Private prisons profit from mass incarceration. One of the largest private prison operators is Corrections Corporation of America (CCA). The company is a publicly traded real estate investment company specializing in owning and operating prisons.
The format of the company is similar to a partnership or trust, whereby shareholder equity interests participate in the profits and losses of the company. Known as a Real Estate Investment Trust (REIT), the format allows investors to participate directly in the mass incarceration boom.
With some prisons closing and prison populations headed down, one may wonder about the merit of such an investment. According to CCA, it is the country’s largest owner of partnership correction and detention facilities. It is also one of the largest prison operators in the United States. The company owns 53 correctional and detention facilities and manages 16 other facilities, which are owned by governments.
Capacity
CCA operates institutions with a total design capacity of about 90,000 beds in 20 states. As the fifth largest provider of prison bed space, the company stands behind only the federal government and three states in terms of the numbers of inmates housed in its facilities.
As an investment, perhaps the company stands as a great real estate investment program. However, as Kanye West cited in his rap music, “America’s New Slaves” do not fare very well at the hands of a private prison operator. According to the political publication, The Nation, that negative view is justified because private prisons are a bad investment.
“Profiting off mass incarceration is a dirty business,” said Jesse Lava and Sarah Solon, authors of “Why This Company Wants You in Prison” (The Nation, Nov. 5, 2013). In state after state, the private prison concept represents a failed approach to public safety. Private prison companies have a corrupting incentive, they said. It is clear that many people have a perverse incentive to “see you in prison.”
According to The Nation’s research, CCA squanders taxpayer money and runs facilities rife with human rights abuses. Not unlike prison guard unions who have paid millions to sponsor “lock – em – up – forever” initiatives, there are many corrupting incentives in the private prison concept according to the magazine.
One of the most perverse incentives is the drive to cut costs at the expense of health and safety of the inmates. Increasing profits and pay by cutting corners on basic services to the inmates, is exceedingly perverse, according to the American Civil Liberties Union in its “Prison Profiteers” video.
“When people seek to profit from prisons, it creates a powerful incentive to cut corners in the services they’ve been hired to provide,” said The Nation. Another incentive is to promote the bottom line, whether or not it secures public safety or promotes any taxpayer value.
Profits
Last year CCA made $1.7 billion, and their profits are often at the expense of their wards. Recently, U.S. District Judge David Carter held the company in contempt of court for persistently failing to adequately staff its facilities at the Idaho Correctional Center. Carter indicated the company had the ability to properly staff the facility, but he found the company had consistently failed to do so. He also said the company continuously under-reported the degree of staff shortages.
Rejecting company contentions that the warden and company officials did not know about the understaffing, the judge indicated the company had been warned about its staffing problems multiple times. Understaffing may have contributed to the bottom line profits. Although CCA failed or refused to correct the problems, it is clear that at a minimum, 4,800 hours of vacant security post time was unfulfilled during 2012. The judge also said that there is no reason to believe that the problem began in 2012.
Judge Carter said that the company had lied to the court about whether or not officers were at their posts. Today, the Idaho State Police is investigating whether CCA committed any crimes, and the judge has appointed an independent monitor to oversee staffing at the prison.
