent to St. E’s anyway because the D.C. General plan only calls for seven-day stays.
Johnson insists the deal is a win-win situation for the District, because his firm is putting up the capital to renovate part of the sixth floor of D.C. General and will then rent the space from the hospital. He says patients, primarily Medicaid patients, would stay in the ward for six or seven days until they get stabilized. D.C. Acute Care would set up a plan for them for either outpatient services or hospitalization. “This is not a glamorous 28-day stay facility. This is a pretty meat-and-potatoes program,” Johnson says.
He says the project will also have no impact on the city’s budget because the federal government picks up the tab for 50 percent of the cost of treating mentally ill patients on Medicaid. “There is no public exposure here….These are services that are currently reimbursable under Medicaid. This is not a Medicaid-busting scenario.”
But Moon disagrees, and sees the project as a Medicaid mill because Johnson’s firm is asking for $851 a day per patient. Stays at St. E’s only cost the city $425 a day. “We’ve been pushing this as a principal for a long time, but it only works if they’re diverting patients from St. E’s. And [any saving] depends on how high the rate is.” With Johnson’s high rate, even with the federal Medicaid reimbursement covering half the costs, the city will still have to come up with $400 a day per patient from its own Medicaid budget.
Despite the thunder clouds that seem to be rumbling in the background, Johnson is in an expansive, blue-sky mood in an interview back in April. Back in his swanky conference room, Johnson has been joined at the cherry-wood board table by his associate, Roux, and they are talking about their grand plans to take their business on the road to New Jersey and other potentially lucrative locales.
Roux is a pudgy, bespectacled man with jowls and a slow, gravelly voice straight out of a Martin Scorsese movie. He’s dressed in a photographer’s khaki vest and a baseball cap that says, “Pro Golf.” A former board member of the local chapter of the Rainbow Coalition and also Jesse Jackson’s personal physician, Roux is involved at Johnson’s firm in both the CTF contract as well as the D.C. General project.
“Dr. Roux is an integral part of fixing the medical part of CTF,” says Johnson, glowing with pride as he pumps up his colleaguethe only doctor in his company klatch. Johnson says his firm consists of only seven people, but says he’s planning to hire psych teams and nurses, and eventually he’ll have a staff of about 60 or 70 people. “The firm is growing pretty fast,” he says, adding that Roux will also bring in doctors from Howard and the city’s doctors’ union to develop the medical services at CTF.
“The biggest issue to making these things work is the medical services,” says Johnson, adding that the rest of correctional programs, like education, is relatively easy to provide.
Roux claims that under Johnson’s company the medical services at CTF will be top-notch, and that they will provide special care for the large number of HIV-infected inmates in the system. “We’re going to deliver to them the very best drugs,” says Roux, who promises inmates will have access to consultants from the National Institutes of Health and other infectious-disease specialists.
He also envisions using CTF and the D.C. General psych wing as training sites for Howard University Medical School. Roux would like to see the school develop a specialty in correctional medicine. “Correctional medicine is a very growing field,” he says.
However rosy the portrait Roux and Johnson paint of their future, Johnson’s deals in the District look less lustrous every day. He may have locked CCA into a 20-year CTF contract with the District, but CCA promptly relegated Johnson’s own firm to consulting status, at least for the first year. And CCA’s Youngstown, Ohio, project is in limbo. “The Youngstown issue is unfortunate,” admits Johnson.
He takes issue with the control board’s characterization of the contract, arguing that there was nothing improper about it. CCA was merely out in front, anticipating the changes that would take place, he says, adding that the mayor announced two years ago that he intended to privatize two-thirds of the Department of Corrections. Johnson says CCA spotted the District’s ad in the Wall Street Journal in November 1995, which solicited private prison contractors to provide space for inmates at the Occoquan facility, which needs to be closed. As a result, CCA started looking into it. “We knew there was going to be some change,” says Johnson.
CCA is still pushing the Ohio deal, and it is by no means dead in the water. Corrections Department head Moore says the city is still trying to find prison beds, but that they are being selected through competitive bidding.
The psych unit at D.C. General may be a different story, though. The D.C. mental health commission and the D.C. Office of Corporation Counsel have basically stonewalled Johnson’s firm because of their objections to the way the contract is structured, according to a corporation counsel source.
In a July 1996 memo, former mental health commissioner Guido Zanni wrote Rogers that after raising concerns about the contract back in 1995, he had been excluded from D.C. General’s negotiations over the acute care contract, which he wrote, “continues to be seriously flawed as many of my concerns were not addressed. To date Corporation Counsel has reviewed neither the original solicitation nor the proposed contract.”
Zanni’s objections were nearly enough to doom the mental health unit, which needs to be able to refer patients to and from the city’s mental health commission. On top of those problems, the control board is now taking a second look at the contract, after advocates and mental health commission members questioned why the board had signed off on a contract with a firm that seemed to exist only on paper.
Johnson is incensed that the project has generated such resistance. “This is really a public-private partnership. We’re trying to do some good in the area,” he insists.
Initially, he was projecting an opening date for the mental health facility in June, with 100 beds called for in the contract. Now, though, he says it will be more like 60 beds, if any. “I’m trying to make this a project that people are not at odds with,” he explains. “We tried to meet with people to talk about concerns of the people who didn’t think we were qualified.” But he says that Zanni never returned his calls. “If we can’t get through the bumps on this issue we’re probably not going to do it. Having signed the contract doesn’t mean we’re going to go ahead with it.”
Johnson maintains that his firm is just as competent as the others considered by D.C. General, and that when he made his pitch to the hospital selection panel, Roux brought the chair of the Howard Hospital department of psychiatry to the table. As a result, to question whether his firm has the credentials to do the work, Johnson replies angrily, “That’s a racist statement on its face.”
Putting on a heated display of indignation, he reiterates that he grew up in segregated Arkansas, where he drank out of segregated fountains. Johnson apologizes for the outburst but says some issues touch hot buttons that are still there, such as when his minority-owned firm is grilled about its qualifications in a way he suspects white firms are not. Johnson claims that questions about competency are merely code words for racism. “It’s always been a question of whether these people have the qualifications or the proper background to do these things,” he says. “It’s very unfair and almost racist to say those kinds of things, and I believe the impetus comes from a racist.”
Johnson refuses to acknowledge that questions about competency might be legitimate to ask any contractor seeking city business, given the District’s conflicted history. “We look at this from two different sides, Stephanie,” he says patronizingly.
As Roux and Johnson collect their things and get ready to head off to their next meeting, Johnson lets his guard down a little. With obvious frustration, he says that starting a new company is tough because people don’t look at the collective skills of the individuals involved, only the company’s newness. He doesn’t see why people should be upset about the fact that former Corrections Department officials are working with him or that he has signed on some of the old hacks privatization was supposed to help get rid of.
“You can’t paint people with a broad brush,” Johnson says. He also insists that the team he has assembled is doing the city a favor by helping it save money and raise capital. “Here I am, the guy who brought $52 million to the District, and all I get is shit for it,” he says, before hopping in a car with Roux and heading off to hustle up his next deal.CP
Art accompanying story in the printed newspaper is not available in this archive: Darrow Montgomery.