Operation Mississippi Hustle

Overview

In the late 20th century, Mississippi began to enter into contract with private prison management companies to build and operate prisons under contract to the state. It eventually had contracts for five private prisons: Walnut Grove Youth Correctional Facility, for inmates under 18 who had been convicted as adults; East Mississippi Correctional Facility, devoted to treatment of state prisoners with mental illness; Marshall County Correctional Facility; Tallahatchie County Correctional Facility; and Wilkinson County Correctional Facility, which was converted to maximum security after receiving numerous prisoners transferred from Mississippi State Penitentiary following settlement of a class-action suit there. Contracts were also made for related mental and medical health services, education, telecommunications, and food services. In 2002 Christopher Epps was appointed as Commissioner of Mississippi Department of Corrections; he served under three governors.

On November 6, 2014, the United States Attorney for the Southern District of Mississippi announced indictments he had obtained against the Commissioner Chris Epps and his associate Cecil McCrory, a consultant and Republican former state house member. The government charged that, beginning as early as 2005, Epps had begun to take bribes from various contractors and subcontractors for the state; they had been passed through McCrory and another consultant, Robert Simmons. Those payments had been structured to fall beneath the mandated reporting amount so that bank deposits would not come to the attention of federal banking authorities. Epps resigned as commissioner and as the president of the American Correctional Association the day before the indictments were announced. Both defendants entered into plea bargains and became cooperating witnesses; initially they were to assist the government with the identification of the originators of those bribes, who were also to be prosecuted with the help of both men.

Epps had been appointed to the Commissioner post in 2002 by Democratic Governor Ronnie Musgrove, and was retained by his successors, Republican governors Haley Barbour in 2004, and Phil Bryant in 2012. In 2011, Epps had told assembled attorneys involved in negotiating lawsuits that had been brought against the Walnut Grove Correctional Facility and the East Mississippi Correctional Facility, that he could not end the contracts of the for-profit companies operating Mississippi's prisons "because of all the money they spread around Jackson," the state capital. His remarks were made during the period when the U.S. Attorney in the Southern District of Mississippi has said Epps was receiving more than $700,000 in bribes, including the purchase of a beachfront condo on his behalf.

The government's revised estimates of those alleged bribes to Epps have increased to an estimated total of at least $1.47 million. Over the next two years, the U.S. Attorney filed numerous indictments against persons alleged to have paid the bribes, and he indicated that further indictments would be forthcoming. A year after entering a plea of guilty, McCrory requested that he be allowed to change his plea to one of "not guilty" and go to trial. This request was rejected by the judge. Many other defendants pleaded "guilty;" others "not guilty." One defendant committed suicide shortly before his arraignment. Numerous corporations were ordered by the presiding Federal judge, Henry Travillion Wingate to produce business records. Some complied, others ignored the subpoenas, and four requested that the information they were willing to provide be kept under seal, which the judge took under advisement.

On November 1, 2016, while still awaiting sentencing, Epps was arrested for breaking into the home he had forfeited to the federal government as a part of his plea bargain. He had removed light fixtures and other items which he moved to his nearby previous domicile, which he was again occupying. His bail was revoked and in December 2016, Judge Wingate ruled that he would be held in jail until sentencing in May 2017.

Prosecutors

Background

Mississippi was among the many states that began to rely in the late 20th century and early 21st century on private contractors to build and operate prisons to house its growing number of inmates convicted and sentenced under increased criminalization of drug possession and a variety of mandatory sentencing laws. The private prisons and management included contracts with GEO Group, which took over the company that built and operated the Walnut Grove Correctional Facility in Walnut Grove, Mississippi. The prison opened in 2001 in an unincorporated area of Leake County, but the town annexed the prison property to increase its population and tax base; it derived 15% of its revenues from the prison corporation's payment in lieu of taxes. The East Mississippi Correctional Facility was another private prison. Numerous contractors served both facilities, providing related telecommunications, food services, health, and other services.

According to Leake County Sheriff Greg Waggoner, he initiated the federal investigation into the state Department of Corrections activities. In 2009, he said, Epps' MDOC leased buildings owned by Cecil McCrory in Walnut Grove, Mississippi, for what became the Walnut Grove Transition Center. MDOC also contracted with McCrory to operate the male and female facilities. Although Walnut Grove's longtime mayor, William Grady Sims, had no correctional experience, McCrory appointed him as the warden of the Transition Center. In addition, Sims had a separate contract for revenues from 19 vending machines at the Walnut Grove Youth Correctional Facility.

Walnut Grove was to be a model transition center: a type of halfway house as part of a state effort to support newly released inmates in adjusting to life outside prison. The center charged newly released inmates $20 a day for room and board in dormitories, and was paid a supplement of $6 daily, per bed, by the MDOC. Nearby Walnut Grove residents complained that the center residents were poorly supervised and seemed to be roaming in town without structured activities.

According to Waggoner, "It looked like everything new that happened with MDOC, Cecil [McCrory] was involved in... They [residents of the center] were not supposed to be out at all." He said, "If I ran my facility like that, Epps would have shut me down, but it seemed like there was no problem when McCrory did it." After Sims was reported to have taken a female inmate to a motel in nearby Carthage for sex in November 2009, Sheriff Waggoner became involved. He reported the allegation to MDOC, which assigned an internal investigator to assist the sheriff in an investigation.

Investigators from both Leake County and the state jointly talked to the female inmate, gathering evidence to refer the case to the county district attorney. In the spring of 2010, before they could do so, the MDOC investigator came to Waggoner and told him it was over. "We're closing the case down," he told Waggoner, who was "shocked" and asked, "What do you mean?" Waggoner told a reporter, "You could tell he wasn't happy about it but that he was given orders." Waggoner said firing a man who committed a felony doesn't end an investigation. It ends when the man is indicted and brought to justice; "If you have knowledge of a felony and chose not to pursue it, you're negligent in your duty." Stunned by the MDOC's termination of the Sims investigation, Waggoner called U.S. Attorney John Dowdy for advice. Dowdy said he contacted the FBI afterward to report the situation. The FBI launched an investigation against Sims and eventually Epps, and named it, "Mississippi Hustle."

Indictments and suicide

On November 6, 2014, the Federal Government of the United States announced that it had indicted Epps on corruption charges; these charges were based on his dealings with the for-profit prison industry. The federal indictment stated that McCrory, a Republican and former Mississippi State House member, was a businessman who served as the chairperson of the Rankin County School District's board of education. He had paid Epps with kickbacks and bribes totaling more than $1 million. Those transactions included a $200,000 payment, as part of the mortgage of Epps' primary residence in the Jackson area. Epps leveraged the resulting increased equity together with another bribe payment to buy a condominium; he later traded up the latter for a larger, more expensive condo. In exchange, Epps directed contracts to McCrory-owned companies for prison-services contracts, as well as to related companies that hired McCrory as a paid consultant. Per the indictment, the activity started in 2007 and ended on March 12, 2014. Epps entered an initial plea of not guilty, and he received a bond of $25,000.

McCrory had previously served as a judge and former Sheriff's investigator. He started a prison commissary company, G.T. Enterprises, selling it at a substantial profit to the Centric Group holding company, which owns the Keefe Commissary Network (KCN). McCrory also had gone to work for Correctional Communications Inc. "I brought Cecil in in 1996 to help me with political connections," said owner and consultant, Sam Waggoner. "I do all the work, and Cecil did the political stuff. I talk to him about twice a year." Waggoner, of Carthage, said the scandal had affected his business, and he worried he'd lose some of the 40 or so contracts he and McCrory had earned during the past two decades. "Nobody wants to be associated with the company because of the stigma," he said. "But he did no contracts with the county jails, no connections with the sheriffs or anything like that." Sam Waggoner subsequently pleaded guilty to bribery.

In November 2014 Governor Phil Bryant, formerly the State Auditor, ordered rebids of the four operating contracts for prisons that had been awarded by Epps to Utah-based Management and Training Corporation (MTC). Bryant directed interim Corrections Commissioner Richard McCarty to stop negotiations with MTC over renewing a $60-million-a-year contract to manage four private prisons, which held 4,000-plus state inmates. MTC had been sued for mistreatment of inmates in two of those prisons. A fifth private prison was still under contract to CCA.

McCrory plea bargained to lesser federal charges. He had begun working as a consultant to MTC, GEO Group's successor operator in Mississippi for state prison contracts. It had held a $60 million contract to operate three Mississippi prisons: Walnut Grove Correctional Facility, East Mississippi Correctional Facility and Marshall County Correctional Facility, which had been managed by GEO Group, and a fourth, Wilkinson County Correctional Facility, which had been managed by the Corrections Corporation of America. MTC fired McCrory, claiming they had known nothing of his criminal activities.

In February 2015 Epps pleaded guilty to corruption-related charges: one count of filing a false tax return and one count of conspiracy to launder money. As part of the plea, he forfeited two Mercedes Benz vehicles and his two residences. Epps and McCrory blamed each other for beginning the bribery scheme. Sentencing was first scheduled for June 9, 2015, but a day earlier, the U.S. Attorney for Mississippi said the sentencing was indefinitely delayed, as they were pursuing additional indictments.

Harrison County Supervisor William Martin, a former prosecutor, was indicted in February 2015. He committed suicide hours before he was scheduled to appear on charges of bribery and corruption.

On August 22, 2015, the US Attorney announced the indictment of former legislator Irb Benjamin for bribery of Epps in connection with the drug and alcohol treatment programs that his company provided under contract to MDOC prisons. In addition, Benjamin was paid at least $862,000 to acquire and maintain American Correctional Association accreditation for jails in numerous counties. Passing ACA standards was required if the prisons were to gain contracts to hold state prisoners. Epps had been elected a few years earlier as the president of the ACA, and resigned the day before his indictment was announced.

Epps personally received at least the $1.47 million in bribes for steering what Assistant US Attorney LaMarca estimated to be $800 million in contracts between 2006 and 2014. Judge Wingate was to hear the cases of others who were charged with bribing Epps.

Benjamin, a Democrat, had represented Alcorn County in the State House from 1976-80 and the State Senate 1984-92. He later worked for Republican Lieutenant Governor Eddie Briggs, who ran as a candidate for the governorship. Alcorn County paid Benjamin, president and lobbyist for Mississippi Correctional Management (MCM), $114,000 a year , although he lived more than 200 miles away. The attorney of the Alcorn County Board of Supervisors said the supervisors were not required to seek bids before giving Benjamin the contract as warden, because it was a contract for services, which are exempt from state bid laws. He was also paid $5,000 a month to handle and maintain accreditation by the American Correctional Association for the Alcorn's Regional Correctional Facility and another $4,500 a month as warden of the jail.

Benjamin had formed his business MCM in 1996, when the state Department of Corrections and counties started hiring private contractors to operate prisons and smaller regional jails. MCM operated the Grenada County Jail for several years. Benjamin said the company also had jail accreditation contracts worth $4,000 or $5,000 per month with other counties, including Chickasaw, Hancock, Holmes, Marion, Pearl River, Washington and Yazoo. In the past, he also worked as a $3,000-a-month jail consultant for DeSoto County. The DeSoto County Board of Supervisors supervisors had approved his contract in December 2008, saying: “Mr. Benjamin was recommended by Commissioner Epps at the state level.” On November 25, 2014, Benjamin said that he was not aware of the Epps recommendation.

Benjamin pleaded guilty to federal charges on October 18, 2016. He faced 10 years in prison, plus a fine of up to a quarter-million dollars. Benjamin said that he was "pressured" by Epps; the contractor estimated he had paid the Commissioner between $180,000 and $225,000 in cash bribes to secure support for his contracts for operation of the regional jails. His plea also covered bribes paid for drug and alcohol rehab programs which his company ran. Assistant US Attorney LaMarca told Judge Wingate, "it's just a matter of time" until others whom Benjamin informed upon were indicted.

On February 11, 2016, consultant Robert Simmons was indicted for giving kickbacks to Epps from three contractors involved in constructing expansions of the Walnut Grove and East Mississippi correctional facilities; his kickbacks included part of a $10,000-a-month fee he got from AJA Management and Technical Services of Jackson, Mississippi and more from a second unnamed contractor. He also gave Epps kickbacks on fees involving contracts awarded to Sentinel Offender Services of Irvine, California, which supervises probationers and parolees, allegedly paying Epps $1,400 a month from his $4,000-a-month consulting fee. When pleading guilty before U.S. District Judge Sul Ozerden in Gulfport on February 18, Simmons said that bribery was "the cost of doing business in Mississippi."

In April 2016, McCrory informed the court that he wanted to change his plea to "not guilty" and requested a trial. As a consequence, the judge postponed Epps' sentencing until July 18, 2016. Epps had first been scheduled for sentencing on April 11, 2016, after pleading guilty to money laundering and filing false tax returns.

The sentencing of Epps and Brandon businessman McCrory, scheduled for July 19, 2016, was delayed again by Judge Wingate to give their defense lawyers additional time to review materials concerning how much money was gained by the 15 corporations that paid bribes to the pair. Prosecutors hoped to use the evidence to increase the recommended prison sentences for Epps and McCrory. Epps faced a possible 23 years after his 2015 guilty plea to money laundering and filing false tax returns related to $1.47 million in bribes. Numerous companies denied knowing that their consultants were making kickbacks to Epps and others. GEO Group's Finance Director John Tyrell testified that, "We often have consultants..."

GEO was paying McCrory $5,000 monthly, which President and Chief Operating Officer Wayne Calabrese later increased to $10,000 (Calabrese has since retired). Finance Director Tyrrell did not answer the question as to why the amount was doubled. He speculated it may have been because on August 10, 2010, GEO Group, had absorbed Cornell Companies in a merger. Cornell, which was absorbed into GEO Group in 2010, had been operating Walnut Grove Youth Correctional Facility and had been accused in a lawsuit of mistreatment of prisoners; the settlement included conversioin of the facility to adults only. McCrory remained free on bail, with sentencing proceedings to be held on February 2-3, 2017. Outstanding issues related to how much consideration he should receive for his cooperation, including recording conversations with other participants in the schemes.

Assistant U.S. Attorney Darren LaMarca announced in June 2016, that eleven more people may face criminal charges in the Epps' bribery cases. Ten more people could face federal indictments; another could face state charges, which were expected by mid-July. LaMarca estimated that the corruption's net benefit to contractors exceeded $65 million. Investigators have determined that Epps demanded bribes to exercise his influence, not only at the state level, but among county supervisors. Epps controlled where state inmates were placed, giving him influence over local jails. Cecil McCrory initially pleaded guilty to a single count of money laundering conspiracy and faced up to 20 years in prison. He has agreed to forfeit $1.7 million in assets. Based on the prosecutors' $65 million estimate, federal sentencing guidelines recommend a maximum of 23 years. However, Epps' lawyer asked the judge to sentence Epps based only on the value of the bribes he collected. If the lower amount of $1.47 million is used, Epps faces a recommended sentence between 14 and 17 1/2 years. Wingate has latitude in sentencing. Because of Epps' cooperation in providing information about those paying the bribes, prosecutors were expected to recommend a shorter sentence for the former commissioner.

Calculating benefit to 16 contractors necessitated examining their accounts. On June 30, John Colette, Epps' defense attorney, said he had received more than 1,500 pages of documents in the previous week and would require at least 30 days to review them. Four companies asked Wingate to shield their information from public view; four more did not respond to subpoenas. Wingate said he would hold a hearing by July 16, 2016, to consider requests for protective orders, and to consider contempt orders against companies that had failed to respond to disclosure requests.

On July 20, 2016, in a seven-count indictment returned by a federal grand jury, Dr. Carl Reddix, an obstetrician/gynecologist and owner of Health Assurance LLC, a firm in Jackson, Mississippi, was charged with paying bribes and kickbacks to Epps in return for contract awards with the MDOC and for-profit prison operators. The contracts for four for-profit Mississippi prisons held by Wexford Health Sources were sequentially taken and subsequently awarded to Reddix. In 2008, his company received a contract to "provide inmate health care services" at the Walnut Grove Correctional Facility, which was renewed in 2011. Transfers of contracts for the state's East Mississippi Correctional Facility and Marshall County Correctional Facility followed in 2012. The final contract was for Wilkinson County Correctional Facility, awarded in 2013. The attorney for Reddix said he had been the victim of a "shakedown." Judge Wingate recused himself from trying the Reddix case, which will be heard by Judge Daniel Gordon.

On July 25, 2016, Teresa Malone, the wife of former State Representative Bennett Malone, who was former Chairman of the Mississippi House Corrections Committee, was indicted for giving bribes to Epps through McCrory on behalf of AdminPros LLC. Mark Longoria, CEO of Drug Testing Corporation of Houston, Texas, was also indicted for paying a bribe to Epps. On August 3, 2016, Longoria, who had been recorded by Epps, pleaded guilty to a single felony count of bribery. Teresa Malone pleaded not guilty.

In August 2016, the indictment of Guy E. "Butch" Evans was announced. In 2012 Evans was awarded a contract as the insurance broker of record for the Mississippi Department of Corrections. He was given exclusive access to MDOC employees to sell policies and products; he received commissions from insurance companies. He kicked back $1,400 to $1,700 per month to Epps for 16 months, starting in January 2013. The Evans arrangement ended with the Epps indictment. Epps personally received a total of at least $1.47 million in bribes for steering $800 million in contracts between 2006 and 2014.

Scheduled trials and sentencings

On September 15, 2016, Biloxi consultant Robert Simmons was sentenced to seven years and three months for his part in the MDOC bribery scandal. A sealed record filed by the U.S. Attorney's office indicated he had provided the government with “substantial assistance at great risk.” His cooperation, plus a clean prior record, led the judge to sentence him to less than the nine years required by federal sentencing guidelines. The Department of Justice had initially confronted him with considerable evidence against him, including video and audio recordings, and wiretaps. Simmons had been paid a $10,000 monthly fee by AJA Management & Technical Services Inc. of Jackson, Mississippi, for 18 months as it managed expansions of the Walnut Grove and East Mississippi state prisons. Simmons kicked back a portion of that monthly fee to Chris Epps. Simmons admitted bribing Epps from 2005 to 2014, and Martin from 2005 through 2011. Martin committed suicide just prior to the first hearing on his indictment in February 2015.

William Grady Sims, former mayor of Walnut Grove, pleaded guilty to interfering with a witness and received a seven-month sentence, plus six months' home confinement. Sims had also been ordered on October 25, 2011, by then-Mississippi State Auditor Stacey Pickering, to repay $31,530 for using city employees and equipment to work on the privately owned Transitional Center and the Correctional Facility, both of which were privately owned.

Businessman Sam Waggoner pleaded guilty in August 2015 to a single count of bribery, waiving indictment in a plea bargain. In November his sentencing was postponed due to his undergoing heart surgery. He admitted to Judge Wingate that he paid more than $108,000 in kickbacks to Epps from a consulting contract with prison phone company Global Tel-Link (GTL). GTL had been awarded the Mississippi prison telephone business monopoly. As a result of the prosecutors' efforts to determine the value of the damages suffered by the state of Mississippi as a result of the bribery scheme, Waggoner's sentencing was again delayed. On January 19, 2017, the 62-year-old Waggoner was sentenced to five years in federal prison, with two years of supervised release and a $200,000 fine. He had received 5 percent of phone revenues as a consultant for Global Tel-Link, which provided phone services at Mississippi state prisons. He had told the FBI that before their investigation started, he wrote Epps saying he wanted to end the payments. In a meeting Epps ripped the letter into "teeny, tiny pieces," flushing it down a toilet, telling him their arrangement would continue. Waggoner said: "He was basically my boss." Waggoner paid bribes to Epps from 2012 until at least Aug. 26, 2014.

Among other persons charged with bribing Epps, Irb Benjamin, a former state legislator and Alcorn County jail warden, pleaded guilty on October 18, 2016. He faced 10 years in prison, plus a fine of up to a quarter-million dollars. Wingate sentenced him to 70 months in prison, fined the former Democratic state representative and senator $100,000, and ordered him to forfeit $260,782. Wingate said the length of his sentence could be reduced, depending on the convictions of others involved. Longoria was to be sentenced on October 13, 2016. Wingate rescheduled trials to January 9, 2017, for Malone and April 3 for Evans. Malone's trial was once again delayed, due to complications from a double lung transplant, and no new trial date was set.

After delaying Epps' sentencing twice, Judge Wingate reset the date for May 24–25, 2017. Although Epps' sentencing was delayed, Wingate initially set sentencing for two other defendants, Rankin County businessman Cecil McCrory and Sam Waggoner, for Dec. 21-22. On December 8, McCrory repeated his request to change his plea, claiming he had received ineffective aid of counsel in April of 2015 and had been pressured by the prosecutor.

On December 21, 2016, Judge Wingate rejected McCrory's request to withdraw his plea, ruling it had been made with sufficient advice of counsel. In the FBI's first interview with him, McCrory admitted to laundering $40,000 in cash for Epps; he began wearing a recording device for his conversations with Epps. After being sentenced to 8 1/2 years, on February 3, 2017, McCrory remained free on bail. Judge Wingate said that his time may be reduced after the other defendants in the case are sentenced.

On November 1, 2016, while out on bail and awaiting sentencing, Epps was arrested by the Flowood, Mississippi Police Department. He was charged with breaking into his former primary residence, which he had given up to the federal government as part of his plea agreement. He had removed light fixtures and other items. They were recovered at his nearby second home. Appearing in court on November 3, Epps said he had made a "terrible mistake," and wanted only to retrieve some outside floodlights for Halloween. On November 15, 2016, Epps petitioned the court to be allowed release to house arrest. Epps has remained in jail since his November arrest on burglary charges with his sentencing set for May 24, 2017. In December 2016, Judge Wingate rejected Epps' plea, saying he would be held in jail until his sentencing scheduled for May 2017.

State legal issues

On February 8, 2017, Mississippi Attorney General Jim Hood announced he had filed civil cases against 15 corporations and numerous individuals who had engaged in contracts with the MDOC and Epps, seeking damages and punitive damages. Hood said,

“The state of Mississippi has been defrauded through a pattern of bribery, kickbacks, misrepresentations, fraud, concealment, money laundering and other wrongful conduct.” He continued, “These individuals and corporations that benefited by stealing from taxpayers must not only pay the state's losses, but state law requires that they must also forfeit and return the entire amount of the contracts paid by the state. We are also seeking punitive damages to punish these conspirators and to deter those who might consider giving or receiving kickbacks in the future." Besides Teresa Malone and Carl Reddix, the defendants included Michael Reddix; Andrew Jenkins; Management & Training Corporation; The GEO Group, Inc.; Cornell Companies, Inc.; Wexford Health Sources, Inc.; The Bantry Group Corporation; AdminPros, L.L.C.; CGL Facility Management, LLC; Mississippi Correctional Management, Inc.; Branan Medical Corporation; Drug Testing Corporation; Global Tel*Link Corporation; Health Assurance, LLC; Keefe Commissary Network, LLC of St. Louis; Sentinel Offender Services, L.L.C. and AJA Management & Technical Services, Inc.

As of February 2015, Epps was still eligible to receive benefits from the Mississippi Public Employees’ Retirement System.