On August 18, 2016, the Deputy Attorney General of the U.S. Department of Justice (DOJ) announced, via a memo to the acting director of the federal Bureau of Prisons, that the DOJ plans to phase out contracts with private, for-profit prisons.

The memo cited a scathing report by the DOJ’s Office of the Inspector General, released earlier in August, which found higher rates of assaults, disciplinary convictions, lockdowns, use of force and contraband at private prisons that hold federal prisoners. Improperly placing prisoners in segregation units was also cited as a problem at the facilities, run by Corrections Corporation of America (CCA), GEO Group and Management & Training Corp. (MTC).

“Private prisons served an important role during a difficult period, but time has shown that they compare poorly to our own Bureau facilities,” the memo stated. “They simply do not provide the same level of correctional services, programs, and resources; they do not save substantially on costs; and as noted in a recent report by the Department’s Office of Inspector General, they do not maintain the same level of safety and security.”

The findings by the OIG were, in fact, nothing new – for decades there have been reports of problems with private prisons, including higher levels of violence and security deficiencies, as well as higher recidivism rates for prisoners released from private facilities.

Additionally, since late 2008 there have been four major riots at private prisons housing federal prisoners, including two riots at the GEO Group-run Reeves County Detention Complex in Texas in December 2008 and January 2009 [see: PLN, Feb. 2010, p.22]; an uprising that resulted in the death of a guard at CCA’s Adams County Correctional Center in Mississippi in May 2012 [see: PLN, June 2014, p.48]; and a February 2015 riot at MTC’s Willacy County Correctional Center in Texas that led to the prison’s closure [see: PLN, July 2016, p.1]. Comparably, there were no major riots at public federal prisons over the same time period.

“The private prison industry has a long and sordid track record of abuses and poor performance, which has been documented in numerous after-action reports following riots, escapes and deaths at for-profit facilities,” said PLN managing editor Alex Friedmann, who served six of his 10 years behind bars at a CCA-managed prison prior to his release in 1999.

He noted that what was surprising about the memo from the Deputy Attorney General, directing the Bureau of Prisons to “either decline to renew [each private prison] contract or substantially reduce its scope,” was that someone actually read the OIG report and took action based on the extensive criticism of the Bureau of Prisons’ private contractors.

“Advocates have been arguing for years that research shows private prisons have higher levels of violence, partly due to their business model of understaffing and cutting corners to generate profit, which results in high staff turnover rates, inexperienced staff and institutional instability,” said Friedmann. “Thus it’s encouraging that someone has finally paid attention.”

Both CCA and GEO Group, which trade on the New York Stock Exchange, suffered major declines in their stock prices following the DOJ’s announcement – 35% and 39% respectively – and their stock rebounded only slightly in the following days. MTC is a privately-held company. Some analysts complained that the market had overreacted, as just 7% of CCA’s gross revenue comes from its contracts with the Bureau of Prisons. Regardless, ratings firm Standard & Poor’s downgraded CCA’s corporate credit rating while Moody’s, another ratings firm, downgraded CCA’s debt to “junk” status.

CCA took issue with the findings of the OIG report, claiming that the population at privately-operated facilities housing federal prisoners was more likely to engage in violence. The prisons investigated by the OIG were “CAR” (Criminal Alien Requirement) facilities, which house immigrants facing deportation after they finish their federal sentences. CCA also claimed that prisoners at CAR facilities, which are all privately operated, were more likely to be involved in gang activity.

Yet that ignored the fact that CAR prisons are low-security; in fact, the CAR facilities operated by CCA – Adams County, McRae, Eden and Cibola – are listed as “low” or “minimum” security on the company’s website. Many if not most of the prisoners held at those facilities are incarcerated for either illegal entry into the United States or illegal reentry – not exactly violent crimes. And, of course, there are also violent prisoners and gangs in public federal prisons, which did not have the problems documented in the OIG report. Nor did CCA’s rationale explain the much higher amount of contraband found in for-profit prisons – nearly twice as many weapons and over eight times as many contraband cell phones.

The Bureau of Prisons has already started to scale back its use of private facilities; it declined to renew a contract with CCA at the Northeast Ohio Correctional Center in late 2014, and recently announced its decision to end a contract to house prisoners at the company’s Cibola County Correctional Center in New Mexico. Further, GEO Group announced in August 2016 that the Bureau of Prisons had rescinded a contract extension previously granted at the company’s D. Ray James Correctional Facility in Georgia.

“The fact remains that for-profit prisons are part of the problem, not part of the solution to mass incarceration in the United States,” said Paul Wright, executive director of the Human Rights Defense Center, PLN’s parent organization. “Imprisoning people so corporations can generate profit, with the collusion of government officials, is just one of the many failings of our nation’s criminal justice system. Private prisons are accountable to their executives and shareholders, not to members of the public.”

While many anti-private prison activists rejoiced in the DOJ’s announcement and the drop in CCA and GEO Group’s stock price, the DOJ’s decision will affect just 13 facilities housing around 22,000 prisoners – approximately 11% of the total federal prison population. It does not impact state prisons, county jails, immigration detention centers or the U.S. Marshals Service. Further, the private prison phase-out is estimated to take five years, and many things can happen during that time – beginning with who wins the presidency in the November elections.

The DOJ could “change course depending on who is in the White House,” Friedmann pointed out. “I imagine [private prison companies] are going to be spending a lot of money lobbying, that they are already setting up meetings with lawmakers to roll this back.” Both CCA and GEO Group lobby heavily on the federal level; they have reportedly spent a combined $25 million in lobbying plus over $10 million in political donations since 1989, according to an April 28, 2015 article in the Washington Post.

Still, some private prison opponents harbor hope that there will be a trickle-down effect that leads state prison systems and perhaps the Department of Homeland Security (DHS) to scale back their use of for-profit prisons. On August 22, 2016, U.S. Senator Bernie Sanders and Rep. Raul M. Grijalva wrote a joint letter to DHS Secretary Jeh Johnson, urging him to discontinue contracts with private prison companies to house immigrant detainees. Currently, about 62% of detainees are held in privately-operated facilities.

“Given the impact on detainees, the high cost to taxpayers and the Department of Justice’s recent decision, we believe the Department of Homeland Security can and should immediately begin phasing out for-profit, privately run immigration detention facilities,” the joint letter stated.

As another consequence of the DOJ’s announcement, at least four law firms are pursuing shareholder class-action lawsuits against both CCA and GEO Group.

Sources: HRDC press release (Aug. 19, 2016); Washington Post; Palm Beach Post; Nashville Post; Reuters

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