Report: “Low-Crime Tax” Keeps For-Profit Prisons Profitable

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The Idaho Correctional Center south of Boise, Idaho. A group of eight inmates at the facility filed a lawsuit in 2012, contending that poor management and chronic understaffing led to an attack in which they were jumped, stabbed and beaten by members of a prison gang. (AP Photo/Charlie Litchfield, File)

Compare these two tales of corruption that illustrate how the opportunity to turn a profit distorts our supposedly impartial judicial system.

In 2008, a scandal rocked Wilkes-Barre, Pennsylvania, when the FBI charged two judges, Mark Ciavarella and Michael Conahan, with taking kickbacks from a private juvenile detention facility in exchange for handing down lengthy prison terms to young offenders. Robert Mericle, who had built two for-profit detention centers, and a businessman named Robert Powell paid the judges almost $3 million over a three-year period to help smooth the way for the construction of the facilities and to keep their beds full.

According to an appeals court ruling, “over the course of several years, Ciavarella committed hundreds of juveniles to detention centers co-owned by Powell, including many who were not represented by counsel.” Hundreds of young lives were ruined. Kids, including first-time offenders, were sentenced to juvenile facilities for “offenses” like mocking an assistant principal on Myspace, taking loose change from unlocked cars and trespassing in an abandoned building. In one tragic incident, a star high-school wrestler who had never been in trouble before was sentenced to months behind bars for a minor charge of possessing drug paraphernalia. He missed his senior year of high-school, and became bitter and depressed. His mother would blame his suicide several years later on the corrupt judges.

“By the summer of 2008,” reads the appeals court ruling, “Ciavarella and Conahan, aware that they were under criminal investigation, met with Mericle and Powell to collaborate on their stories, discuss how to mitigate the effects of damaging witnesses, and encourage the destruction of records.” What the others didn’t know is that Powell was cooperating with authorities and wore a wire during the discussion. Judge Ciavarella was sentenced to 28 years in federal prison. Judge Conahan got over 17 years. Robert Powell received a sentence of 18 months as a result of a plea bargain. Robert Mericle pled guilty and awaits sentencing.

When you deliver boxes full of cash to judges in exchange for keeping your private prison profitable and your beds full – when there’s a clear quid-pro-quo – then the FBI will investigate and the perpetrators will likely end up in prison. But a new report issued this week by In the Public Interest, a government watchdog group, shows that you can achieve a similar result through less direct means – lobbying and campaign financing – and it’s perfectly legal.

The report found that 2/3 of a sample of state contracts with private prison companies have “occupancy clauses” that guarantee the companies’ facilities will remain full. The minimum occupancy requirements varied from 80 to 100 percent, with 90 percent being the most common threshold.

With crime rates dropping nationwide, taxpayers are forced to pay the companies compensation if their prison populations fall below the minimum. In some cases, state-owned prisons are now under-populated as detainees have been shifted to for-profit facilities in order to meet these quotas.

According to the report:

These clauses can force corrections departments to pay thousands, sometimes millions, for unused beds — a “low-crime tax” that penalizes taxpayers when they achieve what should be a desired goal of lower incarceration rates. The private prison industry often claims that prison privatization saves states money. Numerous studies and audits have shown these claims of cost savings to be illusory, and bed occupancy requirements are one way that private prison companies lock in inflated costs after the contract is signed.

By contractually requiring states to guarantee payment for a large percentage of prison beds, the prison companies are able to protect themselves against fluctuations in the prison population. These provisions guarantee prison companies a consistent and regular revenue stream, insulating them from ordinary business risks. The financial risks are borne by the public, while the private corporations are guaranteed profits from taxpayer dollars.

The report offers examples of some nightmarish results of the cost-cutting measures these private facilities often impose – including housing prisoners in deplorable living conditions, overcrowding, violence, mismanagement and escapes.

There are no boxes of cash involved. But as the report notes, “the for-profit prison industry works hard to ensure harsh criminal laws and elect policymakers that support its agenda.”

The Center for Responsive Politics reports that [Corrections Corporation of America] spent $17.4 million in lobbying expenditures from 2002 through 2012, while GEO Group spent $2.5 million from 2004 to 2012. Similarly, CCA spent $1.9 million in political contributions from 2003 to 2012, and Geo Group spent $2.9 million during the same time period.

A 2011 report by the Justice Policy Institute also found that private prison companies lobbied hard for harsher sentencing laws. Steve Owen, a spokesman for CCA, the nation’s largest private prison company, admitted to the Shreveport Times that the occupancy requirements “are necessary for a feasible business model.”

But government shouldn’t be in the business of keeping an unsustainable industry afloat. And yet that’s just what they’ve done in the past. In 2008, Leslie Berestein reported for the San Diego Union-Tribune that the country’s leading private prison firms – CCA, Geo Group, Halliburton and Management and Training Corp. – lobbied lawmakers to pass harsh new immigration laws, including changes “in the way that immigrant detainees – illegal immigrants, asylum-seekers, legal residents appealing deportation and others – are held.”

“The private prison industry was on the verge of bankruptcy in the late 1990s, until the feds bailed them out with the immigration-detention contracts,” said Michele Deitch, an expert on prison privatization with the Lyndon B. Johnson School of Public Affairs at the University of Texas in Austin.

As increasingly tough immigration laws have called for the detention and deportation of ever more immigrants, the demand for bed space by immigration authorities has helped turn what was once a dying business into a multibillion-dollar industry with record revenue and stock prices several times higher than they were eight years ago.

According to Aviva Shen at Think Progress, the private prison industry spent $45 million on immigration lobbying alone. They now enjoy a $5.1 billion industry, with virtually no risk – the risk instead is borne by American taxpayers and those more likely to end up behind bars to fill quotas.

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  • Anonymous

    Everyone is for sale, along with justice, democracy, even the very lives of our children. Is this horror reversible?

  • Anonymous

    Why am I not surprised. Those firms had much better contract lawyers than than the cities or states.

  • Michael Geoghegan

    why spend taxpayers’ money on public education and health care when it can go to private prisons…

  • Innocent Jogger

    It’s possible, but highly unlikely. Not as long as uninformed people elect uniformed people to office. Not as long as organized lobbying groups spend many millions to influence the uniformed voters and lawmakers. The side with the most money rarely loses.

  • MD

    How can they possibly face themselves? This story sickens me to my core.

  • MD

    Bill Moyers followers please, please, please investigate Wolf Pac. We are trying to reverse Corporations are People rulings (Citizens United) by using state legislatures (because federals are up to their necks in corporate money and changing their minds is highly unlikely) by calling an Article V Convention to amend the constitution. We need to stop the industries that profit by keeping our citizens imprisoned (prison industry), armed (gun industry), dependent on oil (oil industry) and sick (healthcare). When did it become ok to make a profit at any cost?

  • Anonymous

    Can’t win for loosin’: not when amoral politicians sell out to the highest bidder, this merely institutionalizes the Pennsylvania model where the child-court judge got *personal* kick-backs for working piecework for dollars on each conviction for youthful offenders (definitely a Bozo No-No!). Looks like they’ve ramped this up big-time, institutionalized the greed and, therefore expiated *corruption* by now offering guarantees to The Corporate Citizens who claimed they could operate these pest-holes at a profit and relieve the taxpayers of the burden & costs…FOR CHR!ST’S SAKE!!! ARE THERE NO FREE MARKETS LEFT ANYWHERE??? NOT EVEN IN THESE NEW FARENGI PRISON ECONOMIES???? You know, I live out here exiled in Thailand and the big joke is how rampant and obsequious corruption is on an individual level…I merely bow my head in shame and declare that the corruption in *advanced democracies* (i.e., Corporate Fascist States) is merely institutionalized where the only sin occurs when Citizens born of a woman’s womb prosper from the graft; when Corporate Citizens benefit from the corruption, we call it *service*…these MFers can service my @ss!!! ;-} rap.

  • medcannabis1

    How can this conduct not be viewed as criminal under the RICO act?
    They bribe legislators and law-enforcement as a business model and use public funds for that conduct…so where are the honest prosecutors ?

  • Scott Fox

    I can say from personal experience the prison system is about money. A person very close to me was on probation for 5 years. With 4 months left on his probation. 4 months on a 5 year time of no trouble and working two jobs, he violated his probation with a non violet offense. His punishment for violating his probation is 3 years 5 months 12 days. For a system that claims to not want people in the system it is instances like this where the punishment does not fit the crime. 3 years 5 months 12 days sitting in a GEO own prison facility. Considering the judges were behind the scam in the story mentioned above, it is easy to see how something like that can occur, the judge in this case did not consider attorney or probation officer recommendations. For this my brother continues to sit his time out in a private facility. I hope that one of the laws that the attorney general recently mentioned about fair sentencing addressed violation of probation charges.
    For example; a person with less than 6 months probation on a non violent offense should not receive more time than what is left on current terms of probation. A new law like this in place would have let my brother finish off his remaining 6 months. Keep in mind this is only on the violation of probation charge. . 3 years 5 months, 12 days with 4 months left to go on 5 years of probation hardly fits the crime or makes for a smart sentence.
    .

  • SunshineSunshineSunshine

    Best is to not commit crime or to not reside in the US of Am.

  • medcannabis1

    and until the good compassionate people of this nation come forward and vote and elect qualified and un -corrupted public officials at ALL LEVELS OF GOVERNMENT, LOCAL STATE and FEDERAL we will continue to be plagued by those that pervert the concept of justice into a financial model complete with expandable business plans….