The Record — For-Profit Prisons Raise Quality Concerns

Quality versus Profit

In a for-profit environment every dime not spent adds to the company’s bottom line. The lack of services in a for-profit environment has been documented in studies, press clippings and state audits. For example, a comparison of a CCA-run prison with public prison services in Minnesota found that the public programs were fully licensed with instructors that were more likely to have proper credentials than the for-profit prison. The study also revealed that inmates’ participation in education and vocational classes was more likely to be full-time in the public prisons. Intensive, full-time chemical dependency treatment programs were more available in the public system, while the for-profit prison failed — for nearly two years — to provide a full-time treatment program required by the service contract.⁴³

The profit motive not only provides an incentive to hold down costs, it also provides an incentive to increase revenues. One way to increase revenues is to increase an inmate’s sentence. For example, a state appointed monitor at the Pahokee Youth Development Center in Florida discovered an internal Correctional Services Corporation memo “directing staff to hold juveniles beyond their scheduled release dates to increase the company’s income by $3,400.”⁴⁴ The company also billed the government for schooling it didn’t provide. In another example, a story about for-profit prisons pointed out that some CCA guards in Tennessee say privately that they are encouraged to write up prisoners for minor infractions and place them in segregation. Inmates in segregation not only lose their good time, but also have 30 days added to their sentence — a bonus of nearly $1,000 for the company at some prisons.⁴⁵ These and other examples illustrate that for-profit firms can increase their profits by providing less programming than they are obligated to provide and by holding inmates longer than they should.

No public access

Services provided by the public sector are accountable to the public. They are governed by open meetings and open records requirements. For-profit firms typi-cally are not, so it can be difficult to assess the quality of services or where money is actually being spent. Even when there are complaints of abuse or poor contractor performance, a for-profit company may not be required to provide public officials and the press with important information. An example of the difficulty the public may encounter in getting information from for-profit prison firms occurred when the Kentucky Department of Corrections uncovered numerous cases of improper use of canteen profits by U.S. Corrections Corporation, a for-profit operator. When The Courier-Journal newspaper wanted to investigate the improprieties, it could not get financial information about U.S. Corrections Corporation because Kentucky law specifically exempted from public disclosure the financial records of for-profit prison companies.⁴⁶ Even when the law does not exempt disclosure, it still may be difficult to obtain records from a for-profit company.

For-profit prison firms can claim that they cannot share information because it is proprietary. While commercial privacy is important, the need for public disclosure in a correctional setting is crucial. Too often, however, the public is left in the dark. For instance, after five inmates escaped from a CCA-operated facility in Youngstown, Ohio, a legislative advisory group could not get clear answers from the firm.⁴⁷ At investigative hearings, CCA’s corporate attorney provided its warden with CCA’s responses to legislators’ questions. In a state-run facility, the warden would have been required to answer the legislators’ questions. In the aftermath of the escapes, CCA also denied access to the facility to the Ohio Correctional Institution Inspection Committee, which is comprised of legislators who are authorized to inspect for-profit as well as state-owned prisons.⁴⁸

Some organizations have had to sue for-profit prison operators to get information. In Florida, for instance, the ACLU had to sue Wackenhut to get records about sexual harassment and abuse of prisoners. This came shortly after The Ledger, a Lakeland, Fla., newspaper, had already won a similar suit against Prison Health Services Inc., a for-profit prison health care provider.⁴⁹ While various organizations have had some success using the legal system to acquire for-profit prison records, small communities may not have the resources to battle multi-national corporations.

Public disclosure is not only an issue when a for-profit prison is up and running; it is an issue even before the project gets off the ground. Many for-profit prison deals seem to get done with little, if any, public input. When the public is well informed, for-profit projects can cause serious concern. An example of the public’s ability to have meaningful input into this process occurred in 1999. Alternative Programs Inc. was seeking to build a for-profit prison for out-of-state inmates in Arizona. Local legislators in Yuma County sought public input when they were considering a zoning ordinance that would have allowed the 2,000-bed facility. Foes of the for-profit proposal aired their concerns. When it was all said and done, Alternative Programs Inc. backed out of the project because it had been told originally that there would be no public comment and the company felt it was subjected to “emotional untruths.”⁵⁰ A similar victory for the public also occurred in 1999 when Washington, D.C., community activists convinced zoning officials to reject CCA’s application to build a prison in one of the poorest sections of the nation’s capital.⁵¹ The public is entitled to know about projects that will have a major economic impact on their communities; however, too often for-profit prisons are the result of backroom deals.

Poor jobs and working conditions

A major factor driving the development of for-profit prisons, especially spec facilities, is the promise of jobs. The quality of jobs created by for-profit prisons, however, may not provide much benefit to a community. For-profit prisons pay lower salaries and benefits than public prisons. According to The Corrections Yearbook, 1998, the annual starting salary for for-profit prison guards was $17,344, compared to $21,246 for public corrections officers.⁵² Because the private sector statistics were self-reported while the public sector information comes from public records, the pay discrepancy may be even greater. In a for-profit prison setting, the savings in pay from prison employees who put their lives on the line every day is transferred to company corporate executives and shareholders. This was recently illustrated in Tennessee. In 1998, CCA lobbied the Tennessee legislature to allow it to operate up to 70 percent of the state’s prisons. As part of its decision-making, the legislature analyzed one of its contracts with CCA. The study revealed that the state did not save any money by contracting with CCA. The firm, however, did cut costs, and reported a 2 percent profit, by spending almost $2 million less on annual salaries and benefits for its employees than the state spent.⁵³

For-profit prison companies also tend to provide inferior benefits. They further reduce their labor costs by giving employees stock instead of a real pension. These employees’ entire retirement benefit can be wiped out in the blink of an eye. In 1999, for instance, Wackenhut’s stock (NYSE:WHC) fell from approximately $29 a share to under $10. CCA’s stock (NYSE:PZN) fell from approximately $24 to $4.50. Employees with this stock saw their retirement assets plummet in value. A prison is a major employer in many communities. If employees of these prisons have inadequate retirement income, that could place a serious strain on the economy. There is evidence that the for-profit firms also skimp on health benefits. For example, when CCA took over the Silverdale Penal Farm in Hamilton County, Tenn., it lowered wages and eliminated benefits. New employees hired by CCA were not provided with family hospitalization insurance that the county had provided when it operated the facility. CCA replaced the employees’ retirement plan with a stock program that gave employees 1 percent of their salaries per year in CCA stock.⁵⁴

Reports and audits

Some contracting jurisdictions have chosen to audit their for-profit prison operations and published reports indicate that several firms did not score well on these audits in 1999. For instance, a periodic audit by the Georgia Department of Corrections criticized CCA for a lack of inmate health care. The audit also revealed that CCA kept unmanned posts and allowed inmates access to tools that could be used as weapons.⁵⁵ Later in the year, a subsequent audit of the same facilities revealed that CCA was “still not complying with its multimillion-dollar contract.”⁵⁶ Other contractors have been found to suffer from similar shortcomings when governments have the resources to audit them. For instance, a 1999 internal audit in New Mexico revealed that Wackenhut had numerous deficiencies at one of its facilities, including deficiencies in prisoner classification, discipline and programs.⁵⁷

Another indicator of contractor performance is whether contracts are terminated or whether contractors are found to be in violation of the contract. The following are some notable contract terminations:

• On Nov. 1, 1999, Texas state officials took over security and food service operations at Austin’s troubled state jail.⁵⁸ A full takeover occurred on Nov. 8. The state canceled the contract with Wackenhut amid an ongoing criminal investigation into allegations of neglect, falsification of records, and sexual misconduct and abuse.⁵⁹ There was also a chronic staff shortage at the facility.



• In September 1999, Correctional Services Corporation issued a press release saying its contract to run the Tallulah (Louisiana) Correctional Center for Youth ended because the state refused to refer enough youth or provide enough funds to make Tallulah profitable.⁶⁰ The state had already moved in and assumed operational control of Tallulah prior to CSC’s announcement because of a series of mishaps by CSC.



• Correctional Services Corporation’s July 28, 1999 news release boasted that general revenues for the second quarter of 1999 were nearly 45 percent over those for the comparative period in 1998.⁶¹ Overall, the company made $2 million during that period.⁶² Investors in CSC did not find a trace of the recent scathing reports of problems at the CSC-run Pahokee (Florida) Youth Development Center in company reports or press releases. By August, the final setback for Correctional Services came when the Pahokee center failed its second state review in a row, getting poor scores on security, schooling, case management and counseling. The company, saying only that the center had not met expectations, decided to end its contract with the state eight months early.



• In 1998, a series of problems over a 13-month period at the privately run Teller County (Colorado) Jail — including two suicides and an escape by a suspected killer — prompted cancellation of a contract with CiviGenics Inc. of Milford, Mass. According to Sheriff Frank Fehn, the cancellation was due to “a general dissatisfaction with the way CiviGenics has operated, and we think the taxpayers deserve more.”⁶³



• In 1998, citing evidence of sexual and physical abuse and a spate of management problems, Colorado officials closed the High Plains Youth Center for violent, troubled boys. The center was run by the Denver-Based Rebound Corporation. The state lunched an investigation of High Plains after a Utah boy hanged himself. The inquiry determined the facility was unsafe and rife with abuse and inadequate care.⁶⁴



• Rebound has a track record of poor performance in other states as well. In 1997, Florida terminated a contract with Rebound to run a juvenile facility after a string of assaults on guards and an inmate riot. In 1993, Maryland terminated a contract with the firm to run the Charles H. Hickey Jr. Juvenile Facility in Baltimore County after more than 80 inmates escaped in one year.⁶⁵



• In 1997, the Oklahoma Department of Corrections canceled its contract with Capitol Correctional Resources, a subsidiary of the Jackson, Mississippi-based Capital Services. The DOC was housing Oklahoma inmates in the Limestone County Detention Center in Groesbeck, Texas, under a contract with the for-profit prison operator. The DOC cited concern over the center’s use of force, including the frequent use of pepper spray. Oklahoma officials believed the center was using unsound correctional practices, and on-site visits, reviews of incident reports and what it called a lack of progress in resolving certain issues only confirmed their suspicions.⁶⁶



• The CCA-run Columbia Training Center opened in July 1996 to ease overcrowding. A year later, after continued dissatisfaction with CCA, South Carolina ended its pact with the for-profit prison company.⁶⁷ There were reports of prison guards beating 13-year-old inmates, hogtying them, and barring them from bathrooms. There were also two escapes.



• In 1996, Utah terminated its contract with Dove Development Inc. (based in Greenville, Texas), which operated the Frio County (Texas) Detention Center.⁶⁸ Utah sent 100 prisoners to the for-profit facility in Texas. Several of them escaped by basically bolting through a door. These were dangerous criminals, including killers. Security was lax and Utah officials were, for the most part, left in the dark. Yet the state of Utah, not the for-profit prison operator, ultimately was liable for the escapees.⁶⁹

Absent the ability to properly monitor for-profit prison operators, companies can overcharge and falsify records. Some get caught, but considerable damage may be done. Consider these examples:

• The for-profit prisons operated by Wackenhut in New Mexico provide little schooling, job training or library books, although the state pays Wackenhut for these services.⁷⁰



• Correctional Services Corporation billed the Pahokee County, Fla., government for schooling it didn’t provide.⁷¹



• The Oklahoma Board of Corrections cancelled a contract with CCA after finding out that the company was billing the state for $858,000 more than expected.⁷²



• Montana canceled its contract with the Houston-based Bobby Ross Group after it discovered that the company had double-billed Montana for outside medical services by $54,000. Montana was housing more than 250 inmates at the Dickens County Correctional Center in Spur, Texas.⁷³

In 1998 and 1999, there were several significant settlements against for-profit prison firms that indicate serious quality problems. In the nation’s largest prison abuse settlement, Capitol Correctional Resources (a for-profit, prison operator), the state of Missouri, and Brazoria County, Texas, agreed to a proposed $2.2 million settlement for the prisoners abused at the for-profit prison in Brazoria.⁷⁴ In another major settlement, CCA agreed to pay inmates $1.65 million to settle a class action lawsuit that claimed the facility in Youngstown, Ohio, was unsafe.⁷⁵ A jury in U.S. District Court ordered U.S. Corrections Corp. to pay $100,000 in the 1996 death of an inmate at the Marion Adjustment Center in St. Mary, Ky. An attorney representing Walter Thurman’s estate said U.S. Corrections ignored “clear warning signs” Thurman was ill and waited more than seven hours to take him to a hospital.⁷⁶ U.S. Corrections was acquired by CCA in 1998.

Little competition in for-profit corrections

Privatization advocates argue that competition in the for-profit sector is the key to quality. This argument holds that for-profit operators, knowing they could be replaced if they fail to deliver, have incentives to provide quality service. This theory assumes a system in which there is an adequate supply of competitors. However, this is definitely not the case in the for-profit corrections industry. In general, the market is characterized by many buyers (in this case the jurisdictions) and a very limited number of sellers.

CCA and Wackenhut control over 75 percent of the privately managed beds in the United States. The big two are often the only companies with enough resources to go after a contract. The use of speculative prisons, which only CCA and Wackenhut have been building, has further increased their competitive advantage over the rest of the industry. Speculative prisons often result in a sole-source contract, which cannot be readily replaced because the company owns the facility.

The market-efficiency argument also assumes that the buyer has adequate information to make a decision. The lack of public access to for-profit prisons means that the public officials who buy the service, as well as the taxpayers that pay for it, do not have adequate information. Spec prisons pose a unique challenge. A host jurisdiction may have difficulty getting information about a spec facility, let alone the contracting state. A contracting state may not find out about problems at a contract facility until it is hit with a lawsuit or there is extensive media coverage.

⁴³ David Jackson, “Broken Teens in Correctional Facilities Left in Wake of Private Gain,” Knight-Ridder, September 27, 1999.

⁴⁴ Eric Bates, “Prisons For Profit,” The Nation, January 5, 1998, pg. 15.

⁴⁵ R.G. Dunlop, series: “Cutting Corners; Profits and Private Prisons; Speaking Softly, Carrying No Stick,” The Courier-Journal (Louisville, Ky.) December 21, 1993, pg. 01A.

⁴⁶ Mark Tatge, “Panel to Address Violence at Private Prison,” The Cleveland Plain Dealer, August 20, 1998, pg. 5B.

⁴⁷ Mark Tatge, “Inspectors Question Youngstown Prison Access; Private Facility Refused to Let Some Inside,” The Cleveland Plain Dealer, May 9, 1998, pg. 4B.

⁴⁸ “When Private is Public,” The Ledger (Lakeland, Fla.), June 8, 1999, pg. A6.

⁴⁹ “Plan to Build Jail is Scrapped,” The Arizona Republic, October 9, 1999, pg. B5.

⁵⁰ Nancy Zuckerbrod, “Commission Votes Against Zoning Land for Prison,” Associated Press, June 15, 1999.

⁵¹ Camille Camp and George Camp, The Corrections Yearbook, 1998 (Middletown, Connecticut: Criminal Justice Institute Inc., 1998), pgs. 148, 398.

⁵² “Study: CCA Makes Money Running State Prison Mainly by Slashing Personnel Costs,” The Knoxville News-Sentinel, March 23, 1998, pg. A4.

⁵³ “Tennessee County Finds Pitfalls in Private Prison,” The Phoenix Gazette, April 7, 1990, pg. A15.

⁵⁴ “Audit Criticizes Management of Two Private Prisons,” Associated Press, October 2, 1999.

⁵⁵ “Growing Pains for 2 Prisons: Private Facilities Have Glitches, Audit Says,” The Florida Times-Union, December 5, 1999, pg. B-1.

⁵⁶ Lou Fecteau, “Audit: Hobbs Prison Deficient,” Albuquerque Journal, June 16, 1999, pg. A1.

⁵⁷ Mike Ward, “State Takes Charge of Food Service, Security at Jail,” Austin American-Statesman, November 2, 1999, pg. B3.

⁵⁸ Leah Quin, “Travis to Jail: Stay Out of Probe: County Wants Inquiry into Whether Wackenhut Corrections Corp. Wrongly Paid Witnesses,” Austin American-Statesman, September 23, 1999, pg. B1.

⁵⁹ David Jackson, “Broken Teens in Correctional Facilities Left in Wake of Private Gain,” Knight-Ridder, September 27, 1999.

⁶⁰ Sue Burrell and Michael Dale, “Trading on At-Risk Kids Leaves Company Poorer, Not Wiser,” The Palm Beach Post, September 17, 1999, pg. 23A.

⁶¹ Gary Kane, “Firm Was Losing Money on Pahokee Youth Prison,” The Palm Beach Post, August 27, 1999, pg. 7B.

⁶² Ardy Friedberg, “Teller County Fires Private Jail Company,” The Gazette (Colorado Springs), August 19, 1998, pg. A1.

⁶³ Tom Kenworthy, “Colorado Shuts Down Private Juvenile Jail,” The Washington Post, April 22, 1999, pg. A03.

⁶⁴ Ibid.

⁶⁵ “Prison Contract Canceled,” Tulsa World, September 27, 1997, pg. A8.

⁶⁶ Robert Tanner, “State Ends Prison Pact,” The Herald (Rock Hill, S.C.), February 20, 1997, pg. 1B.

⁶⁷ Abt Associates Inc., “Private Prisons in the United States: An Assessment of Current Practice,” July 16, 1998, pg. 53.

⁶⁸ “Private Prisons Are a Bad Idea,” Salt Lake City Deseret News, July 21, 1998, pg. A08.

⁶⁹ Gregory Palast, “Free Market in Human Misery,” The Observer (United Kingdom), September 26, 1999, pg. 9.

⁷⁰ David Jackson, “Broken Teens in Correctional Facilities Left in Wake of Private Gain,” Knight-Ridder, September 27, 1999.

⁷¹ Barbara Hoberock, “Private Prison Loses Its Contract,” Tulsa World, September 5, 1998, pg. 17.

⁷² Kathleen McLaughlin, “Montana Terminates Contract With Private Texas Prison,” Missoulian, September 24, 1997, pg. A1.

⁷³ “Brazoria Agrees to Settlement of Inmate Suit,” The Fort Worth Star-Telegram, June 20, 1999, pg. 10.

⁷⁴ “Policing the Prison; Settlement with Private Lockup in Youngstown Should Cut Violence and Mismanagement,” The Cleveland Plain Dealer, March 3, 1999, pg. 8B.

⁷⁵ “Company Ordered to Pay $100,000 in Inmate’s Death,” Associated Press, July 9, 1999.