Cash-strapped Wyatt Detention Center enters into receivership

PROVIDENCE, R.I. (WPRI) – A judge has allowed the troubled Wyatt Detention Center in Central Falls to enter into receivership after prison officials said they are facing serious financial problems.

Lawyers for the prison told Superior Court Judge Michael Silverstein Friday afternoon they can’t make their $4.4-million debt service payment for July. The prison has $93.7 million in outstanding bond debt, according to Margaret Lynch-Gadaleta, Wyatt’s legal counsel.

Silverstein appointed attorney Jonathan Savage as a temporary receiver at the request of officials from Central Falls and the prison. Savage, one of the state’s most well-known lawyers, oversaw the first two months of Central Falls’ receivership in 2010.

“After a detailed review of the finances and operations, the board of the Central Falls Detention Facility Corporation determined that receivership is a viable way to move forward and address the Wyatt Detention Facility’s unsustainable debt,” prison chairman Kelly Sheridan said in a statement. “The seeds of this problem were planted long ago.”

The Wyatt is a privately-operated prison that relies on reimbursements from the federal government for funding. Lynch-Gadaleta said the prison’s average daily population has dropped from a high of 649 inmates in 2011 to just 503 in 2014. Even at its peak population, the prison was still losing $2 million annually and officials believe it would need more than 700 inmates to break even, she said.

The prison went into a financial free-fall when Immigration and Customs Enforcement stopped sending detainees there in 2009 after a Chinese national died while in custody.

Adrienne Walker, a lawyer for the bondholders, argued that receivership wasn’t necessary because her clients were willing to forbear the July payment. She said “there is no urgency” for entering receivership.

In the statement, Sheridan said the receiver will try and restructure the prison’s debt by negotiating with bondholders “and develop a plan to return the Wyatt to fiscal sustainability so that it can hopefully benefit the residents of Central Falls once again.”

In court, Central Falls city solicitor Matthew Jerzyk called the situation a “fiscal crisis” for a prison plagued by “mismanagement” until recently. He said the prison has not made any host payments to the city since 2009. Lynch-Gadaleta said the prison has lost $7.6 million since 2012.

“I fully support the board’s decision to file for receivership,” said Central Falls Mayor James Diossa in a statement. “Unfortunately, due to previous mismanagement and mounting debt, the Wyatt has broken their commitment to the city. The residents of Central Falls, struggling with annual court ordered tax increases as part of our exit from bankruptcy, deserve to benefit from our host arrangement with the Wyatt.”

“I am hopeful this is the best way to address the Wyatt’s deep fiscal woes and put the facility on a sustainable path forward,” he added.

Officials for the prison have said they aren’t housing enough prisoners to stay solvent, running below an inmate population of 700 since 2009.

The Wyatt Detention Center employs roughly 170 people.

Tim White ( twhite@wpri.com ) is the Target 12 investigative reporter for WPRI 12 and Fox Providence. Follow him on Twitter: @white_tim

Dan McGowan ( dmcgowan@wpri.com ) covers politics, education and the city of Providence for WPRI.com. Follow him on Twitter: @danmcgowan

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