Prisons As Big Business
E-Mail   by LAWSON STRICKLAND     Bio/Address

From: Frontiers of Justice Vol II: Coddling or Common Sense
Biddle Publishing  1998

    Finally, and perhaps for good, the truth is in the open. In that liberating light which is ever cast about truth, a few brave souls are stepping forward to announce what has long been denied: "Crime pays. I hate saying it, but it really does," concedes Arthur McDonald.' Larry Solomon echoes him a little less hesitantly, "What can I say, it's a great, great business.'
    "Crime Does Not Pay," is a slogan we have often repeated but which is assuredly now in doubt. Crime does indeed pay and handsomely so. It is a force in our society which we love to hate, and we are going to learn that we possibly cannot live without it. In an ironic turn, thousands of Americans today would have to agree that the presence of crime has benefited them personally and the country economically. In fact, crime is not only making millionaires of respectable citizens, it has financial analysts betting on its longevity as a recession-proof growth industry.
    Of course, neither Arthur McDonald nor Larry Solomon are in any sense criminals. They are merely examples of the growing wave of people and corporations taking advantage of what is being touted by Norwegian criminologist Nils Christie as the "corrections industrial complex."' A burgeoning industry which has been in existence for over the last twenty years has only recently (since the mid- to late 1980s) begun to step forward as an economic giant. It includes the construction, maintenance and operation of private prisons; the purchasing of existing state prisons by private firms; the financial underwriting of those endeavors and the selling of goods by corrections market oriented companies specializing in everything from body armor to clog proof waste-disposal systems; personnel management; and the interstate, even international, transport of prisoners. The industry is complete with its own lobbyists, packing political clout from the state level (with hundreds of thousands of dollars donated to state candidates since 1993) up to the national level, the Republican party being the recipient of the majority of donations.
    Arthur McDonald was once the owner of the private Houston firm Cornell Cox. Today he is retired, living comfortably in South Dakota, wealthy from the selling of the firm for more than $ 1 0 million. Cornell Cox bought California's largest private prison company, Eclectic Communications, Inc., with the backing of Wall Street investment houses Dillon, Reed & Co. and Charterhouse. Eclectic Communications has managed to receive prison contracts worth over $50 million in revenues since 1988.
    Larry Solomon, serving as vice-president for the Florida based Joy Food Services Inc., has also reaped profits, the benefit of his access to the ever present and swelling prison population which must be fed.
    Crime pays the bills for Fortune 500 CEOs and their finance houses: Goldman Sachs & Co., Prudential Insurance Co. of America, Smith Barney Shearson Inc. and Merrill Lynch & Co. Wall Street giants underwrite prison construction with business-friendly private, tax exempt bonds, such as those usually reserved for the state, at taxpayer cost.
    Lehman Brothers in partnership with Paine Webber, working with the nation's largest private prison operator, Corrections Corporation of America, formed C.C.A. Prison Realty Trust in early 1997 for the sole purpose of purchasing existing prisons. The company's Initial Public Offering raised a staggering $388.5 million. Paine Webber describes the sale of prisons to a company such as C.C.A. as "free money," money which a "politician could then use for initiatives that fit his or her agenda, possibly improving the chances for re-election."'
    Even American Express, always looking for a good return, has gotten into the frenzy of this "boom" industry, having invested $31 million in what is now the private $38 million Great Plains Correctional Facility in Hinton, Oklahoma. This facility houses inmates on contract from as far away as North Carolina.
    What should stop private sector companies from entering into a market that is costing the federal and state government $30 billion to operate yearly, with private prison stocks surging on average over 40% yearly. C.C.A., co-founded in Nashville in 1983 by Thomas Beasley (a former chairman of the Tennessee Republican Party) and Dr. R. Crants (its present chairman and CEO), says, "Nothing." Since its original financing by Massey Burch Investment Group of Nashville, it has seen its stock rise from $50 million in 1986 when the company went public to over $3.5 billion in October of 1997. 5
   Wackenhut Corrections Corporation agrees. Based in Miami and the second largest private prison firm in the nation, it houses 23,000 prisoners in facilities spread across this country and those it operates in England. In 1996, the company managed $ 1 00 million in revenues with a 26% share of the global market. That same year the company was selected to assume control of a 600 bed facility in Arkansas worth an estimated $7 million in revenues.
    Charles Thomas, head of the Private Corrections Project and a criminologist at the University of Florida, believes the private sector can cut construction costs by as much as 25% and operating costs by up to 15%, helping the government to free up needed taxpayer dollars. His Private Corrections Project predicts that by doing so, the availability of private prison beds will grow annually 20% to 25% for the next ten years with capacity topping 276,000 by the end of 2000.
    With such figures driving the market, everyone seems to want a foot in the door. Beyond C.C.A. and Wackenhut, which together control over 70% of the global market, 18 other firms are currently in business managing private facilities.
    Chances are, if you have your money in the market in either mutual funds or stocks, you are providing for your own future on the interest earned from either housing, managing, caring for or transporting some of the 1.8 million Americans who are incarcerated in the United States.

II

    There is an inherent problem with an industry which finds itself economically interested in the perpetuation of a negative aspect of society. Dr. Nils Christie explains, "You get private lobbying for prisons and you get private capital interested in building more prisons, in expanding that system. The industry has no interest in its own abolition."8
   The more society becomes financially dependent upon crime and its control, the weaker the desire to eradicate it becomes. "Ideally, prisons should be trying to put themselves out of business by doing everything in their power to reduce the recidivism rate," said Jenni Gainsborough, spokeswoman for the National Prison Project of the American Civil Liberties Union. "But the very function of a for-profit prison company is to keep people locked up, as long as possible, because the companies are paid a certain amount per prisoner, per day."9
    Has economic security become more important than personal security? Are court verdicts and sentences tainted by the corruption often present where money collides with principles? If so, is that not criminal in itself?
    Critics of prison privatization and prisoner exploitation are not few in number. Opponents cite the lack of evidence supporting claims that taxpayers' dollars are being saved; the U.S. General Accounting Office released a report in August of 1996 which stated, "Comparisons of operational costs indicate little difference and/ or mixed results." The report detailed a comparison of a C.C.A. prison in Tennessee with two other similar state run prisons, revealing that savings of only 1% were realized. The report concluded, "These studies do not offer substantial evidence that savings have occurred."
    And yet, while the supposed purpose behind prison privatization has not been definitively proven, there is ample evidence that private prisons end up costing taxpayers more in two areas. The care of hospitalized inmates is turned over to the state and the state must step in and correct problems that private prisons are unable to cope with. In addition, private prisons frequently jeopardize the safety of those prisoners incarcerated within them.
    Issues have been raised over the conflict of interest between private prisons' search for profits by the long term housing of inmates and the government's desire to rehabilitate and return prisoners to society. The private sector's drive to streamline and cut corners means efficiency comes before adequate treatment. The result is lack of sufficient governmental oversight; high turn-over rates and inexperience of private prisons' staffs; reports of higher percentages of violent incidences than within state run facilities; and maybe most alarming, the state's inability to protect prisoner rights, such as First Amendment rights, as private prisons are naturally private property.
    In August of 1997, after two prisoners escaped from the private C.C.A.-run Houston Processing Center, assaulting a guard and taking his vehicle in the process, the state of Texas was surprised to discover it could prosecute neither of the men for their flight. "They have not committed the offense of escape under Texas law," said District Attorney John Holmes. "The only reason that they're subject to arrest and were arrested was that during their escape, they assaulted a guard and took his motor vehicle. That we can charge them with, and have."10
    The real shock was that the Houston Processing Center, a facility to hold illegal immigrants awaiting deportation, should not have been housing the two men to begin with; the local authorities had never been made aware of their presence in the state. Neither man was an illegal immigrant; they were two Oregon state prisoners, one serving time for the beating and rape of an 88 year-old woman, and were among 240 other sex offenders shipped to Texas a month earlier by the company.
    Had the two prisoners escaped cleanly, then to whose jurisdiction or responsibility it would have fallen for their recapture is in doubt. At that time, C.C.A. itself was not legally obligated to notify the state of the absence of the two men. Texas, which leads the country in the use of private prisons, has since hurriedly passed legislation making such escapes illegal. The incident only underscores opponents' criticisms.
    Not only the safety of the public is at issue, but of those imprisoned. Most states do require private prisons to achieve accreditation by the American Correctional Association, but critics argue that ACA standards are inadequate, often not met, and difficult to enforce. Even in states which require state employed monitors to be present in private facilities or visits by independent boards, inmate abuses including substandard diets, the beating of prisoners, inadequate protection from rape and assault, and denial of medical treatment have been well documented.
    In 1995, the state of Colorado admitted it could not guarantee the safety of juvenile inmates at the Rebound Corporation-run High Plains Youth Center in Brush, Colorado, after allegations of rape and assault were made by one teenage boy. He had been serially raped for months without intervention by center staff.
    The state's director of Youth Corrections admitted, "We were so desperate for beds here in Colorado, we lowered some of our own levels of expectation. The monitors knew if we went in and were too aggressive with it, we had the possibility of losing the contract provider."" In this instance, one among many, the state placed its interests before those of the individual in its care. Money took precedence over safety, legality and humanity.
    Still, the industry is not defenseless. Dr. Charles Thomas of the Private Corrections Project says, "Private sector companies are increasingly moving to prove their effectiveness, earning better records than public sector systems for seeking and achieving ACA accreditation. This fact may serve to deflate some of the arguments that facilities run by the private sector do not adhere to generally accepted standards and procedures.""
    The National Rifle Association as well has taken up the cause, in efforts to deflect attention away from itself as pro-gun to the more politically acceptable anti-crime. In 1991, the NRA formed CrimeStrike to lobby for "tough on crime" and prison building initiatives.
    In 1993 and 1994, CrimeStrike lobbied up billion-dollar bond initiatives to finance private prisons in Texas and Mississippi respectively. The Texas campaign produced 76,000 beds in that state alone, which have been filled with prisoners from as far away as Hawaii. The butter for the bread is the creation of 12,000 new prison jobs for staff and security."
    With a prison population of over 1.8 million in the U.S., which has doubled within the last ten years, there is no doubt a need for more room. It is the simple fact that existing federal and state prisons are bursting, often running at over 125% capacity, filled with the product of the war on drugs. Non violent drug offenders are the largest and fastest growing section of the inmate population. "Three Strikes You're Out" laws such as California's Prop. 184, "Truth In Sentencing" initiatives and "Tough On Crime" mandatory sentencing procedures serve neither society nor the offender. Such "band aid" approaches have not proven their worth beyond creating corporate profits.
    While the industry can benefit the economy, it should be held to ethical and moral standards. For that to happen, private prisons and the "crime control industry" must go beyond the status quo. Profits should serve not to enrich individuals, but to combat the social ill of crime and the difficulty of effective rehabilitation.
    Financial success in prison privatization provides many benefits: the economic recoveries of cash-strapped rural towns, employment opportunities and investment wealth. But these should take a back seat in importance to providing the country with humane, constitutionally sound facilities whose first priority is to invest the resources necessary to return individuals capable of being re-integrated socially in a fair manner to society. If that standard is not met or even attempted, then the purpose of this venture into privatization is flawed. This does seem to be the case. Lobbyists connected to the industry have been consistently behind tougher and longer sentences while the national crime rate in the last few years has dropped and remained below what it was twenty-five years ago.
    The incentive for private prisons is, if they cannot increase the number of individuals entering the system, to influence the length of those individuals' stays. The longer a prisoner remains under their control, the more he or she generates a profit. David Shicher, a professor of criminal justice at California State University San Bernardino, calls it the "Hilton Scheme": "You want to keep your hotel always full."14
   "A critical issue is accountability," Marc Mauer of the Washington, DC based Sentencing Project warns. "You can imagine someone coming up for probation. The tendency of a private prison will be not to release them." 15
   A 1992 study conducted by the New Mexico Corrections Department revealed that women inmates at a C.C.A.-operated prison lost accumulated credit for 1 4 good time" at almost 8 times the rate of men at a similar state prison. Prison officials determine when an inmate should have their "good time" debited for disciplinary reasons and guards often are encouraged to write up prisoners. This can lead to not only the loss of an inmate's accumulated "good time," but can also add time to their sentences, up to 30 years in some instances.
    Not only do the CEOs and financiers of private prisons have an interest in the bottom line, but often the newly hired guard does as well. Many private prisons offer employees stock ownership as opposed to guaranteed pensions, a money saving plan that compels guards to lengthen inmates' stays at every opportunity, while skimping on such things as food, medical services and rehabilitative activities.
    A Prudential Security's report on C.C.A. cautioned, "It takes time to bring up inmate population levels to where they cover costs. Low occupancy is a drag on profits." A similar 1995 report on Wackenhut stated: "The fine tuning of earnings hinges critically on bed count and when new prisons become occupied. 16

III

    The second tier of this industry is inmate labor. Texas Republican Phil Gramm, during a 1995 Senate Judiciary Committee meeting, spelled it out quite clearly. "We ought to build our prisons as mini-industrial parks, where people go to prison, they work, they go to school at night.""
    The goal is to repeal such laws as the Walsh-Healy Public Contracts Act and Executive Order 11755, both of which place restrictions on the purchase of inmate produced products by the federal government, and the Sumners-Ashurst Act which prohibits the interstate movement of inmate-made goods except for those produced in designated projects.
    These laws have either been struck down or weakened by any of the 17 bills concerning inmate labor which were brought before Congress by October 1995. Inmate labor is another "booming" industry netting over 1.8 billion and it is not in danger of being stopped. In 30 out of 50 states today, inmates produce goods in both public and private prisons for the open market. The concept of "factories with fences," championed by former chief Justice Warren Burger in the 1970s, is in full swing. By 1994, more than 70,000 inmates were employed by state and federal correctional industries."
    The impetus for private prisons is clear. In a brief to the National Conference of State Legislatures' Criminal Justice Committee, Knut Rostad explained that prison officials believed inmates could pay as much as three times more of their own costs if work programs were increased by 166%.
    "Prison officials who manage these prison businesses believe their greatest challenge is creating productive jobs, and that job creation in competitive markets is the business of private enterprise. Most industries' managers have put out the welcome mat for private companies to get involved; they want to talk business," Rostad said. 19
   Inmates now produce circuit boards for Lockhart Technologies Inc. and air conditioner valves for Chatleff Controls Inc. They make snowshoes for Stowe Canoe and Snowshoe Co., raise pigs in California and sell prison-made "Prison Blues" blue jeans for UniGroup, the title of Oregon Prison Industries. Prisoners have even been used as strike busters by such companies as TWA.29
   If private prisons can capitalize on inmate labor, then the investment comes full circle. Not only are they paid to house inmates for the state, but they have a captive labor force which requires no benefits, has no lobbying power and cannot strike for higher wages or better working conditions.
    Critics are concerned with prison labor undercutting outside wages or removing much needed jobs all together from the private sector. There is also the fear of lax health and safety standards.
    Many inmates praise the opportunity to work and earn wages, though. Private sector jobs at prisons pay more than the average "incentive pay" most prisoners in public prisons receive. In some facilities, inmates may also earn more "good time" off their sentences for their work.
    Linda Marin of Texas-CURE (Citizens United for the Rehabilitation of Errants) agrees: "If there's a means for them to earn money and get benefits-getting to work on time, having their work valued-that's a good thing. 21 This money can provide for such things as victim compensation, taxes, room and board and child support. All these issues are generally left unaddressed when individuals are sentenced to public prisons without meaningful employment.
    What must be decided is if such inmate labor is a means for rehabilitation and for lessening the burden on taxpayers, or if it only amounts to exploitation of a particular class of society. That inmates should be required to work and be charged with victim compensation is a sound ideal. Time in prison should not be idle time, but an obligation to repay one's debt to society.
    Yet, if prison administrators only enter into agreements with private companies to make a dollar, which does not benefit the system as a whole by either freeing up or creating more money to fund rehabilitation, then it serves only to harm workers in society in need of employment. The production of wealth by a few, with the exploitation of some, does not justify its existence.

IV

    The problem with private prisons and those companies which are strictly oriented towards the prison industry as a whole, at both public and private levels, is that too many have gotten into the business for the wrong reasons.
    There is a strong urge to deprive individuals of their liberty for purely economic reasons as the "prison industrial complex," like any other, suffers from the desire to expand. The only possible way for the industry to accomplish such is for it to maintain high confinement rates, while providing the least number of services that cut into profits. This can only lead to the privatizing of the justice system by the influence of the industry's money and lobbying power for longer, tougher and stricter sentences, without chances for parole or probation.
    States are consistently lured into the trap by the siren song of savings, most of which never appear. Once there, they find themselves unable to pull away from the commitment. Inmates handed over to private prisons do not have anywhere to go if a prison ends up bankrupt. Once private prisons become imbedded in local economies, politicians are loathe to not renew contracts, even when rates increase by 20% or more and counties find themselves hundreds of thousands of dollars over budget.
    As of now, only about 2% of the nation's prisoners are confined within the walls of private prisons. Before that number grows, as experts all agree it will, decisions must be made and exacting standards implemented.
    The focus must be shifted away from profits which may be generated by a few individuals and Wall Street finance houses and redirected towards building a system that draws from the best of both public and private sectors. The goal is a system which is cost effective, serves society and produces what prison systems are designed for: a rehabilitated inmate. It is not an unachievable goal; America has done as much with greater problems.
    It is already proven that inmate labor and prison privatization can create money and in huge amounts. This money should benefit the taxpayers, and it should, in part, be earmarked expressly for the funding of the justice system, including indigent defender expenses, prison construction, operation and maintenance, and, most importantly, crime prevention measures and prisoner rehabilitation.
    Only then will the industry, by cutting costs to taxpayers while partially funding itself and legitimately seeking answers to the elimination of crime, benefit society in a responsible way.

Footnotes:

  1. Jan Elvin, "Corrections-Industrial Complex Expands in US," The National Prison Project Journal, Winter 1994/95, p. 4

  2. lbid

  3. lbid, p. 1

  4. Eric Bates, "Private Prisons," The Nation, January 5, 1998, p. 16

  5. lbid, pg. 12

  6. Joseph Epstein, "Wackenhut & CAA; Covicts R Us," Financial World, March 18, 1996

  7. Joseph Epstein, "Private Adult Correctional Facility Census, 10th Ed." Private Corrections Project, Center for Studies in Criminology and Law, Univ. FL, March 15, 1997.

  8. Jan Elvin, "Corrections-Industrial Complex Expands in US," The National Prison Project Journal, Winter 1994/95, p.3

  9. Don Vannatta, Jr., "Private Prison Business Booms, Despite Setbacks," New York Times, August, 1995

  10. Eric Bates, "Private Prisons," The Nation, January 5, 1998, p. 12

  11. Kristin Bloomer, "America's Newest Growth Industry," In These Times, March 17, 1997, p. 16

  12. Corrections Alert, "Privatization Census Reveals Continued Expansion," March 6, 1995, p. 1-2

  13. Chris Bryson, "The NRA Strikes Back," In These Times, March 17,1997, p. 18-19

  14. Kristin Bloomer, ibid, p. 18

  15. lbid

  16. Ken Silverstein, "Jailhouse Stock," In These Times, March 17, 1997, p. 18

  17. Gwen Smith Ingley, "Inmate Labor: Yesterday, Today and Tomorrow," Corrections Today, February, 1996, p. 77

  18. lbid

  19. lbid

  20. Kristin Bloomer, "A Captive Labor Force," ibid., p. 16

  21. lbid

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