Skip navigation

PLN quoted in article on CCA's business outlook amid abuse reports

Tennessean, Jan. 1, 2009.
PLN quoted in article on CCA's business outlook amid abuse reports - Tennessean 2009

September 1, 2009

Analysts give CCA an upbeat outlook

Stock price doubles amid abuse reports

By Chris Echegaray

Despite state budget crunches, reductions in beds at jails and controversy surrounding at least two detention centers, analysts and criminal justice experts say Nashville-based Corrections Corporation of America's financial forecast remains strong.

This outlook comes as the private prison operator's stock price has doubled since spring, rising to the $20-a-share range from a price in the high single digits less than half a year ago.

CCA has procured a state contract with Georgia for a 1,500-bed facility and was awarded a contract in Nevada.

Earlier this year, it postponed a $143 million prison in Trousdale County, one of the areas of Tennessee hit hardest by unemployment, but that project could still happen in the next couple of years, said Tony Grande, CCA's executive vice president and chief development officer. The prison was to employ 350 people.

Analyst Cooley May, of New York-based Macquarie, said CCA is sound and the for-profit prison sector has a generally healthy outlook even with federal and state budgets shrinking amid the recession.

In a recent analyst's report on CCA, May wrote that the company operates "existing beds in an efficient manner," although hazards remain, he said, such as "potential negative publicity from inmate altercations" at some of its facilities.

"We think longer-term risks include contract terminations, lawsuits and greater government regulation," he added.

Lawsuit, investigation

Those risks are real as CCA is embroiled in a federal lawsuit in Kentucky stemming from rape allegations at the Otter Creek Correctional Center in Wheelwright, Ky.

An accompanying investigation involves 23 female inmates, including seven from Hawaii, who say they were sexually assaulted. Hawaii officials have said they are removing inmates from the CCA facility.

CCA has asked for the lawsuit to be dismissed on procedural grounds.

Meanwhile, CCA's T. Don Hutto facility, which garnered national attention after reports of questionable treatment of immigrant families, will be converted to a female detention center, said company spokeswoman Louise Grant.

"If there are any allegations, we rapidly move to take action," Grant said.

Prisoner rights groups question the level of inmate protection at CCA facilities, said Alex Friedmann, associate editor of Prison Legal News, a magazine that advocates for inmates' rights.

Even if private prisons are cheaper to operate, "you often get what you pay for," Friedmann said.

Success in recession

Michael Montgomery, from Tennessee State University's criminal justice department, said states often turn to private prison contractors in hard economic times as a cost-cutting measure.

Montgomery said the economic downturn has proved to be a successful time for CCA and other for-profit prison operators. "A judge is going to sentence a person, and one can't circumvent that," he said.

Elsewhere, California was ordered to reduce overcrowding as it struggled with revenue, and the state handed over 8,000 inmates to CCA to house in various Mississippi, Oklahoma and Arizona prisons.

"There has to be flexibility when (states are) experiencing severe reductions in their revenue and we are able to deliver," said Grande, CCA's chief development officer. "What we do for our government partners is offer an immediate solution."