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PLN associate editor mentioned in puff piece article re CCA annual meeting

Tennessean, Jan. 1, 2010.
PLN associate editor mentioned in puff piece article re CCA annual meeting - Tennessean 2010

Despite critics, prison operator CCA says times are good

Private prisons gain acceptance

By Daniel Taub • BLOOMBERG NEWS • May 14, 2010

Erik Townsend says he prefers the Arizona prison where he's serving 15 years for robbery to a California facility where he was until August. For one thing, he was getting just two hot meals a day at the other prison.

"We get three hots here," said the 40-year-old Townsend, while taking a quick break from sweeping the yard at La Palma Correctional Center in Eloy, Ariz., a desert town halfway between Phoenix and Tucson. "It's all right. It's decent."

La Palma, which houses 2,900 convicts from California, is one of 65 facilities operated by Corrections Corporation of America, the Nashville-based private company that gets government contracts to build and run prisons for state and federal authorities.

CCA, which held its annual shareholders' meeting in Nashville on Thursday, has become the largest private-prison operator in the U.S. as states from California to Florida turn to corporate America to punish felons and hold lesser offenders, amid iffy tax revenues and tight budgets.

Despite such financial pressures, company officials are optimistic about their business's long-term prospects.

CCA reported $155 million in earnings last year. Net income has risen in each of the past four years. For 2010, the company forecasts per-share earnings of $1.16 to $1.26, down from $1.32 last year.

Recent contracts have been tied more to federal prison clients than individual states, although CEO Damon Hininger, who began his career as a prison guard, thinks the fact that states have less money to build jails puts CCA in a sweet spot as more construction gets outsourced to private companies.

"We think that is very favorable for the company and for the industry," he said.

Critics, who see a conflict between making profits and providing adequate care to prisoners, aren't so sure.

"Lobbyists for CCA want to make sure they keep their prisons full. It's a question of how you delegate the really ferocious powers of the state to a private enterprise," said Mark A.R. Kleiman, a University of California, Los Angeles professor and author of When Brute Force Fails: How to Have Less Crime and Less Punishment.

Allegations that CCA doesn't do enough to provide adequate health care or prevent [rape and sexual] abuse and violence within its facilities cropped up at the annual stockholders' gathering. Alex Friedmann, an opponent of for-profit prisons and a CCA stockholder, asked what the company's board was doing to protect prisoners.

"We take those allegations very seriously," responded Richard Steiter [Seiter], a vice president and chief corrections officer.

Costs kept in check

Hininger said in an earlier interview that the company strives to keep costs in check but doesn't treat prisoners poorly. CCA has to comply with accreditation standards put in place by the American Correctional Association, a Virginia-based trade group, and is always at risk of losing its contracts if it doesn't do an adequate job.

"We are held to a higher standard," he said.

CCA says its national reach allows it to operate at lower costs. The company says it can build prisons for $55,000 to $65,000 per bed, compared with $80,000 to $250,000 for government-owned facilities.

In investor presentations, CCA touts as corporate benefits certain demographic trends that in other contexts might be considered societal ills.

"At current incarceration rates, jail and prison populations would grow by about 121,000 between 2010 and 2015, or more than 24,000 per year on average," Corrections Corp. said in a February presentation. Both "high recidivism" among felons and "inmate population growth following prior recessions" are highlighted as positives for the company in the 48-page report.

With about 2.3 million people in prisons and jails, the U.S. has the most convicts of any country, according to the International Centre for Prison Studies at King's College London.

The perceived long-term growth potential may explain why William Ackman's hedge fund has been buying Corrections Corp.'s shares. New York-based Pershing Square Capital Management LP, which is CCA's largest shareholder, added 3.58 million shares in the fourth quarter of last year, bringing its stake to 9.6 percent, according to filings with the U.S. Securities and Exchange Commission. Ackman declined to comment on his investment.

Complaints persist

While private prisons have gained acceptance among state governments, vocal opponents remain, including the American Civil Liberties Union, which has filed several complaints against CCA.

ACLU attorneys in 2007 filed a complaint that says immigrant detainees at the company's San Diego Correctional Facility, managed for the federal government, got inadequate medical and mental health care resulting at times in avoidable death. That case is being mediated.

In March, ACLU attorneys, working on behalf of six prisoners at the Idaho Correctional Center, said in a complaint that the [CCA-run Idaho] prison has become so violent that it's known as a "Gladiator School."

"We think there are certain structural problems that exist with private prisons," said David Fathi, director of the ACLU National Prison Project in Washington.

* NOTE: Minor corrections where noted by PLN staff, including a misspelling and factual errors.