The Prison Industrial Complex: Biased, Predatory and Growing

DiversityInc, October 15th, 2010

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In this exposé of America's prison system, DiversityInc examines the rapid growth of privately run prison operators and what is fast becoming the next dark chapter in the ever-expanding prison industrial complex: immigrant detention. What are the racial implications? And why has anti-immigration sentiment helped private prisons make a fortune?

The fastest growing form of incarceration in the United States is immigration detention. And the biggest benefactor of this increased enforcement of border and immigration laws is the very profitable and politically connected private-prison industry.

This story examines the dramatic growth of privately run prison operators and the next dark chapter in America's prison industrial complex: immigrant detention. As the federal government increasingly turns to corporate America to punish and hold its detainees, we examine the racial and ethnic disparities produced by the boom in the U.S. prison population and the role the industry plays in exerting political pressure on lawmakers to encourage not only a shift to privatization but harsher and longer sentencing guidelines

Between 2003 and 2010, Nashville, Tenn.—based Corrections Corporation of America (CCA), the giant of the industry that controls roughly half of all private-prison beds in the nation, spent $14.5 million lobbying the Department of Homeland Security, U.S. Immigration and Customs Enforcement (ICE), the Department of Justice, the Office of Budget Management, the Federal Bureau of Prisons, and both houses of Congress.

Andrea Black, coordinator for Detention Watch Network (DWN), which represents immigrant-advocacy groups, says, "DWN has questions about the role of the private-prison industry and its lobbyists in shaping current immigration detention policies."

In less than a decade, the country's punitive crackdown on undocumented immigrants and the unprecedented demand for bed space by federal immigration authorities has been nothing short of a bonanza for private-prison operators such as CCA and its chief competitors GEO Group and Cornell Companies, which are merging. (Click here to see a chart of these industry leaders.)

How did this come about? In 2001, Steve Logan, then-CEO of Cornell, fielded a question from a Wall Street analyst during an investor conference call wondering what impact the Sept. 11, 2001, terrorist attacks would have on his company's bottom line.

"I think it's clear that with the events of Sept. 11, there's a heightened focus on detention, both on the borders and within the U.S. [and] more people get caught," Logan told the audience. "So that's a positive for our business. The federal business is the best business for us. It's the most consistent business for us, and the events of Sept. 11 are increasing that level of business."

His response was prophetic. Strip away the emotions, the questions of justice, the callous and racial political wrangling, and Arizona's tough new immigration law–SB1070, which gives police broad authority to arrest and detain anyone they suspect of being undocumented–means one thing for private-prison operators: more demand for immigration detention beds and a steady flow of inmates to fill them.

On July 6, 2010, the U.S. Department of Justice filed a lawsuit to block the state of Arizona–a border state that's a major gateway for undocumented immigrants from Mexico–from using police-state tactics to crack down on undocumented immigrants crossing the border. But the fractious debate is spreading: Oklahoma, Texas, Utah, Maryland and Colorado are now considering tough immigration laws of their own on the heels of Arizona's efforts.

And in the topsy-turvy world of the private-prison industry–where societal ills, like recidivism, crime and recessions are touted as "good for business"–this kind of news makes shareholders and investors very happy.

Booming Detainee Population

In 2009, ICE–a division within the Department of Homeland Security (DHS) responsible for enforcing immigration law–had 387,790 immigrant detainees in custody or supervised, more than twice the number in 2003 when ICE was created and the crackdown on immigrants began in earnest.

All told, the number of immigrants in detention has climbed from around 5,000 in 1994 to more than 30,000 last year.

A Detention Watch Network briefing to the U.N. Special Rapporteur on human rights notes that "at an average cost of $95 per person/per day, immigration detention costs the U.S. government $1.2 billion per year."

ICE officials say it costs about $175 a day to detain someone at Elizabeth Detention Facility in New Jersey. They refused to say how much ICE pays CCA.

For private-prison corporations, which provide most of the prison beds that house this booming detainee population, all this new business since Sept. 11 has translated into record revenue and stock prices. Since 2000, the number of federal inmates held in privately run prisons has climbed 114 percent, while the number of state inmates held in private facilities has increased by 33 percent.

Six states house at least 25 percent of their prison population in private facilities. They are New Mexico (46 percent), Montana (36 percent), Hawaii (35 percent), Vermont (34 percent), Alaska (29 percent) and Idaho (29 percent), according to CCA's 2009 annual report.

"Between 2007 and 2009, when earnings for the S&P 500 dropped by 28 percent, ours grew by 18 percent," said Damon Hininger, the chief executive officer of CCA, during an investor conference call in May.

Federal Government to the Rescue

In the late 1990s, the private-prison industry was on the verge of bankruptcy. Speculative over-building had left many of these companies over-leveraged, debt-ridden and bloated with thousands of empty beds. A series of highly publicized scandals, lawsuits and fines over human-rights violations, including the use of attack dogs, physical and sexual abuse and poor healthcare at a number of facilities, prompted many states to pull the plug on their private-prison contracts. Investors on Wall Street sold their shares en masse.

In its 10-Q annual filing back in late 2000, CCA's stock was trading at a low of $1.15 and its accountants expressed "substantial doubt" about the company's ability to continue.

But today, business is back on track, thanks largely to immigrant detention: In the first quarter of 2010, it earned $1.7 billion in revenues, 40 percent of it from contracts with ICE, U.S. Marshals Service and Federal Bureau of Prisons.

Today, almost 9 percent of inmates are housed in private facilities, and private-prison operators say they are capturing an increasingly larger share of the incremental prison-population growth every year.

During a recent investor conference call, Hininger noted that in 2002, only 6.8 percent of the incremental growth in the prison population was being funneled into the private prison system. In 2008, they are capturing 72.4 percent.

A Growing Backlash

As the industry grows, so too does a backlash–from critics who argue that private prisons are morally wrong, mismanaged and unsafe. Critics say that human-rights violations and physical and sexual abuse of inmates flourish in privately run prisons and detention centers because they are closed to outside scrutiny, allowing guards and officials to act with impunity. Immigration detainees are particularly vulnerable because of language barriers and fear of deportation.

"The condition and terms of immigration detention in the U.S. are equivalent to prison where freedom of movement is restricted, detainees wear prison uniforms and are kept in a punitive setting," according to the Detention Watch Network briefing to the U.N. Special Rapporteur.

This is the case even though under U.S. law an immigration violation is a civil offense–akin to a traffic violation. The companies counter that they are living up to their contractual obligations and continue to win new contracts because they run their prisons well and treat prisoners fairly.

Several weeks after DiversityInc submitted questions in writing to CCA officials, the company responded in writing. Steve Owen, a spokesperson for the corporation, wrote that CCA operates "safe and humane detention facilities in a manner that respects the dignity of the detainees and adheres to federal ICE detention standards."

"In addition to strong oversight from government officials–who have full access to our prisons and detention centers–our facilities are also audited and inspected regularly by independent teams of professional experts," he wrote.

A similar request from DiversityInc to GEO Group was rejected. Because of its merger with Cornell, Pablo Paez, GEO's director of corporate relations, says neither firm could "comment beyond the information that is available through our public filings and statements."

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