Politics & Government

New memo: McCrory prodded top aide on prison contracts

Pat McCrory
Pat McCrory Raleigh

Gov. Pat McCrory twice told his secretary of public safety about his concerns that private prison maintenance contracts held by his friend and political contributor would expire, according to a recently released memo from a top prison administrator.

The memo, written earlier this year by Joe Prater, a deputy commissioner of correction, recounts events leading up to the McCrory administration’s renewal of the contracts over the objection of senior prison officials.

Prater’s memo dates the phone calls as coming prior to a meeting that McCrory arranged and attended in October 2014 in Charlotte. In that meeting, Graeme Keith Sr. is said to have discussed his political contributions and said he wanted “something in return.”

The three contracts, which are the subject of an FBI inquiry, are worth about $3 million annually and are held by The Keith Corp. of Charlotte, where McCrory was mayor for 14 years. The owners, Graeme Keith Sr. and Graeme “Greg” Keith Jr., are friends of McCrory and contributed $12,000 to the governor’s political committee from 2008 through 2012.

Prater’s memo, placed in a state file, was released in response to a public records request from The News & Observer. The memo says McCrory called Secretary of Public Safety Frank Perry in September 2014, after prison officials decided to cancel the contracts with a subsidiary of The Keith Corp.

Prater had drafted letters for Perry to sign that would inform the Keiths that the contracts would be allowed to expire, an action Perry has said he supported.

At an employee’s going-away reception, Perry approached Prater “and indicated that he had some concerns about signing the notification (about ending the contracts) as the governor had concerns about our allowing the contracts to expire,” says the memo, written Jan. 28, 2015.

During another conversation, “Sec. Perry told JP (Joe Prater) in the basement parking lot that the governor had called him again, concerned about our allowing the Keith contract to expire, as Keith is a friend of his (the governor’s).”

Perry declined to be interviewed. But he wrote in a recent statement that he did not recall the parking lot conversation.

Perry’s statement reflects that he knew of the governor’s feelings about the prison contracts. “I do recall speaking with Mr. Prater about holding the letter regarding the contract extensions,” Perry wrote. “This was because the Governor wanted further analysis of the wisdom of allowing the contracts to expire due to the lack of clarity regarding savings.”

McCrory’s office declined a request for an interview about the January memo from Prater. The governor previously has said that he was involved in a “side conversation” during the October 2014 meeting and did not hear any comments from Keith about his political contributions.

Perry said at a legislative hearing last month that in addition to the statement at the meeting, Keith had mentioned his contributions on at least three other occasions in person and on the telephone. Perry said, however, there had been “no quid pro quo” regarding the contracts and “therefore no crime.”

McCrory, a first-term Republican, has said that it’s not unusual for him to get involved in even relatively small disputes, and he said that he had asked State Budget Director Lee Roberts to analyze private prison maintenance to see what worked best for the state. Roberts decided that the private contracts did save money, and the contracts were renewed for a year.

The N&O also reported last month that McCrory was personally involved in a new state policy that has resulted in hundreds of tickets given to napping truck drivers who park along exit ramps on North Carolina highways.

In that case, McCrory was urged to act by Charlie Shelton, a Surry County business executive whose hotel and vineyard are near one of the exits. The Shelton family and company executives donated $40,000 to McCrory’s 2012 campaign.

Not signed or sent

Private prison maintenance has been in dispute at the legislature for years. In 2011, the General Assembly ordered prison officials to submit a report comparing private versus public maintenance.

Prison officials compared the three prisons maintained by The Keith Corp. with three virtually identical prisons maintained by state employees.

After sending the report to the governor’s office for approval, prison officials submitted the report to the General Assembly in May 2014. The conclusions were unwelcome news to Graeme Keith Sr. and other privatization boosters: Private maintenance did not lead to significant savings, the report said.

In August 2014, prison officials decided not to renew the contracts; two were to expire at year’s end and the third in April.

Prater drafted letters for Perry to send to Graeme Keith Sr. Perry never signed or sent the letters, which were dated Sept. 9, 2014, and Sept. 12, 2014.

“We held it up when Mr. Keith had called me with ever-increasing urgency in his voice that he simply took issue with our numbers,” Perry said in an Oct. 29 interview. He did not mention calls from the governor.

A one-year extension

According to Prater’s more recent memo, Perry first spoke of McCrory’s concerns at the going away party for Perry’s executive assistant on Sept, 12, 2014. It said the parking lot conversation followed soon after.

One week later, Perry told his senior prison officials that McCrory wanted to set up a meeting with The Keith Corp. The meeting was set for Oct. 28, 2014, in the governor’s office in Charlotte. According to Prater’s January 2015 memo, the governor’s office offered to fly Perry and his team to Charlotte, but they declined.

At that meeting, Keith spoke about keeping the contracts and proposed that his company take over private maintenance contracts at all of North Carolina’s 56 state prisons, Prater reported in a memo that was previously released.

Prater wrote that, in the presence of McCrory and prison officials, Keith said he “had given a lot of money to candidates running for public office, and it was now time for him to get something in return.”

Keith has said that the accounts of his behavior were “a gross misrepresentation.”

Roberts, the budget director, was not at the meeting in Charlotte. But after it was over, McCrory asked him to look into the issue and recommend whether private or public maintenance was the better choice.

Over the objection of Perry and other prison officials, Roberts decided to renew the contracts, saying The Keith Corporation saved taxpayers $1 million a year. Prison officials dispute that conclusion.

In October of this year, the Department of Public Safety notified The Keith Corporation that the contracts would expire at the end of 2015.

Joseph Neff: 919-829-4516, @josephcneff

The missing Page 2

In reporting on the McCrory administration’s handling of contracts with The Keith Corp., The News & Observer filed several public records requests.

On Oct. 29, the Department of Public Safety produced 163 pages of records, both digital files and a printed copy.

Both sets of documents contained a two-page memo dated Jan. 28, 2015, written by Joe Prater, a deputy commissioner in the Division of Correction. Given the format of the memo, a reader would not know that a page was missing.

On Nov. 20, the department produced 399 pages of additional records, again including the Prater memo. This time, it included a missing Page 2, which included Prater’s description of Gov. Pat McCrory’s phone calls to Perry involving private prison maintenance contracts.

In a statement dated the same day the records were given to The N&O, Secretary of Public Safety Frank Perry noted several instances in which his recollections differed from the memo. He said he did not remember, for example, discussing McCrory’s concerns with Prater in a parking lot.

Perry declined to discuss the missing record. Department of Public Safety spokeswoman Pam Walker said she did not know why the page did not show up in documents produced for the first records request. Walker said the full memo turned up as she was making “doubly and triply sure” that all records had been produced.

Who is Joe Prater?

The man making the memos that make the news is Joe Prater, deputy commissioner for the Division of Correction since March 2013. Prater oversees the $1 billion annual prison budget, personnel, fiscal and other administrative functions.

He serves at the pleasure of the governor and is paid $104,316 annually.

The N.C. State University graduate began his career in prisons in 1997 as a correctional planner. In 2000, he became the chief administrator of probation and parole for eight years.

Prior to working in corrections, Prater worked in local government for 14 years and two years as a chief financial officer for a private nonprofit.

Prater, 58, was not present at a recent legislative oversight hearing that addressed the private prison contracts, but he was much on the mind of legislators. Several questioned why he wrote the memo outlining the governor’s meeting in Charlotte last year and when it was written.