Prison town eats troubled youth alive: The "profitable operation" of Walnut Grove.

This wasn't just Cornell's or the GEO Group's responsibility - this is the doing of the people of Walnut Grove, Mississippi. That's the problem with being a "successful" prison town: if you aren't careful, you'll be so busy raking in the profits that you lose your soul...

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Town Relies On Troubled Youth Prison For Profits

By John Burnett

National Public Radio
Fri., March 25, 2011 2:12pm (EDT)

The Walnut Grove Youth Correctional Facility houses 1,200 boys and young men
east of Jackson, Miss.

First in a two-part series on private prisons


Prisons are filled with stress and violence; without proper supervision they can revert to primitive places. That's what happened at Walnut Grove Youth Correctional Facility in Mississippi, an NPR news investigation has determined.

As the nation's largest juvenile prison, Walnut Grove houses 1,200 boys and young men in a sprawling one-story complex ringed by security fences about an hour's drive east of Jackson. The State of Mississippi pays a private corrections company to run the prison.

NPR's investigation found that allegations swirling around the prison raise the fundamental question of whether profits have distorted the mission of rehabilitating young inmates.

An Environment Of Violence

Walnut Grove "started out and it was formed to be something good for youth, but somewhere down the line it took a turn for the worse," said former inmate Clayborne Henderson, 27. He spent two years for kidnapping in "the Grove," as they call it, between his 19th and 21st birthdays. Now he's working at a car wash and taking community college courses in Jackson, trying to straighten out his life.

He and other former inmates describe an environment of violence inside the youth prison as so pervasive it became entertainment.

"It'd be like setting up a fight deal like you would with two dogs," Henderson said. "I did witness twice while I was at Walnut Grove, they actually bet on it. It was payday for the guards."

The Southern Poverty Law Center and the ACLU National Prison Project have filed a class-action lawsuit on behalf of 13 inmates against the prison operator, GEO Group, the prison administration and state officials. The complaint describes rampant contraband brought in by guards, sex between female guards and male inmates, inadequate medical care, prisoners held inhumanely in isolation, guards brutalizing inmates and inmate-on-inmate violence that was so brutal it led to brain damage.

"When we began investigating conditions inside this facility and seeing how these kids were living with the beat downs and the sexual abuse and violence and corruption, it became a no-brainer. It became something we had to do," said Sheila Bedi, the lead attorney on the case and deputy legal director for the SPLC.

Earlier this year, the Civil Rights Division of the U.S. Department of Justice launched its own investigation into some of these charges. A spokesperson in Washington, D.C., said the probe is ongoing and declined to comment.

Questionable Prison Guards

Several former inmates who spoke to NPR say guards are a big part of the problem. Justin Bowling, who spent 17 months in the Grove in 2007 and 2008 for marijuana possession, says the prison is overrun with gangs, whose members include correctional officers.

"A lot of times, the guards are in the same gang. If the inmates wanted something done, they got it. If they wanted a cell popped open to handle some business about fighting or something like that, it just pretty much happened," Bowling said.

There's also a problem of too few guards. A state audit in 2005 and another one last year noted that staffing at Walnut Grove decreased even as the prisoner population increased.

According to the audit, in 2009 there were three inmate injuries a day. In the first six months of 2010 there was more than one fight a day, an assault on staff at least every other day and nine attempted suicides.

The Council of Juvenile Correctional Administrators, whose members represent youth facilities in all 50 states, reports that a guard-to-inmate ratio of 1 officer to 10 or 12 juvenile prisoners is common. The state audit of Walnut Grove found the guard-to-inmate ratio to be 1 to 60. Salaries are the largest expense of a correctional budget, and reducing staffing is typically a way to keep costs down.

Pablo Paez, vice president for corporate relations for GEO Group, based in Boca Raton, Fla., declined repeated requests by NPR to give the company's side of the story. He cited the pending lawsuit. GEO, which is traded on the New York Stock Exchange, is the nation's second largest prison corporation and had more than $1 billion in revenue last year.

Mississippi Corrections Commissioner Chris Epps also declined repeated requests for an interview, citing the litigation. In a brief email in January, he wrote, "If staff ... abused inmates they should be punished. However, I have no knowledge of them abusing inmates."

He added that the facility has improved since GEO took over last August. Two months later, his spokesperson confirmed in an email to NPR that the Department of Corrections had hired an independent consultant, experienced in fixing troubled lockups, to review operations at the Grove.

Ethel Heard is one of 100 parents who have banded together to pressure the state to make reforms at Walnut Grove. Her 21-year-old son, Tyrone, is serving time there for armed robbery.

"We know that our children have made mistakes," she said. "We're not asking that they open the cell doors and let our kids out. We're asking for them to have better treatment."

Creating A Distinct Youth Facility

When Walnut Grove opened 10 years ago it was a model youth facility. The idea was to get teenaged felons out of the notorious Parchman penitentiary and away from hardened criminals. As one young inmate said, "An old fool has lived his life, but a young fool can change."

But that's not how it has turned out, says state representative John Mayo, a member of the corrections committee that oversees Walnut Grove and other Mississippi prisons.

"To me, in my mind, it's just a prison," he said. "It's another adult prison."

Mayo says the Legislature kept raising the age of inmates sent there from 18 all the way up to 22. He says he voted against the age increases.

Today, Walnut Grove is the only juvenile facility in the country that locks up 22-year-olds with 13-year-olds.

"Initially, it was to be 13- through 18-year-olds," Mayo said. "And then, quite frankly, that did not populate Walnut Grove to what I'm going to call a 'profitable operation.'"

Two years ago, Walnut Grove added 500 beds to accommodate all the new prisoners. According to the 2008 and 2009 annual reports for Cornell Companies, the prison operator at the time, the expansion created an extra $3.4 million in revenue. GEO acquired Cornell last year.

George Cole, a career educator who served as principal of the prison school for four years, was at a legislative hearing held in January to look into alleged abuses at Walnut Grove.

"I thought when I went to Walnut Grove I was going to a place that was really interested in the rehabilitation of our children, but I found out quite the opposite. And I guess as a private facility they had to make money," Cole testified.

The hearing was heavily attended by inmates' parents, most of whom are black, and all of whom wore bright orange T-shirts that read, "Friends & Family Of Youth Incarcerated At Walnut Grove." Though invited, neither GEO nor the state corrections department sent a representative to the hearing.

Taking Educational Grant Money

NPR examined thousands of pages of public records associated with federal grants paid to the Walnut Grove Youth Correctional Facility. Records show that Warden Brick Tripp and his deputy wardens already paid by GEO have been receiving checks for $2,500 to $5,000 as "supplemental salaries" for administering federal Title 1 education funds.

"The warden and deputy warden had no dealings whatsoever with educating students," Cole stated emphatically in a phone interview.

The warden declined an interview request. Jeff Webb, the lawyer who represents the five-member Walnut Grove Correctional Authority, which writes the checks, says overseeing the grants is part of the warden's job, though he did not say why deputy wardens receive paycheck bonuses.

GEO Group's Paez was also asked why the prison administration was receiving supplementary paychecks from federal education grants, which have nothing to do with the civil rights lawsuit or Justice Department investigation. He said he had no comment.

NPR forwarded the paycheck supplements to the U.S. Department of Education and asked if this was normal. Chief of Communications Justin Hamilton said the agency is concerned and has referred the matter to its Office of Inspector General for investigation.

Support For Walnut Grove

Despite all the controversy, the youth prison has staunch defenders.

Dennise Jones-Putnam, municipal clerk of the town of Walnut Grove, says her nephew is in the prison boot camp program. "He will be one of the first ones to tell you that's the best thing that's ever happened to him. It's turned his life totally around," she said.

As to why the kids are frequently placed on lockdown and fight with staff?

"Walnut Grove is not a day care," said the Rev. Justin Chaney, the prison chaplain there from 2007 to 2010. "I'm afraid a lot of people think it might be just a little detention center. It's maximum security. So yea, you do have those that can be rough."

Grady Sims, mayor of Walnut Grove, says he visits the prison frequently and knows the staff well. "I wouldn't interfere with the way they're operating it," he said. "They've done an excellent job."

Why The Prison Matters To The Town


The town of Walnut Grove is so small there's no stoplight or supermarket. In fact, inmates outnumber citizens 2 to 1. The prison just about saved this town from extinction. The 200 prison jobs helped fill the void when a shirt manufacturer and a glove maker closed and moved overseas several years ago.

The mayor's own vending company has 18 snack machines inside the prison.

"It's been a sweet deal for Walnut Grove," Sims said. Indeed, every month, the prison pays the town $15,000 in lieu of taxes which comprises nearly 15 percent of its annual budget.

"For a small town, that's a lot of money," the mayor said, "and it helps us maintain a full-time police department that we wouldn't be able to afford without that income."

There's more.

GEO pays the Walnut Grove Correctional Authority which sends the prison all of its grant money $4,500 a month. Webb, the authority's lawyer, says the money is kept in escrow and rarely spent.

Finally, there's a full-time state corrections employee whose job is to monitor how the prison is run. His salary is reimbursed by GEO.

All of this raises the question: Is oversight of the Walnut Grove Youth Correctional Facility negligent because it's a golden goose?

"All this community is just making so much money off Walnut Grove that no one wants to upset the applecart. Then that means they're not gonna make their money anymore," says State Representative Earle Banks, chairman of the state Juvenile Justice Committee. He called the recent hearing to investigate Walnut Grove. Banks, a plaintiff's lawyer, is suing the prison for wrongful death of an inmate.

That hands-off policy might be about to change.

"If there's mistreatment going on at Walnut Grove and the Justice Department finds that it is, they ought to sue the hell out of somebody," Mayo said. "I can't understand why we have to be sued to do what's right."

Aarti Shahani contributed to this NPR News investigation and report.

Prisoner Patrick Lee Ross' tragic death: more to the story

Last week on Arizona Prison Watch I posted a press release from the Arizona Department of Corrections about the suicide of a young prisoner named Patrick Ross. This morning I found that someone who knew and loved him had left a comment following that post. It suggested that there was more to the story, so I went to the Phoenix New Times to check the comments section there. Indeed, his loved one posted there, too, elaborating even more on Patrick's struggles and articulating his own sense of rage and loss.

The kid was apparently dying already, and not getting the medical care he needed - nor, do I suspect, was he about to get a compassionate release out of our governor, especially with an armed robbery conviction and more than 12 more years to serve. I doubt he was really sent to Oklahoma for "better" medical care - they probably just figured they could warehouse him more cheaply there and let Cornell take the heat from the family when he died. The judge who sentenced him - probably to the mandatory minimum, because of his prior conviction - was either oblivious to the realities of incarceration and compassionate release, or he knowingly gave the family false hopes by relaying their willingness to be his caregiver to the ADC as if it might ever happen. I can't imagine he didn't know that kid would never see freedom again.

Since Patrick's story in that comment would just be lost in the archives of the New Times, I'm reposting it here, in full, with the crass article that precipitated it. I'm a survivor of suicide myself, and am particularly sensitive to what these folks must be going through - callous remarks from people who know nothing about the person who died are only hurtful to those left behind to make sense of it all.

Anyway, I think it's important for the community to know the side of the story that would otherwise be buried with Patrick and his family's grief. If anyone out there who knew him wants to send me an obituary or write something about his struggles in prison with his illness specifically for this site, contact me at arizonaprisonwatch@gmail.com

First, the Phx New Times article, then the comment.

Wishing you peace and freedom for the rest of your journey, Patrick.

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Arizona Inmate Housed in Oklahoma Prison Dead in Apparent Suicide

By James King, Wed., Sep. 1 2010 @ 11:33AM

An Arizona prison inmate, being housed in a private prison in Hinton, Oklahoma, is dead after apparently taking the easy way out, rather than completing his sentence.

Officials at the Arizona Department of Corrections tell New Times inmate Patrick Ross was found dead in his cell around 7:50 a.m. yesterday.

Responding Medical teams tried to revive Ross but were unsuccessful.

DOC officials wouldn't say how Ross killed himself only saying he died "after apparently committing suicide."

Ross was serving a 13-year sentence -- at a private prison run by Cornell Companies -- for an armed robbery he committed in Maricopa County.

Ross began his sentence in December 2009 and ended it -- apparently on his own terms -- yesterday.

DOC is investigating the death.

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Shawn Humphreys (comment added September 6, 2010)

Suicide, my ass suicide. PATRICK ross was an incredible human being, with a sad story and a debilitating disease that was taking over his life. His family was told he was being moved to Oklahoma so that he could get better treatment for Huntington's Chorea. He was supposed to get released into his grandmothers care in Wa. state when his symptoms worsened and the prison could no longer take care of him, as she is trained in caring for people with this disease. This is obviously another case where they, being the prison system, has failed to help a inmate who was sick and trying to turn their life around. So what do they do? Cover their asses by saying it was a suicide. FUCKED! IN LOVING MEMORY PATRICK LEE ROSS YOU WILL BE GREATLY MISSED WE LOVE YOU

AZ dumping Cornell in OK.

Again, this is a company press release, not journalism. Just thought it was interesting to get it the way they spin it. Kind of makes you feel sorry for them, doesn't it? They really sound let down. They hope to get the same prisoners back again down here, though. No one's going free before their time is up, of course (I can only imagine how jammed the in-state prisons will be for awhile) but at least visitation won't be such a hardship for families if they aren't farmed out to another state. A lot of Hawaiians wish their folks would be brought back home, too.

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Cornell Companies, Inc. Announces Receipt of Arizona Notification Not to Renew Contract at Great Plains Correctional Facility

HOUSTON, Aug 6, 2010 (GlobeNewswire via COMTEX) -- Cornell Companies, Inc. /quotes/comstock/13*!crn/quotes/nls/crn (CRN 28.06, -0.22, -0.78%) ("Cornell") announced today that it has received notification from the Arizona Department of Corrections of its election not to renew its contract at Cornell's 2,048 bed Great Plains Correctional Facility in Hinton, Oklahoma, which is scheduled to expire on September 12, 2010. The Company will be working with Arizona in the coming days to determine the schedule for the transfer of inmates, which the Company expects to complete in 2010. As a result of this notification, Cornell intends to continue marketing the facility to other customers.

Cornell's previous 2010 guidance assumed that the Arizona DOC would maintain its use of the Great Plains facility at its present level through the end of the year. In May 2010, Cornell reported that the ultimate resolution of Arizona's usage of the facility would likely depend on the timing of Arizona's budget process and may not occur until the third quarter of 2010. In light of the contract termination, Cornell is withdrawing its prior annual financial guidance.

James E. Hyman, Cornell's Chairman, President, and Chief Executive Officer, said, "The loss of the Great Plains contract will have a negative impact on our near-term financial results. As a result, we are withdrawing our prior annual financial guidance. In light of our proposed merger with The GEO Group ("GEO"), we have decided not to issue updated financial guidance at this time. However, GEO has previously stated that it believes the merger will produce an accretive transaction in 2011, which included an assumption that Arizona would withdraw their inmates from Great Plains during 2010."

About Cornell Companies

Cornell Companies, Inc. (http://www.cornellcompanies.com) is a leading private provider of corrections, treatment and educational services outsourced by federal, state and local governmental agencies. Cornell provides a diversified portfolio of services for adults and juveniles, including incarceration and detention, transition from incarceration, drug and alcohol treatment programs, behavioral rehabilitation and treatment, and grades 3-12 alternative education in an environment of dignity and respect, emphasizing community safety and rehabilitation in support of public policy. At June 30, 2010, the Company had 68 facilities in 15 states and the District of Columbia and a total service capacity of 21,392.

The Cornell Companies, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=1468

Forward-Looking Statements

This press release contains "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including but not limited to statements regarding Arizona's schedule for the transfer of the inmates out of the Great Plains facility, as well as any other statements that are not historical facts, These statements are based on current expectations of future events. If underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results could vary materially from Cornell's expectations and projections. Risks and uncertainties include, among other things, the uncertainties associated with, general economic and market conditions, actions by government agencies and other third parties, and other risks and uncertainties detailed in the Company's most recent Form 10-K, the definitive Proxy Statement on Schedule 14A filed by Cornell with the SEC on July 15, 2010 and other filings made by us from time to time with the Securities and Exchange Commission, which are available free of charge on the SEC's Web site at www.sec.gov. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from the statements made. All information set forth in this release is current as of the date of this release. Cornell undertakes no duty to update any statement in light of new information or future events.

Important Additional Information About the Transaction

This press release may be deemed to be solicitation material in respect of the proposed merger between GEO and Cornell. The proposed transaction will be submitted to the respective stockholders of GEO and Cornell for their consideration. In connection with the proposed transaction, GEO has filed with the Securities and Exchange Commission (the "SEC") a registration statement on Form S-4, as amended, that includes a definitive joint proxy statement of GEO and Cornell and that also constitutes a prospectus of GEO. The respective stockholders of the companies are urged to read the definitive Joint Proxy Statement/Prospectus and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information. You may obtain a free copy of the definitive Joint Proxy Statement/Prospectus, as well as other filings containing information about the Companies at the SEC's Internet site (http://www.sec.gov). Copies of the definitive Joint Proxy Statement/Prospectus and the SEC filings that are incorporated by reference in the Joint Proxy Statement/Prospectus can be obtained, free of charge, by directing a request to Pablo E. Paez, Director, Corporate Relations, (561) 999-7306, ppaez@geogroup.com, One Park Place, Suite 700, 621 Northwest 53rd Street, Boca Raton, Florida.

Participants in the Solicitation

GEO, Cornell and their respective directors and executive officers and other persons may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information regarding GEO's directors and executive officers is available in its Annual Report on Form 10-K for the year ended January 3, 2010, which was filed with the SEC on February 22, 2010, and its proxy statement for its 2010 annual meeting of stockholders, which was filed with the SEC on March 24, 2010, and information regarding Cornell's directors and executive officers is available in Cornell's Annual Report on Form 10-K, for the year ended December 31, 2009, which was filed with the SEC on February 26, 2010 and its Form 10-K/A, which was filed with the SEC on April 30, 2010. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, are contained in the definitive Joint Proxy Statement/Prospectus and other relevant materials filed with the SEC. You may obtain free copies of these documents as described in the preceding paragraph.

This news release was distributed by GlobeNewswire, www.globenewswire.com

SOURCE: Cornell Companies, Inc.

CONTACT: Cornell Companies, Inc.

Charles Siegel, Vice President, Public Policy

(713) 623-0790

GEO Group growth = more victims of crime.

Don't think of this tidbit below as a piece of journalism, folks - it's just a press release put out by the massive private prison operator, the GEO Group. Basically what it says is that they just got a huge line of credit to take over competitor Cornell based on the promise that humanity (primarily America) will continue to feed them plenty of bodies for their prisons in the years to come.

That's a pretty sad comment on the state we're in. I hope we can prove them wrong. These SOBs should be driven into the poor house for helping to perpetuate crime and incarceration, instead of working on how to prevent it. They're clearly hoping we continue to be baffled about how else to deal with the causes and consequences of poverty, addiction, violence and greed. Look for them to lobby for more prisons and fascist legislation - sucking money from public education - in Congress and the statehouse nearest you.

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Aug. 5, 2010, 8:15 a.m. EDT

The GEO Group Completes New $750 Million Senior Credit Facility; Expects to Close Cornell Merger on August 12, 2010

(posted at marketwatch.com)

BOCA RATON, Fla., Aug 05, 2010 (BUSINESS WIRE) -- The GEO Group /quotes/comstock/13*!geo (GEO 21.59, +0.30, +1.41%) ("GEO") announced today the closing of a new $750.0 million Senior Credit Facility comprised of a five-year, $150.0 million Term Loan A bearing interest at LIBOR plus 2.50%; a six-year, $200.0 million Term Loan B bearing interest at LIBOR plus 3.25% with a LIBOR floor of 1.50%; and a five-year $400.0 million Revolving Credit Facility (the "Revolver") bearing interest at LIBOR plus 2.50%.

GEO's new Senior Credit Facility will be used to repay borrowings outstanding under GEO's existing Revolving Credit Facility and Term Loan B; fund the cash consideration and transaction-related expenses in connection with GEO's previously announced merger with Cornell Companies ("Cornell"); and repay Cornell's current senior debt. Immediately upon completion of the merger, the new Term Loan A and Term Loan B are expected to be fully funded, and GEO expects to have approximately $220.0 million in borrowings outstanding, approximately $50.0 million in letters of credit, and between $120.0 million and $130.0 million in available borrowing capacity under the Revolver.

GEO expects the closing of the Cornell merger to occur on Thursday, August 12, 2010 following the previously announced special meetings of Cornell and GEO stockholders. The closing of the transaction remains subject to GEO and Cornell stockholder approval, as well as other customary closing conditions.

The GEO Group, Inc. ("GEO") is a world leader in the delivery of correctional, detention, and residential treatment services to federal, state, and local government agencies around the globe. GEO offers a turnkey approach that includes design, construction, financing, and operations. GEO represents government clients in the United States, Australia, South Africa, and the United Kingdom. GEO's worldwide operations include the management and/or ownership of 62 correctional and residential treatment facilities with a total design capacity of approximately 60,500 beds, including projects under development.

This press release contains forward-looking statements regarding future events and future performance of GEO that involve risks and uncertainties that could materially affect actual results, including statements regarding estimated earnings, revenues and costs and our ability to maintain growth and strengthen contract relationships. Factors that could cause actual results to vary from current expectations and forward-looking statements contained in this press release include, but are not limited to:

(1) GEO's ability to successfully pursue further growth and continue to enhance shareholder value;

(2) GEO's ability to access the capital markets in the future on satisfactory terms or at all;

(3) risks associated with GEO's ability to control operating costs associated with contract start-ups;

(4) GEO's ability to timely open facilities as planned, profitably manage such facilities and successfully integrate such facilities into GEO's operations without substantial costs;

(5) GEO's ability to win management contracts for which it has submitted proposals and to retain existing management contracts;

(6) GEO's ability to obtain future financing on acceptable terms;

(7) GEO's ability to sustain company-wide occupancy rates at its facilities; and

(8) other factors contained in GEO's Securities and Exchange Commission filings, including the forms 10-K, 10-Q and 8-K reports.

SOURCE: The GEO Group

The GEO Group

Pablo E. Paez 1-866-301-4436

Director, Corporate Relations

For-profit prisons: The eggs in this basket are cracked.

How The Recession Hurts Private Prisons.

Newsweek

by Nancy Cook
June 30, 2010

America’s constantly booming prison population has seemed like a good business to be in, but even that is slowing with the economy.

Baldwin, Mich., (population 1,107), will soon have more prison beds than full-time residents. On the outskirts of town, one of the country’s largest private prison companies recently spent $60 million to expand a former juvenile prison into a 1,755-bed facility meant to house illegal immigrants before deportation. This is the same town where every summer locals gather for a carnival nicknamed Troutarama at which teenage girls vie for the crown of Ms. Lake County. Thirty-two percent of Baldwin’s families live below the poverty line, in a state with a 13.6 percent unemployment rate, compared to the national unemployment rate of 9.7 percent. Baldwin residents were counting on the private prison to create jobs, but this past March, the federal government pulled back its funding on the bid. This left the Geo Group, Inc., with an empty fortress in the middle of rural Michigan, 85 miles north of Grand Rapids.

A similar scenario is playing out across the country, in states such as California, Oklahoma, and Colorado, where entire private prisons now sit vacant. The Huerfano County Correctional Facility in Colorado and the Diamondback Correctional Facility in Oklahoma temporarily shut their doors this spring after the state of Arizona stopped sending prisoners out of state in an effort to save money. Cornell Companies, one of the three largest private prison operators in the U.S., expects two of its California prisons to remain empty through 2010, while 11,600 of Correction Corporation of America’s beds were unoccupied as of early May. The empty prisons are not a result of the number of inmates dropping. In fact, according to the Pew Public Safety Performance Project, the number of inmates rose in 2007 in Arizona, Ohio, Kentucky, Mississippi, and Florida. Instead, the empty beds are because state corrections agencies are crowding prisoners into more facilities as they do in California, or trying to change legislation to make sentencing less harsh for nonviolent criminals. The private prison industry’s reliable mix of housing state and federal inmates and illegal immigrants—a model that helped to fuel two decades of growth—is no longer a surefire way to get rich. “There are only so many places you can find people,” says Martin F. Horn, a former commissioner with the New York City Department of Correction and a lecturer at the John Jay College of Criminal Justice.

Though it’s certainly not disappearing and there are signs of a potential recovery for the sector, the private corrections business is under financial pressure to change its business plan, and as that happens, prison advocates worry that the industry and it’s bottom-line approach will come to dominate other areas of the justice system. Rather than worrying about upping the number of inmates, private prison companies are tapping into overseas markets and offering a wider range of services. GEO increased its revenue by $20.2 million in the last year by opening up prisons in Australia and the United Kingdom, while also eyeing contracts in South Africa and New Zealand.

Cornell runs halfway houses and youth prisons and has noticed an uptick in the demand for drug treatment, housing, or job placement programs that help prisoners reenter society. “The challenge for reentry is funding,” says James Hyman, CEO and president of Cornell Companies. “If states can’t fund programs for their star college graduates, how do they fund programs for the prisoners?”

The private prison business experienced a similar watershed moment starting in the late 1990s and into early 2000. Shares of private prison companies then traded at roughly $2.50 (today, a share of GEO or CCA can easily sell for anywhere between $21 and $29), CCA also had thousands of empty beds, and the industry as a whole faced scandals over its treatment of prisoners. Twelve former prison guards in Texas had been indicted for sleeping with female prisoners, while a juvenile prison in Louisiana lost its contract after the U.S. Justice Department charged its guards with beating and throwing tear gas at the boys housed there. But two major events saved the industry. The Federal Bureau of Prisons saw an uptick in its number of prisoners (from 1987 to 2007, the national prison population tripled, from 585,084 to 1,596,127, according to a report by the Pew Center on the States), and then post-9/11, the Bush administration began to detain more immigrants and house them at a patchwork of private facilities across the United States.

The industry’s political connections have also likely helped ensure its longevity. The boards of directors for GEO and CCA read like a who’s who from past administrations and include both Republicans and Democrats. GEO board member Norman Carlson served as the director of the Federal Bureau of Prisons for 17 years. CCA’s board boasts Thurgood Marshall Jr., former cabinet secretary to President Bill Clinton and son of the late Supreme Court justice, as well as former U.S. senator Dennis DeConcini, Democrat of Arizona, who, during his 18-year tenure in Congress, served on the judiciary and appropriations committees.

DeConcini says he has never lobbied on behalf of CCA, though he did, as a board member, attend a meeting with the director of the Arizona Department of Corrections and has publicly spoken in favor of the private prison business. During the 2008 election cycle, the political action committees of GEO, Cornell, and CCA, the three largest companies, were also generous, donating a total of roughly $679,000 to political groups and politicians from key states where they are courting new business, including Arizona, California, Louisiana, and Florida. “The private prisons companies know how to play the legislative game,” says Michael Jacobson, director of the Vera Institute of Justice.

As the economy recovers, both industry stock analysts and executives from Cornell and CCA say business is cylical and will rebound (GEO did not want to comment on the record). The private prison business now houses just under 9 percent of U.S. prisoners, compared to 6 percent in 2000, says Damon Hininger, president and CEO of CCA. Though it’s unclear where the new business will come from, Hininger points to several options. California’s budget crisis could actually prove to be a boon to business, since its prisons already are so overcrowded. The Federal Bureau of Prisons recently announced that it’s looking for a few thousand additional beds, and private prison executives argue that they operate 10 to 20 percent cheaper than state-run facilities, in part because they do not have to contend with the salaries and benefits of state correctional officers’ unions. (Corrections unions, for their part, say that makes the private prison guards less qualified and trained to deal with criminals and less prone to oversight.) “When I think about the future constraints on state governments, the fact that we can build quickly and cheaply only increases our value,” says Hyman of Cornell Companies.

The only part of the story left is the prisoners themselves. As David Fathi of the ACLU National Prison Project points out, “Prisoners cannot decide they don’t like where they live.” Because the private prison business does not follow the same rules as the rest of the market, in which consumers voice their preferences through what they buy, the question of how and where we house prisoners becomes merely an issue of economics. And for the private prison companies, the answer so far has been lucrative—as private prison executives are confident it will continue to be.

Find out more about the social and economic impact of America's prisons in our series. Read about the debate over whether cash-strapped states should cut classrooms or prison cells, and find out why we should treat drug addicts in prison.

Private Prison Industry: Sell, sell, sell

This is why they're all flocking to Arizona - they hope we keep increasing our incaceration rates....think about it. Don't let these vampires into your homes and communities. hey would just as soon incarcerate your kids as anyone else's - and will...

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3 Prison Stocks Set for Release - CRN, CXW, GEO

March 18, 2010

By Louis Navellier, Editor, Blue Chip Growth

Louis Navellier is one of Wall Street's renowned growth investors. Investing for over 28 years, he has earned a national reputation as a savvy stock picker and portfolio manager. The New York Times called him "an icon among growth stock investors."

According to The New York Times, for the first time since 1972 we have seen a reduction in the U.S. prison population instead of an increase. That spells bad news for publicly traded prison stocks like Cornell Companies Inc. (CRN), Corrections Corp. of America (CXW) and Geo Group Inc. (GEO).

And what’s more, that reduction isn’t just a tiny dip -- state prisons held 1.4 million people as of January 1, about 6% less than the year before. That’s a substantial drop-off that could signal continued trouble for these corrections companies.

Don’t get me wrong, this drop is good news for public safety advocates, our overtaxed criminal justice system and a host of others. But for investors who always thought publicly held prison companies were low-risk ways to make a bundle off the corrections system, it’s been a rude awakening.

Let’s look at each of these three prison stocks, and why they are each “sells” right now in my FREE Portfolio Grader stock ranking tool.

Prison Stock to Sell - Cornell Companies, Inc. (CRN)

Cornell Companies, Inc. (CRN) provides correctional, detention and rehabilitation services that are outsourced by federal, state and local government agencies. Its Abraxas Youth and Family Services division also provides residential, detention, shelter care, and community-based services for juveniles between the ages of 10 and 18. First Analysis Securities recently downgraded the Houston company to "equal weight" from "overweight" in late February after Arizona’s governor indicated it would phase out the use of Cornell’s private out-of-state prison beds for inmates. The loss of the Arizona prisoners which could cut into Cornell's annual earnings by 35 cents to 45 cents per share. Earnings have already declined for the last three consecutive quarters, so that’s not an inspiring sign for this prison stock. Shares have lagged the market in 2010, down about -4% compared to a +3% gain in the broader market YTD.

Prison Stock to Sell - Corrections Corporation of America (CXW)

Corrections Corporation of America (CXW) owns and operates privatized correctional and detention facilities in the United States. As of December 31, CXW operated 65 prison facilities, including 44 sites that it owned, in 19 states and the District of Columbia. It also owned 2 additional corrections facilities that it leased to third-party operators. with Systemwide, Corrections Corporation of America boasts a total capacity of 87,000 beds.

Though CXW’s fourth-quarter profit beat the Street in early February, the company announced a weak Q1 outlook with estimated earnings of 28 cents to 30 cents a share, compared previous estimates of 33 cents. Shares have been brutalized so far in 2010, losing 17% even while the market has been moving up, and it looks like more bad news is yet to come.

Prison Stock to Sell - Geo Group, Inc. (GEO)

The GEO Group, Inc. (GEO) provides government-outsourced correctional services for prisons, specializing detention and mental health. GEO is a truly global prison stock, with facilities in the United States, Canada, Australia, South Africa, and the United Kingdom. The company also provides consultation and management services relating to the design and construction of new correctional and detention facilities. In mid-February, GEO Group announced its Q4 earnings fell 6%, weighing on shares. Then on March 2, word that the Federal Bureau of Prisons would cancel plans for a GEO facility to house illegal aliens convicted of crimes sent shares down about 8% in one trading day alone. Share are down double-digits year to date.

As of this writing, Louis Navellier did not own any shares of these stocks in personal or client portfolios.

http://www.investorplace.com/experts/louis_navellier/articles/prison-stocks-to-sell-geo-cxw-crn.html