Jailing for Dollars
BEISER, VINCE
THE NEW GROWTH INDUSTRY Jailing for Dollars By Vince Beiser Want A hot stock tip? Get into prisons. Privately operated, for-profit prisons are multiplying like mushrooms all across the...
...CCA's main competitor, Wackenhut Corrections Corporation (WCC), saw its profits nearly double last year on revenues of over $ 137 million...
...However good it is for shareholders, though, this explosive growth carries disturbing implications for the criminal justice system...
...President Clinton himself is pushing for the Federal government to contract out more to private prison companies, which may explain why Crants and his wife donated $2,000 to his last campaign...
...For a start, they might not be saving any taxpayer money at all...
...Co-founder Thomas Beasley once chaired the Tennessee Republican Party, and is especially tight with Governor Don Sundquist...
...Scrambling to cope with overcrowding and escalating costs, and encouraged by the "privatize everything" climate in Washington, policy makers are turning increasingly to privately run prisons...
...And WCC's 1997 first quarter earnings are up 75 per cent over last year's...
...The industry has spawned its own symbiotic class of lobbyists, academics, consultants, investment analysts, and financiers...
...mainly because it doesn't need to be...
...Little wonder, then, that the governor backed CCA's efforts to open a new prison in Tennessee last year over the objections of the state comptroller...
...Small wonder the industry leaders have earned "buy" recommendations from a bevy of investment analysts, including Lazard Fr??res...
...One of the ways private prisons do end up saving money is by relying almost exclusively on nonunion workers, who generally receive lower salaries and fewer benefits than their unionized, public-sector counterparts...
...The first private prison opened for business in 1983, holding a mere 350 inmates...
...Spending on prisons has topped $20 billion a year and continues to grow, even as government spending on health care, education and just about every other social service is being slashed...
...With that in mind, it's disturbing to note that as theirprofits have ballooned, so have their political contributions...
...The companies that run them have become Wall Street darlings, and with good reason...
...So far, private prison company money is not explicitly aimed at supporting tough-on-crime legislation...
...Some companies offer stock options in lieu of a pension plan...
...A comprehensive General Accounting Office report issued in August "could not conclude whether privatization saved money...
...Even the smaller fish have joined the feeding frenzy...
...The largest of these, controlling nearly half the market, is the Corrections Corporation of America (CCA...
...Prison construction is draining resources from otherneeded services, and strict sentencing laws have put many more people behind bars...
...In California, for instance, since 1980 the percentage of the state budget devoted to education has dropped 35 per cent...
...We have never been involved in lobbying for such laws," says Zoley...
...With an increasing number of states considering legislation to allow private prisons to operate, and thousands of projected prison beds already contracted out to private companies, the industry is set to sustain its dizzying expansion...
...And the board of its parent, the Wackenhut Corporation, has included such heavies as Reagan-era National Security Adviser Frank Caducci, ex-CIA director William Raybom and ex-deputy director Bobby Ray Inman...
...An industry whose raw materials are incarcerated human beings has every reason to support policies that get more and more Americans thrown in jail for longer and longer sentences, regardless of their objective merits...
...Company executives say that at this point they have no need to push explicitly for harsher sentencing laws, because politicians across the spectrum are already falling all over themselves to do it for them...
...Privately operated, for-profit prisons are multiplying like mushrooms all across the United States...
...Most ominous, according to Steven Donziger, editor of the new book, The Real War on Crime, "is that it all creates a whole power base to push for continuing to expand the prison population as a source of economic profit, regardless of whether that's a good thing for society...
...Its revenues have soared from $ 152 million in 1994 to $293 million in 1996, when its profits reached a record $30 million...
...So what could be wrong with private prison companies and their friends making money by providing a service more cheaply than the government can...
...Vince Beiser, a New York based journalist, writes frequently on prison issues...
...For its part, in addition to a board that includes another former Federal Bureau of Prisons director, CCA enjoys excellent ties with the political and business elite of its home state...
...Now we're doubling that, and as we continue to expand into other states we will make more contributions...
...There's so much support already for tougher laws...
...Financial analysts predict that private prisons will house as many as 400,000 by 2006...
...And in 1994, it spent tens of thousands of dollars backing the "three strikes" voter initiative mandating longer sentences for repeat offenders...
...Doctor R. Crants, CEO of the Tennesseebased CCA, also chipped in $5,000 to the Florida Republican Party, and another $ 1,000 to the Florida Democrats for good measure...
...Furthermore, many of their inmates are less dangerous offenders who require less supervision...
...This growth would be considered phenomenal in any other consumer-related industry," notes a typical report by Rodman & Renshaw, an equity research firm...
...Owing to massive increases in drug arrests and "three strikes and you're out" mandatory sentencing laws, the number of people confined in local, state and Federal correctional institutions has more than tripled since 1980, to over 1.6 million today...
...The Texas firm of Raucher, Pierce and Refsnes rakes in several million dollars annually by buying and reselling private-prison-issued bonds and securities...
...But since companies are compensated by the government on aper-prisonerper-day basis, the potential for abuse is built in...
...CCA and WCC retain professional lobbyists in many of the states that are considering following suit...
...appropriations for prisons, meanwhile, have risen five-fold...
...WCC's board includes a former director of the Federal Bureau of Prisons, Carter-era Attorney General Benjamin Civiletti and a former governor of Illinois...
...According to Federal Election Commission filings, total contributions to candidates for Federal office from private prison companies, their top executives and their spouses rose from $27,200 in 1992 to $147,650 in 1996...
...Prison companies are thus free to spend their money on supporting lawmakers who want to use private facilities to hold all those new prisoners they are keen to lock up, and on convincing others to get on board...
...Private prison companies have an identical economic incentive to support longer sentences, reducing parole and, of course, more prison construction...
...Additional cash is handed out at the state level...
...A couple of months ago, an exuberant WCC launched a subsidiary to build its prisons...
...Only about 30 states so far allow private prisons to operate...
...Nonetheless, the powerful California prison guards' union has already proved that an economic interest group will gladly lobby for more prisoners...
...A reason may be that private prisons generate hidden costs...
...Sundquist's chief of staff owns CCA stock, and his main adviser on prison expansion is a former CCA lobbyist...
...Smith Barney, Prudential Securities and other top financial institutions have been financing private prison construction...
...Today, almost 90,000 inmates languish in over 100 for-profit lockups in the United States and Puerto Rico...
...The figures aren't huge, yet, but the trend is clear...
...As it is, the boom in the private prison industry echoes that in America's prison population...
...revenues at Cornell Corrections, for instance, more than doubled in '96 to top $ 13 million...
...The union has also contributed well over $1 million to Governor Pete Wilson, a staunch crime hawk...
...which claim to run more cheaply and efficiently...
...The two started a successful barbecue restaurant chain together in 1988, and Beasley has contributed over $ 16,000 to Sundquist's campaigns since 1993...
...The result has been a bonanza for private prison companies...
...but there is no clear evidence that any of this is having a significant effect on crime rates...
...If a guard knows his bonus depends on the amount of money the prison makes," observes American University law professor Ira Robbins, "he has every incentive not to write up inmates for good behavior that will get them released sooner...
...While a few studies have found that some private prisons operate more cheaply than their public counterparts, others have found them to cost the same or more...
...In Florida, for instance, which has more private prisons than any other state besides Texas, WCC's campaign contributions wentfromzeroin 1994 to $28,500 in 1996...
...Momentum is clearly building on their side...
...Having powerful connections also helps...
...Until very recently, we were only in half a dozen states," says WCC Chief Executive Officer George C. Zoley...
...More prisoners mean more jobs for prison guards...
...It's completely unnecessary...
...By law, nearly all must be monitored by state bureaucrats, whose salaries are not counted in their operating costs...
...What may get drowned in the process is a criminal justice system that works primarily for the good of society...
...Buoyed by the swelling tide of new prisoners, private prisons seem certain to continue their stunning rise...
Vol. 80 • May 1997 • No. 8
