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Bailing Out the Private Prison Industry

The private-prison industry is in trouble. For close to a decade, its business boomed and its stock prices soared because state legislators across the country thought they could look both tough on crime and fiscally conservative if they contracted with private companies to handle the growing multitudes being sent to prison under the new, more severe sentencing laws. But then reality set in: accumulating press reports about gross deficiencies and abuses at private prisons; lawsuits; million-dollar fines. By 2000, not a single state was soliciting new private-prison contracts. Many existing contracts were rolled back or even rescinded. The companies' stock prices went through the floor.

Here was one experiment in the privatization of public services that might have limped to a well-deserved close. But instead, the federal government seems to be rushing to the industry's rescue.

Consider just the problems of the Corrections Corporation of America (CCA), the country's largest private-prison company, over a single 12 month period in 2000-2001:

Ø In August 2000, two prisoners escaped from a CCA prison in Bartlett, Texas. State investigators found that doors had been left unlocked at the facility. No one was watching the closed-circuit TV surveillance monitors. When the prisoners cut their way through the prison's perimeter fence, a security alarm sounded, but staff in the prison's control center turned it off and did nothing.

Ø In October two guards at a CCA prison in Walsenburg, Colorado, who had repeatedly beat a prisoner while he was handcuffed, shackled, and unable to resist pleaded guilty in federal court.

Ø In November the Bartlett facility erupted in a disturbance that left five prisoners injured. Two days later, five guards were stabbed and three others were injured when prisoners at a CCA prison in Estancia, New Mexico, took them hostage.

Ø In December jurors in Columbia, South Carolina, found that guards at a CCA juvenile prison had abused a youth confined there and that their use of force was so malicious it was "repugnant to the conscience of mankind." The jury awarded $3 million in punitive damages. See: William P. v. Corrections Corporation of America , C/A No.: 3:98-290-17 (C.D. SC 2000) .

Ø In April 2001, prison guards at CCA's Cibola County Correctional Center in New Mexico teargassed nearly 700 prisoners who had staged a daylong nonviolent protest of conditions at the facility. The same day, in Oklahoma, the addiction-treatment manager at CCA's Tulsa Jail resigned. The warden, she said, had directed her to make a "sales pitch" to local judges, urging them to sentence offenders to a treatment program in the jail even though the program had been eviscerated in order to cut operating expenses.

Ø In May three prisoners were mistakenly released from the same Oklahoma jail, and nine guards at CCA's District of Columbia Correctional Treatment Facility were indicted. Federal prosecutors alleged that they had accepted money from an undercover FBI agent in exchange for smuggling two-way pagers and cash into the prison.

Ø In June, back at the Tulsa Jail, a CCA guard resigned his post after 10 Valium tablets were reportedly found hidden in his sock during an employee shakedown.

Ø In July, 400 prisoners exported from Indiana to a CCA prison in Wheelwright, Kentucky, started a riot in the prison recreation area that spread to four housing units before it was over, with prisoners setting mattresses on fire and tossing TVs and toilets through the windows. Two weeks later, CCA fired the warden and his top assistant, citing "policy violations."

CCA is not the only private-prison company with a record of continuing abuses. Prisons run by the Wackenhut Corporation in New Mexico have repeatedly erupted in violence and disturbances. (Together, CCA and Wackenhut control 75 percent of the U.S. private-prison market.) Between December 1998 and August 1999, four prisoner-on-prisoner homicides were committed in Wackenhut's New Mexico facilities; and then, in August, a guard was murdered as well. Most people think that kind of violence is the norm in America's prisons. But the best available data on prison homicidescompiled by the Criminal Justice Institute, publishers of The Corrections Yearbook show otherwise: In 1998, when American prisons held 1.3 million prisoners, there were only 59 prisoner-on-prisoner homicides. That's a rate of one murder for every 22,000 prisoners. The homicide rate in Wackenhut's New Mexico facilities in those nine months was about one for every 400 prisonersand that's not counting the death of Ralph Garcia, Wackenhut's guard.

But if the company changed its ways after that explosion of violence, it's hard to tell. In 2000 Wackenhut's Jena Juvenile Justice Facility in Jena, Louisiana, was shut down. A juvenile-court judge in New Orleans found that the youngsters held there had been treated no better than animals.

The Great Escape

Industry executives will tell you that these prison-management disasters were isolated events, confined to a handful of "underperforming" facilities. But the available evidence suggests that the problems are structural and widespread.

A research project I directed in 1999 compared the quality of correctional services in a medium-security private prison run by CCA in Minnesota with the three medium-security prisons run by the state. We found many more operational problems in the CCA prisonfrom program deficiencies and unreliable methods of classifying prisoners for security purposes to high rates of staff turnover that resulted in inadequate numbers of experienced, well-trained personnel. And this was in a private prison that was not notoriously troubleda facility that the company, in fact, considered to be exemplary.

There have been few other studies of the quality (as opposed to the cost) of private-prison services; but evidence is mounting that serious operational problems are not confined to just a few institutions.

Ø An industry-wide survey conducted in 1997 by James Austin, a professor at George Washington University, found 49 percent more prisoner-on-staff assaults and 65 percent more prisoner-on-prisoner assaults in medium and minimum security private facilities than in medium and minimum security prisons run by government agencies.

Ø National data reported in The Corrections Yearbook indicate that correctional-officer turnover was 41 percent for the private-prison industry in 1998, compared with 15 percent in publicly run prisons.

Ø A tally of news reports in 1999 showed at least 37 escapes of adult prisoners from secure private prisons that year. (This did not count escapes from juvenile facilities, from transportation vans, or during escorted hospital visits.) For comparison, one can look at New York's state prisons, which hold roughly the same number of inmates as the entire system of private prisons in the United States. Between 1995 and 1999, there were only eight escapes from secure institutions in New York _ a rate of less than two per year.

The problems seem to be endemic to the enterprise _ a result, in great part, of the private companies' mission to hold down costs. Most important, wages and benefits substantially lower than those in government run prisons have resulted in significantly higher employee turnover, with dramatic ill effects. But other kinds of corner cutting have also taken a toll. Spending on prisoner health care and on staff training also tends to be inadequate at the private prisons_another reason why the industry has fallen behind the public-prison system both in maintaining prisoners' basic human right to a safe and humane environment and in protecting the safety of the prison staff and the public.

Yet for all that, it's unlikely that the states will save much, if any, money by contracting with the private companies. Private-prison cost cutting primarily serves to boost company profits. As early as 1996, a report of the U.S. General Accounting Office thoroughly reviewed a series of academic and state studies and concluded that there was no clear evidence about cost savings. The most optimistic academic advocate of privatizing prisons, Charles Thomas (a criminologist who directed the Private Corrections Project at the University of Florida) had claimed that savings of 10 percent to 20 percent could be expected. But then it came to light that he'd been paid $3 million in consulting fees by private-prison corporations. He was penalized by the Florida Ethics Commission, which enforces the state's conflict-of-interest laws, and had to shut down his research institute at the university.

Moreover, the financial advantage that may have been most attractive to state legislatorsthe private companies' ability to construct prisons unhindered by public debt limits or by the need to get voter approval for bondshas turned out to be the industry's downfall. From 1991 to 1998, according to Charles Thomas's data (unfortunately, the only data available), the growth in private adult-prison beds averaged 36 percent per year. But with the states pulling back from the trouble-plagued facilities and Wall Street reacting even more strongly to the deaths and scandals, the companies have found themselves overleveraged and undercapitalized_ CCA, in particular. It built new prisons "on spec," assuming that contracts to fill them would follow, and by my estimate the company now has more than 8,500 prison beds standing empty. The firm recently came close to a financial meltdown: Its stock lost 93 percent of its value in 2000, and its accountants reported a fourth-quarter loss of more than a third of a billion dollars.

Human rights advocates, public employee unions, prisoners' rights activists, and student groups have not let any of this pass unnoticed. Thus, it should be no surprise that so many states are now backing away from for-profit companies.

But while most state correctional managers are taking a hard look at the private-prison industry, the federal government stepped up to fill the breach. Says Steven Logan, the CEO of Cornell Corrections: "On the federal side, there's an unprecedented [new market]_to the tune of approximately 20,000 beds that are expected to be set out for people to bid on over the next 24 months." If Logan is right, the feds have been poised to take up a lot of the slack_and, in fact, to spur new construction_by showering the industry with contracts that will be worth $4.6 billion over the next 10 years. (Comment: This figure is calculated from the announced value of the first two "CAR" contracts received by CCA in June 2000).

Until recently, the Federal Bureau of Prisons (FBOP) had moved relatively slowly down the road to privatization. It awarded its first private-prison contract only in 1997_to Wackenhut, to operate a 2,048-bed prison complex for low- and minimum-security federal prisoners at Taft, California. A second contract was awarded to CCA in 1998 for a 1,500-bed facility at Eloy, Arizona. But as the industry's troubles escalated, Congress required the FBOP to contract for more private beds, insisting on private prisons for at least half the prisoners at the District of Columbia's prison complex at Lorton, Virginia, which was scheduled to shut down. And then the FBOP launched a massive privatization initiative of its own throughout the country.

In part this was a response to the rapid growth of the federal prison population. Between 1995 and 1999, while the incarceration rate nationwide grew by 16 percent, in the federal prison system it rose by 31 percent. By June of 2001, the FBOP was responsible for some 127,000 sentenced criminals and perhaps 25,000 other detainees; its prisons were operating at 33 percent over their capacity. And like the state legislators before them, members of Congress were madly building new prisons (26 are currently under construction or in the development pipeline), searching for cheap new private-prison beds, and refusing to consider changes in the draconian sentencing laws that were causing most of the increase in prisoners.

In fact, the Illegal Immigration Reform and Immigrant Responsibility Act and the Antiterrorism and Effective Death Penalty Act, new laws passed by Congress in 1996, have conveniently created a special population of prisoners _ immigrant prisoners _ whom the feds seem comfortable segregating from the rest of the prison population and turning over to the private companies.

Find and Deport

It's common knowledge that the harsh drug-sentencing laws that Congress enacted in 1986 have greatly increased the federal prison population. (In 1984 just 30 percent of federal prisoners were drug offenders; today 57 percent are, according to a Bureau of Justice Statistics report.) Less known is the impact of federal immigration policies. Since at least 1994, Congress has put enormous pressure on federal officials to find and deport troublesome immigrants (both legal residents and undocumented immigrants). In the 1996 Immigration Reform Act, Congress widely expanded the list of crimes for which a noncitizen must be deported after serving his or her sentence. These crimes, called "aggravated felonies," are now defined to include many offenses that are neither aggravated nor even, in many other jurisdictions, felonies. But together, the statute and the political pressure have fueled an all-out law-enforcement campaign to find crime-committing immigrants _ even relatively small-time offenders and those whose only "crime" is attempting to re-enter the country _ and with that has come an explosion in the number of non-U.S. citizens in federal prison, the so-called "criminal alien" population.

There were about 30,500 noncitizens serving criminal sentences in federal prisons at the end of February 2002, up from 18,929 only eight years before. About half of them were Mexican citizens, 10 percent Colombians, 7 percent Cubans, and the rest an assortment of other nationalities. In addition, several thousand other noncitizens are being held in federal prisons, not as convicts serving criminal sentences but as pretrial or predeportation detainees. These include many "lifers"_people who have completed their criminal sentences in state or federal prison and are now supposed to be deported but who remain incarcerated because no country will take them. A U.S. Supreme Court ruling in June 2001, prohibited the indefinite detention of certain lifers, but according to Judy Rabinovitz, senior staff counsel at the American Civil Liberties Union's Immigrants' Rights Project, the decision is unlikely to affect most of those in FBOP facilities. See: Zadvydas v. Davis , 121 S.Ct. 2491 (2001).

Telling evidence of the federal-law-enforcement campaign that is targeting immigrants comes from Peter H. Schuck, a professor at Yale Law School. In 1998 Schuck found that while immigrants (legal as well as undocumented) made up 9.3 percent of the American population and a roughly comparable 7.6 percent of the prison population of the states, they made up a vastly disproportionate 29 percent of those in federal prisons.

The "criminal aliens" in federal prison are apparently a relatively unthreatening group of prisoners. According to the federal Bureau of Justice Statistics (BJS), about a third of them were sentenced for immigration violations, and just 1.5 percent of them were sentenced for violent offenses (compared with 15 percent of the U.S. citizens in federal prison). A BJS research project found that even those convicted of drug sales are likely to have played a lesser role in the transaction than did U.S. citizens convicted on drug-sale charges. This may also help to explain why these prisoners have been singled out for incarceration in privately run prisons. Criminal aliens typically require only low-security prisons, since most of them have been classified as low-security prisoners. And as Mike Janus, privatization administrator at the BOP, points out, they face deportation at the end of their sentences and therefore do not require the kinds of education and counseling programs available in regular federal prisons. Moreover, they have little if any political clout.

Off the record, the BOP officials say that they're confident they can oversee the private companies better than the states have. On the record, they say they are simply seeking "management flexibility" to deal with this burgeoning segment of the prison population in a less program-rich environment than their other prisoners require. But that's not far from acknowledging that they think they can get away with providing second-class prisons for these second-class prisoners.

If We Build It, Will They Come?

The BOP's first request for proposals to provide up to 7,500 low-security beds for this population was issued in September 1999. As phase one of the plan for private contractors to meet the prison system's "criminal alien requirements," it was called CAR-I for short. The beds were to serve California, Arizona, New Mexico, Texas, and Oklahoma.

A CAR-I proposal by Cornell Corrections to house almost 2,000 prisoners at a facility near Santa Fe that the company hoped to lease from the state of New Mexico was eliminated from the competition as a result of vigorous opposition from a local coalition of immigrant-rights advocates, civil rights and church leaders, and prison reformers. But in June of 2000, two other CAR-I contracts were signed with CCA_one for 2,304 beds at the company's long-empty "spec" prison at California City, California, and the other for 1,012 beds at its Cibola facility in Milan, New Mexico. (This is the facility where, some months later, guards tear gassed hundreds of prisoners who were protesting conditions.) These contracts are for an initial three-year term, followed by seven one-year renewal options. They will be worth about $760 million over 10 years.

For CCA, which carried more than $1 billion in outstanding indebtedness in 2000 and was in violation of its credit agreements, the two contracts provided a virtual bailout. The company's many creditors were willing to extend it waivers. But without the federal contracts, John D. Ferguson, the company's new CEO, frankly admitted, CCA would likely have been forced into bankruptcy.

A second request for proposals_CAR-II_was issued in July of 2000 for private prison beds to be located in the Alabama, Florida, Mississippi, and Georgia region. Five private companies and one Mississippi county proposed 14 possible CAR-II sites. In the fall of 2001 the field was narrowed to two recommended sites. The apparent winners of this sweepstakes are CCA and Cornell, but the contract awards are still pending final review by the BOP. CCA's proposed site is a "spec" prison already built by the company in McRae, Georgia that has been standing empty for almost two years. Cornell Corrections proposed an undeveloped site in McComb, Mississippi that would require new prison construction from the ground up.

A CAR-III solicitation was issued in November 2000 for three 1,500-bed facilities in California and Arizona. By the January 2001 deadline, six companies, one town, and a sheriff's department had submitted 20 prospective sites. Less than a week later, the BOP filed public notice that it anticipated a CAR-IV as well, for the Delaware, Kentucky, Ohio, Virginia, and West Virginia region.

The momentum of the contracting process appeared to have been slowed by the post-9/11 anthrax incidents, when public comments on the CAR-II environmental impact statements that were mailed to the BOP were held up for examination for possible contamination. As months passed with no news of the impending contracts for either CAR-II or CAR-III, company executives remained bullish on the future, predicting that the "War on Terrorism" will increase the level of federal contracts. In February 2002, George Zoley told the stock analysts who follow his company that Wackenhut stands to gain new business from stepped-up efforts to detain undocumented immigrants:

"It's almost an oddity that, uh& given the size of our country and the number of illegal immigrants entering our country that we have such a small number of beds for detention purposes, and I think this has become an issue under the `homeland security' theme, and I think it's likely we're going to see an increase in that area."

Then, in mid-March 2002, a sudden development stunned anti-privatization activists in Arizona and California, the target states for CAR-III contracts. On March 15 the BOP notified public officials that the Bureau had cancelled the CAR-III solicitation, citing new prison population projections that indicated a reduced rate of growth.

The End of the Bail-Out?

At the time of the CAR-III cancellation, the future of the FBOP "CAR" contracting initiatives was impossible to predict. No word was forthcoming about the status of the promised CAR-II contracts. No information was available about the new BOP forecast for future prison bed needs. The private prison industry had worked hard for many years to develop powerful political allies at the highest levels of the federal government. Michael J. Quinlan, the BOP director under the first President George Bush, had recently announced that he would be stepping down from his post as the chief operating officer of CCA as soon as a replacement could be found. But Norman Carlson, a director of the BOP under President Ronald Reagan, remained a member of Wackenhut's board of directors, and so did Benjamin R. Civiletti, who served as Attorney General of the US during the Carter Administration.

Meanwhile, generous federal campaign contributions ($528,000 between 1995 and 2000) and the best lobbyists that money can buy have spread the influence of private-prison companies beyond the personal networks of their executives and board members to the halls of Congress. There are grass-roots pressures for expanding private prison contracts, as well, coming from desperate pockets of rural America where prisons are seen as a source of new jobs. And there is every reason to expect that the current administration will not easily back off from efforts to expand privatization in the future. With 42 private prisons located within its borders, President Bush's home state of Texas is the world capital of the private-prison industry.

To be sure, political opposition to privatization of prisons is growing. The private-prison industry's record of human rights violations, violence, and prisoner escapes has fueled an unusual alliance between prison-reform advocates and prison guards (union members in government-run institutions), who have stood together with student groups and community organizations. Though the interests among these groups are often widely varied, the end goal is the same: to fight further expansion of prisons for profit. In most states, where prison-population growth is finally slowing or halting, enthusiasm for privatization seems to have waned, and contracting opportunities have almost disappeared. But prison privatization is unlikely to be permanently halted in the federal system unless the growth of the federal prison population is brought under firm control. And that means that the effort to reform federal sentencing guidelines and change the immigration laws must continue.

It's a good cause. The anti-immigrant laws adopted by Congress in 1996, especially as they interact with federal drug laws, create particularly unfair punishments for noncitizens, most of whom are subject to harsh and rigid sentences for drug offenses, with no consideration of mitigating circumstances or the offender's actual role in the crime. And then they are further punished with deportation. The federal plan to create and expand a huge second tier of segregated immigrant prisonswhether public or privateis an irrational and expensive way to avoid coming to terms with those fundamental injustices.

Sources: The Austin American-Statesman ,Associated Press ,The Houston Chronicle ,The Albuquerque Tribune ,The Tulsa World ,The Washington Post ,The Lexington Herald-Leader ,The New York Times ,Current Issues in Criminal Justice ,The Nashville Tennessean ,The Harvard Journal of Law and Public Policy ,The Albuquerque Journal ,PR Newswire ,Federal Register , and Commerce Business Daily .

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