October 2009

Hedge Fund Manager recommends buying CCA Stock

William AckmanWilliam Ackman

William Ackman of Pershing Square, L.P. recommended investing in the Corrections Corporation of America (CCA) at the fifth annual Value Investing Congress (VIC). 

According to Forbes.com ("Jailhouse Shock, Looking to cash out? Hedge fund manager Bill Ackman sees big bucks in private prison operator" October 21, 2009), Ackman says CCA is a good investment because of its 12,000 bed inventory and potential ability to incarcerate people that states like California cannot handle.  

The activist investor's company has a 9.9% stake in CCA.  During his presenation to the VIC, Ackman announced he bought CCA stock at nearly $25 a share and that he believed the stock was undervalued and really worth $40-$54 a share. 

Ackman's assessment of CCA is driven by potential profits and provides proof that persons with financial interests in mass incarceration should not be contributing to policy in this area at all.  According to Ackman, "The biggest risk for Corrections Corp. is that suddenly lots of people stop committing crimes."  He goes on to say he thinks the recession may increase crime rates. 

Ackman was also quick to brush off any concerns about falling occupancy rates at CCA, arguing that the company's aggressive building of new prisons in recent years boosted its total number of beds, and occupancy will rise as those beds are filled. Not to mention that the business is "like a hotel where you lock in the guests, and if they try to escape you shoot them."

Ackman's uninformed theories about linkages between the economy and crime rates could, at the very least, undermine the efforts that many federal and state policymakers are engaged in to deal with overcrowded prisons and bloated correction budgets.

At the most, Ackman's weak assessments could perpetuate a private prison industry that operates on speculation and thrives on the weakening of communities and families by locking up people for long periods of time. 

Following his presentation, CCA was trading up towards 2.50%.  According to Benzinga.com ("The Geo Group (GEO) and Cornell Companies (CRN) Bouncing Off Ackman Comments on Corrections Corp (CXW)" October 20, 2009), Ackman's words impacted the entire private prison industry resulting in growth in other private prison companies too. 

Ackman's announcement that he bought CXW has caused other stocks in the prison sector to spike in late day trading. Cornell Companies (NYSE: CRN) moved up a 2.3% and The Geo Group (NYSE: GEO) rose approximately 2.5% after Ackman's comments made it to the wires.

The activist investor's support of CCA is not the first time he has invested in the private prison industry.  According to the Nashville Post ("Activist investor plows into CCA", October 22, 2009), Ackman, then with Gotham Partners, also bought 6% of Prison Realty Trust as the company merged part of its operations with CCA back in 2000. 

Ackman is probably one of many private prison profiteers whose words can impact prison capacity and mass incarceration.

Coastal Bend Detention Center Passes Round Two of Inspection

Last Monday the Coastal Bend Detention Center had its second round of inspection after failing the first on 17 counts of noncompliance. Within thirty days of failing the first inspection and facing the threat of closure, LCS Corrections got their act together ("Private Robstown prison passes state inspection," October 19, 2009):

“They reviewed all the deficiencies and all were corrected 100 percent,” Harbison said. “We are 100 percent approved. The crew, the new warden and his staff are just doing an outstanding job.”

Texas Commission on Jail Standards director Adan Muñoz said the facility will be issued a compliance certificate once paperwork is complete, likely within two days.

Warden Elberto “Bert” Bravo took over as head of the facility about 10 days before state inspectors arrived and a state inspector told him to address problems or face possible closure. Bravo replaced the previous warden who resigned over management issues.
Bravo immediately hired two deputy wardens with more than 60 years of combined experience to help him shape up the facility...

Muñoz said he was surprised that the LCS staff was able to bring the facility into compliance so quickly.

“I could tell they wanted to get back in compliance, but there were quite a bit of things that needed to get done,” Muñoz said. “I have to got commend them for it.”

It is unclear as to whether or not the health hazards of the food preparation were fixed alongside the administrative failures. For more information regarding the Coastal Bend Detention Center's previous citations feel free to review our past coverage.

"A Death in Texas": More excellent coverage of immigrant detention complex from Tom Barry

Tom Barry continues his excellent coverage of the growing system of private prisons detaining immigrants for ICE, the U.S. Marshals, and the federal prison system in a new article in the Boston Review ("A Death in Texas: Profits, Poverty, and Immigration Converge," November/December 2009) online this week. 

Barry, whose excellent blogging over at the Border Lines Blog, has covered the growing immigrant detention industrial complex in the context of the mess that is the Reeves County Detention Center out in Pecos.  In this new article, Barry takes a comprehensive look at the policies and poverty that have driven poor rural Texas towns into the prison industry, and what some of the disasterous results have been.  Here's a brief sample:

Debbie Thomas, curator of the West of the Pecos Museum (commonly known as the cowboy museum), sighs when asked about the town’s only steady business over the past two decades. “Well, we don’t want to be known as a prison town, but it’s better than being a ghost town,” she says. Pecos was once a busy crossroads and hub of industry. Today, the downtown is dead.  In 1985 Reeves County became the first of a few dozen Texas counties to get into the speculative prison business, when Judge Jimmy Galindo (no relation to Jesus Manuel Galindo) persuaded the County Commissioners Court to take a bold step for Pecos’s economic future. At the time, Judge Galindo and other county leaders argued that Pecos could cash in on the surge in incarceration rates that accompanied the war on drugs. Years later, for the prison’s two expansions, the county and the private operators would rely on the federal government to send them immigrant inmates.

Indeed, immigrant detention has been central to the growth of the “privates” for more than two decades. The Immigration and Naturalization Service’s (INS) 1983 decision to outsource immigrant detention to the newly established Corrections Corporation of America gave birth to the private-prison industry; GEO Group (formerly Wackenhut) got its start imprisoning immigrants in the late 1980s.

While the nation’s nonimmigrant prison population has recently leveled off, the number of immigrants in ICE (formerly INS) detention has increased fivefold since the mid-1990s, and continues year after year to reach record highs. Assuming current trends hold, ICE will detain more than 400,000 immigrants in 2009.
The federal government’s escalating demand for immigrant prison beds saved CCA and other privates that had overbuilt speculative prisons. Over the past eight years, the prison giants CCA ($1.6 billion in annual revenue) and GEO Group ($1.1 billion) have racked up record profits, with jumps in revenue and profits roughly paralleling the rising numbers of detained immigrants.

The full article is certainly worth the time to read.  See it here, and check out Barry's other excellent work at Border Lines Blog.

Lawsuit filed on South Texas private prison corruption scandal

Former Willacy County Attorney Juan Guerra has filed a private lawsuit against several South Texas officials and former U.S. Attorney General Alberto Gonzales in conjunction with his ongoing battle to expose private prison corruption related to the construction of private prisons in Raymondville

According to the report by the Rio Grande Guardian ("KGBT: Juan Guerra files suit against Lucio, Gonzales, et al," October 20)

The Guardian’s media partner, KGBT-TV, is reporting that former Willacy County DA Juan Guerra has filed a federal lawsuit against state Sen. Eddie Lucio and 28 others. Also sued, Action 4 News is reporting, is former U.S. Attorney General Alberto Gonzales, former U.S. Attorney for Southern District of Texas Donald DeGarbrielle, and state District Judges Migdalia Lopez and Janet Leal.

Among the accusations are engaging in organized criminal activity, accepting of an honorarium, abuse of official capacity, official oppression, murder and manslaughter, Action 4 News reports. In the 35-page lawsuit, Guerra alleges that Lucio and the others used their positions to derail an investigation into private prisons in Willacy County.

In the lawsuit, Guerra, who now does pro bono work for immigrants locked up in prison, explains the investigation he mounted in April 2001 over the death of inmate Gregorio de la Rosa. He said that investigation led him to uncover "a massive kickback and corruption scheme between the private prison companies and public officials." Just before leaving elected office last year, Guerra famously got a Willacy County grand jury to indict then-Vice President Dick Cheney, former U.S. Attorney General Alberto Gonzales, Lucio and others. The case was quickly thrown out. He told the Guardian at the time that his top secret investigation was known as Operation Caca Grande.

Guerra made national headlines when a grand jury criminally indicted Cheney and Gonzales last year in related corruption charges.  Two Willacy Commissioners and one Webb County Commisser pled guilty to receiving bribes related to prison construction in the county. We'll keep you posted on what pieces of information Juan's latest effort may bring about. See some of our previous coverage of Raymondville prison scandals. 

Vigil Calls for Closure of Raymondville's Notorious "Tent City" Detention Center

Picture from KGBT-TV4 HarlingenPicture from KGBT-TV4 HarlingenMore than one hundred organizers from across Texas held a vigil Friday for the 4,200 immigrants in detention in the Rio Grande Valley and called for the closure of the controversial Willacy County Detention Center in Raymondville (Protest at Willacy County detention center, Oct. 16, 2009). The 3,086-bed Willacy County Processing Center, a private prison operated by Utah-based Management and Training Corporation (MTC) and partially constructed of Kevlar tents, is the nation's largest immigrant detention center.

In announcing the vigil, organizers pointed to evidence that alternatives to immigrant detention exist which are more humane, more effective, and more fiscally responsible than immigrant detention.

A Vera Institute study from 2000 showed that 91% of immigrants on a supervised release program attended all of their immigration hearings, and the cost of the supervision program was $12 a day, compared with the more than $30 a day ICE pays MTC to detainee immigrants at Tent City.

The Vera Institute concluded:

"Using community supervision as a substitute for detention... will increase the efficiency of the expensive detention system, and it will allow those who win relief, mostly asylum seekers, to avoid the pains of detention altogether."

In calling for closure of the Willacy County Detention Center, organizers cited Raymondville Prison Aerial ShotRaymondville Prison Aerial Shotdismal conditions which have been reported by former detainees and local news outlets. The Director of the facility in 2007 admitted to NPR that prisoners at the facility were forced to eat meals with their hands, and Harlingen's KGBT-TV reported that internal documents showed numerous documented cases that the facility fed immigrant detainees rotten or contaminated food including food infested with maggots.

The vigil also drew attention to the plight of more than 1,800 detainees held at the Port Isabel Detention Center (PIDC), located about forty miles southeast of the Willacy County Detention Center. The prison holds ICE detainees, with subcontracting services by Ahtna Technical Services Incorporated (ATSI). PIDC detainees have been on rolling hunger strike for several months protesting violations of their due process rights, inadequate medical attention, and physical and verbal abuse from ICE and ATSI officers.

Our own Bob Libal was interviewed by KGBT Channel 4's Ryan Wolf at the vigil. Check KGBT-TV's coverage out here.

The vigil was sponsored by the Southwest Workers Union, Grassroots Leadership, Coalition of Amigos in Solidarity & Action (CASA), La Union del Pueblo Entero, Proyecto Libertad, Texans United for Families, Austin Tan Cerca de la Frontera, ACLU of Texas, American Friends Service Committee - Austin, Border Ambassadors, and Texas Indigenous Council.

Previous Tent City Coverage from TPB-

Are the Hurricane Dolly Evacuations Putting Tent City in Financial Trouble? (09/09/2008)
Raymondville MTC Guard Accused of Stealing from Detainees (04/13/2008)
Guards at MTC's "Tent City" Accused of Immigrant Smuggling (11/20/2007)
MTC Prison Populations Growing, Partially Off Texas Expansion (10/23/2007)
Protests to Private Detention Centers Continue to Grow (09/04/2007)
Willacy County Goes $50 Million More in Debt to Expand MTC’s Tent City (08/30/2007)
More Detention Nightmares: Maggots in the food at MTC's Raymondville Prison (08/04/2007)
1,000 More Beds for Raymondville (AKA Prisonville) Detention Center (07/17/2007)
Raymondville Private Prisons and Prison Scandals Have Long History (06/17/2007)

LCS's Coastal Bend Detention Center Preparing for Round Two of Inspection

Last month we covered the failed inspection of an LCS Corrections facility, the Coastal Bend Detention Center (CBDC). The CBDC failed on 17 different compliance issues, with the director of the Texas Commission on Jail Standards stating the inspection results were "really close to complete incompetence" ("Robstown Prison Fails Inspection," Corpus Christi Caller-Times, September 21, 2009). Also in that article, jail Warden Elberto Bravo was quoted with projecting that he would have his facility in compliance with Texas jail standards by the end of October. 

Recently, Bravo has asked inspectors to return in mid-October for a second round of inspections:

"Texas Commission on Jail Standards director Adan Muñoz said his office has been in regular contact with the Robstown facility and Bravo sent a progress update earlier this week.

“I know the warden has been working hard to correct the issues,” Muñoz said. “I think they can get back on par. Having said that, its my understanding that they now have fired or terminated individuals and they are taking the proper corrective actions.”

The prison, completed in September 2008, received its first inmates in March.

Bravo said when he started the job shortly after Labor Day, he found an array of problems including those cited by state inspectors. Many of the issues already were being addressed when the state inspectors arrived, [LCS Vice President] Harbison said. But for a facility to be in compliance, policies and procedures had to be in place for 30 days, Bravo said. Everything also had to be correctly documented.

“Everything is corrected,” Bravo said.

Bravo will ask inspectors to return the week of Oct. 19, the first week the facility is eligible for re-inspection, he said.

The compliance issues did not decrease the number of inmates. When the facility was inspected there were 475 inmates, mostly undocumented immigrants placed there through a contract with federal agencies. Friday morning there were 478 inmates, Bravo said." ("Private prison now ready to pass inspection, new warden says," Corpus-Christi Caller-Times, October 9, 2009).

While we can take the Warden at his word that all 17 compliance issues have been fixed, there are still some remaining, unmentioned hazards not listed in the Texas Commission on Jail Standards September inspection report. The city of Corpus Christi food service inspection from June of 2009, three months after the brand new facility began to house inmates, reports that the CBDC had failed three aspects of inspection. The inspection report states there were two major violations and one minor violation. The two major violations were that the bulk foods were not stored in their original containers (a handling violation) and the paper products were cross-contaminated by being stored on the floor. The minor violation was the discovery of mouse droppings evident in the dry storage area. The facility was given 90 days to fix these violations, but no evidence has been found as to if they have or have not been rectified. The report gave the facility a total of 11 demerits for their three failures, and anywhere from 11-20 is considered in the "good" category for the Nueces County Public Health District. 

However, LCS Corrections' executive Vice President, Richard Harbison stated, “We want to be in compliance with all agencies... We want to run the best prison we can run and comply with all the rules and regulations, both state and federal” ("Private prison now ready to pass inspection, new warden says," Corpus-Christi Caller-Times, October 9, 2009). This should be the goal of any private prison company contracting with state or federal clients. If they were planning on doing so, one would imagine they would have planned better before failing 17 counts of prison standards and 3 counts of health standards. 

We will stay on the lookout for reports regarding the second round of inspections (both jail and health) to keep you informed on the quality of the CBDC.

Emerald's bid for Mineral Wells detention center dead for a second time

Private prison corporation Emerald's second attempt to build a speculative immigrant detention center in Mineral Wells is officially dead, according to a story from the Mineral Wells Index ("ICE project deal dead," October 8):

A two and-a-half year effort to bring an illegal immigrant detention center to Mineral Wells ended Tuesday night with several long seconds of silence from city council members.

A resolution to continue negotiations with Emerald Correctional Management to build a detention facility funded by non-recourse revenue bonds issued by the Mineral Wells Local Government Corporation failed when council members failed to second a motion in support.

“That’s a pretty clear message that the city council has no interest in doing this project,” Steve Afeman, chief operating officer of Emerald, said Wednesday morning. “We’re not about to go back.”

The story itself has some interesting tidbits.  After private financing for the facility fell through, the company tried to convince the city to float revenue bonds to pay for the facility's construction.  The City Councilmembers were having none of it. 

“I don’t think it’s the right thing at the right time,” [Councilmember] Terry said. “I want to see the Baker Hotel situation [succeed] and I don’t want anything to get in the way … I just think there are better deals out there and eventually they’ll come. I feel that Emerald is not being up front with us.”

Terry was the lone dissenting vote when the council agreed to accept a lower impact fee than Emerald announced they would pay the city before the site was moved, asking whether it would be a sign of things to come.

“I don’t like the idea of the city having to issue bonds,” councilman Tommy Blissitte told the Index Wednesday. “It would look bad on the city if they defaulted.”

Clearly, this is a major victory for opponents of the private detention industry in Mineral Wells and around the state.  As we've reported, this is the second time that Emerald has been rebuffed in Mineral Wells this year.  Emerald also had two similar speculative prison proposals defeated in Caldwell County last year.  In spite of the rejections, the private prison company vows to continue pitching private detention centers, even in face of an immigration detention reform that may reduce demand for ICE detention beds. 

“It’s a business decision that the city made and we respect that,” [Emerald's] Afeman said. “There are two other sites that we’ve been in contact with this week.” 

We'll keep you posted on where Emerald moves next with their speculative prison plans.  See our previous posts on Emerald's proposed detention centers in Mineral Wells:

Mineral Wells rejects Emerald detention center financing deal

From the Mineral Wells Index ("Council declines Emerald finance proposal," October 7),

Mineral Wells City Council on Tuesday declined to second a motion to finance a proposed Immigrations and Customs Enforcement detention facility.

Emerald Correctional Management Company said it was unable to date to secure private financing for the 500- to 1,000-bed facility that would house detained or arrested illegal immigrants. The company asked the city to issue public revenue bonds to build the estimated $50 million project.

After a presentation during Tuesday's council meeting, council members asked several questions, and Councilman John Ritchie made a motion to approve the financing request. However, no member of council seconded the motion, and the motion died with no further action or discussion.

What that means for the project's future is not certain. The Index is working on the story and will post it later today.

This is clearly good news for the city of Mineral Wells.  As I wrote yesterday, building a speculative detention center under the auspices that an ICE contract may appear seems less and less like a good idea.  And, floating bonds to pay for such a detention center can be a really bad idea.  Just look at the Littlefield, Texas or Hardin, Montana for examples of what can go pretty horrendously wrong when a municipality floats bonds to pay for a prison that may or may not end up with prisoners.  We'll keep you posted on how this story plays out. 

DHS to announce new reorganization plans; Will Mineral Wells move forward with Emerald's supposed ICE detention center?

Today, Department of Homeland Security secretary Janet Napolitano and Immigration chief John Morton will announce the second phase of a reorganization of the ICE detention system.  While the details are still hazy, it looks like it may not be good news for the private prison industry.  According to the New York Times ("Ideas for Immigrant Detention Include Converting Hotels and Building Models, October 6) article on the announcement,

The Obama administration is looking to convert hotels and nursing homes into immigration detention centers and to build two model detention centers from scratch as it tries to transform the way the government holds people it is seeking to deport.

These and other initiatives, described in an interview on Monday by Janet Napolitano, the secretary of homeland security, are part of the administration’s effort to revamp the much-criticized detention system, even as it expands the enforcement programs that send most people accused of immigration violations to jails and private prisons. The cost, she said, would be covered by greater efficiencies in the detention and removal system, which costs $2.4 billion annually to operate and holds about 380,000 people a year.

It always makes me wary to hear about plans to fix detention system plans by building new detention facilities.  However, the move away from private prisons and county jail contracts could be a good thing.  It's too early to tell if the moves will include closing some of the large and controversial private prisons holding immigrant detainees such as MTC's Raymondville "Tent City." 

One thing is for certain, if I were a city in negotiations with a private prison company for a new 500 or 1,000 bed speculative ICE detention center, I may rethink my plans.  That's exactly where Mineral Wells is in its plans for a detention center operated by Emerald Corrections.  A first proposed speculative detention center was rejected earlier this year after public outcry.  Emerald has been in negotiations with the city on a second proposed site, and the city will vote later today on whether to continue those negotiations.  We'll keep you posted on developments.