The True Cost

Why the Private Prison Industry is About so Much More Than Prisons

owhere has the outsourcing of public functions to private companies been more systematic than in the criminal justice system. It’s so pervasive that the phrase we use to describe the industry – “private prison companies” – is far too limiting to accurately depict the situation.

Actual housing of convicts in prisons and jails is only one part--perhaps the smallest part--of the overall industry revenue stream. Private companies seek to pull profits from the moment someone is suspected of a crime to the final day they meet with a parole officer. Private industry transports prisoners, operates prison bank accounts, sells prescription drugs, prepares inmate food, and manages health care, prison phone and computer time. And that's just the start. The money comes from the taxpayer, in state and federal contracts, and the suspects, inmates, and parolees themselves, in fees and add-ons. Those caught in the web represent what marketers would call the ultimate “captive audience”: there is no way to shop around for a better deal.

“We’ve created a system to squeeze everything we can out of people, the vast majority of whom are poor,” said Alex Friedmann, activist and publisher of Prison Legal News.

Corporate financial incentives to shuttle people into the criminal justice system may seem to conflict with intensifying bipartisan concerns around America’s role as the most incarcerated nation on earth. But private prison companies can prosper whether the incarceration rate expands or lowers, by controlling the other ends of the pipeline, from pre-trial supervision to post-prison re-entry. The greatest source of profits now comes from federal contracts to detain, transfer, and deport undocumented immigrants. The more toxic the immigration debate becomes, the more advantage for-profit corporations take.

Delivering poor services at a premium price is part of the marketing strategy, says Matt Nelson, managing director of the immigration rights group Presente. “They know that cutting costs, services and training for guards increases recidivism,” Nelson said. “They’re familiar that if you have horrible conditions, people stay in the system longer. They know that the younger you incarcerate, it’s more likely they will stay in the system. They keep customers coming back.”

The Walnut Street Prison in Philadelphia was the first state penitentiary in America. It was a private prison administered by local Quakers, who sought to rescue inmates from the chaotic misery of public jails. Despite good intentions, the Quakers invented the concept of solitary confinement, so prisoners could quietly reflect on their crimes.

In the 1820s prisons shifted to the Auburn system (named after a small prison in Auburn, New York), where inmates worked 10-hour days as a means to build values. Southern states expanded this into the convict lease system, renting inmates to private companies for hard labor like coal mining or railroad building. This was a way to extend slavery after emancipation: the majority of all convicts leased were African-American. And it was lucrative for the states: In 1898, nearly three-fourths of Alabama’s entire state revenue came from convict leasing.

But mortality rates were shockingly high, with secret graves often kept at workplace sites. Eventually, the dismal conditions, periodic rebellions, habitual violations of the contract terms by the companies, and resulting public discomfort pushed convict leasing out of favor. Alabama was the last state to formally ban the practice, in 1928.

Living facilities in California State Prison (July 19, 2006) Wikipedia

Private companies seeking to exploit the criminal justice system for profit shifted to a model of winning contracts to run non-prison facilities previously administered by the state, like juvenile centers, probation operations, and even immigrant detention. The return to managing prisons sprung from simple supply and demand. “If you look at incarceration numbers in the United States,” said Alex Friedmann, “it trundles along at 200,000 [per year] until the late 1970s, then skyrockets on a trajectory similar to a jet plane taking off from an aircraft carrier.”

There were a lot of reasons for this: the Reagan-era war on drugs, extended sentences as a backlash to increases in crime, the removal of the federal parole system in 1987. But spikes in the prison population led to a severe bed shortage, with dozens of states sued for overcrowding and substandard conditions.

Building on their lower-security operations, private companies offered to finance prison construction and then bid on contracts to bring prisoners into their own facilities. By owning the prison, the companies secured leverage, since governments cannot replace the contractor without finding another facility to send the inmates.

The Reagan administration welcomed this. The 1988 Report of the President’s Commission on Privatization suggested that contracting out prisons at the local, state, and federal level “could lead to improved, more efficient operation.” Conservative think tanks like the Heritage Foundation stressed cost savings from free market competition. While government ran prisons at that time for around $40 per inmate per day, private prison companies could bid $25–$30.

But for a private prison company to meet that bid, operational costs had to be so low that “efficiency” quickly became mere corner-cutting. “There is good reason to think that… the challenge private prison contractors face — of running the prisons for less money than the state would otherwise pay without also bringing about a drop in the quality of prison conditions — cannot be met,” said Sharon Dolovich of UCLA School of Law in a Duke Law Journal study.

Competition withered quickly as well, narrowing to just two publicly traded companies: Corrections Corporation of America (CCA) and Geo Group, formerly known as Wackenhut Corrections Corporation. By the mid-1990s, these two controlled 75 percent of the private prison market, and between 2012 and 2014, they earned $653 million and $434 million in profits, respectively.

"We've created a system to squeeze everything we can out of people, the vast majority of whom are poor."

Alex Friedmann has intimate knowledge of CCA. In 1992, he arrived at its South Central Correctional Facility in Wayne County, Tennessee, to serve out a sentence for armed robbery and attempted murder. Inmates were recruited from state-run prisons to move to the facility. “The big draw was this rumor that they had free soft drinks in the dining hall,” recalled Friedmann. “When you’re in prison, small things make a big difference.”

Sure enough, when he arrived, the soft drinks were free. But providing cheap sugar water was offset by cost-cutting everywhere else. “They were handing out one blanket instead of two,” Friedmann said. “They were rationing toilet paper. There was ice on the cell window but it cost half as much to heat.”

Friedmann noticed far fewer corrections officers in the CCA prison compared to the state-run alternative. Inmates would get responsibilities for security-related labor like stringing razor wire on the fences, because hiring outside staff would cost money. Friedmann worked in the desktop publishing lab in the prison. “They wanted me to create fire evacuation guidelines,” he said. “They gave me the floor plan layout for the entire administration building. Do you want inmates doing that kind of work?” Friedmann eventually became a jailhouse lawyer and, after release, an activist dedicated to exposing the truth about private prisons.

Stories of cost-cutting are legion, starting with corrections staff. Wages for officers in private prisons are over 20 percent lower than in public ones. Pre-service training is significantly reduced as well, and officers are outfitted with insufficient equipment to deal with prison needs. This creates high turnover and increased possibilities for corruption. But most of all, private prisons simply don’t schedule enough guards to handle the job.

CCA’s Idaho Correctional Center south of Boise was understaffed by 26,000 man-hours in 2012, according to a state audit, and the company falsified records to hide the uncovered shifts. This led to a tacit agreement where prison gangs effectively controlled the facility; it was known as gladiator school” because of the continuous violence. Officers were outfitted with empty cans of pepper spray and told to “just fake it” when breaking up riots. CCA paid $1 million in penalties, and Idaho resumed control of the facility in 2014.

Prison maintenance and investment is also frequently overlooked. Numerous complaints by the Occupational Safety and Health Administration cite Geo Group for exposing prisoners and guards to mold; one such complaint was blamed for a prisoner suicide in 2007. In a Geo Group facility in eastern Mississippi, cell doors had broken locks that could only be opened from the inside by prisoners, not by the corrections officers. At CCA-run Lake Erie Correctional Institution in Ohio, inmates lacked access to toilets and had to defecate in plastic bags.

While dozens of similar stories proliferate, it remains difficult to get the full picture. Private prisons are not subject to stringent public records requirements, a loophole they use to avoid detailing individual incidents. It can take years to uncover records about recidivism, inmate deaths and suicides, and legal actions taken against the companies.

“People find private prisons too much of a brick wall,” said Beryl Lipton of Muckrock, a public records organization that has studied prison privatization. “It’s a huge deterrent to anybody asking any questions at all if the assumption is they’re going to say no.”

For many small towns, securing a private prison facility is a means of survival. The 900 inmates at CCA’s Torrance County Detention Facility in Estancia, New Mexico, represent half the town’s population. Torrance County takes in prisoners from other over-stressed communities, making their economy dependent on importing convicts. Often cities get kickbacks from the private operator in confidential inter-governmental service agreements. A proposed contract in Gary, Indiana, offered hundreds of thousands of dollars for workforce development and support programs. “In Colorado, one place gets $2 a day per prisoner, which adds up,” said Lipton.

In addition to kickbacks, CCA and Geo also use a portion of their prodigious profits for lobbying and campaign contributions. Their management staffs are littered with former state and federal public officials who have spun through the revolving door.

But despite these machinations, by the end of 2013, private prisons only held 8 percent of all U.S. prisoners, according to the Bureau of Prisons. They did not drive mass incarceration but drafted off of it. The key to really making money from the criminal justice system, not just for CCA and Geo but a group of niche services providers, is diversification.

The cash register rings right after arrest. The United States is one of only two developed countries with a private money bail system (the other is the Philippines). While defendants can be released on their own recognizance to stand trial, the vast majority must either pay a fee or sit in jail until resolution of the case. A third option for defendants is to get a commercial bail bondsman to float the amount and guarantee appearance at trial, under penalty of paying the bond to the court.

Bond amounts have risen 50 percent over the last twenty years; the median rate is now $10,000, roughly eight months' income for the typical defendant. Bail bondsmen, who receive around 10 percent of the bond price as a fee from the defendant, will simply not come out for less. Cherise Fanno Burdeen, executive director of the Pre-Trial Justice Institute, describes a strategic effort from the American Bail Coalition, the industry lobby, to raise bail rates through state legislatures. The lobbying muscle comes from the twelve insurance companies that underwrite all bail bondsmen in the country. “They work hard to get public outrage associated with low bonds for heinous crimes,” Burdeen said.

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As a result, over 450,000 people held in local jails in America are awaiting trial, detained for the crime of being too poor. This wastes billions, dislocates families and increases crime overall; a 2013 study of Kentucky prisoners showed that low-risk defendants were 40 percent more likely to violate the law before trial if they spent just a few days in jail.

But those who pay the high rates fund the $2 billion bail industry, which profits from alternatives as well, like pre-trial supervision. “If you have to report in (to a bail bondsman or probation officer) or wear an ankle bracelet or go to classes,” Burdeen said, “some jurisdictions will tack that onto existing contracts. They charge fees to the defendants for the service.”

That puts the bail bondsman in control of sending the defendant back to jail, if they fall behind on pre-trial payments or violate the release conditions. Misdemeanor charges for supervision violations trigger a new, higher bail amount, and the bondsman can write that bond, with a larger premium paid by the defendant. This gives bail bondsmen an incentive to throw their clients back in jail. To Cherise Burdeen, “it’s a cycle of poverty, coercion, and extortion.”

Inside the prison, almost everything is privatized. Keefe Group, Union Supply Group, and others run commissaries for personal items. PharmaCorr (a division of Corizon), Wexford Health Sources, and a couple others handle prescription drugs. They pay the prison a commission for distribution, and make that back from the inmates with higher prices.

The nation’s largest private food service provider in prisons is Aramark, serving over 1 million meals a day. Its $145 million, three-year contract with Michigan in 2013 is instructive. Upon taking over the Michigan system's kitchens, Aramark immediately cut personnel salaries in half, prompting workers to make up lost funds by couriering contraband. Within seven months, Aramark had to ban 74 employees from Michigan prisons for misconduct; only five were banned in the five prior years when the state ran food services.

Kitchens were infested with maggots and rodents; workers covered a rat-eaten cake with frosting to hide the evidence. In Saginaw, workers reheated and served meat that had been thrown in the trash before they realized there were more inmates to feed. The Michigan Department of Corrections cited Aramark for 2,945 food quality and sanitation violations within a 7-month period in 2014. Low-quality meals translated into fewer inmates attending mealtimes, which increased Aramark’s profits by reducing the food served.

The state finally terminated the contract in July 2015, but only because of stalled negotiations to renew it, officials said. To replace Aramark, it hired another private company, Trinity Services Group. Aramark experienced similar problems in Ohio and Florida, where they considered the water in which vegetables were cooked as part of the overall serving.

Corizon Correctional Healthcare, responsible for the health care of 345,000 in jails and prisons nationwide, has seen 200 inmates file lawsuits against them over the last decade – in New Mexico alone. The case files detail a litany of short-staffing and substandard treatment, from prisoners found dead in their cells with 26 different types of medications to others waiting years for treatment as cancers metastasized.

The stories in New Mexico parallel other lawsuits and complaints against Corizon nationwide; in one instance, delays in getting an inmate eye drops led to his going blind. Corizon routinely hides records of mistreatment or out-of-court settlements; when negotiating a contract in Florida, the company attempted to block release of its litigation history by calling it a “trade secret.” The company lost a coveted contract with Rikers Island in New York City last year, as well as four state contracts since 2012. And in Idaho, a federal court ruled Corizon’s services were unconstitutional “cruel and unusual punishment” toward prisoners.

"Officers were outfitted with empty cans of pepper spray and told to just 'fake it' when breaking up riots"

But industry concentration limits options. Indeed, New Mexico recently cancelled its Corizon contract, but replaced it with its main private competitor, Centurion Correctional Healthcare. “If you don’t like Corizon because people are dying, you bring in Centurion, which also has a terrible track record,” said Alex Friedmann of Prison Legal News. “Because the business model is the same. If you want to make money providing medical care to prisons, don’t provide as much medical care.”

Families of prisoners pay exorbitantly to interact with their loved ones. Prisoners are the only Americans who pay for e-mail, through five-cents-a-minute computer access with CorrLinks, a service that also reads the e-mails first. Another company, JMail, takes e-mails from family and friends, prints them, and charges $1 for every 3 pages for delivery; there’s also a $25 annual subscription to the service. For years, JPay, a full-service data company for prisoners, made money from e-mail in a different way; it asserted the right to the intellectual property of everything on its network.

In 2015, a company called Securus merged with JPay, creating the largest prison communications and entertainment service. It sells a music player for prisons, charging up to $1.99 per download from a song library. It has an iPad-like tablet, charging a 40-cent “stamp” per email or video message. But the real profits come from live phone and video calls, which carry inordinately high rates.

A 2013 Prison Policy Initiative study estimated a 15-minute call using Securus at $18.34. Families pay these charges, and they come laden with hidden fees, because the correctional facility gets back up to 40 percent of the revenue in a kickback written into the contract. When you add up all the fees, calls can be as high as $14 a minute. The Federal Communications Commission capped prison phone rates at $1.65 for a 15-minute call last October. But a U.S. appeals court blocked the cap, while allowing for the elimination of ancillary fees.

Live video has become a further profit opportunity. “Two years ago we started hearing reports, there’s a crazy video system that doesn’t work and I can’t visit my loved one anymore,” said Bob Libal of the Texas-based social justice organization Grassroots Leadership. In Texas and throughout the nation, video companies require that their service replace in-person visits – even if the visitor is in the adjoining room. Prisons save money on guards in the visitation rooms, but video visitation costs families $1/minute, where in-person visits were free. The largest company in video visitation is… Securus. “It sounds like the company of a villain in Wayne’s World,” Libal said.

Libal added that, although one argument for video visitation was to limit violent visitation incidents or the trucking in of contraband, an analysis of incident data found those got worse after in-person visits stopped. “Contraband doesn’t come in through visitation, it comes in through the guards,” Libal said. “And people get frustrated when they don’t see their loved ones.” Eventually, Texas passed a bill explicitly allowing in-person visitation, and Libal’s organization worked with county sheriffs in jurisdictions exempt from the bill to restore face-to-face visits. Travis County, Texas, inmates can now see their loved ones for the first time in three years.

With pay rates for in-prison work as low as 12 cents an hour, getting money from the outside into prisoner accounts is critical. Securus profits from that, too, with JPay’s market-leading electronic money transfers, which serve around 70 percent of U.S. inmates. JPay charges $6.95 for a $50 money transfer, and makes it easy for prisons to take their own cut before the money gets to the inmate. Once a prisoner is released, they get their balance on a release card, on which is charged high swipe fees. “Account maintenance fees” take down balances by $2.50 a week even without usage. Mega-bank JPMorgan Chase is a release card market leader, along with JPay.

With all of these services, the correctional facility signs an exclusive contract with the provider, typically one that kicks back to them a commission for access to the captive prisoner market. The lack of choice and need to cover commission costs tends to increase the burden on prisoners and their families.

Private companies manage ex-convict services on the outside, too, from electronic monitoring to probation to “community corrections” like halfway houses and re-entry programs. Individuals also pay for these supervision services in most states. The entire system of capturing, warehousing and rehabilitating prisoners is explicitly tied to the profit motive. “I always thought that quote from CCA’s co-founder was instructive,” said Matt Nelson of Presente. “He said, you can sell prisons like you’re selling cars or real estate or hamburgers. You see the worst of market capitalism being applied to the most intimate parts of our lives.”

Between “smart on crime” and Black Lives Matter, consciousness has been raised about the waste of mass incarceration. Even conservative states have found they can reduce prison populations and reduce crime simultaneously. Both parties are readying a criminal justice reform package in Congress that would follow this lead at the federal level.

Private prison companies have responded in two ways. First, they’ve branched out. CCA and Geo Group run the two largest transportation companies that drive inmates to prisons or to work release programs (CCA runs TransCor; Geo owns Geo Transport). Geo Group recently bought BI Incorporated, the largest provider of electronic monitoring products. CCA has acquired a number of community corrections companies in the past year, making them the second largest supplier of these services. This fallback position seeks to maintain a stake in alternatives to incarceration as well as incarceration itself.

But the bigger response can be seen in the companies’ earnings calls. “Our financial performance was driven primarily by stronger than anticipated demand from our federal partners,” said CCA’s CEO Damon Hininger in a statement, “most notably Immigration and Customs Enforcement (ICE).” Geo Group similarly cited an expansion in immigrant detention centers as driving revenue increases.

Private prison operators have enjoyed federal contracts for detaining immigrants for decades; CCA’s first operation was an immigrant detention center in Houston. But this has intensified with the mass incarceration backlash. “CCA and Geo get 45 percent of their revenues from the federal government,” said Alex Friedmann of Prison Legal News. “The stalemate on immigration reform helps them.”

Both parties have engaged in an arms race to prove which is tougher on border security; even immigration reform measures include stronger enforcement. The Obama administration recently planned a new wave of deportation raids of Central American migrants fleeing violence, including women and children. Someone needs to transport, house, and deport all those undocumented immigrants, and the biggest private prison companies have taken advantage. In fact, there are guaranteed profits in immigration detention, through a policy known as the bed quota.

In one of his last official acts, the late Sen. Robert Byrd (D-WV), known for a harsh perspective on undocumented immigrants, stuck a rider into the 2009 Department of Homeland Security (DHS) appropriations bill mandating that the agency “shall maintain a level of not less than 33,400 detention beds” for daily immigration operations. This later increased to 34,000 in 2013. No other federal law enforcement agency has an incarceration quota.

For the first several years, DHS interpreted it to mean that those beds had to be filled, under pressure from members of Congress who favored that reading. Even when they softened the interpretation to just maintaining the beds, the incentives push toward using them. “People don’t want to get dinged for having wasted money, and they have to spend money to maintain the beds anyway,” said Mary Small of the Detention Watch Network, a national coalition working on immigration enforcement. Even the Obama administration’s 2017 budget request waffles on this point. The body of the request calls for funding for fewer than 34,000 beds, but the performance metric is worded in such a way that “it’s actually about detaining 34,000 people each day,” Small said.

The bed quota massively increased resource needs for detention, and DHS fulfilled it by contracting with private prison companies. CCA, Geo Group, and their counterparts now operate 62 percent of all immigration detention centers, according to a 2015 Grassroots Leadership report, up from 49 percent before the bed quota in 2009. Nine of the ten largest ICE detention centers are private.

"Satsuki Ina, a family therapist born in a Japanese internment camp during World War II,visited the facilities in Texas earlier this year, and said it 'triggered distressing associations of my own experience as a child.'"

CCA and GEO lobby heavily to keep the quota in place. CCA spent over $9.7 million from 2008-2014 just on lobbying the subcommittees with jurisdiction over the bed quota. There have been multiple efforts to eliminate the bed quota – one even snagged the votes of 8 House Republicans in 2013 – but since Congress hasn’t completed appropriations bills for several years, opportunities to nullify it have diminished.

The federal bed quota combines with local lockup quotas, written into contracts between ICE and private entities. These obligate ICE to pay guaranteed minimums to contractors, whether the beds are filled or not. “It’s taxpayer-funded profit insurance for private companies,” said Mary Small.

ICE’s immigration detention facilities are concentrated around the southern border, meaning that anyone picked up nationwide must be flown there, and from there flown to host countries for deportation. That is typically carried out by private companies, as is the provision of services inside the detention centers.

Immigrants convicted of federal crimes – including re-entry after deportation – have their own segregated prison system run by the Bureau of Prisons, and those awaiting trial are detained in U.S. Marshal custody. “The vast majority of those are private prison beds,” said Bob Libal of Grassroots Leadership. Between these two agencies and ICE, “it’s a trifecta for the private prison industry,” Libal said, “and triple misery for migrants.”

Attempts to deter the 2014 migrant influx has led to a rise in family detention centers for women and children. Two giant facilities opened in Texas, one for each major private prison company: the South Texas Family Residential Center in Dilley (CCA) and the Karnes Residential Center (Geo Group). The federal case management system for family detention went to Geo Care, a subsidiary of Geo Group.

Incredibly, the state of Texas attempted to get these facilities labeled child care centers, to comply with a 20 year-old federal lawsuit requiring immigrant children to be held in non-secure licensed facilities. “It’s completely absurd,” said Mary Small. “They’re not allowed to leave. That’s jail.” A Texas court has blocked the designation temporarily.

The family detention facilities have been given the grim nickname “baby jails.” Satsuki Ina, a family therapist born in a Japanese internment camp during World War II, visited the facilities in Texas earlier this year, and said it “triggered distressing associations of my own experience as a child.” A woman in the Dilley location suffered multiple seizures without proper medical care before finally being released. That camp has been cited for at least twelve violations of state regulatory standards, including inadequate staff training and recurrent child illnesses. Geo Group’s Karnes Residential Center has also been cited for deficiencies, including locking mothers in dark rooms as punishment for protesting conditions. A former caseworker at Karnes quit because children in her care were regressing developmentally, and she feared losing her social worker license.

Non-family detention centers and prisons are similarly awful, with allegations of inhumane conditions, lack of access to medical care, physical abuse by staff. Dozens of immigrants have died in private-run detention facilities. To Mary Small, ICE’s lack of enforcement of private prison contracts drives the continued abuse. “Inspections are announced ahead of time, and they look at the presence of a written policy, not if the facility implemented it,” Small said. “In 2009, Congress added language that if a company failed twice in a row, ICE must pull the contract. Before that, facilities failed left and right. After, they never failed. You gotta laugh or otherwise you’ll cry.”

Despite the enormity of the problem, activists and policymakers are working on solutions. There’s legislation to end the immigrant bed quota, and Bernie Sanders’ “Justice is Not for Sale Act,” which would eliminate all federal, state, and local contracts with private prison companies within three years, reinstate the federal parole system, and terminate family detention. Rep. Ted Lieu (D-CA) has a bill to end the money bail system. “I believe that money should not play a role in issues regarding criminal justice, incarceration, and freedom,” said Lieu.