Oregon's independent prison industries operation for years provided costly "gestures of goodwill" ranging from free executive furniture to $5,000 charity sponsorships to keep happy its main client: the Oregon Department of Corrections.

A state

report obtained by The Oregonian also shows corrections officials saddled their industrial partner -- Oregon Corrections Enterprises -- with troubled prison employees. They included corrections officers accused of assaulting a child, drunk driving and prostitution.

And state investigators concluded that Mitch Morrow, Corrections Department deputy director, exerted "improper" influence to get his son a job with OCE.

A prison industries executive described OCE's coffers as a "slush fund" for prison officials, but OCE's use of funds is suppose to be largely restricted to inmate labor.

The Justice Department reported no evidence of criminal conduct, but strongly urged state officials to take a closer look at the two state operations.

Corrections Department Director Colette Peters said in an interview Friday that she takes the Justice Department's Feb. 8 report "seriously" and has directed her inspector general to investigate.

Gov. John Kitzhaber's spokesman said the governor wouldn't comment until he sees the results of that work.

Questioned expenditures

The state Department of Justice investigated a variety of Oregon Department of Corrections expenses paid for off the agency's books by using Oregon Corrections Enterprises funds:

$30,740:

Two heartbeat monitors for two prisons.

$29,622:

Remodel a gate at the Pendleton prison.

$16,673:

Conference table and chairs for the department's executive office.

$9,779:

Printing 2,000 "Focus on Accountability" reports.

$5,611:

Print 500 anniversary books for the Salem prison's 50th anniversary.

$5,000:

Sponsor a table at a dinner for retiring Gov. Ted Kulongoski.

$5,000:

Sponsor a table at a Boy Scouts of America dinner.

$2,883:

Purchase special military coins for a veterans' charity.

$2,485:

Cover part of funeral expenses for a corrections officer murdered off duty.

The report comes at a bad time for the Corrections Department. Legislators are considering the agency's new budget requests and indication of "off the books" spending isn't likely to make them happy. The agency houses 14,283 inmates on a two-year general fund budget of $1.3 billion.

was triggered by Oregon Corrections Enterprises itself. Administrator Rob Killgore, hired in 2001, presented state officials last fall with 875 pages of material detailing what he said was $5 million worth of misappropriated expenses dating back 10 years. He was joined by two other prison industries officials.

Killgore told The Oregonian Friday his concerns "built up over the years" that state prison officials were abusing the autonomy of Oregon Corrections Enterprises.

Investigators concluded a number of Killgore's allegations were "unsubstantiated."

"There were no gains on any personal level for any of these individuals," the report stated.

Oregon Corrections Enterprises is separate from the Corrections Department, set up by the Legislature to independently run in-prison businesses such as furniture manufacturing and telephone answering centers. OCE is self-supporting, getting no state tax money.

The report highlighted an environment where the prison industries operation had to curry favor with the Corrections Department to effectively work within prison walls.

"Our investigation revealed a culture within DOC of requesting OCE to pay for items that have limited, or no, direct business to OCE as a business enterprise," the Justice Department report found. "Deputy Director Morrow told us OCE must make gestures of goodwill to DOC because the director's office cannot make the institutions that comprise DOC cooperate with OCE."

That puzzled investigators.

"No one we interviewed was able to satisfactorily explain why the DOC director could not simply order the institutions to cooperate," the report said.

OCE, for instance, has funded on-duty snacks for corrections officers during Corrections Officers Week. Last year, the snack bill was $5,490. OCE also was tapped to pay nearly $10,000 to print a report called "Focus on Accountability" and $20,000 for a public relations video for the Corrections Department.

"Killgore was concerned because these expenditures had nothing to do with maintaining, implementing or developing prison work programs," the report said.

It also said that prison officials ordered furniture for their agency that either wasn't paid for or obtained at a discount. The furniture portion of OCE has lost nearly $2 million in recent years.

In 2006, OCE was asked to provide a new conference table and chairs for a remodeled meeting room at the Corrections Department's Salem headquarters. The bill was $16,673, but the Corrections Department didn't pay a dime, according to investigators.

Investigators said the expense was legal because it helped market the furniture factory.

"DOC officials would give credit to OCE in the construction of the furniture to visitors at the director's office," the report said.

<a href="http://s3.documentcloud.org/documents/609314/oregon-corrections-investigation.pdf">Oregon corrections investigation (PDF)</a> <br /> <a href="http://s3.documentcloud.org/documents/609314/oregon-corrections-investigation.txt">Oregon corrections investigation (Text)</a>

Peters stuck by that sentiment on Friday.

"It's part of the tradition of OCE to display its work product at different DOC locations as a marketing tool," Peters said.

Marketing was also cited to justify charity dinner sponsorships.

In 2009, then-Director

asked OCE to pay $5,000 to sponsor a table at a Boy Scouts dinner honoring outgoing Gov. Ted Kulongoski.

"Rob, here is the order form," Williams wrote in a Sept. 18, 2009, email to Killgore. "OCE is committed to a $5K table. I'm sure you are thrilled."

A year later, OCE was asked to sponsor another $5,000 table at yet another Boy Scouts dinner.

"It should be a lot of fun for folks -- and a lot of free wine. (You can drink and shoot BB guns at the same time!)," Williams wrote in an email setting up the sponsorship.

Williams, who left the Corrections Department in January 2012, has served on the Boys Scout Cascade Pacific Council board.

Max Williams

In an interview Friday, Williams said he only recommended the sponsorships as a marketing tool.

"I never made anybody do it," Williams said, adding he couldn't recall any other such requests besides the two cited.

In 2011, OCE was asked to cover funeral costs for Buddy Herron, a corrections officer at the Pendleton prison who was murdered while off duty. OCE picked up $2,485 in costs for lodging for Herron's family, facility rental and the Honor Guard.

Later Morrow, the deputy corrections director, wrote to an OCE executive in an email: "Any more crap about the money OCE spent on the funeral stuff? Maybe I don't want to know."

The Justice Department report said that prison officials said in interviews that they "believed covering the funeral expenses was outside the permissible uses of OCE funds. We are very concerned that DOC and OCE officials authorized the expenditures despite their belief the expenditures were not permissible."

More

Yet the Justice Department said "there is an argument" that OCE's contribution "generated tremendous goodwill in the institution in which Officer Herron had worked, while at the same time possibly opening doors to new sales in the community."

Killgore also said that at the Corrections Department's request, OCE hired ex-prison officials, including an officer who lost his state certification because of convictions for resisting arrest and drunk driving, the report said.

"According to Killgore, Deputy Director Morrow requested OCE hire this correctional officer and Killgore created a position for him in one of the laundry facilities," the report said. Killgore said Morrow also asked OCE to "hire a correctional employee who had allegedly solicited a prostitute" and "another who had been arrested for assaulting his own son," the report said.

Investigators found that "all of these individuals were hired by OCE, but there was no documents to establish that the request was made by Morrow."

The report's most direct criticism was leveled at Morrow, who has worked in the Oregon prison system 30 years. It recounted Killgore's allegation that he was forced to hire Morrow's son, who worked as a coordinator in OCE's laundry operation. Killgore told investigators he had to double a moving allowance for the son and increase his pay "because of Morrow's complaints."

Investigators concluded that Morrow had recommended his son for an OCE job and "made follow up calls to make sure that his son was paid more than the typical moving expenses." The report said there was no evidence Morrow tried to "directly influence" OCE's personnel office to hire his son.

Morrow told The Oregonian he couldn't comment until the agency's internal investigation is completed.

Peters wouldn't discuss the allegation, but said, "I have full faith in the deputy director."

The Justice Department also reported Killgore's allegation that Williams was involved in getting a friend hired at OCE. The report said Williams recommended a former Nike executive but told Killgore "he was not looking for any favors" for the man. The man was hired on a temporary basis, and then applied for permanent appointment.

Killgore said he felt he had no choice but to hire the man when a Corrections Department official said "the director was tired of his wife talking to him about it."

Investigators didn't resolve the allegation in their report, but Williams denied he pressured anyone to hire the man, a family friend. He said the notion of his wife having a role was a fabrication.

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