No Profit for Kids In Glen Mills’ Florida Plunge

Robert Kearns
June 1, 1998

$11.7 Million Buys Tickets to 'Phantom' and a State Probe

Cruise a few miles past the neatly groomed retirement community of Sun City Center, turn left at the Mobil station, and continue past the auto body shops, rusting trailers on cinder blocks, a sand and gravel pit, and some small nurseries. Deep in the scrub pines and across the drainage ditches, there should sit the Adam Paine Academy: a glistening new 500-bed alternative education facility for some of Florida's most troubled youth.

Except that after four years and $11.7 million in state funding, all that remains is construction debris left behind by angry, unpaid subcontractors, a cluster of half-done structures that no one seems inclined to finish, frustrated state officials, and investigations into potential criminal wrongdoing. Not one child was served, but several adults drew handsome incomes and perks, including a trip to Broadway to see Phantom of the Opera.
This was to be the centerpiece of a bold leap by the esteemed, nonprofit Glen Mills Schools into the growing world of for-profit youth development. Glen Mills would replicate its Pennsylvania success here, then around the country, in the process showing everyone how to care for the nation's growing legions of incarcerated youth.

"Florida is just the beginning," Glen Mills Superintendent C.D. "Sam" Ferrainola boasted to Youth Today (July/August 1996). "Wait until you see Colorado and Utah and the governor of Minnesota down here."

What they would see now is an expensive lesson in what can go wrong with program replication, turning for-profit, and rushing to tackle a youth problem. In their zeal to clone Glen Mills, with its prep-school like atmosphere and use of peer pressure to influence incarcerated teens, Florida officials circumvented their standard contracting procedures, skimped on oversight, and didn't see the risks in trying to recreate a successful nonprofit from one state as a for-profit in another. States that are considering plans to replicate Glen Mills (such as Colorado and Utah) or other successful nonprofit ventures might want to look at what happened here.

"This was a reasonably good recipe for failure," said University of Florida professor Dr. Charles W. Thomas, describing how the Paine project sailed past the usual state watchdogs.

"It was really a fiasco," said Burke Kibler III, a Lakeland lawyer and former chairman of the Board of Regents appointed by the governor to serve on the board that oversaw the Paine project. "I think it was well motivated to replicate the Glen Mills model. But it had great problems from the start."

Crime Fuels Idea

Florida's infatuation with the Glen Mills concept began after several highly publicized shooting holdups of foreign tourists by teens in Miami in 1994. Several Florida officials were already familiar with the Concordville, Pa.-based school run by the gruff, cigar-smoking Ferrainola. A group of Florida legislators decided that the state should import Ferrainola's formula, creating a virtual clone school for their own burgeoning juvenile detention system. The state, after a series of get-tough laws, estimates that 110,000 juveniles will enter the justice system this year and projects a 25 percent increase in 1999.

Hoping to emulate the success in Pennsylvania and without any real bidding, the legislators drummed up a package that included $30 million in construction funds and planned a $22 million-a-year appropriation for operating costs. They established a beachhead in Pennsylvania, sending 100 Florida juvenile offenders to Glen Mills so they could learn the peer influence system there and help recreate it in Florida.

The Florida school would be named after Private Adam Paine, a Seminole-Negro Indian Scout who was awarded the Congressional Medal of Honor in 1875 for "gallantry in action." Paine, a Florida native, distinguished himself in Texas during the Indian Wars.
The ambitious plan is a case study of politicians casting aside existing expertise and plunging ahead with a pet project without the usual scrutiny of officials who are used to dealing with major procurement from private operators. For starters, Thomas notes, sole source procurement often leads to a haphazard approach.

The winners of this $30 million prize package were none other than members of Ferrainola's family and David M. Deming who had been director of admissions at the 750-acre Pennsylvania campus for nearly 18 years.

Here's how it worked:

Under the auspices of the Alternative Education Institute, Inc. (AEI), a state-appointed not-for-profit organization created to monitor the Adam Paine Academy, the Pennsylvania group was given virtual carte blanche to build and run the school. This proved to be a financial blunder, and an embarrassment to the state legislature and to members of the state board, drawn from the top ranks of Florida's establishment involved in youth affairs.

Thomas, director of the University of Florida's Private Corrections Project at the Center for Studies in Criminology and Law, points out that the legislature bypassed the Florida Correctional Privatization Commission, which it created in 1993 to supervise private contractors in the detention business. Ironically, he points out that while the Paine Academy was struggling to get off the ground, the commission contracted with private operators to organize and build two 750-bed juvenile facilities, with a third close to completion, all through competitive bidding and close supervision. The two detention centers cost about as much combined as the state planned to spend on Paine.

Another member of the board, who asked not to be named, said AEI was so loosely organized that it was months before he even knew he was on the board. By then, he says it was too late. "We were spending money at a God-awful clip and no one could quite get a handle on it," he said.

Frank Orlando, a retired judge in Fort Lauderdale, served on the 16-member board but was opposed to the project from the start. He said the project was robbing from the state education budget to enable a private operator to set up a profit-making school. "If you want to build a prep school at your own expense, then go ahead. But when you're spending state education money, you're taking it away from local school boards," he said. He openly questioned whether the deal was legal; the money was coming from the state's Public Education Capital Outlay (PECO) funds through the AEI, even though PECO money was not meant for such use.

No one from Glen Mills would return numerous phone calls to discuss the Paine Academy.

Cash and Perks

It was a losing battle for Orlando and a dissident minority of the board. The Pennsylvania group set up a new for-profit company, Griff Mills, to run the Florida school. They put up a grand total of $7,100 of their own money. For $1,070, Deming bought 2,140 shares. Sam Ferrainola's son James paid $1,030 for 2,060 shares. Four other of Sam's children — Joseph Ferrainola, Rita Schleet, Rosane Hurst and Tresa Williams — each paid $1,000 for 2,000 shares apiece. Samuel Streit, a Tallahassee lawyer-lobbyist, bought 2,000 shares for $1,000.

Deming had 51 percent of the votes. James Ferrainola had 49 percent.

The rest just collected dividends and other proceeds. In the first year of operations, 1995, they split $127,758. The next year, dividends grew to $173,429. That meant they each got back at least 40 times what they invested, almost before groundbreaking ceremonies took place at the 359-acre site in November 1996. (Sam Ferrainola was the keynote speaker.)

That income was small compared with the consulting fees, extra dividends, travel expenses, overhead charges and professional fees they collected from AEI. Deming took home nearly $250,000, James Ferrainola nearly $97,000, Hurst $20,000 and lobbyist Streit $248,000 in their combined roles as shareholders and consultants to the company. State investigators, led by the Chief Inspector General's Office, last year put the total take at $1,442,594.

Deming, in turn, wooed AEI members in a variety of ways, according to investigators. Aside from occasional meals before or after AEI board meetings, there were trips paid for by Griff Mills. Miami Juvenile judge Tom Petersen and his wife were flown to Pennsylvania to attend Glen Mills’ graduation ceremony, then spent two nights in New York and took in a Broadway show ("Phantom"), all on Griff Mills' tab. Deming told investigators there was a planning meeting during the Petersen's New York stay.
"In retrospect, I wish I hadn't done that," Petersen said of the trip. He said he thought at the time that the trip was being picked by Glenn Mills, not the publicly funded Griff Mills.

He knew things had gone too far, however, when Deming planned to take board members skiing in Colorado. "I said, 'You can't take board members on a ski trip,'" Petersen said. The trip was canceled when the spending controversy erupted last year.

Actually, this all had gone on quietly for nearly two years. Then, with construction just underway, cracks began to show. In late 1996, Streit grew worried about his tax situation because of the way the deal was set up. The company had no employees because it consisted of only eight consultants, and investigators could find no trace of withholding tax on the income being paid. Streit demanded to see the company's financial records. Deming refused. At a December 1996, board meeting in Pennsylvania, Streit was voted off the board and fired as a consultant. He remains a shareholder.

Streit angered Deming, according to investigators, when among other things he raised questions about Deming's financial dealings on behalf of the company. As a result, Deming reimbursed the company $16,662 for travel related expenses and $1,330 in home repair expenses. James Ferrainola gave back $776.

The scuffle caught the attention of the state Department of Education, which asked to look at some financial records itself. Soon thereafter, the state Inspector General got involved.

Grief Mills

"The reported information casts Griff Mills in a poor light and is seen by some as evidence of greed and avarice," the Inspector General said in a subsequent report. The I.G. found that Griff Mills had paid more for the 359 acres ($1,152,947) than the property's appraised value, and that one of the three parcels making up the tract was not even necessary to build the facility. The land had to be rezoned for use as a school, which prompted a series of legal maneuvers by some of its neighbors to block the project.
The I.G.'s harshest judgment focused on the absence of government responsibility. The state legislature had set up AEI, but AEI "did not perform effective oversight before or after the contract was signed," the I.G.'s report said. The Department of Education, which signed the checks for AEI, called itself a "pass-through agency" and said it was not responsible for overseeing the project. Even if the department wondered about how fast AEI was drawing down money for the project, the legislature had given the department no criteria to determine when or if money should be withheld.

"It seems to me," Thomas said of the project, "that it was moving almost entirely through the political process, not some other process such as procurement procedures."

The state DOE suspended all payments to Griff Mills through AEI in March of last year. As Griff Mills' money gradually ran out, construction at the site halted last October, with work only about half done by some estimates.

State legislators threw in the towel, deciding to look at alternatives to the alternative school plan. They tried offering the facility to Hillsborough County or to local school districts, but they seem to have little need or interest in taking over what has been designed as a boarding school. The legislature is also shopping around for a university or a community college to run the school. That, too, has sparked little interest. Nor has a private operator stepped in, as some had hoped.

The hammer finally fell in May when the state legislature, just hours before it adjourned for the session, passed a bill that abolishes the AEI board. It also ordered Florida's Department of Management and Services to take over the facility and essentially keep it in mothballs until someone can figure out what to do with it. It gave the department until October to solicit bids from anyone, public or private, state or federal, who wants to take it over.

Florida's state police and attorney general are still weighing possible prosecutions and lawsuits, state officials said. Meanwhile, legislators have appropriated $50,000 to cover the costs of establishing yet another board, this time to be known as a working group, to help figure out the Paine Academy's future — if any.

Deming has since moved on to Rite of Passage, a youth corrections agency in Nevada that focuses on wilderness experiences. Someone answering the phone there said Deming is director of program development. Deming did not return phone calls.

Meanwhile, Colorado officials say Glen Mills has opted out of the bidding for a state contract to build and run a facility modeled on Glen Mills. The welcome mat remains rolled out in at least one other state: Utah. John DeWitt, a State Juvenile Justice Department official involved in deciding on facilities issues, said Utah sends a couple of dozen juveniles to Glen Mills each year and has been impressed. But the distance and costs are daunting. He said Glen Mills has looked into the possibility of building a facility in Utah.

"We are looking favorably on this," he said.

Tara J. Sullivan contributed to this report.

Kearns, Robert. "No Profit for Kids In Glen Mills’ Florida Plunge." Youth Today, June 1998, p. 1.

©2000 Youth Today. Reprinted with permission from Youth Today. All rights reserved.