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Private Prison System out of Control

Law and Order under Donald Trump expected to create boom for Private Prisons

Prison cell

Deutsche Bank has discovered at least two crisis-proof investments. In a recent report, it said it was bullish about the prospects for a pair of U.S. companies for which it recently issued "buy" recommendations. These companies are CoreCivic and GEO Group, the two largest operators of private prisons in the United States.

Trump's tough law-and-order policies, which have resulted in increasing arrests of suspected illegal aliens, "reinforces our optimism," analyst Kevin McVeigh wrote in the report. The Federal Bureau of Prisons and the U.S. Immigration and Customs Enforcement are both calculating that an additional 12,000 prison beds will be required in the 2018, a development likely to benefit private prison operators.

Roughly 1.7M Americans are behind bars -- one-tenth of them in private for-profit prisons. Government run correctional facilities are hopelessly overpopulated. The controversial reliance on private prisons has been blasted by critics as a form of modern-day slavery, both because of the wretched conditions and because 56 percent of the total prison population is black or Latino.

After the release of a damning report by the DOJ's independent inspector general in 2016, Barack Obama decided to phase out private prisons by allowing existing contracts to lapse without renewal. The DOJ found disproportionate violence and fatalities in private prisons. Then-Deputy Attorney General wrote that the focus should return to "reducing recidivism and improving public safety".

The current Attorney General has since reversed the policy and ordered federal prosecutors to seek the toughest possible sentences against crime suspects in the future -- the type of sentences that Obama had sought to eliminate, particularly for nonviolent drug offenses.

CNN described it as the "golden age" for private prisons.

JPMorgan Chase stated "the stocks are attractive" and warned about "negative headlines" (escapes, riots or other disruptions) and lawsuits relating to civil rights or sexual misconduct against prisoners but added that insurance would cover everything.

GEO Group known as the Corrections Corporation of America generated revenues of $1.7B in 2016 with its more than 70 prisons and 70,000 prisoners.

Analyst McVeigh wrote: "thanks to increased border protection, investors could now hope for higher yields".

During the election campaign, CoreCivic donated $254K to the GOP and GEO spent even more, donating $1.1M to the Republicans.

Top 5 Secrets of the Private Prison Industry

There are 2.3 million prisoners behind bars in the United States, costing the federal government about $55B a year. Ten percent of all prisons in the U.S. are privately operated.

In 1984 the Corrections Corporation of America revolutionized the way prisons in the United States operate. The company took over a prison facility in Hamilton County, TN — the first time a private operator was contracted to run a jail. More prison companies were created and contracts continued to flow — between 1990 and 2010 the number of privately operated prisons in the U.S. increased 1600%. The increase in privately operated prisons has outpaced both the growth of public prison facilities and even the U.S. population.

Private prisons bring in about $3 billion in revenue annually, and over half of that comes from holding facilities for undocumented immigrants. Private operations run between 50% to 55% of immigrant detainment facilities. The immigration bill battling its way through Washington right now might also mean good things for private prisons. Some estimate that the crackdown on undocumented immigrants will lead to 14,000 more inmates annually with 80% of that business going to private prisons.

The prison industry has also made money by contracting prison labor to private companies. The companies that have benefited from this cheap labor include Starbucks, Boeing, Victoria's Secret, McDonalds and even the U.S. military. Prison laborers cost between 93 cents and $4 a day and don't need to collect benefits, thus making them cheap employees.

Federal Prison Industries, a company that contracts out prison labor, made over $900 million in revenue last year. FPI has prisoners working in apparel, clean energy, printing, document conversion and call centers. While FPI claims that prisoners are gaining real-world skills and learning trades, some argue otherwise.

While CCA and The GEO Group claim that private prisons bolster competition and efficiency in the prison system, Christopher Petrella, a prison policy analyst and author, argues that it's the opposite. "What's fascinating is that two companies alone constitute 75% of the entire 'private prisons market' .... unfortunately creating a duopoly," he says.

CCA and The GEO Group made $1.7 and $1.6 billion in annual revenue last year. CCA operates 67 federal and local facilities and has about 40% market share.

These companies are not classified as correctional facilitators; they consider themselves real estate investment trusts to limit corporate tax liability. They derive about 40% of their revenue from the federal government — and are exempt from paying federal taxes.

More Jobs Lost as the Government decides to have Military Uniforms made by Convicts

Apparel Worker

Small businesses are struggling to stay afloat because they have to compete with super cheap prison labor.

Federal Prison Industries (FPI), a corporation owned by the federal government, employs more than 13,000 inmates at wages from 23 cents to $1.15 an hour, making everything from military apparel to call center and help desk support to solar panels and selling the products to the Pentagon and other federal agencies. FPI operates inside 83 federal prisons and made more than $900 million in revenue last year.

In March Tennier Industries, which also makes military clothing, fired more than 100 employees after losing out to FPI on a new $45 million contract from the Defense Department.

In May American Apparel put 175 people out of work when closed an Alabama plant for the same reason. Owner Kurt Wilson expressed his frustration that he pays workers $9 an hour with full benefits and yet "we're competing against a federal program that doesn't pay any of that," according to CNN.

American Power Source will shed about 260 jobs when they close plants in Alabama and Mississippi on Nov. 1 because of competition from FPI, the AP reports. "There's a federal program tanking our industry," Kurt Courtney, director of government relations at the American Apparel and Footwear Association, told CNN. "The only way for workers to get jobs back is to go to prison. There's got to be a better way."

Last month Kentucky apparel factory Ashland Sales and Service, Co. had to reach out to state Sen. Mitch McConnell to prevent FPI from winning an Air Force contract he needed to keep his Olive Hill factory -the town's biggest largest employer- from being forced to shut down.

Founded in 1934, FPI's operations are patterned after a "mass-production, low-skilled labor economy of the 1930s," according to a report last year from the Congressional Research Service. Dianne Cardwell of the New York Times called the company "inefficient by design" because it employs as many inmates as possible, "which diminishes the advantage of its low wages."

Despite a Small Business Administration ruling in 2005 that FPI cannot win service contracts set aside for small businesses, FPI wins federal contracts over private companies as long as its bid is comparable in price, quantity and delivery.

“This is a threat to not just established industries; it's a threat to emerging industries”
--Bill Huizenga

That's because intricate laws, regulations and policies "requires federal agencies to buy inmate-made items even if they are more expensive than like items made by private companies," AP notes.

Representative Bill Huizenga, who has sponsored legislation to overhaul the industry, said "We know that in the recovery, many new jobs are coming out of small businesses. It makes no sense to strangle them in the cradle."

Chris Reynolds, president of Campbellsville Apparel in Kentucky, told NYT that his employees "just cannot believe the fact that a prisoner who should be paying a debt to society is being promoted through the federal government to take a job from an American taxpaying citizen".

Private prison companies, however, essentially admit that their business model depends on locking up more and more people. For example, in a 2010 Annual Report filed with the SEC, Corrections Corporation of America stated: "The demand for our facilities and services could be adversely affected by . . . leniency in conviction or parole standards and sentencing practices . . ."

The current incarceration rate deprives record numbers of individuals of their liberty and disproportionately affects people of color.

The Caging of America

For a great many poor people in America, particularly poor black men, prison is a destination that braids through an ordinary life, much as high school and college do for rich white ones. More than half of all black men without a high-school diploma go to prison at some time in their lives. Mass incarceration on a scale almost unexampled in human history is a fundamental fact of our country today—perhaps the fundamental fact, as slavery was the fundamental fact of 1850. In truth, there are more black men in the grip of the criminal-justice system—in prison, on probation, or on parole—than were in slavery then. Over all, there are now more people under "correctional supervision" in America—more than six million—than were in the Gulag Archipelago under Stalin at its height. -- The New Yorker