January 5, 1998 The Nation [page] 11



Over the nest 5 years analysts expect the private share
of the prison "market" to more than double

by Eric Bates

A few hours after midnight one August evening last year, Walter Hazelwood and Richard Wilson climbed a fence topped with razor wire at the Houston Processing Center, a warehouse built to hold undocumented immigrants awaiting deportation. Once outside, the two prisoners assaulted a guard, stole his car and headed for Dallas.

When prison officials notified the Houston Police that the men had escaped, local authorities were shocked. Sure, immigrants had fled the minimum - security facility near the airport a few times before. But Hazelwood and Wilson were not being detained for lacking the papers to prove their citizenship. One was serving time for sexual abuse; the other was convicted of beating and raping an 88 year- old woman. Both men , it turned out, were among some 240 sex offenders from Oregon who had been shipped to the Texas detention center months earlier - and local authorities didn't even know they were there.

The immigration center is owned and operated by Corrections Corporation of America, which manages more private prisons than any other company worldwide. While CCA made nearly $14,000 a day on the out-of-state inmates, the company was quick to point out that it had no legal obligation to tell the Houston police or county sheriff about their new neighbors from Oregon. "We designed and built the institution," explained Susan Hart, a company spokeswoman. "It is ours."

Yet like a well-to-do rancher who discovers a couple of valuable head of cattle missing. C.C.A. expected Texas rangers to herd the wayward animals back behind the company's fence. "It's not our function to capture them," Hart told reporters.

Catching the prisoners proved easier, however, than charging them with a crime. When authorities finally apprehended them after eleven days, they discovered they could no more punish the men for escaping than they could lock up a worker for walking off the job. Even in Texas, it seemed it was not yet a crime to flee a private corporation.

"They have not committed the offense of escape under Texas law," said district attorney John Holmes. "The only reason at all that they're subject to being arrested and were arrested was because during their leaving the facility, they assaulted a guard and took his motor vehicle. That we can charge them with, and have."

The state moved quickly to pass legislation making such escapes illegal. But the Texas breakout underscres how the rapid spread of private prisons has created considerable confusion about just what the rules are when a for-profit company like Corrections Corporation seeks to cash in on incarceration. Founded in 1983 with backing from the investors behind Kentucky Fried Chicken, C.C.A. was one of the first companies to push the privatization of public services. The selling point was simple: Private companies could build and run prisons cheaper than the government. Business, after all, would be free of red tape - those inefficient procedures that waste tax dollars on things like open bidding on state contracts and job security for public employees. Unfettered American capitalism would produce a better fetter, saving cash-strapped counties and states millions of dollars each year.

Sooner or later, people realize that "the government can't do anything very well," Thomas Beasley, a co-founder of C.C.A. and a former chairman of the Tennessee Republican Party, said near the start of prison privatization. "At that point, you just sell it like you were selling cars or real estate or hamburgers."

Not everyone is quite so enthusiastic about the prospect of selling human beings like so many pieces of meat. By privatizing prisons, government essentially auctions off inmates - many of them young black men - to the highest bidder. Opponents ranging from the American Civil Liberties Union to the National Sheriffs Association have argued that justice should not be for sale at any price. "The bottom line is a moral one," says Ira Robbins, who wrote a statement for the American Bar Association opposing private corrections. "Do we want our justice system to be operated by private interests? This is not like privatizing the post office or waste management to provide services to the community. There's something meaningful lost when an inmate looks at a guard's uniform and instead of seeing an emblem that reads 'Federal Bureau of Prisons' or 'State Department of Corrections,' he sees one that says 'Acme Prison Corporation."'

Eric Bates is a staffwriter with The Independent in Durham North Carolina. Research support was provided by the Investigative Fund of The Nation Institute.

But such moral concerns have gone largely unheeded in all the excitement over how much money the boys at Acme might save taxpayers. There is only one problem: The evidence suggest the savings reaped from nearly fifteen years of privatizing prisons are more elusive than an Oregon convict in a Texas warehouse.

In 1996 the General Accounting Office examined the few available reports comparing costs at private and public prisons. Its conclusion: "These studies do not offer substantial evidence that savings have occurred." The most reliable study cited by the G.A.O. found that a C.C.A.-run prison in Tennessee costs only 1 percent less to operate than two comparable state prisons. The track record also suggests that private prisons political corruption and do little to improve quality, exacerbating the conditions that lead to abuse and violence.

Although private prisons have failed to save much money for taxpayers they generate enormous profits for the companies that own and operate them. Corrections Corporation ranks among the top five performing companies on the York Stock Exchange over the past three years. The value of its shares has soared from $50 million when it went public in 1986 to more than 53.5 billion at its peak last October. By carefully selecting the most lucrative prison contracts, slashing labor costs and sticking taxpayers with the bill for expenses like prisoner escapes, C.C.A. has richly confirmed the title of a recent analysis by Paine Webber: "Crime pays."

"It's easier for private firms to innovate," says Russell Boraas who oversees private prisons for the Virginia Department of Corrections. As he inspects a medium-security facility being b C.C.A. outside the small town of Lawrenceville. Boraas that the prison has no guard towers--an "innovation" that the company $2.5 million in construction costs and eliminates twenty-five full-time positions. "Think about it," Boraas A state corrections director who eliminates guard towers will lose his job if a prisoner escapes and molests a little old The president of the company won't lose his job, as long as he's making a profit."

Although corrections officials like Boraas initially viewed the drive to privatize prisons with skepticism, many quickly became converts. The crime rate nationwide remains well below what it was twenty-five years ago, but harsher sentencing, has packed prisons and jails to the bursting point. There are now 1.8 million Americans behind bars—more than twice as many as a decade ago—and the "get tough" stance has sapped resources and sparked court orders to improve conditions.

With their promise of big savings, private prisons seemed to offer a solution. Corporate lockups can now hold an estimated 77,500 prisoners, most of them state inmates. Over the next 5 years, analysts expect the private share of the prison "market" more than double.

Corrections Corporation is far and away the biggest company in the corrections business, controlling more than half of all inmates in private prisons nationwide. C.C.A. now operates sixth-largest prison system in the country—and is moving aggressively to expand into the global market with prisons in England, Australia and Puerto Rico. That's good news for investors. The Cabot Market Letter compares the company to a "hotel that's always at 100 % occupancy. . . and booked to the end of the century." C.C.A. started taking reservations during the Reagan Administration, when Beasley founded the firm in Nashville with a former classmate from West Point. Their model was the Hospital Corporation of America, then the nation's largest owner of private hospitals. "This is the home of H.C.A.," Beasley thought at the time. "The synergies are the same."

From the start, those synergies included close ties to politicians who could grant the company lucrative contracts. As former chairman of the state G.O.P., Beasley was a good friend of then Governor Lamar Alexander. In 1985 Alexander backed a plan to hand over the entire state prison system to the fledgling company for $200 million. Among C.C.A.'s stockholders at the time were the Governor's wife, Honey, and Ned McWherter, the influential Speaker of the state House, who succeeded Alexander as governor.

Although the state legislature eventually rejected the plan as too risky, C.C.A. had established itself as a major player. It had also discovered that knowing the right people can be more important than actually saving taxpayers money. The company won its first bid to run a prison by offering to operate the Silverdale Work Farm near Chattanooga for $21 per inmate per day. At $3 less than the county was spending, it seemed like a good deal - until a crackdown on drunk drivers flooded the work farm with new inmates. Because fixed expenses were unaffected by the surge, each new prisoner cost C.C.A. about $5. But the county, stuck with a contract that required it to pay the company $21 a head found itself $200,000 over budget. "The work farm became a gold mine," noted John Donahue, a public policy professor at Harvard University.

When the contract came up for renewal in 1986, however, county commissioners voted to stick with Corrections Corporation. Several enjoyed business ties with the company. One commissioner had a pest-control contract with the firm, and later went to work for C.C.A. as a lobbyist. Another did landscaping at the prison, and a third ran the moving company that settled the warden into his new home. C.C.A. also put the son of the county employee responsible for monitoring the Silverdale contract on the payroll at its Nashville headquarters. The following year, the U.S. Justice Department published a research report warning about such conflicts of interest in on-site monitoring—the only mechanism for insuring that prison operators abide by the contract. In addition to being a hidden and costly expense of private prisons, the report cautioned government monitors could "be co-opted by the contractor's staff. Becoming friendly or even beholden to contract personnel could lead to the State receiving misleading reports."

But even when problems have been reported officials often downplay them. The Justice Department noted "substantial staff turnover problems" at the Chattanooga prison, for instance, but added that "this apparently did not result in major reductions in service quality." The reason? "This special effort to do a good job," the report concluded "is probably due to the private organizations finding themselves in the national limelight, and their desire to expand the market."

The same year that federal officials were crediting C.C.A. with a "good job" at the undermanned facility, Rosalind Bradford a 23 year-old woman being held at Silverdale, died from an undiagnosed complication during pregnancy. A shift supervisor who later sued the company testified that Bradford suffered in agony for at least twelve hours before C.C.A. officials allowed her to be taken to a hospital. "Rosalind Bradford died out there, in my opinion, of criminal neglect," the supervisor said in a deposition.

Inspectors from the British Prison Officers Association who visited the prison that year were similarly shocked by what they witnessed. "We saw evidence of inmates being cruelly treated," the inspectors reported. "Indeed the warden admitted that noisy and truculent prisoners are gagged with sticky tape, but this had caused a problem when an inmate almost choked to death."

The inspectors were even more blunt when they visited the C.C.A.-run immigration center in Houston, where they found inmates confined to warehouse like dormitories for twenty-three hours a day. The private facility, inspectors concluded demonstrated possibly the worst conditions we have ever witnessed in terms of inmate care and supervision."

Reports of inhumane treatment of prisoners, while deeply disturbing, do not by themselves indicate that private prisons are worse than public ones. After all, state and federal lockups have never been known for their considerate attitude toward the people under their watch. Indeed C.C.A. and other company prisons have drawn many of their wardens and guards from the ranks of public corrections officers. The guards videotaped earlier this year assaulting prisoners with stun guns at a C.C.A. competitor in Texas had been hired despite records of similar abuse when they worked for the state.

Susan Hart, the C.C.A. spokeswoman, insisted that her company would never put such people on the payroll-well, almost never. "It would be inappropriate, for certain positions, [to hire] someone who said 'Yes, I beat a prisoner to death,"' she told The Houston Chronicle. "That would be a red flag for us." She did not specify for which positions the company considers murder an appropriate job qualification.

In fact. C.C.A. employs at least two wardens in Texas who were disciplined for beating prisoners while employed by the state. And David Myers, the president of the company, supervised an assault on inmates who took a guard hostage while Myers was serving as warden of a Texas prison in 1984. Fourteen guards were later found to have used "excessive force," beating subdued and handcuffed prisoners with riot batons.

The real danger of privatization is not some innate inhumanity on the part of its practitioners but rather the added financial incentives that reward inhumanity. The same economic logic that motivates companies to run prisons more efficiently also encourages them to cut corners at the expense of workers, prisoners and the public. Private prisons essentially mirror the cost-cutting practices of health maintenance organizations: Companies receive a guaranteed fee for each prisoner, regardless of the actual costs. Every dime they don't spend on food or medical care or training for guards is a dime they can pocket.

As in most industries, the biggest place to cut prison expenses is personnel. "The bulk of the cost savings enjoyed by C.C.A. is the result of lower labor costs," Paine Webber assures investors. Labor accounts for roughly 70 percent of all prison expenses, and C.C.A. prides itself on getting more from fewer employees. "With only a 36 percent increase in personnel," boasts the latest annual report, "revenues grew 41 percent, operating income grew 98 percent, and net income grew 115 percent."

Like other companies, C.C.A. prefers to design and build its own prisons so it can replace guards right from the start with video cameras and clustered cellblocks that are cheaper to monitor. "The secret to low-cost operations is having the minimum number of officers watching the maximum number of inmates," explains Russell Boraas, the private prison administrator for Virginia. "You can afford to pay damn near anything for construction if it will get you an efficient prison."

At the C.C.A. prison under construction in Lawrenceville, Boraas indicates how the design of the "control room" will enable a guard to simultaneously watch three "pods" of 250 prisoners each. Windows in the elevated room afford an unobstructed view of each cellblock below, and "vision blocks" in the floor are positioned over each entranceway so guards can visually identify anyone being admitted. The high-tech panel at the center of the room can open any door at the flick of a switch.

When the prison opens next year, C.C.A. will employ five guards to supervise 750 prisoners during the day, and two guards at night.

Another way to save money on personnel is to leave positions unfilled when they come open. Speaking before a legislative panel in Tennessee in October, Boraas noted that some private prisons in Texas have made up for the low reimbursement rates they receive from the state "by leaving positions vacant a little longer than they should." Some C.C.A. employees admit privately that the company leaves positions open to boost profits. "We're always short," says one guard who asked not to be identified. "They do staff fewer positions - that's one way they save money." The company is growing so quickly, another guard explains, that "we have more slots than we have people to fill them. When they transfer officers to new facilities, we're left with skeletons."

Prisons for Profit Continued...

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