Who's Running the Private Prisons?

Private Prison Industry

by Tami Lubby

People and politicians alike bemoan the perceived lawlessness in American society today. However, some companies are capitalizing on the crackdown on criminals. The private prison industry has taken off in the past year. Industry leaders Corrections Corporation of America and Wackenhut Corrections Corporation saw their revenues climb 37 and 36 percent respectively in the first six months of 1996. "I think these are great long-term growth stocks," said Anne K. Anderson, president of Atlantis Investment Company of Parsippany, N.J.

These companies sell themselves by saying they can run prisons more cost-effectively than public agencies. Federal, state and local governments hire the companies either to build new facilities, usually with public funds, or manage existing ones. The industry has a lot of room to grow.

Private prisons now hold about 50,000 inmates in the United States, Australia, the United Kingdom and Canada, according to Charles Thomas, University of Florida criminology professor and director of the Private Corrections Project at the school. Another 31,000 beds are under contract. In the United States, private prisons hold only about 4 percent of the more than 1.6 million people behind bars in federal, state and local prisons and jails, he continued. Texas has contracted the most beds -some 23,000 in 39 facilities -from private prison companies. Florida is second with nearly 6,000 beds in 11 prisons.

"We could see 200,000 prisoners in private prisons by the turn of the century," said Bruce Mendelsohn, editor of Corrections Alert newsletter. The overall prison population has doubled in the past 10 years and many facilities are nearing the end of their life expectancy. Many states don't have enough room to hold all their inmates.

Corrections Corporation, founded in 1983, leads the industry with about 46 percent of the market share. The company, which earned $130.7 million in revenues in the first half of 1996, started 1995 with 15,000 beds under contract and nearly doubled that number in 12 months. Currently, Corrections Corporation has 37,000 contracted beds in 54 facilities, said Susan Hart, the company's vice president of communications.

Wackenhut Corrections, a 12-year-old company which spun off from its parent Wackenhut Corporation two years ago, holds about 29 percent of the market and earned $62.8 million in the first half of 1996. Wackenhut added 2,433 beds in 1995 for a total of 16,165 beds under contract. It has signed contracts for another 4,550, said Patrick Cannan, the company's corporate relations director. By the end of 1997, Wackenhut hopes to have 24,000 beds in operation.

Privately-held U.S. Corrections Corporation and Management Training Corporation together handle about 10 percent of the market, Thomas said.

Cornell Corrections Inc., which holds 3 percent of the market, will soon go public.

Corrections Service Corporation, the former Esmor Correctional Services, holds 2 percent of the market.

Analysts' projections of the industry's annual growth vary from 20 to 35 percent over the next few years. They cite tougher sentencing laws, support of privatization by public officials - like President Bill Clinton and several governors - and the expanding inmate population as some of the reasons the industry is hot.

Though the crime rate is touted as on the decline, Thomas noted the rate doesn't include drug offenses, which make up a large percentage of convictions. The industry is still evolving and finding new ways to push up profit margins, said Alex Singal, a research analyst with Janney Montgomery Scott in Philadelphia. Instead of using public money to build prisons, which means the government owns the buildings, companies now are constructing their own facilities, she said. This gives them more latitude in operations. For instance, if a prison has empty beds, the company might contract with another state to fill them.

Not everyone, however, is convinced that private prisons are the way to go. In August, the federal General Accounting Office issued a report based on comparisons of private and public prisons. "The bottom line of the report is that although private prisons are touted as a way to save money, the five studies we reviewed provide no evidence that they save money," said Laurie E. Ekstrand, associate director for GAO's Administration of Justice Issues. Thomas and analysts called the report flawed, saying it made incompatible comparisons and ignored important information. If the contracts are drawn correctly, private prisons operate at 10 to 15 percent below public agency costs, said Thomas. Hart of Corrections Corporation said her company can save between 5 to 20 percent on construction costs and 5 to 15 percent on operating costs. Wackenhut said it achieves a cost savings of between 10 and 20 percent. But just where do these companies cut costs? Corrections consultants point to a prison's biggest expense - salaries.

"The only place to save money is in the work force. Who are you going to bring in at lower wages?" said Jess Maghan, director of the Center for Research in Law and Justice at the University of Illinois in Chicago and founding member of the International Association of Correctional Officers, a professional advocacy group. Unlike the National Sheriffs Association, which has come out against private prisons, the 26,000-member correctional association has not taken a position. The policy of the American Correctional Association, a professional group which accredits prisons, states that private companies have a place in the field, but they must meet professional standards, provide services equal to or better than the government, and be cost-effective.

Maghan, however, has several concerns about the privatization trend. He's worried about the training and wages offered to correctional officers in private prisons, which mostly hire non-union workers, he said. The federal Bureau of Prisons pulled back from its privatization plans earlier this year because it feared correctional officers might go on strike, Ekstrand said.

Federal officers, who oversee about 100,000 inmates, or 6 percent of the U.S. prison population, are not allowed to go on the picket line. Private prison supporters dismiss these concerns, saying they must pay competitive benefits and wages to attract a quality staff. Also, private prisons use technology - like sensors and monitors - to reduce the number of staff positions needed and therefore save money, Thomas said.

Private prisons have never had a strike, said Cannan of Wackenhut. Maghan said he's also worried private prison companies will cut back programs offered to inmates to push up the profit margin. The companies' annual reports, however, highlight prisoner care. Wackenhut states "the company assumes a greater responsibility for prisoners than just housing them. All Wackenhut facilities provide basic education, job and life skills training and rehabilitation programs." Corrections Corporation said it tailors programs to each prison. For instance, it instituted a sugar-free menu in one facility, reducing prisoners' manufacture of alcohol-based products. Supporters also point to the few number of contracts canceled or not renewed by government agencies as a measure of success. Thomas said he can count the number of contracts canceled since prisons began privatizing more than a decade ago on one hand. Maghan, however, said one also must consider the inmate. He questioned how prisoners will feel knowing someone is making money from their incarceration. "I don't know if you can rent out justice," he said.

( MACC in no way endorses the above corporations... These are the profiteers, alongside the Bobby Ross Group in Texas and hundreds of large outside corporations )



Despite documented abuses and dubious savings, it will be difficult to slow the momentum of private prisons, which have become a political force to be reckoned with. CCA and Wackenhut together gave almost $150,000 in federal and state political contributions during the 1995-96 electoral cycle, according to reports filed with the Federal Election Commission. The companies gave mostly to Republicans, but they also hedged their bets by giving money to pliant Democrats. Having promised to reduce the federal payroll substantially, many Democrats, including Bill Clinton, support prison privatization.

Some of Wall Street's largest investment houses, including Goldman Sachs & Co. and Smith Barney Inc., are competing to underwrite the bonds for the prisons. Other huge companies also have a stake. American Express, for example, invested approximately $31 million in the $38 million Great Plains Correctional Facility in Hinton, Okla., according to the prison's warden, Tom Martin. Great Plains is a private prison that houses inmates from North Carolina.

Prison companies also buy lobbying power. Rodney Blonien, a powerful California lobbyist and former corrections official, was paid more than $600,000 by a variety of corrections clients between 1989 and 1994, according to the Los Angeles Times. Wackenhut alone paid him $220,260 during that period, the newspaper reported. Private prison companies have some powerful allies in the fight for stiffer sentences and more prison spending.

For example, the California Correctional Peace Officers Association, which has grown from 4,000 to 23,000 in the last decade, gave more than $1 million to various California state politicians in 1996. The prison lobby is also supported by the National Rifle Association. Armed with an agenda of deflecting public fear away from guns and toward people, the NRA successfully lobbies for prison construction and three-strikes-and-you're-out laws.

This alliance between private prison operators `and more traditional law-and-order advocates is only natural. David Shichor, professor of criminal justice at California State University - San Bernardino, calls it the Hilton scheme": You want to keep your hotel always full.' But unlike the NRA, companies like Wackenhut and the Bobby Ross Group have direct power over prisoners' lives.

Marc Mauer, of the Washington, D.C.-based Sentencing Project warns that the profit incentive for private prison companies could lengthen prisoners' stays. "A critical issue is accountability." Mauer says. "You can imagine someone coming up for probation. The tendency of a private prison will be not to release them."

At Lockhart, for example, Wackenhut officials decide when inmates should he disciplined or given "good time," both factors considered by parole hoards. Inmates can appeal disciplinary actions to a public board. but in making judgments about convicts futures, the profiteer stands between the prisoner and the state.

Companies serving the corrections industry need an ample quantity of raw material to ensure long-term growth Since that raw material is prisoners, the industry will do whatever it can to guarantee a steady supply.

by Kirsten Bloomer

January 26, 2000



In his state of the state address Governor Cayetano insisted that a new prison in Hawaii must not be run by government workers. "If you want a prison in Hawaii then give me the authority to not only select a site but to fully privatize the operation and maintenance of that prison."

Rodrigues: "We disagree with the demand. I think he's basing it on nonsense without having the facts to support it. It'll tell all of the ACOs who are working now that you're not worth a damn; we don't want you running our new prison."

Rodrigues represents the state's 3-thousand adult corrections officers or ACOs, whom he says are not to blame for the high cost of operating prisons in Hawaii.