Despite outrage over immigrant detention, private prisons’ bottom line is still strong

Introduction

Sept. 2, 2018: This story has been updated.

In the wake of increased immigrant detention, two of the nation’s largest private prison companies hope to cash in with additional federal contracts to hold detainees fighting potential deportation, according to representatives addressing shareholders during second quarter earnings calls in early August.

The two firms, Boca Raton-based GEO Group, Inc., and Nashville-based CoreCivic, formerly known as Corrections Florida Corporation of America, hold inmates under contract for states lacking detention space. But both companies also hold immigrant detainees for U.S. Immigration and Customs Enforcement, or ICE. Both firms’ history of holding immigrants stretches back 30 years and has lasted through both under Democratic and Republican administrations.

Following President Donald Trump’s victory, the value of stock in both companies recovered value that had dropped following Obama Administration moves to reduce federal use of private prisons. The Trump era also has led to new ICE contracts—even as both companies battle allegations about coercive guard practices and, separately, negligence that allegedly could have contributed to deaths, as New York-based Human Rights Watch alleged in a June report.

“We’ve seen a steady increase in our ICE populations throughout the country, and we expect this trend to continue as ICE seeks additional capacity,” said David Donahue, senior vice president of GEO corrections and detention, according to a transcript of GEO’s Aug. 2 call with investment analysts.

Damon Hininger, CoreCivic’s chief executive officer, noted on CoreCivic’s Aug. 9 earnings call that his company’s fresh ICE contracts will bring profits.

“In the last 60 days,” Hininger said, “we have also been awarded two new federal contracts that are scheduled to ramp up in the second half of this year and are expected to contribute meaningfully to earnings growth to 2019.”

The state of California, Hininger added, is a major CoreCivic client. But he explained during the call that as the Golden State continues efforts to reduce prison overcrowding —and its need for out-of-state inmate placement—immigrant detainees are expected to fill many of the CoreCivic beds that the loss of California inmates will leave vacant.

Data that ICE supplied to the Center for Public Integrity confirm a significant increase in immigrant-related detention. From 2015 to 2018 the average daily number of immigrants in detention went from 28,449 to 41,836.

During their earnings calls, representatives of GEO and CoreCivic both sought to distance the companies from a controversial Trump border policy that separated children from migrant parents often seeking asylum. “To be clear, none of our facilities provide housing for children who aren’t in the supervision, under the supervision of a parent,” Hininger of CoreCivic said on the call.

CoreCivic does, however, operate the South Texas Family Residential Center in Dilley, Texas, which has the capacity to hold 2,400 parents and their children. ICE and the facility are under public fire now following the death of a toddler after she was released from the facility along with her asylum-seeking Guatemalan mother.

The 1-year-old fell ill inside the facility and died after she and her mother were released. The mother has taken steps to possibly sue CoreCivic and ICE, alleging poor medical treatment while she and her daughter were in detention in Dilley.

In a response, CoreCivic public affairs director Amanda Gilchrist told the Center in an email: “First and foremost, we have deep sympathy for the family and the tragic loss of their child.”

Gilchrist also said “it’s important to note” that CoreCivic doesn’t provide medical or mental healthcare services or staffing at the Texas facility. ICE’s Health Service Corp, she said, is “solely responsible for contracting, staffing and oversight of any medical and mental health services provided” at the facility.

For its part, ICE told VICE News in an email: “Comprehensive medical care is provided to all individuals in ICE custody.”

During GEO’s earnings call, company chairman and CEO George Zoley noted that GEO is under contract also to hold detained immigrant families. But he also said “our company does not manage any facility that houses unaccompanied minors nor has our company ever provided transportation or any of these services for that purpose.”

“As a three-decade long service provider to the federal government,” Zoley added, “our focus has always been and remains on providing high-quality services. And we’ve never advocated for or against immigration enforcement or detention policies.”

On CoreCivic’s earnings call, Hininger, in a similar vein, said “CoreCivic does not advocate for or against legislation or policies that determine the basis for or duration of an individual’s detention. We do not enforce immigration laws or policies or have any say whatsoever in the individual’s deportation or release.”

Yet both companies, among other activity related to politics, contributed $250,000 each to help support expenditures for Trump’s 2017 inaugural festivities.

During the 2016 election cycle, GEO Group affiliates contributed $275,000 to Rebuilding America Now, a pro-Trump super PAC, according to OpenSecrets.com, which tracks donations. GEO affiliates donated to more than 40 individual GOP congressional candidates in 2016, and at least nine Democrats. GEO also moved a leadership meeting in 2017 to Trump National Doral, a Trump golf resort near Miami.

CoreCivic contributed $35,000 to the National Republican Senatorial Committee and $30,000 to the National Republican Congressional Committee, according to OpenSecrets.com. The company also donated to more than 40 GOP and at least seven Democratic congressional candidates.

Stock value resurrected

Despite controversy over Trump immigrant detention policies, earnings disclosures in August did leave some financial advisers bullish about private-prison performance up to now during the Trump era.

“GEO Group just came out with quarterly earnings of $0.60 per share, beating the Zacks Consensus Estimate of $0.48 per share,” the investment research website Zacks.com wrote. “This quarterly report represents an earnings surprise of 25%. A quarter ago, it was expected that this private prison operator would post earnings of $0.43 per share when it actually produced earnings of $0.57.”

In fact, Zacks.com wrote, GEO “has topped consensus revenue estimates four times over the last four quarters.”

With rising controversy over Trump immigrant policies, though, there are pension funds, including the Chicago Teachers Pension Fund, that are pulling out of investing in private prisons.

Stefanie Miller, an analyst and senior vice president of Height Capital Markets, a Washington-based investment research firm, said that Trump’s presidential win was “a surprise” for the stock market, given predictions that Democrat Hillary Clinton would win. An observer of private-prison stock, Miller said that Trump’s victory followed by more aggressive immigrant roundups triggered “over- excitement” among investors and pushed up GEO and CoreCivic’s stock.

Before Trump’s election, the future appeared uncertain for private prisons after Sally Yates, Deputy Attorney General under the Obama administration, issued an Aug. 18, 2016, memo announcing a reduction in federal use of private prisons. She asserted that private lockup doesn’t “substantially save on cost,” and doesn’t provide the same level of “programs or resources” as government facilities.

A Department of Justice Office of the Inspector General 2016 report found more safety and security incidents per capita in private lockups compared to government-run prisons.

The Trump Administration reversed the Obama reduction policy, however, arguing that it “impaired the future needs of the federal correctional system,” Attorney General Jeff Sessions wrote in a memo.

CoreCivic stock slid after Yates’ announcement from more than $26 a share and began hovering at a daily high of around $14 a share in the fall of 2016. But stock value began climbing after Trump’s election, more than doubling to over $30 a share and then leveling off over more recently to above $25.

GEO Group’s stock value also dropped from above $21 a share after Yates’ announcement and began hovering between $14 and $16 a share through the fall of 2016. After Trump won, stock value bounced back, doubling in value within months and then leveling off to a more recent high of more than$25.

Investors look for deals in the short run, Miller also said, but it’s hard to bet on the long term if the plans for growth in private prisons are uncertain. “It’s hard for us to see how these companies will want to make such a big investment when it’s tied directly to this administration’s policies and this administration isn’t going to be in office in the next 10 years,” Miller said.

For now, though, federal policies have delivered new deals with expectations for future benefits.

Since 2014, CoreCivic has received more than $481 million in contracts and GEO has received in excess of $809 million. More than half of those totals for both companies were awarded between 2016 and 2018, according to data collected by USAspending.gov, which tracks federal spending.

In 2017, GEO was awarded a 10-year contract with ICE to open a 1,000-bed processing center, or detention center, in Montgomery, Texas, company senior vice president of corrections and detention Donahue said during the earnings call.

The Montgomery facility is expected to earn annual revenues of $44 million, Donohue said. GEO also has new contracts to add 780 beds to Folkston ICE Processing, a Georgia detention center, as well as 128 more beds to the Aurora Detention Center in Colorado, Donahue also said.

During the CoreCivic earnings call, CEO Hininger outlined how an ICE deal struck in July of this year will allow CoreCivic to fill a portion of the beds at the company’s large La Palma Correction Center in Arizona. About 2,300 California state prison inmates will depart from La Palma in 2019 as California scales back dependence on outsourced incarceration.

Under the new ICE agreement, Hininger explained, “ICE currently expects to house up to 1,000 adult detainees at the La Palma facility as bed capacity becomes available.” La Palma has the capacity to house a total of 3,600 detainees.

CoreCivic also has a new contract with the U.S. Marshals Service to use the Tallahatchie County Correctional Facility in Mississippi, Hininger said, and ICE already has 500 detainees at the facility.

Neglect, abuse claims

But even as they gear up for more ICE detainees, both companies are simultaneously fighting—in courts—allegations of neglect and abusive practices.

In pending suits filed in 2017 in Washington state and in 2014 in Colorado, GEO is accused of exploiting prisoner labor by paying immigrant detainees $1 per day to clean detention facilities. In a motion to dismiss the Washington suit, GEO defends the $1-per-day payments at the 1,575-bed Tacoma ICE Processing Center in Washington state as a legally acceptable practice, according to court filings. The motion was denied in December 2017.

(Update, Sept. 2, 2018, 10:25a.m.: After not responding to multiple requests for comment and after publication of this story, GEO executive vice president for corporate relations Pablo Paez sent an email addressing unfair wage allegations. The email said:”The federal government sets the performance-based national detention standards which govern the federal government’s Voluntary Work Program at all ICE processing centers, public and private.”)

The suit in Colorado also alleges that GEO staff threatened detainees with solitary confinement if they didn’t agree to work at the 1,530-bed Aurora ICE Processing Center. GEO denies staff threatened detainees with solitary confinement, but admits to paying Colorado detainees $1 per day for labor. Lawyers for GEO and the detainees in Colorado held settlement negotiations Aug. 16, but didn’t reach an agreement. Negotiations will continue, according to a court filing.

In April of this year, detainees at a CoreCivic detention center in Georgia also filed a lawsuit alleging that staff threatened immigrant detainees with solitary confinement if they didn’t work. Detainees at the 2,000-bed Stewart Detention Center in Georgia who filed the suit further alleged that they were coerced to work to gain access to hygiene products and phone calls.

On Aug. 17, a Georgia judge declined CoreCivic’s motion to dismiss the suit based on arguments that detainees weren’t protected by Georgia’s “unjust enrichment” law or by the federal Trafficking Victims Protection Act.

In a statement, CoreCivic public affairs director Gilchrist, said that the company’s main responsibility is to “care for each person respectfully and humanely while they receive the legal due process that they are entitled to.”

On top of lawsuits over prisoner work, GEO has also been scrutinized for allegedly poor medical care.

The American Immigration Council, which supports immigrant rights, filed an administrative complaint in June 2018 with the Office for Civil Rights and Civil Liberties, an oversight branch of the Department of Homeland Security. The complaint demands a probe into what the group called “woefully inadequate medical and mental health care” at GEO’s Aurora ICE Processing Center.

In 2012, the complaint notes, detainee Evalin Ali Mandza died of cardiac arrest after a nurse allegedly waited an hour to call an ambulance after he began complaining of chest pain. A May 2012 death review by DHS asserts that a nurse was not “trained on the use of an EKG” and waited an hour to call 911 because she “needed to get the paperwork concerning Mandza’s medical condition completed before making the call.”

In a statement to the Center for Public Integrity, the American Immigration Council said that after it submitted its complaint, DHS’ oversight branch opened an investigation into the Aurora detention center. Results haven’t been released, but the Council is “confident that the complaint was helpful guidance in the course of their inspection,” Kathryn Shepherd, the group’s national advocacy counsel, said.

In 2012, Homeland Security’s Office of Detention Oversight, or ODO, conducted a compliance inspection of GEO’s Adelanto ICE Processing Center, a detention center in Southern California. The inspection looked into a detainee’s death from liver disease, pneumonia and multi-organ failure earlier in 2012. “OCO found that the death could have been prevented and that the detainee received an unacceptable level of medical care while detained at ACF [Adelanto],” according to the inspection document.

ICE declined to address if there were consequences or changes to the GEO contract after the 2012 death or other deaths in custody. In a statement, the agency said: “Any death that happens in ICE custody is a cause for concern.” Under agency protocols, the statement also says, “deaths are reviewed to determine if detainees received “national recognized standards of detention health care and practices.”

In 2015, ODO also scrutinized the death of Raul Ernesto Morales-Ramos, another Adelanto detainee. A report recounts Morales’ history of medical problems, including complaints of blood in his stool, painful urination and weight loss.

Eventually, Morales was seen by a doctor who discovered a large tumor but he died of intestinal cancer a month later.

The ODO investigation found that medical care provided to Morales-Ramos did not meet ICE requirements that facilities, including those under contract, provide “comprehensive, routine, and preventive health care, as medically indicated…and timely responses to medical complaints.”

GEO did not respond to multiple Center requests to comment on allegations of inadequate care in various cases.

(Update Sept. 2, 2018, at 10:25 a.m.: After publication of this story, GEO executive vice president for corporate relations Pablo Paez sent an email saying: “We strongly dispute” allegations of neglect. “On a daily basis,” the email said, “our dedicated employees deliver high quality services, including around-the-clock medical care, that comply with performance-based standards set by the federal government and adhere to guidelines set by leading third-party accreditation agencies.”)

In May, Central Americans detained at Adelanto filed a lawsuit in Los Angeles against GEO alleging that they’d been beaten, pepper sprayed and placed in isolation in retaliation for staging a hunger strike to protest conditions. GEO called the allegations “completely baseless,” according to media reports. And in a court filing, GEO said that “defendants deny that they or any GEO employees attacked or beat plaintiffs,” and “deny that the conditions at Adelanto are “‘depraved.'”

The Central Americans’ lawsuit was amended in July to add ICE as a defendant. ICE spokeswoman Sarah Rodriguez told the Center that “ICE is unable to comment on pending litigation.”