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CCA Pays $54 Million to IRS and Settles Gender Discrimination Complaint

On October 28, 2002, Corrections Corp. of America, (CCA) settled its 1997 federal taxes after an audit by the Internal Revenue Service for the sum of $54 million. The IRS challenged the validity of the tax deductions that the former Prison Realty, a real estate investment trust (REIT) had claimed in 1997 tax return. This subsidiary of CCA's was formed in 1997 for the sole purpose of creating corporate tax advantages [See: "CCA Sells Self; Wackenhut Creates REIT," PLN Aug. `98.]

This merger between Prison Realty and CCA was disassembled in 2000 after continually plummeting stock prices because of concerns of a potential conflict of interest by the cooperative association of Prison Realty and CCA. Both companies were located in the same Nashville office and shared the same corporate personal on the board of both companies. This allowed CCA to lease their prison back to themselves with a much more profitable tax break [See: "Prison Realty/CCA Verges on Bankruptcy," PLN July `00.]

CCA expects no effect on its real estate investment trust status, and they foresee an increase in the company's accumulated earnings and profits for 2002. CCA went on to say that they do not expect this settlement to result in a material tax benefit or tax expense for the year. CCA is currently appealing additional IRS audits for their 1998 and 2000 tax returns, and they believe the 1998 audit resolution will not materially hurt the company's liquidity or results. The financially troubled company faces numerous shareholder lawsuits and other legal problems, based on its financial chicanery. [PLN May `02].

In a separate matter, on August 27, 2002, CCA agreed to pay $152,000 in back wages for gender discrimination to 96 women who had applied for jobs with CCA but were not hired . The settlement was reached after the U.S. Department of Labor audit found that female applicants with equal or better qualifications than their male counter parts were turned down because of their gender. The CCA owned prison in Sayre, Oklahoma, has offered 19 of the rejected female applicants jobs at the Sayre prison. CCA has to meet federal standards because they have numerous contracts with the federal government. Charles James, deputy assistant secretary for Federal Contract Compliance said. "We strongly encourage all federal contractors to develop and implement self-audit processes to prevent equal opportunity problems from occurring."

Sources: Reuters, The Daily Oklahoman, The Associated Press State & Local Wire

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