by Derek Gilna
Corrections Corporation of America (CCA), now known as CoreCivic, and GEO Group (GEO), the two largest private prison companies, are major profit-generators for six U.S. banks – Bank of America, JPMorgan Chase, BNP Paribas, SunTrust, U.S. Bancorp and Wells Fargo – according to a report issued by In the Public Interest (ITPI), a non-profit public policy organization. The report was sharply critical of the banks’ involvement in supporting the exploitive private prison industry.
ITPI stated that CCA and GEO Group “depend on debt financing in the form of credit, loans, and bonds to conduct their day-to-day business operations....” As of June 2016, according to documents filed with the Securities and Exchange Commission, CCA owed $1.5 billion to various banks while GEO owed $1.9 billion. In comparison, as of late July 2017, CCA had a stock market value of $3.39 billion and GEO was valued at $3.7 billion.
The debt amounts are significant because, as ITPI notes, for-profit prison companies “have a perverse incentive to make business decisions that lead to more people behind bars. Private prisons also are rife with human rights abuses, pay correctional officers less than they are paid at publicly managed prisons, and foster environments unconducive to prisoner rehabilitation.”
Private prisons are especially active in incarcerating undocumented immigrants, and ITPI argues that the banks financing for-profit detention facilities are “complicit with the private prison companies in contributing to and enabling mass incarceration and the criminalization of immigration.” Recently, with incarceration at both the state and federal levels trending downward slightly, CCA and GEO Group have diversified their holdings to include residential reentry and electronic monitoring. [See related article on this page]. Banks have been generous in providing loans and lines of credit to both companies to acquire and develop their new lines of business.
For example, Wells Fargo, Bank of America and JPMorgan Chase have extended a $132.5 million line of credit to CCA, as well as a $14.3 million term loan. The banks also underwrote at least $144 million in bonds for CCA and GEO, and extended a $900 million line of revolving credit to both companies.
What makes lending to private prison firms so attractive to banks is the fact that the revenue used to repay the loans comes from lucrative government contracts, meaning there is little risk the companies will default. In the case of contracts between GEO, CCA and the U.S. Department of Homeland Security, the government guarantees to make per-diem payments for a certain number of detention beds whether they are filled or not.
The ITPI report, issued in November 2016, recommends that the major banks financing the for-profit prison industry “should cease providing debt financing for private prison companies ... [so that] CCA and GEO will be unable to obtain debt and continue contributing to and enabling mass incarceration and the criminalization of immigration.”
But since banks are in the business of making money and generally do not take moral or ethical issues into consideration, it is highly unlikely they will stop providing profitable loans and lines of credit to private prison firms.
For example, for many years, Wells Fargo has been targeted by Enlace and other advocacy groups that have pressured the bank to divest from private prison companies, with limited success. Wells Fargo still owns millions of dollars in private prison stock through its mutual funds. [See: PLN, Oct. 2016, p.48; Aug. 2015, p.46; Nov. 2014, p.32].
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