announced today that it no longer intends to house federal inmates in private, for-profit prisons. The DOJ cited its own study finding that private prisons "simply do not provide the same level of correctional services, programs, and resources; they do not save substantially on costs; and as noted in a recent report by the Department's Office of Inspector General, they do not maintain the same level of safety and security." In a memo released by Deputy Attorney General Sally Q. Yates, federal prison officials were directed to no longer renew contracts with private prison corporations, like the Corrections Corporation of America and the GEO Group, or to significantly reduce the scope of the contract with the end-goal of eliminating federal use of private prison facilities. According to Deputy Yates' release: "Today, I sent a memo to the Acting Director of the Bureau of Prisons directing that, as each private prison contract reaches the end of its term, the bureau should either decline to renew that contract or substantially reduce its scope in a manner consistent with law and the overall decline of the bureau’s inmate population. This is the first step in the process of reducing—and ultimately ending—our use of privately operated prisons."
This is clearly not good news for CCA, the GEO Group, and other for-profit private prison operators. The federal government had steadily supplied prisoners to these profit centers for the past decade as mass incarceration overwhelmed good moral and fiscal judgment in the United States. In fact, CCA and GEO Group stock plunged nearly 40% upon the news today. CNN reports: "[A]dvocates for prison reform believe this could be the
beginning of the end for private prisons. Wall Street appears to agree.
The stocks of two of the largest private prison operators fell
dramatically after The Washington Post reported the news. Corrections Corporation of America ( ) lost 40% of its value Thursday. Geo Group ( ) also slumped about 40%"
The Street reports: "Shares of private prison operators have plunged to new lows for the year on steep declines Thursday following the [DOJ's] decision to effectively end contracts with those companies. . . . Neither company [CCA or GEO] figures to weather this storm very easily, as they don't
have any significant brand extensions that insulate them from their
primary business of providing correctional facilities for the
government. In 2015, for instance, 45% of GEO revenue came from the Federal Government. However, these companies also operate state penitentiaries, which should not be directly affected by the DOJ's action."
The Corporate Justice Blog has long maintained that private, for-profit prison corporations are fundamentally immoral as its leaders are perversely incentivized to injure U.S. citizens by lobbying for harsher sentences (three-strikes laws), developing "new" crimes punishable by prison time (AZ SB 1070, crimmigration), providing poorer services to inmates in order to cut costs, and forcing cities and municipalities into signing contracts that guarantee 90% occupancy rates in the private prisons. Recent research and scholarship indicate that the promised benefits of private prisons, that they are cheaper, safer, and more efficient, are simply not true. This research shows that private prisons keep inmates locked-up longer (for same-time sentences), are less safe, and are more costly, each attributable directly to a profit motivation.
Adam Lamparello and I recently published an update on the perverse incentives that motivate private prison executives summing up the research that finds that private, for-profit prisons do not deliver on their promised efficiencies: Private Prisons and the New Marketplace for Crime.