PRIVATE CORRECTIONS INDUSTRY

NEWS BULLETIN
Vol. 1 - No.7

Reportil1g 011 PriSOI1 Privatizatiol1 and Related Issues

December 1998

Cover-Up Uncovered at CCA Prison
Last July the Wisconsin corrections department began sending
state prisoners to a CCA facility in
Whiteville, Tennessee. On August 5
a rookie officer at the privately-run
prison, Jerry Reeves, was attacked
and seriously injured by Wisconsin
inmates (see PCINB, Sept. 1998,
pg.7). Four prisoners subsequently
claimed that they had been beaten,
maced and shocked with stun guns
by CCA staff members who interrogated them about the attack.
Two days after the allegations
of abuse were made public, the
warden at the Whiteville prison
traveled to Wisconsin to assure state
officials that the complaints were
groundless. At that time, in October,
Wisconsin Corrections Secretary
Michael Sullivan denied that inmates at the privately-run facility
had been abused.
However, Sullivan sent a team
of corrections officials to Tennessee
to conduct their own investigation.
After questioning more than fifty
inmates and prison staff members
they concluded that CCA employees

had used inappropriate force. "Our
folks uncovered the cover-up," said
DOC spokesman Bill Clausius.
On Nov. 10 Sullivan acknowledged that inmates at the Whiteville
facility had been abused. He said his
previous denial was based on the
"apparent forthrightness" of CCA
staff, and accused the company of
withholding information. According
to Sullivan 15 to 20 inmates were
mistreated by CCA officers - the
prisoners were slammed against a
wall, one was struck in the groin and
at least two were shocked with stun
guns or stun shields.
Sullivan announced that his
staff had submitted their fmdings to
law enforcement authorities, whom
he expects will "fully investigate the
cover-up of these incidents" at the
CCA facility. The FBI has launched
an investigation which is expected to
conclude in December. The prison's
security chief and seven other employees were frred; according to CCA
spokeswoman Susan Hart the company has a "zero tolerance policy" for
inappropriate use of force.

Despite the abuse and coverup, Sullivan stated he still intends
to send more Wisconsin inmates
to the Whiteville facility and to a
CCA prison in Oklahoma. Wisconsin
has been transferring prisoners out
of state for the past several years
due to overcrowding in its corrections
system; 2,400 inmates are presently
housed in other jurisdictions.
The Wisconsin corrections department is in the process of hiring
four full-time monitors for out-ofstate contract prisons. "Certainly because of this activity [at Whiteville]
we will have a large presence there
in both announced and unannounced
visits," said Sullivan.
A delegation of five Wisconsin
legislators visited the CCA facility
after the abuse and cover-up were
disclosed. Although it was supposed
to be a surprise inspection CCA had
learned they were coming, and the
lawmakers were greeted by prison
and corporate officials. Following
the visit four of the five delegation
members, all Republicans, said they
saw no reason to [continued¢]

co 1998 - P.C.I. News Bulletin, 3 I 93-A Parthenon Avenue, Nashville, TN

37203

p.e.I. News Bulletin

ADMI NISTRI VIA
The P.C.I. News Blllletin (PCINB) is
a monthly publication that reports on
prison privatization and related issues.
primarily within the United States.
Copyright

PCINB is copyright © 1998. Non-profit
organizations and individuals acting on
their behalf arc granted permission to
reprint or copy any materials included
in PCINB provided that source credit is
given and that such copies are for noncommercial pwposes only - all other
persons are required to obtain written
permission from PCINB before any reprints or copies legally can be made.

PCINB will happily and enthusiastically
pursue legal action against copyright
violators, and will provide a reward to
persons who report copyright violations
that result in successful litigation or
settlements, as determincd by PCINB.
Address

P.C.I. News Bulletin. 3193-A Parthenon
Avenue, Nashville, Tenncssee 37203.

Legal Stuff
The information presented in this publication is not intended to supplant the
services I advice of legal or correctionsrelated professionals. The editors of and
contributors to PCINB disclaim any liability.loss or risk, personal or otherwise.
incurred as a direct or indirect consequence of the use and application of any of
the contents of this newsletter. So there.

2

stop sending inmates to the private
prison. Rep. Spencer Coggs, a Democrat, argued the transfers should be
discontinued until state and federal
investigations are complete.
On December 2 a Wisconsin
legislative committee authorized almost $2 million to send 477 more
prisoners to out-of-state facilities;
according to Corrections SecretaI)'
Michael Sullivan the transfers are
likely to continue for at least a decade. Sen. Brian Burke objected to
doing further business with CCA. "If
the world of privatized prisons were
truly free market, we would not be
rewarding the Corrections Corp. of
America for bad behavior," he said.
Wisconsin Governor Tommy
Thompson reportedly viewed the
abuse of prisoners at the Whiteville
facility as a serious but isolated incident. Chief of staff John Matthews
said the governor "recognizes that
these things can happen anywhere in
any institution, public or private. ,.
Gov. Thompson received a $2,500
campaign contribution from CCA
C.E.O. Doctor R. Crants on Sept. 2,
after the abuse at Whiteville had
occurred and before the cover-up was
revealed and reported.
Jerry Reeves, the correctional
officer whose beating led to the
interrogation and abuse of inmates
by CCA staff members, remains in
critical but stable condition. Nine
Wisconsin prisoners are expected
to be indicted on felony charges by
Tennessec authorities in connection
with the attack that left Reeves hospitalized. 0

WANTED
Articles, clippings and news reports
regarding the private corrections industry - please include the source
and date of all materials submitted.

Sources: The Tennessean, Nov. II,
1998; Milwaukee Journal Senttnel.

Nov. 11, 12, Dec. 3, 1998; Knoxville
News-Sentinel, November 12, 1998;
US.A. Today, Nov. II, Dec. 3,1998.

December 1998

Georgia Inmates Praise
Private Prison
At least some Georgia prisoners are pleased with the state's
first privately-operated prison, a $38
million 750-bed facility in Charlton
County. Inmates at the D. Ray James
State Prison, run by Houston-based
Cornell Corrections, laud conditions
at the facility in comparison with the
state corrections system They cite
amenities such as salt and pepper
shakers and napkins on the tables in
the cafeteria.
Cornell officials say privileges
have made inmates happier, which
reduces security problems and thus
cuts costs. "In most state prisons
the wardens do not talk to the inmates," said Cornell warden Lovell
Hudson, who walks unaccompanied
about the facility and engages in
conversations with prisoners. "But if
you don't want to talk to them, you
don't know what's going on."
"I'd much rather stay here,"
remarked inmate Arthaniel Johnson,
noting that there are fewer rules and
regulations at the private prison.
There may be another reason why
prisoners prefer conditions at the
Cornell facility: less brutality.
In April 1998 the Georgia
Dept. of Corrections agreed to pay
$283,500 to settle a lawsuit stemming from widespread shakedowns
conducted by tactical squads at state
prisons in which inmates were beaten and injured.
State officials have conducted
two audits of the Cornell facility
since it opened in October, citing
lax security procedures among other
problems. 0
Sources: U.S.A. Today, December 31,
1998; The Jackson Sun, Nov. 22,
1998; Prison Legal News, Oct. 1998.

p.e.!. News Bulletin

3

December 1998

Department of Justice Sues Louisiana
Other Private Corrections
Industry Resources
Corrections and Criminal Justice
Coalition (CCJC), Route 2, Box
1144, Harpers Feny, WV 25425
(888) 315-8784; www.ccjc.com.
A consortiwn of anti-privatization
correctional employees' unions.
Corrections USA (CUSA), P.O.
Box 394, Newton, NH 03858
(603) 382-9707; www.cusa.org.
A non-profit association affiliated
with correctional officers' unions;
opposes prison privatization.
Prison Refonn Trust, 15 Northburgh Street, 2nd Floor, London,
EC I V OJR England; phone: 01144-171-251-5070; e-mail: prt@
prisonrefonn.demon.co.uk. Publishes
the Prison Privatisation Report Int '/
(PPRl), which covers news about
the private corrections industry in
the U.S. and abroad.
Private Corrections Project, Center
for Studies in Criminology and
Law, Univ. of Florida, Gainesville,
FL 32611 (352) 392-1025; web
site: web.crim.uf1.cdlpcp. Conducts
research into prison privatization.
Note that the Project receives funding from the private corrections industry; Prof. Charles W. Thomas,
director of the Project, is a board
member of Prison Realty Trust.
Reason Foundation, 3415 S. Sepulveda Blvd. #400, Los Angeles,
CA 90034 (310) 391-2245; www.
reason.org. A libertarian thinktank that favors prison privatization. Note that the Foundation
receives funding from the private
corrections industry - including
CCA, Wackenhut and Securicor.

On Nov. 5 the U.S. Dept. of
Justice filed suit against Louisiana
due to conditions in the state's facilities for juvenile offenders, citing
excessive levels of violence and inadequate medical and mental health
care. The civil rights lawsuit further
alleges that youths are held in isolation cells and are not provided with
sufficient educational services.
The suit follows two damning
reports by federal investigators who
found deficiencies in Louisiana's
four juvenile prisons. "At the moment it is clear that federal court action
is the only way to protect juveniles
in Louisiana's secure correctional
facilities from unlawful conditions,"
said Bill Lann Lee, acting Assistant
Attorney General for Civil Rights in
Baton Rouge.
Singled out for criticism in the
investigative reports and subsequent
lawsuit was the Tallulah Correctional Center for Youth, a privatelyrun juvenile facility that has been
troubled by violence and brutality
(see PCINB, Aug. 1998, pg.2). The
state took over operations at Tallulah
last July after a disturbance by juvenile offenders and the resignation
of the prison's warden. There since
have been complaints that some of
the state guards are more abusive
than the privately-employed guards
they replaced.
Tallulah initially was operated by TransAmerican Development
Associates, a politically-connected
firm that opened the facility with
a no-bid contract in 1994. TransAmerican Development is namcd as
a defendant in the Justice Department's lawsuit. Monroe attorney
Scott Wolleson has announced that
he also plans to file suit against the

company on behalf of up to fifty
juveniles at Tallulah, secking damages for injuries caused by guards.
According to federal officials
the Dept. of Justice sued Louisiana
following unsuccessful negotiations
in which the state failed or refused
to take corrective action. Points of
contention include lowering guardto-inmate ratios, addressing use-offorce concerns, and hiring more
special education teachers. State
officials claim that problems at the
juvenile facilities have been exaggerated. TransAmeriean Development has complained that the cost
of complying with improvements
demanded by the Justice Department would put the company out of
business.
The state of Louisiana also
faces a lawsuit filed by the Juvenile
Justice Project, which represents 12
juveniles at Tallulah who seek improved conditions. A trial is set for
February 22, 1999. As of December
14, management of the Tallulah
facility is being contracted to the
Florida-based Correctional Services
Corporation. 0
Sources: The New York Times, Nov.
6, 1998; The Dallas Morning News,
Nov. 6, 15, 1998; U.S.A. Today, Dec.
11, 1998.

PROTEST PLANNED
Corrections USA will hold its next
annual conference in Miami and will
be demonstrating at the corporate
offices of Wackenhut Corrections
from Feb. 4-6, 1999. Contact CUSA
for details (see far left column).

P.C.I. News Bulletin

News Abroad
Government officials in Ontario,
Canada announced in October that
a 1,600-bed "super-jail" being built
at Maplehurst will not be privately
operated. "There arc a whole range
of issues around privatization that
have not been properly addressed,
and public safety is number one,"
said Solicitor Gen. Bob Runciman.
The Ontario Public Service Employees Union, which opposes prison
privatization, had cited problems at
CCA's Youngstown, Ohio facility.
Source: PPRl, Nov.lDee. 1998.
A contract between Wackenhut
and the Canadian province of New
Brunswick to build and operate the
Miramichi Youth Facility has proven more expensive than if the project had been publicly financed.
Auditor-General Daryl Wilson determined that the project resulted in
additional expenses of C$404,379
instead of C$2.8 million in savings
claimed by the government. Source:
PPRl, Nov.lDec. 1998.
At a special conference held Nov.
12 the Prison Officers Association,
a correctional employees' union in
England, announced it would seek
to recruit workers at privately-run
facilities. While the union opposes
privatization it recognized the need
to represent private prison staff as
part of its overall strategy. In May
the British government announced
that all new correctional facilities
will be privately operated. Source:
Prison Report (U.K), Dec. 1998.

4

December 1998

INS Detainees in TX
Stage Protest

CCA, D.C. Settle
Differences

A group of immigration detainees at a privately-operated INS
facility in Laredo, Texas, upset that
they were not allowed to return to
their homes in Central American
countries that had been ravaged by
Hurricane Mitch, staged a protest
on November 24.
According to INS spokesman
Tomas Zuniga some of the detainees
refused to cat breakfast and shouted
obscenities at the guards; nine detainees then barricaded themselves
in a dormitory by stacking tables and
chairs against the door.
At least 75 U.S. Border Patrol
agents responded to the disturbance
to prevent violence and potential
escapes. A special emergency squad
with riot shields and batons eventually regained control using tear
gas and physical force. No injuries
were reported; six of the detainees
were later transferred to the Webb
County Jail.
The 350-bed Laredo Detention Center is operated by CCA and
primarily houses illegal immigrants
awaiting extradition or seeking political asylum. The detainees who participated in the protest reportedly
were worried about their hurricanestricken families and angry about
a suspension on deportations that
prevented them from returning to
their home countries.
CCA spokeswoman Margaret
Fernandez said the detention center
was operating normally by late afternoon on November 25. 0

The District of Columbia has
dropped legal action that it planned
to pursue against CCA after reaching
an agreement with the company.
CCA and District officials had disagreed as to which party should
pay. for responding to a class-action
lawsuit filed by D.C. inmates at the
company's Northeast Ohio Correctional Center in Youngstown. The
suit, which alleges failure to protect
and inadequate medical care, names
both CCA and the District's Dept. of
Corrections as defendants.
D.C. officials contended that
CCA did not provide legal counsel
to represent the District or produce
proof of insurance that protects
them from liability, in violation of
the company's contract. The District
had filed a complaint with the Contract Appeals Board and announced
plans to seek a temporary restraining
order from D.C. Superior Court before resolving the matter.
"We are committed to working with CCA in the future," stated
George Valentine, deputy corporation counsel for the District. Neither
CCA nor D.C. officials would comment on the specifics of the agreement, although CCA spokeswoman
Susan Hart said the company had
fulfilled its contractual obligations.
A court conference to discuss
settlement of the Youngstown lawsuit is scheduled for December 23.
Approximately 1,500 D.C. inmates
are incarcerated at the Youngstown
facility, which has been plagued by
violence and other problems since
it opened in May 1997.0

Sourees: U.S.A. Today, November
25, 1998; Immigration News Brief,
Nov. 1998 (citing The San Antonio
Express-News, Nov. 24, 1998).

Source: The Tennessean, December
22,1998.

P.C.I. News Bulletin

5

December 1998

Prison Privatization Report Released
In the News
A plan to build a privately-operated
800-bed prison near Fort Greely, a
military base south of Fairbanks,
Alaska, is undergoing public discussion. Fort Greely is being downsized and nearby Delta Junction is
looking for a new source of jobs.
Source: US.A. Today, Dec. I, 1998.
CCA has contracted to build a $45
million 1,524-bed prison in McRac,
Georgia. Thc facility, which is expeeted to open Feb. 2000, will hold
minimum-security state and county
prisoners. Source: The Tennessean,
December 8, 1998.
The state of Washington plans to
send 500-600 inmates to privatelyoperated prisons in Colorado; the
transfers are expected to take place
in Janumy '99. Source: Prison Legal
News (correspondence).
The District of Columbia Zoning
Commission's hearing on CCA's
request to re-zone its Ward 8 property so the company can build
a prison has been postponed until
March 18. Source: U.S.A. Today,
December 8, 1998.
CCA has announced plans to build
a $45 million, 750-bed facility in
Martin Co., Indiana. The company
spent a year evaluating sites and
weighing public opinion, and chose
Martin County after facing vocal
opposition in Orange Co. Sources:
U.S.A. Today, November 25, Dec.
10, 1998.

In 1997 Congress instructed
the Attorney General's office to
undertake a study of prison privatization, to include a review of
legal issues and existing research
regarding cost effectiveness. The
study was conducted by Abt Associates, Inc. through a cooperative
agreement with the National Institute
of Corrections, and the resulting report, entitled "Private Prisons in
the United States: An Assessment
of Current Practice," was released in
October 1998.
The report presents a comprehensive overview of prison privatization based on a survey of the
Federal Bureau of Prisons, Puerto
Rico, the District of Columbia and
48 states. Only Alaska and Maine
did not respond; the report does not
encompasslocalgovenunents.
Previous studies of prison
privatization conducted in Arizona,
Louisiana, Tennessee, Florida and
Texas are evaluated and critiqued.
The report notes that methodological
problems in the studies make it
difficult to assess privately-operated
facilities vis-a-vis public prisons.
Other factors also preclude accurate
comparisons - e.g., differences in
the security classification of inmates
in public and private prisons. "Some
of the more extravagant claims made
on behalf of prison privatization can
be traced to inappropriate handling
of these issues," the authors of the
report state.
The report concludes there is
insufficient data to assess the cost
effectiveness and performance quality of private prisons. "Only a few
of the more than a hundred privately
operated facilities in existence have
been studied, and these studies do

not offer compelling evidence of
superiority," say the authors. These
findings are consistent with a 1996
report by the General Accounting
Office which found mixed results
and little evidence that prison privatization results in cost savings.
The report further addresses
various legal topies relevant to the
private prison industJy, including
liability, employee/organized labor
issues, use-of-force policies, inmate
industJy programs, and contractual
issues. Regulatory laws for private
prison operators are discussed using
an Ohio statute enacted in March
1998 as an example.
The report includes extensive
footnotes with references and case
law, bibliographies, statistical data,
and the results of the Abt Associates
survey of state and federal corrections departments. Three appendices
provide supplemental information
about legal issues involving prison
privatization and previous studies of
privately-run prisons conducted in
New Mexico, Kentucky, California
and Massachusetts.
The acting Assistant Attorney
General described the Abt Associates report as being a "careful and
thorough review of prior research,"
and praised it for presenting a "valuable framework for the additional
research needed on the comparative
cost and quality of private versus
public prison operations."
Copies of the 200+ page report are available from the Bureau
of Prisons, Office of Public Affairs,
320 1st St. N.W., Washington, DC
20534, by written request. 0
Sources: PPRl, Nov.lDcc. 1998; Abt
Associates report.

p.e.!. News Bulletin

6

TN Lawmakers Address Private Prison Issues
A Tennessee legislator, concerned about the Department of
Correction's slow pace in pursuing
prison construction, has accused the
governor's administration of stonewalling to create an opportunity for
private prison companies to step in.
During a December 4 meeting of
the Select Oversight Committee on
Corrections, DOC officials acknowledged that the projccted growth of
the state's inmate population will
exceed available prison space within
five years and that construction of a
new facility had been delayed.
State Senator Pete Springer
criticized DOC Commissioner Donal
Campbell for not being farther along
in building a 1,676-bed prison due
to open by 2001. Seven or eight
counties have offered land for the
facility but there have been only two
follow-ups and no site visits. Sen.
Springer, an outspoken opponent of
privatization, questioned whether the
delay would force the state to contract with private prison companies
to avoid an overcrowding problem.
"What concerns me a great deal
is if the state has no specific plan on
where we're going, that leads credence
for someone to step forward and say
we have a better plan," remarked Sen.
Springer.
A spokesman for the governor's office said there is still time
to build the prison by the original
deadline. Governor Sundquist, who
has business and political ties to
CCA, supported a bill to privatize up
to 70% of the state's prison systcm;
the bill failed to pass last April and
the governor said he would not pursue prison privatization in 1999.
Addressing a related issue,
Senator Jim Kyle, chairman of the

December 1998

A Doubtful Thomas?

Oversight Committee, announced
that "comprehensive legislation" regarding the private corrections indusby would be introduced next
year and would affect both privatelyoperated adult and juvenile prisons.
Approximately 80% of the juvenile
offenders in state custody are housed
in private facilities.
The Committee also requested
a full report on the Oct. 12 escape of
four Tennessee prisoners from the
CCA-run South Central Correctional
Center, noting that guards evidenily
dido't notice the break-out for up to
three hours. "It sounds ... as if someone was aslcep, and if that's the case
I want to know how much overtime
that person worked that week," said
Senator Bob Rochelle.
An investigation into the escape is complete, but DOC Commissioner Donal Campbell said he
had not yet seen the final report.
Campbell also stated he dido't know
if his department had taken any
action against CCA as a result of the
break-out, or whether the company
had made security improvements.
Pam Hobbins, a DOC spokeswoman, later acknowledged that
Comm. Campbell had received the
final investigative report; however,
she said it would not be released
to the public because it was confidential. Senator Kyle observed that
this was "a perfect example of the
public's right to know about issues
of public safety" in relation to private prisons, which is an issue that
he intends to address during the next
legislative session. 0

Much of the statistical and
academic information concerning
prison privatization that is reported
in the media - and relied upon by
lawmakers - comes from Professor
Charles W. Thomas, director of the
Private Corrections Project at the
University of Florida, Gainesville.
In a 1996 interview with The
National Times Thomas admitted he
had invested in "substantially all" of
the private corrections companies,
though he refused to say how much.
On April 25, 1997 The Wall Street
Journal reported that Thomas was
being named a board member of the
CCA Prison Realty Trust - he receives an annual salary of $12,000
with options to buy 5,000 shares
of stock. The chairman of Prison
Realty, Doctor R. Crants, is also the
chairman and C.E.O. of CCA. Prison
Realty and CCA plan to merge in
January 1999 (see pg. 7).
According to a Prison Realty
document filed with the SEC on Oct.
16, 1998, "Charles W. Thomas, a
member of the Prison Realty Board
and a director of New Prison Realty,
has performed and will continue to
perform, certain consulting services
in connection with the merger for a
fee of $3 million."
An ethics complaint was filed
against Professor Thomas for his
financial involvement with the private corrections industry while conducting research in that field The
Florida Attorney General's office has
referred the complaint to the Division
of Administrative Hearings. Thomas
denies there is a conflict of interest. 0

Sources: Commercial Appeal (TN),
December 5, 1998; The Jackson Sun,
November 25, 1998.

Sources: PPRl, Nov.lDec. 1998; The
National Times, Sept. 1996; The Wall
Street Journal, April 25, 1997.

p.e.I. News Bulletin

7

December 1998

CCA-Prison Realty Merger Approved
A merger between Corrections
Corp. of America and Prison Realty
Trust was approved by shareholders
in both companies on Dec. I and
Dec. 3, respectively. CCA had spun
off Prison Realty, a real estate investment trust, in July 1997, then
announced merger plans last April
(seePCINB, June 1998, pg.4).
The CCA-Prison Realty merger was opposed by an organi7.e<i
labor group that safeguards pension
funds of member unions. The AFLCIO's Office of Investment sent
seven-page mailings to CCA shareholders urging them to vote against
the proposed merger because it unfairly favors CCA management and
two major institutional investors,
and transfers some of CCA' s most
valuable assets to companies that
will not benefit shareholders.
"We are reaching out to
CCA's shareholders to put forth our
critique of the deal and get some
dialogue going," stated union representative Beth Young. CCA spokesperson Peggy Lawrence said the
union's complaints were out of context and outdated. The AFL-CIO and
affiliated labor unions own an estimated .5% of CCA's stock.
Threc of the nation's largest
pension funds also opposed the
CCA-Prison Realty merger. The
California Public Employees' Retirement System, the New York City
Pension Fund System and the New
York State Common Retirement
Fund announced they would vote
against the merger because it wasn't
in the best interests of CCA shareholders. CCA offered to meet with
the pension funds but was rebuffed;
the funds own a 1.77% stake in the
company's stock.

Institutional Shareholder Services, a Washington, D.C.-based
investment advisory service, recommended that CCA shareholders
vote against the merger but that
Prison Realty investors vote for the
merger. CCA faces several individual shareholder suits which claim
the merger favors corporate executives - including CCA C.E.O.
Doctor R. Crants, who will own an
estimated 1.9 million shares in the
combined companies.
According to a Prison Realty
document filed with the SEC on
October 14, potential conflicts of
interest exist between CCA and
Prison Realty due to interlocking
business and financial relationships
among the company's directors and
officers. Doctor R. Crants, Chairman
and C.E.O. of CCA, is also Chairman of Prison Realty; his son, D.
Robert Crants III, is Prison Realty's
President. Prison Realty C.E.O. J.
Michael Quinlan is a former CCA
corporate officer.
D. Robert Crants III, Prison
Realty's Chief Operating Officer
Michael W. Devin, CCA board
member Lucius E. Burch III and
the Stephens Group are joint owners
of DC Investment Partners, LLC.
The Stephens Group is an affiliate
of Stephens, Inc., CCA's financial
advisor in connection with the merger. According to the SEC filing,
because of these and other relationships "there exists the risk that
[Prison Realty] will not achieve the
same results in its dealings with
CCA that it might achieve if such
relationships did not exist."
The proposed merger required
a majority vote by CCA investors
and a 2/3 vote by shareholders in

Prison Realty. Sixty-two percent of
CCA's outstanding shares voted in
favor of the merger; 11 % opposed
the merger and 27% did not vote.
An overwhelming 82% of Prison
Realty's shares voted to approve the
merger.
The merger will convert each
share of Prison Realty Trust into one
share of a new trust company, the
Prison Realty Corporation. CCA investors will receive .875 shares of
the new company for each share of
CCA held The merger will turn CCA
into three corporations: two service
companies 95% controlled by Prison
Realty and an operating company in
which Prison Realty has a 9.5%
interest. The resulting companies will
be 58% owned by CCA executives.
The $3 billion merger, which
CCA spokesperson Peggy Lawrence
described as a "watershed event," will
be complete as of Jan. 1, 1999.0
Sources: Business Week, Dec. 7,
1998; The Jackson Sun (TN), Dec.
4, 1998; The New York Times, Dec. 2,
1998; The Tennessean, Dec. 2, 4,
1998; PPRl, Nov.lDec. 1998; The
Knorville News-Sentinel (undated).

ERRATUM
The address for The Atlantic Monthly
on page 10 of last month's PCINB
was incorrect. The correct address is:
The Atlantic Monthly, 77 N. Washington Street, Boston, MA 021 14
(617) 854-7700 or (410) 754-8219;
www.thcatlantic.com. We apologize
for any inconvenience this caused.

p.e.I. News Bulletin

December 1998

8

Judge Blocks Private
Prison Sale

CCS Experiences
Ups, Downs

CCA May Pay $1.3m
in "Non-Fines"

On Nov. 18 an Ohio judge
prevented CCA from selling the
company's Northeast Ohio Correctional Center in Youngstown to
its sister corporation, Prison Realty
Trust. Mahoning County Common
Pleas Judge John Durkin issued a
tempormy restraining order on the
request of the Youngstown school
district, which claims that CCA is
trying to hand otT its responsibility
for the private prison.
Martin Hughes, the attorney
representing the school district, said
CCA deceived Youngstown officials
because the company agreed to oversee the prison if the city provided
tax incentives. Youngstown gave
CCA $11 million in real property
tax breaks and sold the company
100 acres of land for $1.00.
CCA 's sale of the facility is
unrelated to the company's merger
with Prison Realty (see pg.7). 0

Children's Comprehensive Services (CCS), a Nashville-based company that provides education and
treatment programs for at-risk youth
and secure confmement for juvenile
offenders, has contracted with the
Ohio Dept. of Youth Services to
operate a 300-bed facility for female
adolescents. The contract will generate around $3.7 million in revenue
over the next three years.
At the beginning of December
CCS's stock fell by almost 50%
before rebounding to $9.72, down
$2.72, after the company announced
that earnings would be hurt due to
problems at a juvenile facility in
Butte, Montana.
C.E.O. Bill Ballard said he expected quarterly profits to slip because it had taken longer than anticipated to restore operations at the
Montana facility, where two youths
had committed suicide. 0

Last April CCA was charged
with contract violations at the company's Correctional Treatment Facility, a District of Columbia prison
medical center. D.C. investigators
cited a shortage of guards and medication at the facility and recommended $1.3 million in fines.
On November 14 D.C. Dept.
of Corrections spokesperson Danyl
J. Madden denied claims that the
agency had forgiven the proposed
monetmy penalties but also disputed
they were fines. "I wouldn't characterize them as fmes," he stated. CCA
board member (and former D.C.
political insider) Joseph F. Johnson
agreed, saying, "They were deficiencies cited. They never rose to the
level of being fines."
Madden said the department
is reviewing the contract violations
and noted that CCA still may have
to pay the non-fmes. 0

Source: The Beacon-.!ournal (OH),
November 20, 1998.

Sources: The Tennessean, December
4, 16, 1998.

Source: The Tennessean, November
15, 1998.

Colorado Seeks Fifth Private Prison
Discussions about building a
privately-operated prison south of
Antonito, Colorado have received a
"pretty positive" response according
to Mayor Carla Lucero. The town
board is considering whether they
should build a prison on property
owned by the Bureau of Land
Management (BLM), which they
would contract to a private prison
operator.
Bill Miller, a BLM official,
said the agency was approached by

Mayor Lucero and local businessowner Ray Francis about the possibility of constructing a women's
facility with up to 1,000 beds.
Francis is the chairman of a town
board-appointed economic development committee.
Miller stated the BLM would
likely sell 160 acres to the town for
a prison, though the sale would require a property appraisal. "We're
making headway," said Francis, who
noted they need a private prison

company to come in and build the
facility. The town is relying on a
shortage of bed space in the state's
corrections system.
Four private prisons already
operate in Colorado, including CCA
facilities at Olney Springs, Las
Animas and Walsenburg, and a
Correctional Services Corporation
prison at Burlington. 0
Source: The Pueblo Chiefton (CO),
November 25, 1998.