Prisons For-Profit in Texas and Beyond


When I was first told about privatized prisons, I thought it was one of the most absurd things I had ever heard. The concept of a non-government owned prison that was run like a private business, with a for-profit motive, sounded so inherently corrupt I couldn’t help but laugh at the idea of someone taking it seriously. I was in an almost melancholy state of disbelief when I found out that not only were privatized correctional facilities endorsed by legislators as the answer to American crime, but they were also heavily lobbied. It wasn’t until years later, after reading an interview with formerly incarcerated Tommy Chong and having a conversation with anti-privatized corrections activist Frank Smith, that my interest was sparked.

The privately owned prison-for-profit method started taking shape in 1979 when the U.S. Immigration and Naturalization Service (INS) began contracting private firms to detain illegal immigrants. During the 1980s, the federal prison system had lost its credibility with the public and policymakers over its failure to rehabilitate and reduce the number of returning re-offending inmates. With the growing view that the Federal government was ineffective and incapable of handling the operation of a public correctional network, alternative methods of imprisonment were considered. Supported by conservative activists and the growing political enthusiasm for free market axioms, privatized prisons were seen as a great way to experiment with multi-task projects inhibiting Federal influence and debilitating public employee unions.

Private correctional facilities for profit became the answer to meet the growing need for prisoner space during anti-tax administrations. Advocates for privatized correctional facilities expressed that with the freedom to expand on innovative management techniques, they could lower prison costs by 20 percent and, with the use of private sector financing, they could construct facilities in half the time of one constructed by the government. By the mid-80s, prisons for-profit were becoming big news after Corrections Corporation of America (CCA) was contracted to operate Tennessee’s entire prison system, with a 99-year lease from the state for $250 million dollars

Texas’ penal system has a long reputation of corruption and inhumane treatment of its inmates. After Texan officials abolished contracted leasing of the State’s correctional facilities and the use of inmates for private enterprise 100 years ago, Texas began to re-dabble with prisons for profit in 1984, after CCA opened its for-profit immigrant detention center in Houston. Over the next twelve years there were 37 more privately owned prisons being operated in Texas.

CCA operated facilities in Texas began contacting overcrowded prisons and offering “rent-a-cell” services, renting out prison cells for a small fee of $2.50 to $5.00 per day.

The companies collected profits while many states collected reports of abuse, poorly trained staff, poor conditions, and escapes, among other scandals.

![Mugshot - Bill Allen][]
*Bill Allen*
![Mugshot - Richard Smith][]
*Richard Smith*
*Bill Allen, the former CEO of VECO, and Richard Smith, the chief lobbyist and VP of VECO, were found guilty of bribing Alaska state legislators following a series of rejected proposals for privatized correctional facilities.*

Contingency employment and the orange collar work force

Incarcerating inmates is much more expensive than it used to be. Government regulations require prisoners to be given reasonably sanitary conditions, regular meals, and medical coverage.

If the government was losing money running prisons, then how do privatized prisons generate profits?

Using prison labor to offset the costs of housing prisoners and even to generate a profit is not a new concept; it’s been tried a number of times in American history and is continually abolished as a result of the high amount of prisoner deaths and inhumane living conditions.

In 1934, the U.S. legislature attempted a more regulated way of tapping into the prison workforce by creating the Federal Prison Industries also known as UNICOR. UNICOR is a government owned corporation which leases prison labor through government contracts, generating over half a billion dollars per year. UNICOR is not permitted to lease its labor to non-government contractors, stemming from the belief that competition between private business and UNICOR would shrink wages and cut benefits for non-prison workers. Prisoners working for UNICOR have the opportunity to earn anywhere from $0.23 to $1.25 per hour, assembling goods like office furniture and electronics for advanced weapons.

Not restricted to government contracts, leased labor from privatized correctional facilities is much less regulated than UNICOR. Rather than paying the costs that come with outsourcing their factories to foreign countries, companies can contract labor at sweatshop prices without leaving the U.S.

The Prison Industry Enhancement Certification Program (PIECP) was created in 1979 as a compromise with the Ashurst-Sumners Act. After the PIECP, it was no longer illegal to sell prison-made goods in the U.S. if the inmates making the goods were receiving prevailing wages (which most of the time means 20% of the Federal minimum wage). Still, most prison-made goods are sold overseas to avoid paying higher PIECP salaries. Regulation of PIECP is loosely enforced and mainly dependent on lobbying from businesses that are in competition with PIECP labor.

The opportunity to legally exploit sweatshop labor without leaving the country is too attractive for a lot of companies to overlook. Correctional facilities across the U.S. have prisoners working for Victoria’s Secret, Starbucks, Nintendo and even operating phones for airline and other large, networked companies.

Even here in Austin, business owner Leonard Hill of Lockhart Technologies Inc. fired 150 workers and relocated his circuit board factory to a privatized Geo Group prison in Lockhart Texas, where prisoners made circuit boards for companies like Dell and IBM for 20% of Federal minimum wage. After his factory’s relocation to the Lockhart prison, Hill received a tax deduction from the city and no longer had to worry about paying benefits like workers comp and medical, as the prisoners were already being covered.

Maintaining the corporate bottom line

Despite having a general anti-Federal stance, privatized correctional companies are eager to collect the heavy flow of government subsidies they regularly receive. The regular accumulation of subsidies and numerous tax exemptions (often in the hundreds of millions), combined with low operational costs, are the key to increasing profits.

The majority of facility costs are spent on staff salaries, fringe benefits, and overtime. Private correctional firms insist that they cut 10-20% in prison operations costs with an innovative employee infrastructure. Privately operated facilities have significantly lower staffing than publicly operated prisons, minimizing guards and maximizing inmates.

The turnover for privatized prison guards is high in Texas. In some prisons, turnover is as high as 90%. Guards have low wages, minimal – if any – benefits, and they have to work in a shit hole that most people spend their lives trying to avoid. Because of the extreme need to fill guard space, a thorough background check would be counterproductive. It’s not unusual for guards to have already been convicted of a major felony. Female prisoners are often raped by guards. The Coke County Juvenile Justice Center in Bronte, Texas has faced a series of lawsuits for rape and molestation charges. When escapes take place (and they take place often), guards are usually found to have aided them. Privatized prison guards aren’t sworn police officers either, so when riots do take place it’s no surprise they don’t risk their lives interfering.

Private prisons house mostly minimum to medium security non-violent offenders, convicted of low level drug offences or are immigrants detained by the Immigration and Naturalization Service. These facilities are plagued with negligent deaths. Pamela Weatherby was an insulin dependent diabetic at CCA’s Dawson State Jail. She fell into a series of comas after being denied insulin injections. She was then sent to a mental clinic after her comas were interpreted as attempted suicide; she was revived with regular insulin injections. After her recovery she was sent back to the Dawson State Jail where she was once again denied her insulin shots and slipped into a fatal coma; she was serving a one year drug sentence.

During his six month sentence for a driving misdemeanor, 18 year old Bryan Alexander died of pneumonia. Following an investigation, evidence showed Alexander was only treated for a cold and flu, despite coughing up blood during the five days leading to his death.

The medical practices at privatized prisons are typically underfunded, incompetently staffed, and generally dangerous. In February 2009, prisoners rioted and set fire to the Reeves County (Texas) Detention Center in protest of the facility’s cruel and unusual healthcare.

![Mugshot - Mark Ciavarella][]
*Mark Ciavarella, a president judge in Pennsylvania, pleaded guilty to accepting bribes of $2.6 million from two private for-profit juvenile facilities after investigators took notice of his extensive record of frequent and harsh juvenile convictions.*

Passing the buck

Throughout Texas, counties and towns have been paying for the construction of jails and detention facilities with a procedure known as “leaseback” or “lease-purchase.”

With leaseback, financing local officials can create a Public Facility Corporation (PFC), a non-profit corporation. The city or county chooses the PFC’s board of directors and approves its codes and regulations. The PFC can borrow as much money as it wants for projects without the requirement of voter approval from local tax-payers. The leaseback contract only requires the PFC’s debt to be paid off with the money that is generated from the finished project (in this case, a correctional facility). If the correctional facility ends up not making any money, the PFC, instead of the local government, will be held responsible. As it turns out, bond rating companies don’t distinguish between PFCs and the cities/counties that they represent. In the case of a failed prison, the city’s or county’s bond rating is damaged and future development is almost impossible because banks and investors become hesitant to loan to a known liability.

In attempts to speed up litigation and bureaucracy for quicker expansion, financiers, construction contractors, and operators of correctional facilities will work with lawyers to create the litigation and board members of the city or county’s PFC. Texas’s own James Parkey (Corplan Corrections, Inc. founder) is a privatized prison prospector, who is notorious for legally conning small, impoverished local governments into acquiring expensive contracts that bind them to unsuccessful or empty prisons. In 2006, Parkey convinced the city of Hardin, Montana to invest in a prison that would be privately operated. He and his team of lawyers, contractors, underwriters (bond sellers), and economic consultants assessed the city and made an estimate of how much money the city could generate from a potential correctional facility. He promised that the town would gain 150 jobs and at least $100,000 a year from prisoner fees. The construction of the prison was contracted to Hale-Mills Construction of Houston for a guarantee maximum price of $19.88 million. Hardin’s $27 million municipal bond sale earned $1.62 million for the bond companies Herbert J. Sims and Municipal Capital Markets Group of Dallas. Since its construction, the prison has remained empty and has yet to generate anything but massive debt.

In Texas, there are two failed prisons (located in in La Salle and McLennan counties) that were instigated by Parkey’s team (which, again, included MCM and Hale-Mills construction). Neither prison was making enough money to cover operating costs or debt expenses. In 2005, two Willacy County Commissioners were convicted of bribery related to a Corplan project.

Correctional facilities are expensive to maintain, expensive to insure, and they depreciate in value over time; all of these liabilities are risked by the local governments, not the companies operating the facilities. The local government is offered a set fee of x-amount of dollars (usually around $2) a day per prisoner. The companies that operate the correctional facilities charge fixed rates for their services, regardless of how full the facility is. The local government is responsible for paying any of the maintenance and repair costs that occur. They are also responsible for the investigation and prosecution of the frequent crimes that take place in the facilities and the manhunts for escapees, which can go on for days with hundreds of police and search members on the clock.

In the common case of riots or riot induced fires, like the ones in Eden Detention Center (CCA operated), Mineral Wells Pre-Parole Transfer Facility (CCA), Kinney Detention Center (Community Education Centers, Inc), Rio Grande Detention Center in Laredo (Geo Group), Cornell Companies’ Flightline Correctional Center in Big Spring and Reeves County Detention Center (Geo Group), a city or county could lose millions in a single day.

The local governments are ultimately responsible for the performance of the privatized operators, too. It takes decades to pay off the loans taken out for the prison’s construction and any scandal during that time could potentially get the prison decommissioned. Littlefield, Texas has been spending tens of millions while raising property taxes and utility costs, and laying off city employees to salvage its horrible bond rating and pay off its debt. The loans were taken out to construct the now-deserted Bill Clayton Detention Center, a privatized prison that was closed in 2008. Idaho transferred its roughly 305 prisoners from the Bill Clayton Detention Center to a privatized prison in Oklahoma after the suicide of Idaho inmate Randall McCullough. McCullough had spent more than a year in solitary confinement before his suicide. An investigation by the Idaho Department of Correction considered the facility’s understaffing a risk to Idaho inmates.

![Mugshot - Michael Conahan][]
*President Judge Michael Conahan was indicted for money laundering, fraud, and racketeering in Pennsylvania. An investigation into the “kids for cash” scandal discovered that Conahan was receiving payments from for-profit juvenile detention centers after using his budgetary authority to stop funding for the county public youth detention facility and supplying the for-profit facilities with convicted teens and $58 million in contracts.*

The ALEC and the corporate network of conservative legislators

Privatized prisons are politically protected and heavily advocated by The American Legislative Exchange Council (ALEC). The ALEC is a conservative organization started in 1973 for the purpose of advancing free market dogma and promoting limited government. The ALEC serves as a collective bureau for conservative legislators to communicate, cooperate, and research how policy projects and problems have been handled in other states. Its membership includes thousands of legislators, members of Congress, Governors, and corporate board members. Corporations provide most of the funding for the ALEC’s operating budget; this would explain the ALEC’s long history of advocating controversial corporate laws for pharmaceutical companies, oil companies, insurance firms, banks, the asbestos industry, and Enron. The ALEC is also a non-profit 501(c)(3); which means that when companies like Pfizer, Koch Industries, and Philip Morris donate hundreds of millions of dollars to the ALEC (so the ALEC can lobby and change legislature in their favor) the companies will receive a corresponding tax deduction.

Privatized prison operators, the CCA and The GEO Group have both been major contributors to the ALEC. ALEC’s Criminal Justice Task Force co-chairs have included the CCA Senior Director of Site Acquisition, Brad Wiggins, and former CCA Vice President, John Rees.

The ALEC has developed and helped successfully pass “tough on crime” policies like stricter mandatory sentences and the three strikes law (the law that has people serving 85 years for burglary).

In a desperate reaction to the skyrocketing prison population brought about by ALEC legislation, policymakers turned to the privatized correctional industry for help. By building more privatized prisons, the industry would help relieve horrible prison overcrowding and remedy the unconstitutional living conditions.

Privatized correctional facilities are operated throughout all of the U.S. and aside from a handful of devoted activists and litigators, little has been done to effectively curb their growth. John Kasich, Governor of Ohio, is pushing for five prisons to be sold to private correctional companies to raise money during Ohio’s budget crunch. Governor of Florida, Rick Scott, is proposing to privatize all the state prisons in Florida’s southern 18 counties. Currently, New York and Illinois, two of the most politically corrupt states in the U.S., ironically, are the only two states where there is a ban on privatized correctional facilities. Both states happen to have strong correctional unions with lobbying power.

In 2008, Luzerne County, Pennsylvania Judges Mark Ciavarella and Michael Conahan were found guilty of collecting $2.6 million in bribes from a former owner of two privatized detention centers. The Judges were accused of helping the detention centers obtain $58 million in contracts, suppressing a critical audit of one of the centers and closing a competing county-run detention center. Regardless of the scandal and the public’s growing aversion to for-profit corrections, the expansion of privatized correctional facilities in Pennsylvania hasn’t slowed.

In 2007, Alaskan State legislators were found guilty of conspiracy to commit extortion, bribery, and money laundering for Cornell Companies Inc.(CC Inc., a for-profit corrections company) from Houston. CC Inc. and Bill Weimer, the founder of Allvest, Inc., were caught handing out bribes to gain support for publicly-unpopular private prison proposals. The proposals planned privatized correctional facilities to be constructed in Anchorage, Delta Junction, Kenai, and Whittier. It also proposed a Juvenile Psychiatric Treatment Center in downtown Anchorage, which would have been a horrific rape-factory.

California has played a crucial part in the history of privatized prisons. Being the second largest client of privatized prisons behind Texas, California has the largest incarcerated population in the entire country. Californian prisons are so overcrowded that the U.S. Supreme Court considers the facilities to be a violation of the inmates’ constitutional rights, and is demanding that California reduce its prison population by more than 30,000 people in the next two years. Since Californian politicians are expressing a total reluctance to comply with the release of 30,000 dangerous pot smokers and immigrants, it’s very possible that the Californian government may support an aggressive expansion of cheaply built privatized correctional facilities to disperse their inmates rather than release them.

Arizona’s strict anti-Mexican law SB 1070, sponsored by Russell Pearce, was criticized for the enormous amount of unauthorized immigrants it put at risk of detention and deportation. Most of the bill had been designed at a December 2009 meeting for the ALEC. Present at the meeting was Pearce and officials from CCA (who can potentially make millions from the sudden influx of detained immigrants).

In Texas, the HB 9 initiative sponsored by Representative Solomon allows law enforcement more freedom to investigate people’s immigration status. The bill humorously goes on to add that race, color, language, or nationality will not be contributing factors of investigation. In the Texas Senate, the much more complexly-written, but equally anti-immigrant Senate Bill 9 (SB 9) will, in the words of summer legal intern & J.D. candidate for The University of Texas, Betsy Stukes: “hinder Texas law enforcement officers from doing their primary job: catching criminals. Instead, police will be tasked with questioning people-including crime victims, witnesses and children-about their immigration status. […] if SB 9 becomes law, local governments will be prohibited from having policies that focus solely on crime prevention; instead they will face lawsuits from the Attorney General if they ban their law enforcement officers from questioning people’s immigration status.”

For an industry dedicated to criminals, it makes perfect sense that it would be run by criminals too. After 150 years of abolishing and reinstating the for-profit prison method, the private correctional facilities have demonstrated what they’re best at: making profits at the cost of inmates’ lives and tax-payer dollars. Even Alan Greenspan, the free market Buddha, whose ideas make up the cornerstone of thought for American and free market enterprise, admitted that a completely unregulated market should by no means be left to regulate itself.

Texas split from Mexico because of its love affair with slave labor. It later split from the U.S. over slave labor. Now it’s home to the largest concentration of human warehouses in America, this time against popular opinion.


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