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GEO Group Presents to Lehman Brothers Investors

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Last month, the GEO Group presented information at the Lehman Brothers 2008 High Yield Loan and Syndicated Loan Conference. On the call, George Zoley, the company’s Chairman and CEO, discussed why GEO is a good investment for Lehman Brothers stockholders. The call makes clear that private prison profiteers continue to exploit the poor sentencing policies in the United States and across the world that result in the over use of incarceration as a social policy.

It was truly remarkable and disturbing how Zoley talked about the nation’s significantly large prison population in terms of profit and revenue. His presentation mentioned nothing regarding the human factor of prison expansion and how GEO’s large market share contributes to overuse of a failed social policy and the disintegration of communities.

Zoley mentioned that GEO has a total global bed capacity of 59,000 beds. That makes GEO the 7th largest prison in the U.S. directly after the state of New York; according to GEO, Texas is number three after only California and the Federal system. That number includes beds in operation and those under construction in 61 U.S. facilities and 6 international facilities in Australia, South Africa, and the United Kingdom.

According to Zoley, GEO has 7,400 beds under development in Texas alone for completion over the next few months. Those beds include:

Facility Ownership
Beds Under Development
Annual Operating Revenues
Exp. Start Date
Montgomery Co. Detention Center
Managed Only
Maverick County Detention Center
Managed Only
Laredo USMS Facility

Zoley also mentioned that two facilities are empty and GEO is looking for customers at the federal or state level to contract with. One of those prisons includes the notorious Coke County Juvenile Justice Center. The Texas Youth Commission (TYC) contracted with GEO to provide beds in the facility until late last year when scandals were widely reported in the news that young prisoners were not given proper education and forced to live in squalid conditions.

He mentioned that GEO is the world’s second largest private prison provider after the Corrections Corporation of America (CCA). According to GEO figures, there are a total of 210,000 private prison beds worldwide; CCA has 36% of the global market share while GEO claims 28% of the global market share.

Zoley, the company’s top executive, emphasized that demand for prison bed space continues to be driven by U.S. social policy that has resulted in a 1 out of 100 adults in prison or jail, and 1 out of 31 adults under some form of criminal justice supervision in the form of probation, parole or imprisonment. To rationalize why GEO is a good investment, Zoley relied heavily on recent reports published by the Pew Research Center in 2007 and 2008. Those reports mention the nation’s prison population will continue to increase over the next five years and that 24 states are operating over capacity leading to an increased demand for more prison bed space.

According to Zoley, specific social policies that continue to drive private prison demand include the efforts to control borders with Mexico which lead to a need in more detention bed space. Further, he mentioned that Immigration Customs Enforcement (ICE) and United States Marshal Service (USMS) are consolidating contracts in an effort to reduce costs that all contribute to an increase in demand for private prison space.

GEO finances private prison construction in several ways using public bonds, 3rd party ownership, and company ownership. The company values federal clients because they offer the largest contracts and the most profitable contracts on the best terms.

The GEO presentation provided a great deal of information regarding the priorities of the private prison corporations and the overall vision of the company's senior executive. It is disturbing how Zoley and other private prison profiteers continue to exploit bad public policies in an effort to increase revenues for corporations that should not exist in the first place.

If you would like to listen to the GEO presentation, you can find it online here: GEO presentation to Lehman Brothers