America's Newest Growth Industry:

With Incarceration Rates Soaring, It Was Only Matter of Time Before Entrepreneurs Sniffed Out New Business Opportunity

By Kristin Bloomer
Lockhart, Texas

Thirty miles south of Austin on Texas Highway 183, past dozens of dusty, hardscrabble towns that boomed and then busted with the state's petroleum industry, one town named Lockhart is on the rebound.

The source of newfound prosperity, residents say, is the Lockhart Renaissance and Work Facility, the town's fourth largest employer. Located on Industrial Boulevard next to a machine shop, cookie factory and clothing maker, the fiat-roofed, blue-and-white business looks a lot like an upscale Wal-Mart. Its neat well-lit parking lot reserves spots for "Employee of the Month" and a few CEO's.

A secretary at the front desk invites me to wait in a plush chair in the large white-tiled lobby while well dressed men and women--members of the firm's 150-person work force pass through glass double doors to the building's interior. Eventually, a businessman named Greg Skeens walks out and introduces himself with a handshake.

Dressed in a crisp white shirt and silk Skeens looks like an BM executive. But he's not. He's the warden of this private minimum-security prison run by Wackenhut Corrections Corp.

Lockhart residents boast that the prison which holds 500 women and 500 men, fumed the town into an international Skeens gives at least one tour a month; guests have included the home secretary Great Britain and officials from Japan, Puerto Rico, Canada and the Navajo Tribal Council.

From the lobby, Skeens walks visitors through a series of controlled doors to men's side of the prison The wide central hall is bustling with inmates; a long line extends out the door

"It's just like a small community," Skeens remarks with a "We have a lot of talented people locked up in the state of Texas."

For the service of housing each inmate - most of who are here for nonviolent offenses -- the state of Texas pays Wackenhut about $27 per day. Out of that, Skeens pays for everything "from housing and hygiene items to salary and utilities to any instructional materials." Any money left over is profit.

Business is booming for private prison operators like Wackenhut these days. While crime rates have remain fairly steady over the past 20 years, the number of people behind bars in the United States has tripled to 1.63 million according to the Justice Department Tougher penalties especially for drug-related offenses explain part of the growth. But the prison industry itself has also become a big player; it needs prisoners to keep it growing The cost of building and operating prisons has jumped from $6.8 billion in 1980 to $.30 billion today!. Spending on corrections at state level has increased faster than any other category of public spending and an increasing proportion of this money goes to private companies.

Towns used to sue to keep prisons out. Now -- in competition for jobs, tax revenue utility connections and, in some cases, per-inmate payments -- they're fighting to attract them. In Texas last year, several towns stampeded for new state lockups; some offered free country-club memberships to the top officials of any prison that came to town.

In 1995, the Austin-based Bobby Ross Group built a 480-bed, medium-security prison in Karnes City, Texas. The state of Colorado now warehouses more than 470 of its convicts at the Karnes county Corrections Center at a cost of about $41 per day per prisoner. Of that amount, Karnes County government gets 2 5 cents per day per prisoner-for a total of about $26,000 last year. It sounded too good to be true to have a prison built without taxpayer money," says Karnes County Judge Alfred Pawelek "The bottom line was we needed jobs. J-O-B-S.... We were looking at empty classrooms it we didn't do something."

Last year' Romulus N.Y. with a population of 3,000, voted by a 3-l margin in favor of hosting a new state prison. The town is now a finalist in a 22-town competition for one of three state prisons to he built at a total cost of $476 million. The red carpet is out.'' town Supervisor Raymond Zajack says, With the number of prisoners growing, it's a lucrative business, so to speak.'' Towns in Missouri, Washington, Florida and Virginia have also been clamoring for prisons to build in their backyards.

In a climate like this, it's no surprise that some entrepreneurs have spitted out the possibility of making a buck. So tar, private prisons incarcerate only about 50,000 small fraction of the total inmate population. But these private prisons have grown at four- times the rate of public prisons, arid experts predict their numbers will triple by the year 2000, with revenues topping $ I billion. The two largest companies, Wackenhut and Corrections Corporation of America (C.C.A). together own about, 75 percent of the global market share.

Proponents of private prisons say companies like Wackenhut cut costs by 10 percent to 1percent. "If I need something and it's at Wal-Mart, I'll go to Wal-Mart and buy it," Skeens says. 'I have a little more flexibility (than the state)."

Such savings have yet to be proved. The U S General Accounting Office reported in August 1996 that "comparisons of operational costs (between public and private institutions) indicated little difference and/or mixed results." For one thing, private prisons shift significant costs to the state. If an inmate at Wackenhut needs to he hospitalized, Skeens pays for the first 72 hours and the state pays the rest. Prisoners are screened for mental arid physical health before being admitted - leaving costly prisoners in state lockups.

Nor is there any assurance that private companies will treat inmates adequately, even by the abysmal standards of public prisons. Government oversight of private prisons is lax. While most states require that private prisons l c accredited by the American Correctional Association, critics say that ACA standards are minimal at best and that, even so' many private prisons fail to meet them. Most states require on-site, state-employed monitors to ensure contract compliance. Some states also require periodic site visits from independent hoards. But these measures have failed to stem the abuse of inmates in private prisons.

In the competition to offer the best prisons at the lowest cost, prison companies sometimes skimp on food. rehabilitative programs or training for guards. One privately run detention center for illegal immigrants in Elizabeth, NJ., exploded in violence in June 1995 after Esmor Correctional Services Inc. hired inexperienced staff, served inmates a substandard diet and shackled detainees in leg irons. The Immigration and Naturalization Service center reopened last month under the management of CCA.

In 1995, allegations of rape and assault at the privately run High Plains Youth Center in Brush, Colo., prodded the state to admit it could not guarantee inmates' safety at private prisons. Run by the Rebound Corp. in Denver, the 180-bed juvenile facility houses youths from more than two dozen states.

In December 1995, officials from the University of Illinois at Chicago made a surprise visit to the juvenile lockup, where they documented 'a consistent and disturbing pattern of violence, sexual abuse, clinical malpractice and administrative incompetence at every level of the program." One teen-age boy who had been sexually assaulted by another resident told investigators that when he had pounded on a locked door for help, staff told him to "just get back in bed." His attacker serially raped the boy for months, while the staff deliberately ignored it, the University of Illinois report found.

According to Jerry Adamek, director of Colorado's Divisions of Youth Corrections, the state had started in October 1995 to "negotiate" with Rebound about the unacceptable conditions. To date, the state hasn't removed a single youth from the facility.

Adamek, a proponent of prison privatization, acknowledged that the state's level of tolerance for Rebound was a result of its dependence on the company. "We were so desperate for beds even here in Colorado, we lowered some of our own levels of expectation," Adamek says. "The monitors knew if we went in and were too aggressive with it, we had the possibility of losing the contract provider."

The Colorado ACLU has sued the Bobby Ross Group, charging delayed access to medical care, overcrowded and unsanitary conditions, inexperienced and under-trained staff, and inadequate programs and services at its private prison in Karnes City.

Bobby Ross-a former Texas county sheriff-and his spokespeople refused to respond to the allegations. They also refused to distribute my letters to inmates. They returned the letters-opened-and ran me off the property when I appeared in person to request a visit.

Since the prisons are on private property, the Texas Department of Corrections has its hands tied when it comes to protecting prisoners' First Amendment rights in such cases, according to Glen Castlebury, a spokesperson for the Texas Department of Corrections. "There's no regulation whatsoever of the private prisons (in these matters)," he says. "They're scot-free to do whatever they please."

Despite documented abuses and dubious savings, it will be difficult to slow the momentum of private prisons, which have become a political force to be reckoned with. CCA and Wackenhut together gave almost $150,000 in federal and state political contributions during the 1995-96 electoral cycle, according to reports filed with the Federal Election Commission. The companies gave mostly to Republicans, but they also hedged their bets by giving money to pliant Democrats. Having promised to reduce the federal payroll substantially, many Democrats, including Bill Clinton, support prison privatization.

Some of Wall Street's largest investment houses, including Goldman Sachs & Co. and Smith Barney Inc., are competing to underwrite the bonds for the prisons. (See "Jail house stock," by Ken Silverstein, page 18.) Other huge companies also have a stake. American Express, for example, invested approximately $31 million in the $38 million Great Plains Correctional Facility in Hinton, Okla., according to the prison's warden, Tom Martin. Great Plains is a private prison that houses inmates from North Carolina.

Prison companies also buy lobbying power. Rodney Blonien, a powerful California lobbyist and former corrections official, was paid more than $600,000 by a variety of corrections clients between 1989 and 1994, according to the Los Angeles Times. Wackenhut alone paid him $220,260 during that period, the newspaper reported.

Private prison companies have some powerful allies in the fight for stiffer sentences and more prison spending. For example, the California Correctional Peace Officers Association, which has grown from 4,000 to 23,000 in the last decade, gave more than $1 million to various California state politicians in 1996. The prison lobby is also supported by the National Rifle Association. Armed with an agenda of deflecting public fear away from guns and toward people, the NRA successfully lobbies for prison construction and three-strikes-and-you're-out laws. (See "The NRA strikes Back." (By Chris Bryson)

This alliance between private prison operators `and more traditional law-and-order advocates is only natural. David Shichor, professor of criminal justice at California State University - San Bernardino, calls it the Hilton scheme": You want to keep your hotel always full.'

But unlike the NRA, companies like Wackenhut and the Bobby Ross Group have direct power over prisoners' lives. Marc Mauer, of the Washington, D.C.-based Sentencing Project warns that the profit incentive for private prison companies could lengthen prisoners' stays. "A critical issue is accountability." Mauer says. "You can imagine someone coming up for probation The tendency of a private prison Will he not to release them.'

At Lockhart, for example, Wackenhut officials decide when inmates should he disciplined or given "good time," both factors considered by parole hoards. Inmates cab appeal disciplinary actions to a public board. but in making judgments about convicts futures, the profiteer stands between the prisoner and the state.

Companies serving the corrections industry need an ample quantity of raw material to ensure long-term growth Since that raw material is prisoners, the industry will do whatever it can to guarantees a steady supply.

Kirsten Bloomer is a staff writer for the Rutland Daily Herald in Vermont.

A captive labor force

The guards aren't the only people employed at the Lockhart prison.
Lockhart inmates pay their debt ;to society at 85 83 cents an hour.

Past air-conditioned corporate offices that prisoners built themselves, about 150 male convicts make air-conditioner valves for Chatleff Controls Inc. and circuit boards for Lockhart Technologies Inc.

These jobs were once held by 150 workers in Austin. But in 1995, LTI laid those workers off and transferred the jobs here. The company gets cheap labor- ITT pays workers minimum wage and doesn't have to provide benefits or vacations-and cheap rent of $1 a year.

Men sit under work lamps, peering through microscopes and magnifying glasses at circuit-board parts. Some solder the parts on a "touch-up line"; others check for missing pieces. Each prisoner collects about 85 cents an hour from his paychecks. The rest goes to victims' compensation, taxes, family support and the prisoner's own room and board.

Prison labor, which exists in public and private prisons alike, is yet another lucrative enterprise in the prison business, netting a total of $1.8 billion in 1995. Years ago, prisoners made nothing but license plates and furniture for state office buildings. Today, in 30 of the 50 states, they make a gamut of goods for the open market.

Inmates in Vermont, for instance, make snowshoes for Stowe Canoe and Snowshoe Co. Prisoners in California raise pigs for D.R. Ranch of Avenal. Oregon Prison Industries, which goes by the name of UniGroup, markets a line of convict-made blue jeans called "Prison Blues," selling back to the public the very "gangsta" culture it claims to crack down on through the criminal-justice system.

At Lockhart, Leonard Hilt, LTI's soft-spoken controller and former president, says he enjoys having "a captive work force." "They're here every day," Hilt says. "Their cars don't break down, they're rarely ill, and they don't have family problems.... They're delightful to work with."

Many prison reformers favor prison labor because it teaches inmates marketable skills. Linda Marin, executive director of Texas-CURE (Citizens United for Rehabilitation of Errants), says programs like Lockhart's are an improvement over the state's tradition of forcing prisoners to work without pay. "If there's a means for them to earn money and get benefits-getting to work on time, having their work valued-that's a good thing," Marin says.

Sitting in the touch-up line at Lockhart with his name stenciled across the back of his undershirt, Rickey Davis says he likes the program because it lets him "better himself." "You can pretty much get yourself established for your release," says Davis, who is serving time on a cocaine charge. "You get a chance to send your kids some money out of your check." He can also earn "good time" off his sentence.

Not all inmates apply for the jobs, however. "I'm not going to work to pay the state to send me to prison," says Howard Zephur, lifting weights in the out door recreation yard.

Critics worry that prison labor undercuts outside wages and gives scarce jobs to prisoners. "I'm concerned that prisoners would be used as a union-busting tool," Marin says.

In fact, TWA has used inmate labor to break strikes. During a flight-attendant strike in 1986, TWA turned its reservation clerks into flight attendants and put inmates to work on the phone. The airline company still pays $5 an hour to inmate reservation clerks at a juvenile facility in Ventura, Calif. That same work, when unionized pays $18 an hour

Prison labor even beats out the competition in Mexico. In search of lower wages, San Francisco-based Data Processing Accounting Services moved U.S. assembly jobs to a maquiladora in Tecate, Mexico. But increased competition sent the company back to the United States in 1992—to San Quentin State Prison.

"Some of the work went to China and some of the work we sent to San Quentin," DPAS owner Bob Tessler says. "Our objective is to find low-cost labor." The company left San Quentin in 1996 because of high prisoner turnover, but it's looking for an alternative site, ideally at another prison.

Critics worry that health and safety standards in prison workplaces are not adequately enforced. Moreover, they argue, inmates can't organize, collectively bargain or obtain concessions from their employer, who is also their imprisoner.

"I think it's a disgusting economic development model," says Rick Levey, legal director for the Texas AFL-CIO. 'When you have the social cost of maintaining such a massive criminal-justice system and you pay for that through super-exploitation of workers, that's a bad situation for the rest of society."—K.B.

IN THESE TIMES, March 17, 1997

Jailhouse stock

By Ken Silverstein

The euphoria among proprietors of private prisons is shared by financial analysts, who are herding investors into Wall Street's latest "boom" industry. The headline above a recent USA Today story -- "Everybody's doin' the jailhouse stock"—cheerfully captures the exhilaration of industry watchers.

The astronomical rise in the stock-market value of private prison companies is making investors giddy; the value of Corrections Corporation of America (CCA) stock, for example, has quadrupled during the past four years. Brian Ruttenbur, a Nashville-based analyst for Equitable Securities Corp., believes share prices will continue to climb. "There's a lot of investment opportunities out there," he says. "During the next 12 to 18 months, I expect [private prison] stocks to rise by an average of 40 percent, and perhaps by more."

Because they are private firms that answer to shareholders, prison companies have been predictably vigorous in seeking ways to cut costs. In 1985, a private firm announced its intention to build a prison in Pennsylvania on a toxic-waste dump, which it had bought at the bargain rate of $1. The state legislature, however, rejected that plan.

To be profitable, private prison firms must ensure that new facilities are not only built, but also filled. A bullish report on CCA issued by Prudential Securities cautions, "It takes time to bring inmate population levels up to where they cover costs. Low occupancy is a drag on profits." Still, says the report, company earnings will be strong if CCA succeeds in "ramping up population levels in its new facilities." A 1995 Prudential report on Wackenhut, the other behemoth in the private prison industry, reflects the same concern: "The fine tuning of earnings figures hinges critically on bed count and when new prisons become occupied."

The outlook on this front, however, appears promising. Ruttenbur co-authored a 1997 study entitled "Crime Still Pays," which notes that the U.S. prison population "is expected to more than double" during the next 10 years, primarily due to "increasing crime, rising incarceration rates and longer prison sentences." More good news for investors is the rising incidence of juvenile crime "a time bomb set to explode"—and growing opportunities in the international market.

IN THESE TIMES March 17, 1997

The NRA strikes back

By Chris is Bryson

An important and largely overlooked force driving the prison boom in the United States is the National Rifle Association. With a membership of some 3 million, an estimated war chest of $140 million, and paid lobbyists in ail 50 states, the NRA has thrown its weight behind so-called "get tough on crime" measures and prison-building initiatives.

In an attempt to change its image from pro-gun to anticrime, the NRA formed CrimeStrike in 1991 as divisions of its lobbying arm, the Institute for Legislative Action. The NRA shifted gears in response to growing popular disgust with the groups opposition to the Brady bill and its support for the sale of assault rifles and Teflon-coated "cop-killer" bullets. Those campaigns had also drawn attacks from law-enforcement groups that had once supported the gun lobby.

"It's frightening how effective CrimeStrike has been," says Steven Donziger, editor of The Real War on Crime. By orchestrating well-funded efforts to lengthen prison sentences and build new prisons, Donziger says, CrimeStrike has effectively served as a front group for the many constituencies that profit from an expanded crime-control and prison industry.

CrimeStrike logged its first victory in November 1993 when it backed Washington state's "Three Strikes and You're Out" initiative, the nation's first. The NRA provided $50,000 in crucial last minute financing that enabled the local sponsor, Washington Citizens for justice, to place the initiative on the ballot. 'We would have failed without CrimeStrike," says Dave LaCourse, the group's director.

That success was rapidly followed by similar victories in California and Virginia, where NRA lobbyists again provided essential money and manpower to "three strikes" campaigns. In Virginia and Mississippi, according to CrimeStrike state legislative affairs director Susan Misiora, the NRA was "instrumental" in passing truth-in-sentencing measured which lengthened average prison sentences.

CrimeStrike has also led the charge to accelerate prison-building programs around the country. In Texas in 1993 and Mississippi in 1994, the NRA lobbied for billion-dollar bond initiatives to fund prison construction. The NRA-backed public ad campaign in Texas led to the construction of an additional 76,000 prison beds in two years. The state has imported prisoners from as far away as Hawaii to fill the cells and has hired 12,000 new prison staff to guard the growing inmate population.

At the federal level, the NRA lobbied hard for the 1994 crime bill, which, among other things, increased the federal funds available to states for building new prisons from $3 billion to $10 billion. CrimeStrike executive director Elizabeth Swazey says the frequency with which legislators quoted from NRA literature during congressional debate on the bill illustrates how effective CrimeStrike was.

Swazey calls juvenile just ice "one of the most important areas of criminal-justice reform." CrimeStrike is currently examining juvenile-sentencing laws in all 50 states and lobbying for new measures to have young people sentenced as adults.

The NRA's embrace of "get tough on crime" rhetoric is paying off. Despite the widespread criticism of the NRA in the early '9Os, donations to the organization's legislative fund rose to $18 million in 1993, about double the amount given in 1988, according to Donziger. 'There is a direct link," he says. "They recognized a business opportunity, and they chose to exploit it."
Chris Bryson is a freelance writer based in New York City

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