America's Private Gulag
by Ken Silverstein, January 1997
from the book
The Celling of America
edited by Daniel Burton-Rose
with editors of Prison Legal News
Dan Pens and Paul Wright
Common Courage Press, 1998
What is the most profitable industry in America? Weapons,
oil and computer technology all offer high rates of return, but
there is probably no sector of the economy so abloom with money
as the privately-run prison industry.
Consider the growth of the Corrections Corporation of America,
the industry leader whose stock price has climbed from $8 a share
in 1992 to about $30 today and whose revenue rose by 81 percent
in 1995 alone. Investors in Wackenhut Corrections Corporation
have enjoyed an average return of 18 percent during the past five
years and the company is rated by Forbes as one of the top 200
small businesses in the country. At Esmor, another big private
prison contractor, revenues have soared from $4.6 million in 1990
to more than $25 million in 1995.
Ten years ago there were just five privately-run prisons in
the country, housing a population of 2.000. Today nearly a score
of private firms run more than 100 prisons with about 62,000 beds.
That's still less than five percent of the total market, but the
industry is expanding fast, with the number of private prison
beds expected to grow to 360,000 during the next decade.
The exhilaration among leaders and observers of the private
prison sector was cheerfully summed up by a recent headline in
USA Today: "Everybody's Doin' the Jailhouse Stock".
An equally upbeat mood imbued a conference on private prisons
held in December 1996 at the Four Seasons Resort in Dallas. The
brochure for the conference, organized by the World Research Group,
a New York-based investment firm, called the corporate takeover
of correctional facilities the "newest trend in the area
of privatizing previously government-run programs... While arrests
and convictions are steadily on the rise, profits are to be made-profits
from crime. Get in on the ground floor of this booming industry
A hundred years ago private prisons were a familiar feature
of American life, with disastrous consequences. Prisoners were
farmed out as slave labor. They were routinely beaten and abused,
fed slop and kept in horribly overcrowded cells. Conditions were
so wretched that by the end of the nineteenth century private
prisons were outlawed m most states.
During the past decade, private prisons have made a comeback.
Already 28 states have passed legislation making it legal for
private contractors to run correctional facilities and many more
states are expected to follow suit.
The reasons for the rapid expansion include the post-1980s
free market ideological fervor, large budget deficits for the
federal and state governments and the discovery and creation of
vast new reserves of "raw materials"-prisoners. The
rate for most serious crimes has been dropping or stagnant for
the past 15 years, but during the same period severe repeat offender
provisions and a racist "get tough" policy on drugs
have helped push the U.S. prison population up from 300,000 to
around 1.5 million during the same period. This has produced a
corresponding boom in prison construction and costs with the federal
government's annual expenditures in the area now $17 billion.
In California, passage of the infamous "three strikes"
bill will result in the construction of an additional 20 prisons
during the next few years.
The private prison business is most entrenched at the state
level but is expanding into the federal prison system as well.
Last year Attorney General Janet Reno announced that five of seven
new federal prisons being built will be run by the private sector.
Almost all of the prisons run by private firms are low or medium
security but the companies are trying to break into the high security
field as well. They have also begun taking charge of management
at INS detention centers, boot camps for juvenile offenders and
substance abuse programs.
Roughly half of the industry is controlled by the Nashville-based
Corrections Corporation of America, which runs 46 penal institutions
in 11 states. It took ten years for the company to reach 10,000
beds; it is now growing by that same number every year.
CCA's chief competitor is Wackenhut, which was founded in
1954 by George Wackenhut, a former FBI official. Over the years
its board and staff have included such veterans of the U.S. national
security state as Frank Carlucci, Bobby Ray Inman and William
Casey, as well as Jorge Mas Canosa, leader of the fanatic Cuban
American National Foundation. The company also provides security
services to private corporations. It has provided strikebreakers
at the Pittston mine strike in Kentucky, hired unlicensed investigators
to ferret out whistleblowers at Alyeska, the company that controls
the Alaskan oil pipeline, and beaten anti-nuclear demonstrators
at facilities it guards for the Department of Energy.
Wackenhut has a third of the private prison market with 24
contracts, nine of which were signed during the past two years.
In a major coup, the company was chosen to run a 2,200 capacity
prison in Hobbs, New Mexico, which will become the largest private
prison in the U.S. when it opens late this year.
Esmor, the No. 3 firm in the field, was founded only a few
years ago and already operates ten corrections or detention facilities.
The company's board includes William Barrett, a director of Frederick's
of Hollywood, and company CEO James Slattery, whose previous experience
was investing in and managing hotels.
U.S. companies also have been expanding abroad. The big three
have facilities in Australia, England and Puerto Rico and are
now looking at opportunities in Europe, Canada, Brazil, Mexico
The companies that dominate the private prison business claim
that they offer the taxpayers a bargain because they operate far
more cheaply than do state firms. As one industry report put it,
"CEOs of privatized companies... are leaner and more motivated
than their public-sector counterparts."
But even if privatization does save money-and the evidence
here is contradictory-there is, in the words of Jenni Gainsborough
of the ACLU's National Prison Project, "a basic philosophical
problem when you begin turning over administration of prisons
to people who have an interest in keeping people locked up."
To be profitable, private prison firms must ensure that prisons
are not only built but also filled. Industry experts say a 90
to 95 per cent capacity rate is needed to guarantee the hefty
rates of return needed to lure investors. Prudential Securities
issued a wildly bullish report on CCA a few years ago but cautioned,
"It takes time to bring inmate population levels up to where
they cover costs. Low occupancy is a drag on profits." Still,
said the report, company earnings would be strong if CCA succeeded
in "ramp[ing] up population levels in its new facilities
at an acceptable rate".
A 1993 report from the State Department of Corrections in
New Mexico found that CCA prisons issued more disciplinary reports-
with harsher sanctions imposed, including the loss of time off
for good behavior-than did those run by the state. A prisoner
at a CCA prison said, "State-run facilities are overcrowded
and there's no incentive to keep inmates as long as possible...
CCA on the other hand reluctantly awards good time. They give
it because they have to but they take it every opportunity they
get... Parole packets are constantly getting lost or misfiled.
Many of us are stuck here beyond our release dates."
Private prison companies have also begun to push, even if
discreetly, for the type of get tough policies needed to ensure
their continued growth. All the major firms in the field have
hired big time lobbyists. When it was seeking a contract to run
a halfway house in New York City, Esmor hired a onetime aide to
state Rep. Edolphus Towns to lobby on its behalf. The aide succeeded
in winning the contract and also the vote of his former boss,
who had been an opponent of the project. In 1995, Wackenhut Chairman
Tim Cole testified before the Senate Judiciary Committee to urge
support for amendments to the Violent Crime Control Act-which
subsequently passed-that authorized the expenditure of $10 billion
to construct and repair state prisons.
CCA has been especially adept at expansion via political payoffs.
The first prison the company managed was the Silverdale Workhouse
in Hamilton County, Tennessee. After Commissioner Bob Long voted
to accept CCA's bid for the project, the company awarded Long's
pest control firm a lucrative contract. When Long decided the
time was right to quit public life, CCA hired him to lobby on
its behalf. CCA head Massey has been a major financial supporter
of Lamar Alexander, the former Tennessee governor and failed presidential
candidate. In one of a number of sweetheart deals, Lamar's wife,
Honey Alexander, made more than $130,000 on a $5,000 investment
in CCA. Current Tennessee Governor Newt McWherter is another CCA
stockholder and is quoted in the company's 1995 annual report
as saying that "the federal government would be well served
to privatize all of their corrections."
The prison industry has also made generous use of the junket
as a public relations technique. Wackenhut recently flew a New
York-based reporter from Switzerland-where the company is fishing
for business-to Florida for a tour of one of its prisons. The
reporter was driven around by limousine, had all her expenses
covered and was otherwise treated royally.
In another ominous development, the revolving door between
the public and private sector has led to the type of company boards
that are typical of those found in the military-industrial complex.
CCA co-founders were T. Don Hutto, a ex-corrections commissioner
in Virginia, and Tom Beasley, a former chairman of the Tennessee
Republican Party. A top company official is Michael Quinlan, once
director of the Federal Bureau of Prisons. The board of Wackenhut
is graced by a former Marine Corps commander, two retired Air
Force generals and a former under secretary of the Air Force,
as well as by James Thompson, ex-governor of Illinois, Stuart
Gerson, a former assistant U.S. attorney general and Richard Staley,
who previously worked with the INS.
Because they are private firms that answer to shareholders,
prison companies have been predictably vigorous in seeking ways
to cut costs. In 1985, a private firm tried to site a prison on
a toxic waste dump in Pennsylvania, which it had bought at the
bargain rate of $1. Fortunately, that plan was rejected.
Many states pay private contractors a per diem rate, as low
as $31 per prisoner in Texas. A federal investigation traced a
1994 riot at an Esmor immigration detention center to the company's
having skimped on food, building repairs and guard salaries. At
an Esmorrun halfway house in Manhattan, inspectors turned up leaky
plumbing, exposed electrical wires, vermin and inadequate food.
To ratchet up profit margins, companies have cut corners on
drug rehabilitation, counseling and literacy programs. In 1995,
Wackenhut was investigated for diverting $700,000 intended for
drug treatment programs at a Texas prison. In Florida the U.S.
Corrections Corporation was found to be in violation of a provision
in its state contract that requires prisoners to be placed in
meaningful work or educational assignments. The company had assigned
235 prisoners as dorm orderlies when no more than 48 were needed
and enrollment in education programs was well below what the contract
called for. Such incidents led a prisoner at a CCA facility in
Tennessee to conclude, "There is something inherently sinister
about making money from the incarceration of prisoners, and in
putting CCA's bottom-line [money] before society's bottom line
The companies try to cut costs by offering less training and
pay to staff. Almost all workers at state prisons get union-scale
pay but salaries for private prison guards range from about $7
to $10 per hour. Of course the companies are anti-union. When
workers attempted to organize at Tennessee's South Central prison,
CCA sent officials down from Nashville to quash the effort.
Poor pay and work conditions have led to huge turnover rates
at private prisons. A report by the Florida auditor's office found
that turnover at the Gadsden Correctional Facility for Women,
run by the U.S. Corrections Corporation, was 200 percent, ten
times the rate at state prisons. Minutes from an administrative
meeting at a CCA prison in Tennessee have the "chief"
recorded as saying, "We all know that we have lots of new
staff and are constantly in the training mode... Many employees
[are] totally lost and have never worked in corrections."
Private companies also try to nickel and dime prisoners in
the effort to boost revenue. A prisoner at a Florida prison run
by CCA has sued the company for charging a $2.50 fee per phone
call and 50 cents per minute thereafter. The lawsuit also charges
that it can take a prisoner more than a month to see a doctor.
A number of prisoners complain about exorbitant prices. "Canteen
prices are outrageous," wrote a prisoner at the Gadsden facility
in Florida. "[We] pay more for a pack of cigarettes than
in the free world." Neither do private firms provide prisoners
with soap, toothpaste, toothbrushes or writing paper. One female
prisoner at a CCA prison in New Mexico said: "The state gives
five free postage paid envelopes per month to prisoners, nothing
at CCA. State provides new coats, jeans, shirts, underwear and
replaces them as needed. CCA rarely buys new clothing and inmates
are often issued tattered and stained clothing. Same goes for
linens. Also ration toilet paper and paper towels. If you run
out, too bad-3 rolls every two weeks."
General conditions at private prisons appear in some respects
to be somewhat better than those found at state institutions,
a fact possibly linked to the negative business impact that a
prison disturbance can cause private firms. For example, the share
price of stock in Esmor plunged from $20 to $7 after a 1994 revolt
at the company's detention center for immigrants in Elizabeth,
Nevertheless a number of serious problems at prisons run by
private interests still exist. Back in the mid-1980s, a visiting
group of professional guards from England toured the CCA's 360-bed
state prison in Chattanooga, Tennessee, and reported that prisoners
were "cruelly treated" and "problem" prisoners
had been gagged with sticky tape. The warden regaled his guests
with graphic descriptions of strip shows performed by female prisoners
for male guards.
Investigators at a CCA jail in New Mexico found that guards
had inflicted injuries on prisoners ranging from cuts and scrapes
to broken bones. Riots have erupted at various private facilities.
In one of the worst, guards at CCA's West Tennessee Detention
Center fired pepper gas canisters into two dormitories to quell
a riot after prisoners shipped from North Carolina revolted over
being sent far from their families.
In addition to the companies that directly manage America's
prisons, many other firms are getting a piece of the private prison
action. American Express has invested millions of dollars in private
prison construction in Oklahoma and General Electric has helped
finance construction in Tennessee. Goldman Sachs & Co., Merrill
Lynch, Smith Barney, among other Wall Street firms, have made
huge sums by underwriting prison construction with the sale of
tax-exempt bonds, this now a thriving $2.3 billion industry.
Weapons manufacturers see both public and private prisons
as a new outlet for "defense" technology, such as electronic
bracelets and stun guns. Private transport companies have lucrative
contracts to move prisoners within and across state lines; health
care companies supply jails with doctors and nurses; food service
firms provide prisoners with meals. High-tech firms are also moving
into the field; the Que-Tel Corp hopes for vigorous sales of its
new system whereby prisoners are bar-coded and guards carry scanners
to monitor their movements. Phone companies such as AT&T chase
after the enormously lucrative prison business.
About three-quarters of new admissions to American jails and
prisons are now African-American and Hispanic men. This trend
combined with an increasingly privatized and profitable prison
system run largely by Whites, makes for what Jerome Miller, a
former youth corrections officer in Pennsylvania and Massachusetts
calls the emerging Gulag State.
Miller predicts that the Gulag State will be in place within
15 years. He expects three to five million people to be behind
bars including an absolute majority of African-American men. It's
comparable, he says, to the post-Civil War period, when authorities
came to view the prison system as a cheaper, more efficient substitute
for slavery. Of the state's current approach to crime and law
enforcement, Miller says, "The race card has changed the
whole playing field. Because the prison system doesn't affect
a significant percentage of young White men we'll increasingly
see prisoners treated as commodities. For now the situation is
a bit more benign than it was back in the nineteenth century,
but I'm not sure it will stay that way for long."