PRIVATE CORRECTIONS INDUSTRY

NEWS BULLETIN
Vol. 1 - No.1

Reporting on Prison Privatization and Related Issues

June 1998

Corrections Companies Target California
CCA, which began building a
l,024-bed prison in Mendota, San
Joaquin County last February, is now
planning to construct a 2,304-bed
facility in California City, north of
Los Angeles. The $94 million prison
is expected to open next year and is
being welcomed by the community
for the 500 jobs it "ill create.
Said Mayor Lany Adams, "We
did a survey of the people, and they
said they wanted it." CCA' s efforts
to build the California City prison
have been endorsed by state Sen.
Richard Polanco; the company also
intends to construct a $60 million
1,000-bed immigrant detention center in California by 1999.
All three prisons are being built
on-spec, with no firm contracts with
any government agency to house inmates at the facilities. "If you build
it in the right place the prisoners will
come,'· said David Myers, president
of CCA's West Coast operations.
Myers expects to attract business
from the INS and the U.S. Marshals
Service, and also hopes to \\in over
the California Dept. of Corrections.

However, the politically powerful California Correctional Peace
Officers Association, a 23,000-member union, vehemently opposes expanding the use of private prisons
beyond thc state's current contracts.
CCPOA president Don Novey
vowed to "fight like hell" to keep
CCA from housing California inmates at its new facilities. The union
is backing a proposed amendment
to the California Constitution that
would prohibit state and local agencies from contracting with private
companies for public safety services,
including prison management.
CCA and two other for-profit
corrections firms, Wackenhut Corp.
and Cornell, have hired lobbyists
and public-relations experts to oppose the constitutional amendment.
The companies stand to profit enormously should they crack California's prison market, as the state
operates the largest corrections system in the nation. California's prison popUlation is expected to triple
over the next 25 years due to the
state's notorious three-strikes law.

A nwnber of community corrections facilities already are privately managed, and the state has
contracted with Wackenhut Corp.
and Bakersfield-based Maranatha
Productions for 2,000 low-security
emergency prison beds.
But unlike in California City,
not all state residents are enthused
about for-profit prisons. Concerned
citizens in Blythe have called on the
city council to reject proposals from
three companies seeking to build a
correctional facility in their community. Cornell, Maranatha Productions, and Management and Training
Corp. (MTC) are vying to construct
a SOO-bed medium-security faeility
in Blythe. More than 100 residents
and guards from nearby state prisons
protested the proposal, saying that
privately-operated facilities lack adequate staffing levels, safety features
and employee training. 0
Sources: The Wall Street Journal,
May 27, 1998; The Fresno Bee
(CA). May 31, 1998; The PressEnterprise (CA), July 1, 1998.

<01998 - p.e.!. News Bulletin, 3193-A Parthenon Avenue, Nashville, TN 37203

P.C.I. News Bulletin

2

AFSCME Report Critical of Prison Privatization
On May 6, 1998, Corrections
United, a 100,000-member subdivision of the American Federation
of State, County and Municipal
Employees, released a scathing report on the private prison industry.
"Private prisons are a threat to public
safety, a taxpayer ripoff and they
saddle the public with unlimited liability," stated AFSCME President
Gerald McEntee. Last year McEntee
withdrew his union's support from a
prison privatization bill being considered by the Tennessee legislature.
The 16-pagc report cited myriad
problems at private prisons, including the following:
~
A guard at a privately-operated
facility in Florida who aided an inmate's escape.
~
Video-taped brutality and abuse
at a CCRI-managed jail in Brazoria
County, Texas.
~
The license revocation of a privately-run juvenile prison in Brush,
Colorado.

~
Florida paid a private company
$48-$49 a day per inmate, when it
cost the state $43 per day for each
prisoner housed at public jails.

~

A study by Ok1ahoma officials
indicated that the state paid 45%
more to house prisoners at private
prisons than in its o\\n facilities.
The AFSCME report also noted
that guards at privately-run prisons
are paid less and receive fewer benefits than their public counterparts.
A spokesperson for CCA discounted
the union report as "assertions and

allegations based on nothing."
Several prison guards' unions
took action to highlight the report
locally. AFSCME Council 4, which
represents almost 5,000 corrections
employees in Connecticut, gathered
at the state capitol to denounce prison privatization efforts.
Connecticut Governor John G.
Rowland is considering plans to
transfer 350 inmates to rent-a-jails in
other states at a cost of$7.2 million.
"The governor has the authority to
do it on his own, but we know it's a
bad idea," said state Rep. Michael
Lawler, who supports the union's
opposition to privatization. "Justice
is not something that can be put
out to bid; public safety is not something that can be put out to bid,"
he added.
Michael Minney, president of
AFSCME Local 391, noted that the
state still has the option of reopening the 350-bed Northeast Correctional Institution, which was closed
in 1996 around the same time that
Gov. Rowland began contemplating
out-of-state inmate transfers. ''No
one is claiming the DOC is perfect,
but it is doing a much better job than
the more costly companies operating
prisons for profit," Minney said
According to Council 4 executive director Michael Ferrucci, prison privatization was the topic of
numerous press conferences held by
Corrections United chapters across
the country following the release of
the AFSCME report. 0
Sources: San Francisco Chronicle,
May 7, 1998; The Tennessean, May
7, 1998; The JOllrnallnquirer (CT),
May 13, 1998.

June 1998

In the Ne\vs
The Cumberland County, Virginia
planning commission voted to recommend amendments to a local
development plan to permit the
construction of private prisons in
the area. The county has received
an application from Dublin-based
NKW Development to construct
a 1,000-bed facility that would
house federal prisoners for the
INS. Last March the state's first
privately-run prison - a I,SOO-bed
mediwn-security facility built and
managed by CCA - opened in
La\\Tenceville. Virginia is leasing
the $44 million prison, which was
financed "ith tax exempt municipal bonds. Sources: The Richmond-Times Dispatch, March 21,
May 20, 1998.
Wackenhut Corp. plans to build a
SOO-bed "special needs" prison for
mentally ill inmates in Lauderdale
Co., Mississippi. Other privatelyrun prisons in the state include
the Delta Correctional Facility in
Leflore Co. (CCA, 1000 beds); the
Marshall Co. Correctional Facility
(Wackenhut, 1000 beds); and the
Wilkinson Co. Correctional Facility (CCA, 500 beds).

WANTED
Articles, clippings and news reports
regarding the private corrections industry - please include the source
and date of all materials submitted.
Contact: PCINB, 3l93-A Parthenon
Ave., Nashville, Tennessee 37203.

,

p.e.I. News Bulletin

3

June 1998

Switch to Private Prison Angers Ohio City
Officials in Grafton, 25 miles
southwest of Cleveland, are incised
that a prison planned to be built in
their community will be privately
operated. The 500-bed facility initially was going to be managed by
the state, like three other prisons
already located in the town. But
Ohio lawmakers, in hammering out
a compromise to a stalled bill to
regulate privately-operated facilities,
H.B. 293, decided to privatize the
minimum-security prison.
Unfortunately they didn't consult with city officials in Grafton,
who oppose the idea due to safety
issues. Concerned citizens note that
guards at the private facility likely
will be lower-paid non-union employees, which has people worried
about their qualifications.

Other nay-sayers cite a CCAoperated prison housing out-of-state
inmates in Youngstown, the Northeast Ohio Correctional Center, which
has been embroiled in controversy
- including numerous stabbings,
two murders, loekdowns, and an
extensive lawsuit. Said Tom Smith,
president of the Grafton Village
Council, "We just don't think this is
an area that government should be
privatizing."
A campaign is under way in
Grafton-area communities to pass
resolutions opposing the privatelyrun facility. The sponsor of H.B.
293, Rep. Ronald Gerbeny, agrees
that state lawmakers should rethink
their plans. "If they would have done
their homework, they wouldn't be in
the unfortunate position of being in

New Private Jail Contracts in Texas
The Texas Board of Criminal
Justice has agreed to new contracts
with private operators of five state
jails. The contracts, wruch take effect
Sept. 1, include a change in management at the 2,OOO-bed Dawson
State Jail in Dallas from CCA to
the Ogden, Utah-based Management
and Training Corp. (MTC).
In announcing the altered contracts the state cited savings of $21
million, mostly due to reduced daily
rates for housing prisoners at the
facilities. State officials say they \\ill
save more than $3 per inmate a day
at the Dawson facility by s"itcrung
the contract to MTC~ the other four
privately-operated jails include one

managed by MTC, two by Wackenhut and one by CCA. The three-year
contracts are valued at $225 million,
with bids ranging from $26.89 to
$29.74 per prisoner per diem.
Tom Baker, the state's jail director, noted that his staff presently
spends about 60% of their time focusing on the 30% of facilities that
are privately operated. "With better
contracts, I think that balance "ill
begin to shift," he stated. The new
contracts call for more rehabilitation
programs, including substance abuse
treatment, at the jails. 0
Source: Tyler Morning Telegraph
(TX), May 23, 1998.

a community that doesn't want (the
private prison]," he said. Despite the
city's concerns, and opposition by
the Ohio Civil Service Employees
Association, it is unlikely the legislature will reverse its decision.
Another privately-run prison is
being built in Conneaut, about 70
miles northeast of Cleveland. The
Conneaut community is looking forward to the 400 prison jobs, but,
according to City Manager Robert
Herron, would prefer to have the
prison publicly managed.
The Grafton and Conneaut facilities would be ov-ned by the state
and subject to state rules and regulations. 0
Source: The Columbus Dispatch,
(OH), May 15, 1998.

Other Private Corrections
Industry Resources
The Prison Privatisation Report
International, a publication of the
non-profit Prison Refonn Trust, is
published ten times a year. Highly
recommended! Subscription rates are
£25 for individuals, £50 for public
or non-profit agencies and £ 100 for
corporations or businesses. Covers
private prison news both in the U.S.
and internationally. Address:
Prison Refonn Trust, 15 Northburgh
Street, London ECIV OAH. Phone:
++44-171-251-5070; e-mail: prisonrefonn@prisonrefonn.demon.co.uk.

p.e.I. News Bulletin

June 1998

4

Idaho Regulates
Private Prisons

Private Prison Companies Do the REIT Thing
In July 1997 CCA spun off a
related company, the Prison Realty
Trust, which was formed to buy the
corporation's prisons under a leaseback arrangement.
Prison Really is a real estate investment trust, or REIT, which offers
certain tax advantages. Nine months
later, on April 20, 1998, CCA stunned investors by announcing that
it intended to sell itself to Prison
Realty in a $3 billion stock swap that
would create a "super-REIT."
There already had been controversy regarding the interconnecting corporate directorships of CCA
and Prison Really: Doctor R. Crants,
CCA's C.E.O., is also the chairman
and C.E.O. of Prison Realty; his son
is Prison Realty's president, former
CCA officers sit on Prison Realty's
board, and both companies share the
same Nashville office. Crants denies
there is a conflict of interest.
The proposed merger will split
CCA into three companies, all under
the CCA name, with two managing
facilities not owned by the REIT
and the third handling contracts for
REIT-owned facilities. This convoluted arrangement is necessary to
squeeze the merger into IRS regulatory guidelines, which restrict the
revenues that REITs can receive.
Prison Realty also plans to buy
out the real estate assets of U.S.
Corrections Corporation, the third
largest private prison contractor in
the United States, thereby adding to
CCA ' s market share of the for-profit
corrections industry.
Apparently Wall Street did not
appreciate the incestual marriage between CCA and its sister corporation
- in the weeks follo\\ing the an-

nouncement of the merger CCA' s
stock dropped almost 25%. Several
investment firms downgraded their
ratings of CCA stock, and one company, Paine Webber, said the merger
would result in a "shell corporation"
v,ith little capitalization.
At least nine investors have filed
shareholder suits against CCA claiming the proposed merger puts the
personal gain of corporate officers
before the interests of stockholders.
Following the merger Crants would
own 1.9 million shares in the combined companies. Although he said
he would have to pay more income
tax as a result of the merger, Crants
evidently doesn't find his situation
very taxing: He recently purchased
a $3.7 million home in the amuent
Green Hills section of Nashville.
Meanwhile, Wackenhut Corp.,
the nation's second-ranking private
corrections contractor, announced it
was creating a REIT of its own, the
Correctional Properties Trust, which
would purchase eight of the company's facilities. Although Correctional Properties Trust will be run by
two former Wackenhut executives,
Wackenhut C.E.O. George Zoley
made it clear that he didn't plan to
follow in CCA's footsteps by pursuing a merger.
Eager investors looking to cash
in on the profitable private prison
industry apparently took him at his
word: While CCA's stock dropped,
shares in WackenhuCs REIT rose
15% on its frrst day of trading. 0
Sources: The New York Times, April
21, 1998; The Wall Street Journal,
April 21 , 22, 1998; The Tennessean,
May 3,1998.

The state of Idaho has enacted
statutory guidelines regarding the
establisJunent of privately-operated
prisons. Highlights of the new regulations include:
All profits from inmate labor at
private prisons must revert to the
contracting government agency; this
precludes contractors from reaping
extra profits through private prison /
private industry partnerships.
c>

c>
Privately-run prisons may only
house medium or lower security inmates. No prisoners with records of
institutional violence with a weapon,
or inmates with histories of escape,
may be housed in privately-operated
facilities.

Prisoners transferred from other
states must be tested for HIV, with
negative results.
c>

I>
Private prisons may be established only with the permission of
local government entities; this prevents the construction of unwanted
speCUlative facilities built to house
out-of-state inmates. .

I>
Private prison contractors must
reimburse local or state authorities
for expenses incurred in responding
to riots, escapes or other emergency
situations that occur at privately-run
facilities.

These statutory guidelines, codified at I.C. §§ 20-801 to 20-812,
go into effect on July 1, 1998.0
Source: Correspondence.