Tom Gores under fire for deal on inmate phone service

Tom Gores built a private equity empire that made him rich enough to buy professional basketball’s Detroit Pistons and become a civic leader in Michigan.

Now the billionaire’s firm has struck a deal to buy Securus Technologies Inc., a company that provides telephone services to Michigan prison inmates at rates of up to $22.56 for a 15-minute call.

Critics say the lucrative venture could tarnish the image of the team owner who has won plaudits for returning the National Basketball Association Pistons to downtown Detroit and for helping to raise $10 million to help Flint, his boyhood home poisoned by lead in tap water.

“It would fundamentally seem at odds with his and the Pistons’ best interests to be affiliated with a company like Securus,” said Aleks Kajstura, legal director of the Prison Policy Initiative that works to expose harms of mass incarceration. “Securus preys on the very community that the Pistons and Gores support.”

Gores’ Platinum Equity asked the Federal Communications Commission to approve its purchase of closely held Securus for a reported $1.6 billion. The Dallas-based company provides phone service to 1.2 million inmates at facilities across the United States and Canada.

Objections from the Prison Policy Initiative and other activists knocked the deal off a quick track for approval at the FCC. There’s no deadline for the agency act.

The purchase “is a microcosm for everything that is wrong with the prison-industrial complex,” groups objecting to the sale told the FCC in a filing.

The sale would bring the current owner, private equity firm Abry Partners, about $960 million more than it paid four years ago when it bought Securus for $640 million from yet another private equity firm.

“They built it on the back of inmates and their families,” Lee Petro, a Washington-based attorney representing inmates’ families that object to the sale and other groups, said in an interview. “All of that money came from charging inmates and their families excessive rates.”

The objections have nothing to do with the transaction, but are “simply part of petitioners’ broader campaign to change correctional policies they oppose,” Securus and Platinum said in a filing to the FCC.

Dan Whelan, a spokesman for Platinum, and Kostas Sofronas, a spokesman for Boston-based Abry, didn’t return multiple telephone calls seeking comment. Nor did Russell Roberts for Securus. A message left on Gores’s voicemail was not returned. Neil Grace, an FCC spokesman, declined to comment.

Gores, 52, founded Beverly Hills, California-based Platinum Equity in 1995. He’s worth $3.4 billion, according to data compiled by Bloomberg. Platinum Equity now has more than $11 billion of assets under management and has a portfolio of about 30 operating companies that serve customers around the world, according to its FCC application.

Gores was born in Israel and his family moved to Flint when he was a child. He graduated from Michigan State University.

In 2011, he bought the Pistons and last year announced they would move back to downtown Detroit after leaving for the suburbs in 1988. He also pledged to raise $10 million to help Flint recover from having lead in its drinking water.

Platinum and Securus say in filings one reason for the FCC to approve the deal is that the sale won’t change much. The same officers will run the company, and Securus “will continue to provide high-quality services to the same extent and at the same rate,” according to a May 11 application for deal approval.

Securus has sidestepped a ban on charging to connect a call by setting a high rate for the first minute, according to the objecting groups represented by Petro. They include the Wright petitioners, named for a mother who sought lower rates to stay in touch with her incarcerated son, and seven other groups.

Securus rejected the assertion. “Nowhere in the rules is there a requirement that all per-minute charges be equal,” the company said in their FCC filing.

First-minute rate

Securus and another firm, Global Tel*Link Corp., also owned by private equity, lead the inmate-calling industry. Prisoners are charged as much as $14 per minute, or 31 times the rate for calling Antarctica, according to a 2015 FCC order. Costs for families to stay in contact with imprisoned loved ones can mount to hundreds of dollars monthly.

Companies bid to gain control of calls at a jail or prison, and then operate as “unchecked monopolists” that pay commissions back to the institutions, according to the FCC order. Prison officials have defended the commissions as paying for needed programs such as inmate recreation, jail maintenance and victim compensation funds.

In 2015, the FCC, then led by Democrats, voted to limit rates on intrastate calls — those that don’t cross a state line. Last month inmate-calling companies won a U.S. appeals court ruling voiding the limits. Judges acted after the new Republican majority at the FCC declined to defend the restrictions, saying the agency lacked authority.

‘Market failure’

The decision to stand aside drew congressional attention.

What is the the logic “behind the FCC abandoning its defense of capping the cost of these calls, which often are dollars for minutes?” Sen. Cory Booker, a New Jersey Democrat, asked Brendan Carr, the agency’s general counsel and a Republican nominee to a vacant commission seat, at a July 19 confirmation hearing.

“There is a market failure,” Carr said. “The question is, how to go about solving that?”

Republican FCC chairman Ajit Pai said at the hearing that he would welcome additional authority from Congress to address inmate phone rates.

Sen. Tammy Duckworth, an Illinois Democrat, said she wanted to “to rein in the often ridiculous prices prisoners and their families are forced to pay.”

She introduced a bill days later to bolster FCC authority over prison calls, saying it would reduce recidivism by helping families keep in touch with imprisoned relatives.

Duckworth’s bill gives the agency a framework for taking action, Yosef Getachew, a fellow at the Public Knowledge policy group, said in an email.

“Without clear rules in place capping intrastate rates, families will continue to bear the high burden of staying connected with loved ones serving prison sentences,” Getachew said.