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Wednesday, 05 June 2013 08:54

Lives in the Balance While America’s Prison Profiteers Rake in Massive Profits

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5751317156 1a9225f81a n(Photo: Talk Radio News Service)BILL BERKOWITZ FOR BUZZFLASH AT TRUTHOUT

It is not hyperbolic to state that the prison system in the U.S. is one unholy dysfunctional mess. Over the past few months I've written about overcrowded and crumbling prisons, the revival of debtors prisons in a number of states across the country, the disenfranchisement of former felons, and the problems of false confessions and the wrongfully convicted. In years past I've written about the rising rates of sexual assault against incarcerated women and men, and how people with mental illness are disproportionately represented in America's correctional institutions.

In a recent piece titled The Graphic Truth of America's Criminal Justice System, I reviewed Race to Incarcerate: A Graphic Retelling, a graphic novel that re-imagines Marc Mauer's 1999 book Race to Incarcerate, which discussed the reasons for the unprecedented growth in the U.S. prison population over the past forty years – from 300,000 in 1972 to 2.3 million in 2010.

The massive growth in the prison population in the United States over the past four decades has been accompanied by the privatization of America's prisons. If you've paid any attention at all to this phenomenon, you will recognize the names of two companies that have benefitted royally: Corrections Corporation of America (CCA) and GEO Group, the two biggest corporations operating detention centers in the US.

While we know a fair amount about these companies, we know little about the individuals who invested in private prisons and are making off like bandits.

Corrections Corporation of America (CCA) and GEO Group

Founded in 1983, by Tom Beasley, Robert Crants and Don Hutto, the Justice Policy Institute has pointed out that the three "Uncovered a system plagued by overcrowding [and] tight budgets... convincing [them] that with a few simple applications of business practices the corrections system could be transformed from an inefficient bureaucracy to a profitable business."

According to theinternational.org's Nicholas Rochon, "Since its inception, CCA has grown to be a billion dollar company that constructs and manages 66 correctional and detention facilities across the US."

"Both the CCA and GEO record near 50 percent of their annual earnings through state level contracts, while the remaining 50 percent comes through contracts with the Federal Bureau of Prisons, US Marshals and the US Immigration and Customs Enforcement agency. As of 2010, these two private prison giants netted a total of $2.9 billion, as cited in the Justice Policy Institute's 2011 "Gaming the System" report.

Recent news about the controversial CCA includes a stories about the public beating back an attempt to build an immigrant detention center in Joliet, Illinois; efforts by the company to keep secret information about a series of violent incidents at "Gladiator School" an entity it operates – receiving $29 million in tax dollars each year -- out of the Idaho Correctional Center near Boise, Idaho, where it has been reported that the company "has turned the place over to prison gangs to maintain order"; and, a court case in Texas where CCA failed to respond to public records requests regarding facilities it operates in that state.

The GEO Group (formerly Wackenhut Corrections Corporation), was founded in 1984 "as a for-profit private corrections, detention and mental health treatment provider. Today, GEO runs 96 facilities in North America, Australia, South Africa and the United Kingdom," Nicholas Rochon reported.

The Boca Raton, Florida-based GEO Group has also been in the news lately: protesters, angered by reports of human rights violations at several GEO-run prisons, picketed at the company's annual shareholders meeting in Florida; despite previous statements pledging not to interfere in the immigration reform debate, The Nation's Lee Fang recently reported that the company "paid an 'elite team of federal lobbyists' to influence the comprehensive immigration reform legislation making its way through Congress; and, earlier this year a plan by Florida Atlantic University to sell the name of its football stadium to GEO Group was kyboshed after significant student protest.

The Individual Profiteers

Vice.com's Ray Downs, reporting on the many detention centers in the U.S. that are run by for-profit companies, profiled several individuals who are walking away with millions of dollars.

Using NASDAQ data, Downs sifted through massive amounts of data "to find out who was cashing in the most on prisons": "When we say 'prison-industrial complex,' this is who we're talking about."

According to Downs, Henri Wedell is the biggest individual investor in private prisons. Wedell "started serving on CCA's board of directors in 2000, when the company was struggling with scandals related to prisoner abuse and mismanagement." A decade later, Wedell "now owns more than 650,000 shares in the company, which is far more successful these days. Those shares are worth more than $25 million."

"America is the freest country in the world," Wedell told Downs. "America allows more freedom than any other country in the world, much more than Russia and a whole lot more than Scandinavia, where they really aren't free. So offering all this freedom to society, there'll be a certain number of people, more in this country than elsewhere, who take advantage of that freedom, abuse it, and end up in prison. That happens because we are so free in this country."

George Zoley
is the CEO of GEO Group "and the second-biggest investor in the incarceration industry," Downs reported. "Zoley made nearly $6 million last year through salary and bonuses alone, but the real money is in stocks — he owns more than 500,000 shares in GEO, and he has made $23 million in stock trades during one 18-month period." Downs pointed out that GEO "saw a 56-percent spike in profits in the first quarter of 2013, and the company's executives reassured investors that the incarceration rate wouldn't be dropping any time soon when announcing its earnings."

While Wedell and Zoley are big donors to the Republican Party, Matt Sirovich and Jeremy Mindich "both donate to Democratic politicians and are involved with progressive-leaning organizations like Root Capital, a nonprofit lending company that offers loans to farmers in developing countries to alleviate poverty," Downs reported.

They run Scopia Capital, "a hedge fund that is the one of the largest shareholders of GEO Group. The fund owns about $300 million in shares in that company, which represents 12 percent of its entire portfolio."

Downs also discovered that a chunk of the general public is also invested in private prisons: "The Vanguard Group and Fidelity Investments, ... America's top two 401(k) providers. ... are ... two of the private prison industry's biggest investors."

"Together, they own about 20 percent of both CCA and GEO. That means if you have a 401(k) plan, there's a good chance you benefit financially from private prisons. And even if you don't, there are many more mutual funds, brokerage firms, and banks that invest in private prisons — it being a growth industry and all — so if you have money somewhere other than your wallet or your mattress, it's a good bet you're involved in some way with companies that are locking up and probably abusing inmates."

According to NASDAQ data, the retirement funds of government employees – including public school teachers – "are some of the biggest investors in private prisons": "The retirement funds for public employees and teachers in New York and California together have about $60 million ($30 million each) invested in CCA and GEO. Teacher retirement funds in Texas and Kentucky have $8.3 million and $4 million invested in prisons respectively, and public employees in Florida ($10.3 million), Ohio ($8.6 million), Texas ($5.6 million), Arizona ($5.3 million), and Colorado ($2.25 million) are also connected to the industry."