× You have 2 more free articles available this month. Subscribe today.
The Poor Get Poorer - The Rich Get Prisons
This Nashville-based corporation is a spin-off of the world's largest private prison corporation -- another Wall Street darling, Corrections Corporation of America -- whose stock is one of the top performers on the NYSE (doubling in value in just the first six months of 1997). CCA Prison Realty Trust is the nation's first real estate investment trust (REIT) that will focus solely on buying prisons.
As reported by Gregg Wirth in Left Business Observer, CCA Prison Realty sold 18.5 million shares in its IPO, 1.5 million more than originally planned, at a price of $21 a share, a dollar above initial projections, so hot was Wall Street for a piece of the imprisonment action. The deal was underwritten by investment bank J.C. Bradford & Company, also based in Nashville, and a fleet of co-managing firms, including heavyweights Lehman Brothers and PainWebber.
In a research paper, Equitable Securities (yet another Nashville firm), estimated that the U.S. prison population will reach 3.5 million over the next ten years, more than double the 1995 warm-body count of 1.6 million prisoners. In an SEC filing in advance of the IPO, Equitable Securities wrote: "As a result of the number of crimes committed each year and the corresponding number of arrests, incarceration costs generally grow faster than any other part of a government's budget. In an attempt to address these pressures, government agencies responsible for the operation of correctional and detention facilities are increasingly privatizing such facilities."
The malodorous language of corporate profiteering on the commodification of the imprisoned is bad enough. But as Wirth points out in LBO, the real stench of this IPO rises from the revelation that CCA Prison Realty will make its first incestuous purchase of nine prisons from its parent corporation, Corrections Corporation of America, for $308.1 million. Unsurprisingly, many of the top executives of CCA are also running CCA Prison Realty. Doctor R. Crants, CEO of CCA, is also chairman of CCA Prison Realty. While some Wall Street analysts pointed out this apparent conflict of interest, that didn't deter eager investors from scooping up the shares.
CCA Prison Realty will hand over $308.1 million -- cash to its parent and then lease the nine prisons back to CCA. With the $80 million left over, CCA Prison Realty will be shopping for more prisons -- most likely from CCA, which has five new prisons under construction.
And CCA, flush with over $300 million in cash, will be looking to boldly expand the frontiers of prison privatization, no doubt lobbying state and federal lawmakers for tougher crime bills and longer sentences in the process.
Left Business Observer (ISSN 1042-0134), the principal source for this article, is available for $22/yr ($55/yr for institutional/high income) from: LBO; 250 W 85 Street; New York, NY 10024-3217. Doug Henwood's book, Wall Street, can be ordered by calling 1-800-233-4830, or by visiting a bookstore.
As a digital subscriber to Prison Legal News, you can access full text and downloads for this and other premium content.
Already a subscriber? Login