One On One With Diane McClure

By Roger M. Williams

In almost three decades as an executive in the corrections field, Diane McClure has acquired an unusual perspective on privately run prisons. That's because, after starting her career in a public facility for juveniles, she joined Corrections Corporation of America in the early 1980s and subsequently worked for three of its rivals. At the third of those, she was co-founder and CEO.

Two years ago, after a bitter disagreement with that company's other managers, McClure left the business. She and her husband settled in the Blue Ridge Mountain town of Tyro, Va., where she now raises Shiloh Shepherd dogs — and where she reflects on her disillusionment with important aspects of the private-prison business.

You have said, "Public prisons should have the public — not private companies — as their masters." Why have you come to feel that way?

I came to realize that, in any private enterprise, the final objective, whether stated or not, is to create increased value for the shareholders. That's a particular problem when it comes to public safety, because the public should be the sole beneficiary. So there are serious issues when bottom-line considerations compete with correctional services. And when you look at the private-company data on those services, you find many breaches — of contract and of the public trust.

You were obviously successful as a manager of private prisons. When did you start to feel the reservations you've described?

Frankly, I had no great interest in the general profit-vs.-nonprofit matter until after the Sept. 11 attacks, when it came out that the same violations occurring in the private-prison business were also occurring with private com-panies that were operating and responsible for airport security. The debate over that made me intensely interested in the issue of profit making in the public sector — especially where the profit-makers had demonstrably failed.

But before that, I left the second company because of concerns over such firms being able to deliver the services they were selling. I felt they couldn't do that for the fees they were being paid by governments.

What kinds of services weren't they delivering?

Professional services related to employee hiring, background screening and training, and services ensuring sound security practices. The companies were lax in following their own policies and procedures as well as in adhering to contract requirements. And if you don't follow them in corrections, you put the lives of the staff, inmates and members of the community at risk.

A final straw in convincing me was the riot that took place at an Elizabeth, N.J., immigration facility in June 1995. The suit that stemmed from the riot is still in litigation, and I'm a named defendant.

You mentioned government. Does it bear some responsibility for the shortcomings of private prisons?

Absolutely. Government at various levels has applied increasing pressure on companies to come up with the lowest bid. In addition, governments laid down legislative requirements: Companies competing for the contract had to come in at least 5 to 7 percent lower than it was costing the government to run the facilities — and/or the company had to "streamline" operations, eliminating "duplication" and "redundancies." What are called redundancies, however, are often nothing more than checks and balances, and valuable ones at that.

On the whole, the private-prison sector might have done much better if companies hadn't relentlessly pursued market share in terms of "beds under contract." Although corrections professionals run the operations side of the business, bottom-line guys run the investment side, and the tension between the two increased as more and more companies entered the field.

The professionals generally didn't have the capital to manage the business, and the entrepreneurs weren't comfortable with the professionals managing their money. So the professionals were caught in the middle: They had to deliver correctional services to the government that had contracted for them and also deliver financial profits to the entrepreneur.

In addition, there was the issue of stock options. In the industry's go-go days, in the 1990s, many companies posted — right at the prisons — what the stock was worth each day. During that time, many private-prison administrators were millionaires, at least on paper.

What has made prisons so attractive to business people seeking profits?

Partly it's that, as the saying goes, "Inmates have no lobbyists," that is, no or few people who can effectively stand up for them. But basically, it's because, at least in the years when this was a "sexy" industry, you could produce a good return without a lot of corner cutting. Trouble was, as more companies entered the business, the pressure for low [contract] bids grew, and [profit] margins got smaller and smaller.

Are privatization and profit inherently bad in corrections?

There's nothing wrong with the profit motive in itself. It's the way the motive is directed that can be the problem. In a government-contract system, when the payment for the services rendered is not sufficient to provide a fair return to investors, services will almost always end up being compromised in favor of shareholder value.

In terms of expansion and profits, what's your prediction for the industry?

I don't know that the go-go years will ever return. For that to happen, governments will have to recognize that they can't award contracts on the basis of the lowest bid, and companies will have to learn that quick profits are not the way to long-term viability.

What are the most effective steps unions like AFSCME can take to effectively combat prison privatization?

For one thing, unions could study what the private sector has done more cheaply than government yet done successfully. For another, they could do a better job of monitoring private companies' operations and pushing for higher fines for breaches of contract. They could do better in public relations, too.