US prison operator running Nauru regime accused of fraud and ‘pandemic profiteering’ in Texas

The private prison corporation running the Nauru offshore processing centre was accused of fraud and "pandemic profiteering" in Texas just one month after signing its lucrative deal with the Australian government.

The government struck a preliminary agreement with the US-based Management and Training Corporation (MTC) in early October to provide "garrison and welfare services" to less than 100 people on Nauru, initially agreeing to pay it $47.3m for just 62 days work.

In mid-November, just seven weeks after the Nauru deal, authorities in Texas opened multiple investigations into allegations that MTC engaged in "fraudulent conduct and pandemic profiteering" by deceiving the state government and collecting millions of dollars for in-prison therapeutic programming it did not provide.

According to a detailed complaint submitted by prisoner rights group LatinoJustice to the Texas state audit office, MTC allegedly made prisoners sign falsified documents signalling they participated in treatment programs during the pandemic.

"People were instructed by MTC staff that if they did not fill out the false timesheets, they would be disciplined or lose their parole and be forced to return to prison," the group's senior counsel Andrew Case wrote.

The documents were then used by MTC to fraudulently collect payment from the state, the complaint alleged.

MTC strongly denies the allegations and says it is looking forward to working "with the TDCJ and Texas State Auditor to disprove the allegations and affirm the consistent quality of MTC programming across our facilities, including during the pandemic".

Both the audit office and the Texas Department of Criminal Justice have announced formal investigations into the allegations against MTC, according to a report by the Texas Tribune.

In the weeks after the allegations were made public, the Australian government extended the Nauru deal with MTC until the end of January, agreeing to pay it an extra $21.7m. An amended contract notice, published on 23 December, shows the government is now paying MTC a total of $69m for its work on Nauru.

There is still no finalised contract for MTC's work on Nauru. MTC has been named as a "preferred tenderer" and is being paid through a letter of intent, a type of preliminary agreement allowing it to begin providing services on Nauru.

Jana Favero, director of advocacy and campaigns with the Asylum Seeker Resource Centre, said it was "irresponsible and inappropriate" to hand a lucrative deal to a company facing such allegations.

"Refugees held offshore deserve a place to call home, their basic rights and a future in which they can heal from the abuse they have suffered," she said.

"Having just voted for a more compassionate and humane type of politics, I think the public should be outraged."

In a statement to Guardian Australia, an MTC spokesperson vehemently denied the fraud allegations. The spokesperson said MTC had followed the Texas justice department's protocols around the provision of therapeutic programs to prisoners during the pandemic, including using alternative treatment plans.

"This was particularly the case in the four treatment programs identified in the complaint, each of which MTC operated within a TDCJ-controlled and operated correctional facility," the spokesperson said.

"However, in adherence with CDC and TDCJ safety guidance, the safety modifications were temporary. MTC worked diligently to restore programming to normal as soon as it was safe and permitted to do so.

"The allegations of fraud against MTC relating to its treatment programs are unfounded."

The Guardian has previously revealed that MTC was awarded the contract despite a string of scandals in the US. MTC has variously been accused of "gross negligence" and "egregious" security failures in its operation of private prisons, including failings alleged to have allowed the gang-rape of a woman in detention, the murder of two retirees by escaped prisoners, and the months-long solitary confinement of a US citizen wrongfully held in immigration detention.

Favero said it was of "grave concern" that MTC took over garrison services on Nauru before it had signed a final contract with the Australian government, and was operating on the island using taxpayers' money made available under a letter of intent.

The home affairs department said it was still finalising its procurement processes for the Nauru work and that MTC Australia had been selected as a preferred tenderer.

"The procurement was undertaken in accordance with the Commonwealth Procurement Rules and the Department's robust governance framework," a spokesperson said.

"MTC Australia is required to deliver services consistent with Nauru legislative requirements and in a manner that preserves individual human rights, dignity and the well-being of transitory persons. The Department administers an evidence based performance monitoring framework to verify the delivery of services in line with contractual requirements."

Nauru remains Australia's sole offshore processing centre, after the detention centre on PNG's Manus Island was ruled unlawful and ordered to be shut down by that country's supreme court.

Nauru and Australia signed a memorandum of understanding in 2021, committing to an "enduring form of offshore processing" on the Pacific island state, and the Labor government has committed to maintaining an offshore processing capability.

There are currently about 90 people immured on Nauru. That cohort lives in the Nauru community, but cannot leave the island. The Australian-run detention centre is currently empty but on standby for future arrivals.