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Posted by: Jessica Silver-Greenberg on June 17
The private prison industry has moved its sights, from bread and butter incarceration, to the new gold rush: immigrant detention. You might have thought that a seemingly left-leaning Obama administration would shut off the spigot of government dollars flowing to private prison contractors, especially given the spotty track record many of these firms have. But Obama is actually upping the ante, by funding a newly minted project called “Secure Communities.” This immigration policy started in December is based around databases. It deputizes local law enforcement to run a federal back-ground check on any local arrests. The aim is to target immigrants with serious crimes on their record, and deport them.
In his 2010 budget, Obama ups funding for the program by 30%. He’s also continuing to fund Immigration and Custom Enforcement’s already existent Operation Streamline, started by the Bush administration in 2006. When it passed in 2006, it marked a transition from the old policy of catch and release. Under Streamline, immigrants illegally crossing the border would be charged with low-level criminal charges and detained in these U.S. detention centers. Obama has already pledged $1.4 billion to immigration enforcement. ICE expects detentions to rise this year, moving up 25% in 2009.
Obama’s immigration policy could translate into huge profits for prison contractors. The private prison companies promise that they can detain immigrants more efficiently than their public counterparts. ICE already allocates roughly half its budget to detention, and out-sources most of its detention responsibilities to the largest private prison operators. In January, the prisons bureau awarded a huge detention contract to Corrections Corporation of America, to operate a 4,000 person facility devoted to housing criminal aliens. In a conference call with investors, CCA’s president Damon Hininger said, “We believe this suggests that ICE will continue providing meaningful opportunity for the industry for the foreseeable future.” It’s at work to build a 2,172 bed facility in San Diego, and has already won four new federal contracts this year. GEO Group, CCA’s competitor is reaping considerable gain as well. In a recent conference call CEO George Zoley said, “Turning to the federal market, the primary driver for growth continues to be the detention of criminal aliens."
How durable are the cost savings, which in some cases cost half as much as federal prisons? (in Hawaii, Geo Group has ratcheted up its cost-per-prisoner by over 30% and the state, which hasn’t built its own prison capacity, will likely oblige). At what expense – be it safety of prisoners or treatment of workforce – are these cost savings achieved? And how does the industry defang oversight efforts? (One former CCA auditor has accused the company of keeping two sets of records of prisoner violence – one for internal use and one to present to federal regulators. I think these are questions worth considering
BusinessWeek's Adrienne Carter, Jessica Silver-Greenberg, and David Henry deconstruct the mysteries of high finance, Wall Street, and hedge funds for pros and ordinary investors. E-mail them directly if you've got tips about big deals, a hedge fund, or even securities industry gossip.