Private Prisons Pose Problems for Taxpayers

News Reports Document Bad Management and Financial Concerns; States Like Texas Lead the Way in Finding Alternatives to Incarceration

By Ryan Meltzer
ACLU of Texas Intern

Back in June, we published a post detailing the Christian Broadcasting Network’s critical coverage of the private prison industry. A little over a week ago, CBN rebroadcast its investigative report, titled Selling Prisons “for Profit,” exploring the miserable conditions in private prisons as well as the ethical implications of treating prisoners as dollar signs.

Although our previous post quoted at length from the accompanying CBN print story, the television broadcast (available for streaming here) includes some compelling footage:

  • Prison security cameras capture a brutal inmate-on-inmate fight while a guard watches from the security of an enclosed room.
  • An investor presentation by Corrections Corporation of America (CCA) boasts of corrections as a “recession resistant” industry, with high recidivism rates making for a good investment.
  • Jesus Cardenas, a former inmate at Texas’s own Mineral Wells Pre-Parole Transfer Facility, recounts a handful of the horrors he witnessed while in custody.

Texas Prison Bid’ness, Grits for Breakfast, and the Private Corrections Working Group have extensive coverage of the problems that have plagued Mineral Wells over the years, but suffice it to say that CCA, the private company that operates the facility, has been ineffective at preventing escapes, disturbances, and contraband smuggling. Cardenas’s testimony certainly doesn’t help CCA’s image: Describing the stark difference in security between Mineral Wells and the public prison where he was first held, Cardenas recalls “at least one or three [inmate fights] a day” and reports that known gang members routinely stored cell phones, drugs, and weapons in their cells.

If it wasn’t bad enough for the image of the private prison industry for CBN anchor Pat Robertson to lead the story with a comparison of the U.S. to jail-happy China and Russia, CBN’s rebroadcast coincided with a raft of bad news for private prisons and their investors.

First, the Conroe Courier reported that a federal grand jury is investigating the construction of two privately run facilities, the Joe Corley Detention Center and the Montgomery County Mental Health Treatment Facility, based on allegations of corruption. The article explains that Montgomery County is at risk of losing its tax-exempt status on the $45 million in bonds it issued to finance the Joe Corley Detention Center, as the facility is currently housing only federal prisoners. If the county loses its tax-exempt status, County Judge Alan Sadler is quoted as remarking, “the tax implications would be huge.”

Next, the Brownsville Herald covered the dispute between Willacy County District Attorney Bernard Ammerman and Willacy County Judge John Gonzales over the county’s debt from the Willacy County Regional Detention Center. While Judge Gonzales maintains that the county has insulated itself from creditors by financing the prison through a public facility corporation, Ammerman counters that Willacy County will be liable to bondholders if the center fails. By any estimate, the county’s debt is between $75 and $189 million, so in the event of a default, the county could potentially see a sharp drop in its bond status—a catastrophic economic turn of events for the County’s 22,000 residents.

Most recently, the New York Times continued its investigation of Community Education Centers (CEC), the New Jersey-based corrections company that operates a number of penal institutions in Texas. Having exposed chronic problems with violence, escapes, contraband, and poor rehabilitative services at CEC facilities, the Times has turned its attention to CEC’s tumultuous finances. According to records filed in a lawsuit against CEC by its former chief financial officer, the corporation has faced such severe financial turmoil over the last four years that it considered filing for bankruptcy in 2010. What, you might wonder, could have so shaken a supposedly “recession resistant” industry that a company like CEC is at risk of bankruptcy? Simple: When your business is dependent on high incarceration rates, sensible policies that reduce prison populations are going to hurt your bottom line. Indeed, CEC’s financial problems didn’t come from their New Jersey contracts, which have grown over the past decade; rather, the Times writes, “Community Education has . . . run into trouble after an aggressive expansion foundered in states like Alabama and Texas.”

Arguably more troubling than the possibility that CEC has been on the brink of financial ruin for years, though, is the fact that in Texas, government entities are expected to scrutinize the qualifications of corporate bidders before awarding a private prison contract. (For a sample jail-related Request for Proposal issued by Harris County, see here.) Because CEC has apparently received new and renewed contracts in Texas during the time frame examined by the Times, this suggests one of two things: Either CEC was less than honest in its financial accounting, or Texas officials enamored of corrections privatization chose to ignore the grim truth behind the numbers. In light of such reports, it’s clear that the CBN story has only just scratched the surface of prison privatization.

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