The United States, with just 5 percent of the world’s population, currently holds 25 percent of the world's prisoners, and for the last 30 years America’s business entrepreneurs have found a lucrative way to cash in on the incarceration surplus: private for-profit prisons.

While the implications of an industry that locks human beings in cages for profit is an old story, there is an important part of the history of private prisons that often goes untold.

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Just a decade ago, private prisons were a dying industry awash in corruption and mired in lawsuits, particularly Corrections Corporation of America (CCA), the nation's largest private prison operator. Today, these companies are booming once again, yet the lawsuits and scandals continue to pile up. Meanwhile, more and more evidence shows that compared to publicly run prisons, private jails are filthier, more violent, less accountable, and contrary to what privatization advocates peddle as truth, do not save money. In fact, more recent findings suggest that private prisons could be more costly.

So why are they still in business?

In a recently published report, "Banking on Bondage: Mass Incarceration and Private Prisons," the American Civil Liberties Union examines the history of prison privatization and finds that private prison companies owe their continued and prosperous existence to skyrocketing immigration detention post-September 11 as well as the firm hold they have gained over elected and appointed officials.

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The Rise of Private Prisons

David Shapiro, the primary author of the ACLU report, told AlterNet that prior to the early 1980s, private prisons were “virtually nonexistent.” That quickly changed as the War on Drugs "tough on crime" mentality swept the nation with institution of draconian sentencing and release laws for nonviolent offenders, causing an explosion in U.S. incarceration rate. State and federal governments increasingly struggled with overcrowded prisons and the rising costs of housing the rapidly growing pool of inmates.

Coupled with the emergence of privatization madness under Ronald Reagan (a pattern that has continued under both Democrat and Republican administrations), skyrocketing imprisonment presented the perfect opportunity for the private sector to get in on the action, with promises of cost savings and more efficient operations than government-run facilities. In 1984, the Corrections Corporation of America was awarded a contract to operate a public jail in Hamilton County, Tennessee, and the nation’s first-ever private prison was born.

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According to the ACLU report, From 1970 to 2005, the number of people locked up in the U.S. shot up by 700 percent. Meanwhile, between 1990 and 2009 the number of prisoners behind private prison bars exploded from 7,000 to 129,000 inmates, a growth rate of 1600 percent. But the private prison boom of the ‘90s did not last.

Immigration Detention Saves the Day

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In 1999, independent auditors were skeptical about whether CCA could stay afloat because beds were empty and the company experienced a $72 million net loss in revenue. By 2000, an article in BusinessWeek declared “the industry is in a rut, and its prospects have been severely trimmed. Overbuilding and ill-fated financial schemes have hammered stock prices. States, once eager to outsource their inmates, are backing out of private prison contracts. News of escapes and violence at private prisons adds to a climate of distrust.” The article concludes that “the industry's heyday may already be history.”

A 2001 article in the American Prospect, "Bailing Out Private Jails," offers a snapshot of the industry’s bleak future at the turn of the century:

… with the states pulling back from the trouble-plagued facilities and Wall Street reacting even more strongly to the deaths and scandals, the companies have found themselves overleveraged and undercapitalized--CCA, in particular. It built new prisons "on spec," assuming that contracts to fill them would follow, and by my estimate the company now has more than 8,500 prison beds standing empty. The firm last year came close to a financial meltdown: Its stock lost 93 percent of its value in 2000, and its accountants reported a fourth-quarter loss of more than a third of a billion dollars.

With demand down, private prisons were forced to seek out new markets if they were to survive, so they turned to immigration detention. According to the Columbia Law Review, the daily average of immigrants detained in 1994 was 6000. After Congress passed Illegal Immigrant Reform and Immigrant Responsibility Act (IIRIRA) in 1996, which authorized the mandatory detention of noncitizens with criminal convictions, immigration detention swelled dramatically. By 2001, the number of detained immigrants more than tripled to 20,000. But this alone wasn’t enough to save private prisons.

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According to the ACLU report, heightened immigration enforcement following the 2001 terrorist attacks were largely responsible for resurrecting the private prison boom, as was predicted by Steve Logan, CEO of Cornell Corrections which has since been acquired by the GEO Group, the 2nd largest private prison operator. On a conference call with investors just two months after 9/11 Logan said:

I think it’s clear that with the events of Sept. 11, there’s a heightened focus on detention, both on the borders and within the U.S. [and] more people get caught. So that’s a positive for our business. The federal business is the best business for us.

He was right. The number of immigrants detained annually has nearly doubled, to 390,000 since immigration enforcement was transferred to the newly formed Department of Homeland Security in 2003, creating a huge market for private prison operators, who house almost 50 percent of all federally detained immigrants compared with just 6 percent of state prisoners and 16 percent of federal prisoners.

Since 2001, CCA revenues have increased 88 percent, earning over $1 billion annually for the last eight years in a row. Today, CCA receives 40 percent of its business from the federal government, including Immigration and Customs Enforcement and the Federal Bureau of Prisons. GEO Group revenues shot up as well, from $517 million in 2002 to $1.3 billion in 2010, a 121 percent increase.

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Given the private prison industry’s heavy reliance on immigration detention, it comes as no surprise that Arizona’s draconian immigration law SB 1070 was shaped with the assistance of private prison leaders and lobbyists. The law authorizes Arizona police to arrest and detain individuals they suspect are undocumented if they fail to provide paperwork proving their legal residence, essentially legalizing racial profiling.

Gaming the System

Although these companies are increasingly depended on immigration detention, they have not given up on the criminal justice market. For private prisons whose profits are dependent on a constant and growing pool of prisoners, that means supporting policies that maintain and even increase the incarceration rate. For inmates, that translates to longer sentences, unsanitary conditions, and as Shapiro documents in the ACLU report, brutal violence, corruption, and abuse with little to no oversight.

"Leniency and sentencing changes actually pose a threat to business models of these companies. The more crime there is the more business private prison companies get, and the more strict sentencing laws there are the more taxpayer money is poured into private prison companies incarcerating individuals for nonviolent offenses,” says Shapiro.

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The CCA lays out the risks to their business model in their 2010 Annual Report to the Securities and Exchange Commission (SEC):

The demand for our facilities and services could be adversely affected by the relaxation of enforcement efforts, leniency in conviction or parole standards and sentencing practices or through the decriminalization of certain activities that are currently proscribed by our criminal laws. For instance, any changes with respect to drugs and controlled substances or illegal immigration could affect the number of persons arrested, convicted, and sentenced, thereby potentially reducing demand for correctional facilities to house them.

The GEO Group, highlighted similar risks to their revenue stream in the company’s 2010 Annual Report:

[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.

In other words, a more humane criminal justice and immigration detention system threatens the very existence of these companies, and according to the ACLU report, they have flooded government at the state and federal level with cash and armies of lobbyists to keep the laws as harsh and cruel as ever.

That explains why CCA spent over $18 million on federal lobbying between 1999 and 2009 and has spent $970,000 on federal lobbying in 2010 alone. As for state government influence-peddling, the ACLU report cites a study by the National Institute on Money in State Politics which found that from 2003 to 2011 CCA hired 199 lobbyists in 32 states while GEO Group hired 72 lobbyists in 17 states.

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The Justice Policy Institute (JPI) released a comprehensive report in June called "Gaming the System," that comprehensively lays out the tactics private prison companies exercise to push for tougher sentencing policies that add to the private prison population. While their strategy is built largely around campaign contributions and lobbying, they also cultivate and maintain special relationships with current and former elected and appointed officials, which can lead to disastrous consequences.

The Human Cost

Despite numerous cases of corruption, the private prison industry continues to thrive with little oversight, largely due to a revolving door between public and private corrections that, according to Shapiro, "may contribute to the ability of some companies to win contracts or to avoid sufficient scrutiny from the corrections departments charged with overseeing their operations."

One of the most egregious examples of this dynamic took place at a West Texas juvenile prison run by GEO Group where inmates were found living in filth. In 2007, the Texas Youth Commission, which was responsible for monitoring the quality of the facility, fired several employees who not only failed to report on the horrific conditions but also actually praised and thanked the GEO staff for their fine work, awarding them an overall compliance score of 97.7 percent.

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It was eventually discovered that the prior to working for TYC, the state monitors had been employed by the GEO Group.

The situation became even more troubling when independent auditors were sent to the jail, where they "got so much fecal matter on their shoes they had to wipe their feet on the grass outside.” Among the long list of reported findings was evidence of “racial segregation [in] the dorms; Hispanics are not allowed to be cell mates with African-Americans." The youth reported to the auditors that they were "disciplined for speaking Spanish," prevented from speaking to their lawyers, denied access to medical treatment, and even "forced to urinate or defecate in some container other than a toilet" due to a lack of toilets in some of the cells.

The potential for such injustice involving incarcerated children isn't limited to Pennsylvania. The ACLU report notes, "According to the Office of Juvenile Justice and Delinquency Prevention, privately owned corporations operate more than 50 percent of youth correctional facilities in the United States."

There is no clearer example of dangers associated mixing profit-making and juvenile rehabilitation than the Walnut Grove Youth Correctional Facility (WGYCF) operated by the GEO Group in Mississippi. WGYCF, which has been called "the deepest depths of hell," is the nation's largest juvenile prison. It houses 1,200 young males between the ages of 13 and 22, 67 percent of whom are incarcerated for non-violent offenses. The facility was originally established by the Mississippi state legislature to create a safe environment for juveniles charged as adults by keeping them separate from the cruel and harsh conditions often found in adult prisons.

Unfortunately, that mission is incompatible with the priorities of the for-profit prison industry. As it turns out, conditions at WGYCF are so atrocious that the ACLU and Southern Poverty Law Center have teamed up to file a class-action lawsuit on behalf the inmates against the prison operator (GEO Group), prison administrators, and state officials.

The complaint alleges, "The for-profit entities that manage WGYCF perpetuate violence and corruption." More specifically, youth have been kicked and punched while handcuffed, others stripped naked and confined to solitary for weeks at a time. Another inmate was "held hostage in his cell for almost 24 hours, brutally raped and physically assaulted after prison staff failed to heed his plea for protection." Another lives with permanent brain damage after suffering multiple stabbings and beatings that prison staff are described as having been complicit in.

While each atrocity sounds more chilling than the next, even more striking is the prospect that this inexplicable violence and neglect may be rooted in the insatiable desire for higher profit margins through cost cutting at the expense of the safety and health of inmates.

An investigation carried out by NPR found that state audits from both 2005 and 2010 indicate that there were fewer guards despite an increase in the number of prisoners. According to the Council of Juvenile Correctional Administrators, most juvenile facilities around the country have one guard for every 10 to 12 juveniles. At WGYCF there is 1 guard for every 60 inmates. Yet, as the ACLU report points out, "private companies, including the GEO Group... have extracted more than $100 million in revenue from the facility’s operation." Since salaries make up the largest chunk of correctional budget expenses, hiring fewer guards can prove to be quite lucrative, especially since the one full-time state employee tasked with monitoring the prisons operations has his salary reimbursed by the private company operating the facility.

The violence doesn’t stop at WGYCF. According to Shapiro, there is evidence, including multiple studies carried out by the Justice Department, that for-profit prisons are more violent than governmentally operated facilities, which is likely the result of understaffed, poorly paid, and poorly trained guards.

These are the companies we are putting in charge of the expanding immigration detention system, and so far, their track record fairs no better. Last year, the New York Times and ACLU obtained documents under the Freedom of Information Act detailing107 deaths in ICE detention since October 2003. According to the report, nine of those deaths occurred at a CCA detention center in Eloy, Arizona, “more than any other immigration jail under contract to the federal government." Even worse, “the documents show how officials — some still in key positions — used their role as overseers to cover up evidence of mistreatment, deflect scrutiny by the news media or prepare exculpatory public statements after gathering facts that pointed to substandard care or abuse,” underscoring the lack of oversight that exists in immigration detention as it is.

Private Prisons Must Go

Despite the questionable cost-cutting measures that private prisons have employed, there is little to no evidence that they cost less than government run corrections as privatization advocates have claimed.

According to Shapiro, evidence behind the assertion that private prisons save money is “mixed at best,” with a number of studies even showing that privatizing jails may actually cost the state more money. An analysis conducted by the Arizona Department of Corrections of the state’s prisons indicated just that, finding that Arizona’s prisons may be more costly than publicly run prisons even though they avoid housing sick inmates to save on healthcare costs, something state run facilities cannot do. In 2007, researchers from the University of Utah Criminal Justice Center published a meta-analysis of previous privatization studies and concluded, “Cost savings from privatization are not guaranteed and quality of services is not improved. Across the board effect sizes were small, so small that the value of moving to a privately managed system is questionable.”

Shapiro added, “In general the evidence that there are these cost savings associated is questionable and dangerous because the only way that money really can be saved is by putting less people in prison. This argument has the potential to get politicians side-tracked from the making the moral and ethical and financially sustainable decisions.”

Shapiro believes the best way to scale back the abuses of the private prison industry is to reduce the number of people in prison. “This is crippling state budgets. We can’t pay for roads or schools because so much money being funneled in corrections. It’s tearing apart families and communities completely counterproductive. It’s good for no one except the private prison industry,” says Shapiro.