Texas Prison Bid'ness

In an 8-1 opinion last week issued in Minneci v. Pollard, the Supreme Court held that an inmate in a privately contracted federal prison cannot maintain a Bivens action against facility employees to redress injuries he sustained as a result of their neglect. 

The plaintiff, Pollard, a prisoner in the Taft Correctional Institute operated by The GEO Group (formerly Wackenhut Corrections Corporation), fractured his elbows in a fall outside of the prison’s butcher shop in 2002.  He alleges that through the neglect of Wackenhut staff, he suffered immeasurable pain and “two permanently damaged arms”.

Although the Ninth Circuit found existing California tort law to be an insufficient remedy for Pollard, the Supreme Court found that "the state tort law authorizes adequate alternaive damages actions -- actions that provide both significant deterrence and compensation."

The ruling is significant for states (including Texas) “where federal prison facilities are being run by private companies”, but it is also important to note that the decision is narrowly focused on cases in which an appropriate state remedy exists that provides protection to the plaintiff.  The greater question of whether or not an employee of a private corporation under contract with the federal government “acts under color of federal law” for the purpose of Bivens remains unanswered.  

Over the next several days, Texas Prison Bid'ness will be highlighting the top five private prison stories of 2011, and looking forward to the new year.   Our #3 story is the increased exposure of the American Legislative Exchange Council and the role of private prison lobbyists in influencing legislation.

Earlier this year, The Nation and The Center for Media and Democracy released ALEC Exposed.  ALEC Exposed brought to light the actions of the American Legislative Exchange Council (ALEC), an organization that unites corporations with state legislators to “discuss” public policy and draft model legislation.  One of the most concerning areas of this public/private partnership is in the realm of criminal justice and prisons.  In fact, criminal injustice may be a more appropriate phrase.  Thanks to ALEC, the for-profit prison industry has a lot to be thankful for during this holiday season.

As The Nation reported, “ALEC helped pioneer some of the toughest sentencing laws on the books today, like mandatory minimums for non-violent drug offenders, ‘three strikes’ laws, and ‘truth in sentencing’ laws.”  According to the proponents, these laws are designed to reduce crime.  In reality, as California saw first hand, instead of reducing recidivism these laws lead to severe overcrowding.  In the end, public safety is undermined (at the expense of taxpayers) while the for-profit prison industry makes out like a bandit.  Corrections Corporation of America (CCA), the largest private prison company, played a lead role on the ALEC task force developing some of this legislation.  NPR reported last year that through its membership in ALEC, CCA was actually able to help draft model anti-immigrant legislation like Arizona's noxious SB 1070.   

Unfortunately, the negative influence of the for-profit prison industry is not limited to ALEC.  As the ACLU reported, CCA and The Geo Group, Inc. have engaged in a multi-state lobbying effort to fight smart on crime reforms.  These two corporations hired 271 lobbyists in over 32 states between 2003-2011.  Between 1999 and 2009, CCA alone spent over $18 million on lobbying, just at the federal level.  To understand their need for this army of lobbyists you do not need to read any further than Geo’s Securities and Exchange Commission filings (CCA’s is similar):

“Our growth depends on our ability to secure contracts to develop and manage new correctional, detention and mental health facilities, the demand for which is outside our control …. [A]ny changes with respect to the decriminalization of drugs and controlled substances could affect the number of persons arrested, convicted, sentenced and incarcerated, thereby potentially reducing demand for correctional facilities to house them. Similarly, reductions in crime rates could lead to reductions in arrests, convictions and sentences requiring incarceration at correctional facilities. Immigration reform laws which are currently a focus for legislators and politicians at the federal, state and local level also could materially adversely impact us.”

 The U.S. has the highest rate of imprisonment in the world, and the private prison industry clearly wants to make sure it stays that way. While taxpayer and civil rights advocates have been working to reform archaic and ineffective criminal justice laws, working to ensure that our laws reflect current research on effective ways to reduce crime and protect human rights, for-profit prison corporations are headed in the opposite direction.  To these corporations, societal impact and public safety don’t matter.  The only thing that is relevant is maximizing the bottom line.

In New Braunfels, Daniel McCullough has filed a $595 million lawsuit against the GEO Group (the total worth of company) following the 2008 death of his father Randall McCullough, who allegedly committed suicide while in custody at the Bill Clayton Detention Center. McCullough senior, an Idaho native, was in solitary confinement for over a year for a fight that was never criminally prosecuted. About a month later, the state of Idaho dropped their contract with GEO and stopped sending their inmates to the facility.

Now, two years later, Daniel McCullough seeks retribution for the illegal treatment of his father and perhaps question whether his death was a suicide or not, given the alleged record-keeping practices of some of the employees at the Bill Clayton Detention Center (Madison Venza, Courthouse News Service, "Corruption and Death Alleged at Private Jail," June 17, 2010):

In his complaint in Comal County Court, Daniel McCullough says his father "was found dead after supposedly being monitored by GEO and its personnel."

The complaint states: "McCullough's death was caused by specific breaches of duty by the Defendants... who engaged in grossly inhumane treatment, abuse, neglect, illegal conditions of confinement, and subsequent coverup of wrongdoings." McCullough claims that "GEO and its personnel were found to have fabricated evidence, including practicing 'pencil whipping,' a policy and practice of GEO to destroy and fabricate log books and other relevant evidence." 

He claims that GEO and its officers "personally engage in efforts to illegally influence public officials in Austin, Texas and in the Texas counties where the GEO prisons are located, including Laredo, Webb County, Texas. Their goal is to conceal, deflect, hide or exculpate themselves and their company from all forms of personal civil or criminal liability, censure, detriment, or punishment in order to procure and continue their lucrative contracts at the expense of the inmates' and their families' suffering. They and their company, GEO, engage in a pattern and practice of abuse, neglect, public corruption, and cover up."

McCullough claims that GEO and its officers "have a history of illegally neglecting, manipulating, and abusing inmates, and then covering up their wrongful and illegal conduct." 

He claims these abuses include "making illegal payments to governmental entities in exchange for contracts and permits; ... destruction of evidence and lying to state investigators; and misrepresentations to state and governmental entities regarding conditions inside their facilities." 

While the plaintiff may not receive $595 million in this case, as GEO likely try to settle the case for significantly less money, I do think that given the history of GEO in Texas the case will be ruled in favor of McCullough. However it turns out, we will report the findings of the court here.

The GEO Group LogoThe GEO Group's 2010 Q1 call was fairly uneventful, filled with more of the common prepared remarks to reassure shareholders. The big news was obviously their planned merger with Cornell Companies which they hope will "prove beneficial to both parties," as they said about five times. GEO also said that once the merger is completed they will go under some re-branding to think of a new way to market their company. During the question and answer session, one of the investors asked about their customers and whether or not they disapproved of the deal. GEO stated that no customers disapproved of the deal when GEO called them.

To get into the details, their Q1 revenue was $288 million, up from $259 million this time last year. With regards to their stock buyback program, 2.7 million shares were bought up at $54 million of the available $80 million. 

Wayne Calabrese did the business overview section, and he had some notable quotes about speculative building in Michigan and Colorado (which was also covered in the 2009 Q4 call):

"In Michigan, our 530-bed Northlake facility is being expanded by 1,225 beds. As you may know, we previously submitted this expanded facility in response to the Bureau of Prisons' CAR-9 procurement. In March, the Bureau decided to cancel CAR-9 due to a funding shortfall, but we believe the agency continues to have a strong need for additional criminal alien beds. We are continuing our efforts to market the facility to state and federal agencies and we are hopeful that the Northlake facility will be activated later in the year or some time next year.

In Colorado, our 432-bed Aurora Immigration Detention Facility is being expanded by more than 1,000 beds. We believe our federal clients, primarily ICE and the U.S. Marshals, will continue to require beds as they consolidate existing populations into larger facilities such as our expanded Aurora facility. However, we currently do not have a contract for the use of the expanded beds."

The state markets (other than California, Arizona, and Florida) continue to have the lowest need for private prisons, and GEO has specifically stated they are mostly going after Federal contracts, and mostly after the detention of undocumnented immigrants and "criminal aliens". Calabrese also had this quick statement about their Bridgeport facility:

"In Texas, our managed-only 520-bed Bridgeport facility is currently being re-bid with a contract decision expected by the third quarter."

Another notable instance was when CFO Brian Evans stated,

"The Newton County facility, which was about an 850-bed facility, The Jefferson facility, also in Texas, and then the Fort Worth Community Center. Between those three facilities, I'll say it was about 1,700 beds that we exited from that were lower per-diem, lower margin contracts..."

The investors took interest in this statement because they wondered why GEO would just leave a facility and make no money rather than a little money. Their reasoning was that their new speculatively-expanded facilities in Michigan and Colorado would make up for the lost beds in Texas because they claimed Federal contracts were usually more long-term than State contracts. This was also discussed in the 2009 Q2 conference call to more detail.

For the most part the call was uneventful and focused on business dealings with the merger which is under litigation. Fell free to review our coverage of the past few GEO conference calls for a richer business history of the company.

• The GEO Group's 2009 Q4 Conference Tells of Speculative Building, Stock Buybacks
• The GEO Group's 2009 Q3 Conference Call Tells of Vacancies and Sale/Leaseback
• The GEO Group's 2009 Q2 Conference Call Outlines Plans for Profit