Security company Serco has been slapped with a $NZ500,000 ($A328,750) fine after a string of allegations about how the company's been running Auckland's Mt Eden prison.
NZ Corrections boss Ray Smith signed off on the penalties on Monday morning before heading to the prison, which is being taken over by the government department after the emergence of "fight club" videos and a string of allegations of serious violence.
The penalties only take in what has occurred in the last financial year to June and more fines are likely, Mr Smith says.
Corrections chief inspector is expected to complete an independent review by the end of August. At that point Mr Smith will consider whether to terminate the contract with Serco, and any other penalties.
Serco staff will stay on at the prison while Corrections is in charge and the company will pay for the Corrections officers.
When asked whether it was worth Serco's while continuing to run the prison when it had been slapped by penalties, Mr Smith replied: "Their performance is their performance. This is a performance-based contract."
Meanwhile, Prime Minister John Key says statistics about incidents at Mt Eden prison are broadly in line with publicly run prisons around the country and didn't spell the end of privately run prisons.
"Those people who hate private sector provision of services and the like will say this is the moment that we told you so and it's all wrong," he told TVNZ's Breakfast.
"Yes, Serco may well have got some things wrong that may end very badly for them, I don't know, it'll depend on whether they have honoured their contract, but I don't think you can say there's no role for the private sector."
Serco has a $300 million, 10-year contract to run Mt Eden. The contract is now subject to its required six-year review.
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