Prison Privatization: Recent Developments in the United States …

Prison Privatization: Recent Developments in the United States




                          Judith Greene
                       Senior Justice Fellow
             Center on Crime, Communities & Culture

                      Presented at ICOPA

                        Toronto, Canada
                         May 12, 2000
       In the United States, the concept of prison privatization was first proposed early in
the 1980s. By the middle of that decade a number of firms were established, eager to
take over prison and jail facilities and to build new prisons to tap into the needs of states
that were struggling with rapidly expanding prison populations and deteriorating
conditions in their existing facilities.

         In 1997 the private prison industry was estimated to yield revenues of around $1
billion, with about 64,000 adults confined in approximately 140 privately operated secure
facilities in the U.S. By 1998 the estimate of prisoners confined in private facilities had
swelled to 85,000.

        In the last few years in the U.S., there has been a heightened level of awareness
and concern about issues related to privatized corrections. The performance record of
private prisons in the U.S. since the mid 1980s can be described as "patchy at best."
Recently a number of troubling developments in facilities operated by the two largest and
most experienced corporations have damaged the credibility of privatized correctional
services as a concept. These developments add further weight to ongoing concerns about
the legitimacy of the private prison industry.

       The private prison industry caught the national media spotlight almost two years
ago when six prisoners from Washington, D.C., (five of them murderers) escaped from a
Corrections Corporation of America prison in Youngstown, Ohio. It came to light that
two prisoners had been murdered and at least 20 more were stabbed during the first year
of operations at that facility.

         In late 1998, the U.S. Department of Justice issued a major report criticizing
many operational shortcomings that contributed to the disaster at the Youngstown
facility. Concerns included staffing deficiencies, poor security procedures, and problems
with the mis-classification of prisoners. Litigation stemming from these problems
resulted in a landmark settlement involving both monetary damages and a total
restructuring of the prison's policies and practices in regard to staffing, classification,
medical care, and monitoring of prison conditions.

        Since then, news reports of incidents in private prisons involving violence,
physical and sexual abuse of prisoners, riots, escapes and homicides have triggered a
fierce debate about their effectiveness. Private prison executives claim that they offer
better-quality correctional services at a lower price. It is clear, however, that privatization
offers no special protection against the most serious kinds of operational difficulties, and
that CCA is not the only company with a poor track record in this regard.

        In 1994 Wackenhut Corrections Corporation was awarded a contract by the state
of Texas to build and operate a juvenile justice facility in Coke County for delinquent
girls. In a rush to receive its first inmates, Wackenhut opened the Coke County Juvenile
Justice Center in Bronte before it was fully staffed. No educational programs were in
place, and most employees had no background experience in dealing with the types of
troubled young girls the state placed at the facility.
         A class action lawsuit filed in Dallas alleged that girls held at Coke County were
"degraded, humiliated, assaulted, harassed, and emotionally abused," and that the facility
was deficient in medical care, counseling, and vocational training. Two Wackenhut
employees pled guilty to criminal charges of sexual assault, and Wackenhut decided to
settle the lawsuit. One of the girls who had been raped committed suicide the day the
settlement was announced. The Texas Youth Commission responded by removing the
female inmates, but modified the contract to house delinquent boys, and increased the
number of beds in the facility.

       More recently Texas state officials terminated a contract with Wackenhut in
Austin. They had already levied $625,000 in fines against the company for chronic staff
shortages before reports of alleged criminal activity -- sexual misconduct and abuse of
prisoners, assaults, drug smuggling, and alleged cover ups ­ led to contract termination.
A dozen former Wackenhut employees have been indicted on criminal sex charges.

         In New Mexico, two prisons Wackenhut operates have repeatedly erupted in
violence and disturbances; the death toll in these prisons reached five in less than one
year. Wackenhut activated the Lea County Correctional Facility at Hobbs in May of
1998. Before the end of the summer there were reports of widespread violence at the
facility.

        In August a lieutenant at Hobbs allegedly beat and kicked an inmate who was
restrained with handcuffs and leg irons. The associate warden for security was removed
from his position, two lieutenants resigned, and three guards were reprimanded. A
monitor's report indicated that the beating had been ordered by the associate warden, who
then attempted to cover-up the incident. Shortly after the report was filed the monitor
was hired by Wackenhut to work as a deputy warden at a facility they were planning to
open at Santa Rosa.

       In December a prisoner, Jose Montoya, was stabbed to death in the prison
barbershop at Hobbs. Eleven days later guards allegedly kicked another prisoner while
he was in restraints, causing head injuries. Two guards were fired, two supervisors
resigned, and two were disciplined for attempting to cover up the incident.

       In January 1999 Robert Ortega was found dead from stab wounds in his cell. This
was the twelfth stabbing of a prisoner since the facility opened.

        In April hundreds of prisoners were involved in a two-hour melee at Hobbs that
required assistance of more than 100 law enforcement and prison officers from around
the state to lock the facility down. Thirteen guards and one prisoner were injured.
Fifteen guards resigned their jobs after this event. A member of a Wackenhut emergency
response team flown in from Texas was arrested and charged with beating shackled
prisoners at the Hobbs facility days after riot had been quelled. Two other members of
the team were administratively disciplined.
        In June a third Hobbs prisoner, Richard Garcia, was stabbed to death in his cell.
Two inmates had tricked a guard into opening Garcia's cell door to gain access to murder
him in what was described as a gang-related hit. That same month an audit report cited
the prison for numerous deficiencies. Wackenhut was not providing a sufficient number
of work and education programs; work assignments were for the most part "on paper
only." Prisoners were not being classified in a timely manner, and were not scheduled
for parole hearings as required by state standards.

         By August it was clear that the same types of problems experienced at Hobbs
were shared at the facility Wackenhut had opened in Santa Rosa. A prisoner, Orlando
Gabaldon, was beaten to death at that prison by inmates wielding a laundry bag filled
with rocks they had smuggled from the prison yard past a security check-point.
Gabaldon's death brought the total number of homicides at Wackenhut's facilities to four
in less than nine months.1

         Less than two weeks later an inmate was stabbed during an altercation in the
Santa Rosa prison's gym. As Wackenhut's guards struggled to effect a lock-down, one
of them, Ralph Garcia, was stabbed to death. While prisoners rampaged through five
housing units at the prison, Garcia was trying to convince prisoners in one unit to return
to their cells. State officials charged that Wackenhut misled them while the riot was in
progress, assuring NMDC staff by telephone that conditions in the prison that night were
uneventful. State police sent to check on media reports of the disturbance were held at
the gate for a half-hour before being allowed to enter the facility and discover that a full-
blown riot was occurring.

         An independent board of corrections experts called in to investigate the murder of
the guard issued a scathing report detailing many failings in Wackenhut's prisons. These
alarming defects include poor design and construction; an inexperienced correctional
staff; a failure to deal effectively with inmate misconduct; and a lack of adequate
monitoring by state authorities.

       Wackenhut's staffing plan at Santa Rosa was very thin, frequently permitting only
intermittent patrolling of the housing units by guards who were assigned supervision of
multiple housing units. Critical security posts often went uncovered and basic safety
procedures were sloppily performed or ignored altogether. On the night that the guard
was murdered there were only 18 staff on duty to handle 418 inmates.

         The report also made it clear that New Mexico's public officials must share the
blame with Wackenhut. The state's custody classification system was deemed
"dysfunctional." It did not take account of information about prisoners' gang
affiliations. Prison housing assignments were often made without information needed to
separate inmate enemies. Prisoners with serious mental health problems had been
transferred to the Wackenhut prisons by NMCD staff who should have known that the
facilities were not properly staffed to provide the treatment the prisoners would require.
        Decisions to privatize prisons in New Mexico were driven by politics. Governor
Gary Johnson had boasted that he would completely privatize the prison system, making
extravagant claims of the cost savings this would win for taxpayers. He had run
campaign ads calling for prisoners to serve "every stinking minute" of their sentences ­
and then attempted to implement this harsh penal policy through directives to strip the
state's newest prisons of even minimal comforts. No electrical outlets were installed in
the cells to allow operation of televisions or radios.

        Mired in litigation over conditions in another facility it built to house juveniles,
Wackenhut is now withdrawing from a contract to operate the facility after Louisiana
state officials assumed control of the institution. Youths were treated no better than
animals at the Jena Juvenile Justice Facility according to a New Orleans juvenile court
judge. The problems cited by Judge Mark Doherty of Orleans Parish Juvenile Court
when he released six boys from Jena were foreseen by federal officials even before the
Wackenhut facility began operating.

        The physical plant at Jena was constructed with numerous hazards and was not
designed to meet the needs of the young offenders to be housed there. Most youths at
Jena would be housed in crowded 48-bed dormitories that exceed the population
limitation standards for juvenile facilities, which require living units of no more than 25
juveniles each. The facility was built with no indoor recreation area or gym, and without
adequate space for educational activities. Counseling offices had to be converted to
classrooms, affording little room for therapy groups or private counseling sessions.

        The opening of Wackenhut's Jena facility was delayed for months by a federal
judge who requested that the U.S. Department of Justice evaluate the proposed operating
plan. The shortcomings identified in this review included an unacceptably low staffing
plan, inadequate psychiatric and counseling resources, and a behavior restraint policy that
inappropriately included use of Mace.

         Within a month of admission of the first group of juveniles in December 1998, a
disturbance at Jena was quelled with tear gas deployed by an eight-member tactical squad
from Wackenhut's adult prison in Allen Parish and deputies from the local Sheriffs
Department. Justice Department officials warned then that Wackenhut was already
failing to meet agreed-upon staffing requirements; that staff were physically abusing
youth, denying them access to showers, to recreation, to telephones; and overusing
administrative segregation and isolation.

        A thorough review of Wackenhut operations at Jena by Department of Justice
experts in January of this year charged that facility operations were chaotic and
dangerous. The experts reported that the youth confined at Jena were not issued adequate
clothing or linens; education and substance abuse programs were deficient; the medical
and mental health services were inadequate; and the youth were subjected to physical and
verbal abuse by staff.

        The difficulties at Jena were attributed primarily to staffing deficiencies: a lack of
stable leadership, high turnover, excessive overtime, and inadequate training. These
faults are common in private corrections, with staff turnover running almost three times
higher, on average, than at public correctional facilities.

        Litigation alleging dangerous operational practices and physical abuse of
prisoners is on the increase. In a far-reaching legal strategy one seasoned civil rights
attorney is bringing lawsuits on behalf of prisoners held in CCA facilities in three states.
He is alleging that the largest private prison firm in the world is using "a violent, abusive,
disciplinary/fear system" of excessive force against prisoners as an intentional,
conspiratorial effort to maintain prison order without providing a sufficient number of
adequately trained, experienced staff. In short, he is alleging that terror tactics are being
used to control staffing costs and maximize profits.

          The proponents of prison privatization have argued that market pressures will
inevitably produce both greater cost efficiencies and quality improvements in
correctional services. Their explanations about how the market works to effect these
outcomes range from the general thesis that inefficient providers of low quality, costly
services will be driven out of the marketplace by competition, to specific arguments
about how privatization dislocates the public sector union power which many believe
stands as the chief barrier to better public service delivery at a lower cost. But there is
little in the existing body of academic research comparing the costs and/or quality of
privatized corrections that addresses whether, or to what extent, or in what ways these
arguments are valid.

        In a recent assessment of the national experience with privatization, a team of
researchers led by Douglas McDonald at Abt Associates has concluded on the topic of
cost savings that, "The few existing studies and other available data do not provide strong
evidence of any general pattern." Research recently completed by this author comparing
private and public facilities in Minnesota was specifically designed to explore the impact
of cost savings and profit taking on the quality of prison services and programs. The
findings present strong evidence that the widely publicized disasters in Ohio, Texas, New
Mexico, and Louisiana are emblematic of a pattern of basic structural problems: staffing
deficiencies, insufficient program services, faulty prisoner classification and security
systems.

         While performance problems of such severe magnitude are not yet common in the
private prison industry, violent incidents are not isolated to a few facilities. A recent
survey of private prisons by James Austin compared the rates of major incidents in
private and public prisons of comparable security levels and found that private prisons
had fifty percent more inmate-on-staff assaults and two-thirds more inmate-on-inmate
assaults. These ominous signs are fueling a mounting perception that in pursuit of
profits, private prison managers are heedless of the essential requirements necessary for
delivery of safe and humane correctional services.

        Over time the industry will either have to address these issues by increasing costs,
or further intensification of these difficulties will result. This is clearly illustrated by the
claims now made by CCA that the problems at the Youngstown prison have been
addressed and the facility is operating as a model for the industry. But the attorney who
represents the Youngstown prisoners estimates that the post-litigation remedies now in
place come with a high price tag, and that operational costs are probably running
considerably above pre-settlement levels. Similarly, recent news accounts from New
Mexico indicate that the cost of upgrading the Wackenhut prisons to provide safe and
secure operations there will be substantial.

        Since these problems are structural, operational crises and the litigation that
results will continue until the industry comes to terms (or is forced to come to terms) with
the need to remedy them. Political and legal battles over performance failures will
continue to raise the ante, and as this process takes hold, costs will spiral, and the primary
argument for privatization will be even further undermined.

        The difficulties detailed above, coupled with steps taken by CCA to restructure its
operation to better absorb the shock of these setbacks, have also greatly shaken the
confidence of Wall Street stock analysts and institutional investors in the long-term
viability of what once was seen as a tremendously high-growth investment opportunity.
This is a crucial point, since the industry needs to raise capital for its existing operations,
to finance expansion, and to be seen as a viable financial alternative to public financing.

         While CCA was "taken private" last year as part of a corporate restructuring deal,
publicly-traded stock of the Prison Realty Trust (the Real Estate Investment Trust that
uses CCA as its prison "operating company") has nose-dived since the company was hit
with litigation over the scandalous mismanagement of its Youngstown prison. In
December 1997 the stock was trading at $45 per share. Twenty-nine months later its
value has dropped below $3 and the company is struggling to avoid bankruptcy. The
financial picture at Wackenhut shows that company is not immune to similar economic
repercussions when mismanagement spirals into deadly episodes. Wackenhut stock fell
by 28 percent after the death of the prison guard in August 1999 and has continued a
steady decline since that event.

        In the U.S., CCA and Wackenhut are the industry leaders. Between them they
hold three-quarters of market share. Although the vagaries of the stock market do not
provide an exact barometer, recent stock price declines in the eight other publicly-traded
private corrections companies suggest that the problems at the two leading companies
have had a negative impact right across the industry.

       From the start, the private prison industry has been heavily dependent on political
connections and campaign contributions to secure the contracts necessary to grow their
business. Corporate leaders have filled the ranks of upper management with corrections
executives from the public prison systems. They have spared no expense to curry favor
with politicians, high-powered government employees, and academics that are strongly
wired into government networks.2 They employ lobbyists with the best connections their
money can buy.3

       For some time, many of the industry's failures and dubious practices had been
reported on and even fought over. But the recent events outlined above are a watershed
for the industry, bringing it under more intense scrutiny from elements of the national
media. Now that the performance record of the industry has come under closer media
scrutiny, the nature of these arrangements have begun to call into question the
responsibility of government itself for lapses in both performance and accountability.
Important issues are now being raised about whose interests are being served.

        A backlash against all this is rapidly growing in the U.S. Politicians at various
government levels, academics, print and broadcast media, sections of organized labor,
penal reformers, lawyers and people in economically deprived communities faced with
the prospect of a private prison being located in their areas, have all increased their
scrutiny of the private corrections industry.

        In the intensity of this growing spotlight, the process for contracting is becoming
yet harder, fraught with political pitfalls and legal wrangling. Recent efforts by the
Federal Bureau of Prisons to site facilities to house prisoners from Washington DC as the
Lorton prison complex is shut down have become mired in difficulties. The complaints
of those opposed to this effort have been greatly bolstered by the poor performance
record established by CCA with housing DC prisoners at Youngstown. Arguments about
cost-effectiveness pale in the face of vivid testimony about riots, escapes, and homicides.

        CCA's attempt to obtain a zoning variance for a prospective prison site in
southeast Washington DC has failed. Cornell Companies Incorporated's effort to site a
prison to house DC prisoners at Philipsburg, Pennsylvania has been brought to a standstill
by a threat of litigation by the state's Attorney General. In California, CCA's newly built
and staffed 2,300-bed private prison holds less than 300 federal detainees, standing as a
nearly empty monument to the powerful opposition of the California Correctional Peace
Officers Association.

        In Utah the selection of Cornell to build and operate a 500-bed private prison was
met with vigorous opposition from the Utah Citizens Education Project and the ACLU.
A broad coalition was quickly assembled from the ranks of organized labor and the
religious community. Joined with support from the state's sheriffs, the coalition has
managed to stall the contracting process for nearly a year. In Santa Fe New Mexico
another coalition of community groups, spearheaded by immigrant rights advocates, has
blocked Cornell's bid to lease a prison facility the state had shut down. Cornell had
hoped to secure a contract with the Federal Bureau of Prisons to house 1,900 criminal
aliens.

        In the face of these developments, government is beginning to address a serious
threat that its own legitimacy, and the legitimacy of the criminal justice system, may
suffer due to the foibles of its private prison contractors. Public officials are responding
with necessary measures: they are tightening the requirements they write into "requests
for proposals" and contracts; they are strengthening their capacity to monitor contract
compliance; they are beginning to "fine" companies by holding back payment where
services are found to be deficient; and they are terminating contracts ­ and in a few cases
have assumed control and are running facilities where contracting has brought more
problems than benefits.4 It is still too early to tell exactly how the industry will respond
to these pressures. But it seems unlikely that firm demands from government such as
these can be met without hampering private sector opportunities for growth and profit-
taking.
1
  Inmate homicides are rare events. In 1997 there were 79 in the entire U.S. while the average daily prison
population was 1.2 million. That's a rate of one homicide for every 15,000 inmates. While the inmate
homicide rate in New Mexico was far higher that year (one in about 1,650), the recent inmate homicide
rate in Wackenhut's NM prisons (four deaths in nine months) is off the charts at one for every 400 inmates
­ and that's not counting the murder of the guard.
2
 Charles Thomas resigned his tenured professorship at the University of Florida this year after admitting to
violations of Florida State ethics laws. It had come to light that not only was his research supported by
contributions from the industry, but he had accepted board membership and a $3,000,000 fee from CCA's
REIT, the Prison Realty Trust.
3
 These have included Manny Aragon, President Pro Tem of the New Mexico Senate, who was employed
by Wackenhut to lobby on their behalf (only in other states, he said) and the wife of Jimmy Naifeh,
Speaker of the Tennessee of the House of Representatives.
4
  Texas has tightened contract specification to the point that CCA has bowed out of some contracts in that
state; North Carolina has withheld almost $1 million in fees from CCA for contract non-compliance.