by Douglas Ankney

In an April 2024 article, Willamette University Van Winkle Melton Professor of Law Laura I. Appleman traces the profit motive in American criminal punishment from colonial times, aiming to better understand and reform the way private companies exploit prisoners and their families.

Appleman identifies the investors, corporations and profiteers—she calls them “Big Capital”—in four historical eras or “Transformative Periods.” In the first were 16th and 17th-century British merchants who transported convicts and the indentured poor to the American colonies, where they were sold for their labor, generally on tobacco farms. The merchants profited both from the sale of their human cargo their transport.

After the Revolutionary War, this practice died, replaced with “contractual penal servitude”—convicts rented out to private businesses. New York’s Auburn Prison, opened in 1817, was the first of these “industrial prisons,” which sold prisoners’ labor to private businesses that leased the prison structures as well as the prisoners themselves. They were forced to work 12 to 14 hours per day and brutally beaten if they were too slow or broke equipment.

Convict leasing moved offsite in the Second Transformative Period after the Civil War. In the South, Appleman noted, local courts sentenced many Black men under “strict misdemeanor criminal codes, applied in a racially discriminatory manner”—driving the Black incarceration rate 12 times higher than that of whites. Local sheriffs then sold the labor of the Black prisoners to industrialized corporate prison mines, or leased groups of prisoners to nearby farmers and plantation owners.

One major profiteer was Tennessee Coal, Iron and Railroad Company. For at least five years after its acquisition by U.S. Steel Corporation in 1907, “an unknown number of Black men continued to perform convict labor in Birmingham, Alabama,” Appleman said, working U.S. Steel’s coal mines in dangerous conditions. Another industrial player then that is still in operation today was U.S. Pipe and Foundry Company; its forerunner, Sloss-Sheffield Steel and Iron Company, almost exclusively used convict labor in its deadly coal mines; in 1890, nearly 10% of its convict workforce died on the job.

Another exploiter of convict labor after the Civil War was Imperial Sugar Company of Sugarland, Texas. In 1878, the entire population of the Texas prison system was leased to labor in its sugar fields. Mosquito-borne epidemics, physical abuse, minimal housing and no medical care yielded a high mortality rate.

Still another current industry that built its billion-dollar empire off the backs of convict labor is Union Pacific Corporation. Beginning in 1875, Louisiana prisoners constructed the New Orleans Pacific Railway (NOPR), and 140 of them died from November 1, 1879, to January 1, 1882. After merger with Texas Pacific Line, NOPR became Union Pacific Railway.

In Northern states, penal contract labor was abolished by 1900 under pressure from organized labor. But convict leasing lingered until the U.S. entered World War II in December 1941—and then abolition was not primarily concerned with the horrors that prisoners suffered but “concern that racial inequalities would be used in anti-U.S. propaganda.”

Appleman marks the Third Transformative Period to America’s first private prison company: Corrections Corporation of America (CCA) was founded in Nashville in 1983 by Terrell Don Hutto, Thomas Beasley, and Robert Crants. Hutto had spent the 1960s overseeing prisoners on Texas’ Ramsay prison, living with his family in the “big house” on the cotton plantation penitentiary, with unpaid prisoner nannies, servants and a “house boy.” Hutto exploited the prisoners, deriving annual profits of $14.7 million from these labor camps. In 1971, he was “rewarded” with appointment to Commissioner of Arkansas prisons.

It was while Arkansas prisons were under his supervision that the Supreme Court of the U.S. (SCOTUS) found conditions so cruel and unusual as to violate the Eighth Amendment. In Hutto v. Finney, 437 U.S. 678 (1978), SCOTUS detailed how prisoners were mistreated at Cummins Farm with forced work “in the fields six days a week, often requiring prisoners to run to and from the fields, in all kinds of weather and with insufficient clothing.” They also “slept together in an enormous 100-man barracks, leaving them at risk of being stabbed by one another. For infractions large and small, they were lashed with a wooden-handle leather strap five feet long and four inches wide, and electric shocks were frequently applied to their genitals. Most of the guards were simply other prisoners given guns, with little to no training.”

CCA cofounder Beasley was head of Tennessee’s Republican party and worked those connections to ensure the firm’s success. Meanwhile Hutto assumed leadership of the American Correctional Association (ACA), inking contracts with the federal Bureau of Prisons. In 1990, CCA raked in a little over $50 million in revenue; by 1997, that figure had skyrocketed to $462 million, with over $50 million in profits.

Another private prison company, Wackenhut Security Corporation, was founded by former FBI agent George Wackenhut and in 1987 received its first contract to build and manage Aurora Processing Center in Colorado for federal Immigration and Customs Enforcement (ICE).

The Fourth Transformative Period began with the 21st century. CCA and Wackenhut, now known as CoreCivic and GEO Group, are the major players in the private prison industry. At one point, each restructured as a Real Estate Investment Trust (REIT), “an investment vehicle created primarily for companies such as hotel chains,” Appleman explained. The firms argued that renting prison cells to the government was similar to a landlord charging rent to housing tenants, and the IRS accepted that argument. Until their bank financing dried up under pressure from activists opposed to mass incarceration, the REITs enjoyed enormous advantages; CoreCivic, for example, paid 36% income tax in 2013 as corporation, but just 3% in the first quarter of 2015, after restructuring as a REIT. Both CoreCivic and GEO Group have since reconstituted as corporations again.

Private equity firms have also jumped into the fray, providing prison telephone and email services, healthcare, commissary items, transportation and financial services. As often reported in PLN, these services and products are often accused of being substandard and overpriced.

One major player, HIG Private Equity, created Wellpath— the largest correctional healthcare company in America— by combining Correct Care, Correctional Medical Group Companies and California Forensic Medical Group. HIG also controls TKC Holdings, which operates Trinity Service Group and Keefe Group, the latter of which owns prison telecom ICSolutions. HIG also owns Access Corrections, which focuses on “inmate banking,” charging rates as high as 37% simply to deposit money into a prisoner’s bank account.

In 2020, BlueMountain Capital Management sold YesCare/Corizon Health—America’s second largest correctional healthcare company—to Flacks Group. Corizon Health was insolvent and heading toward bankruptcy, owing in part to millions of dollars prisoners had won from lawsuits alleging substandard medical care. Flacks then gamed the bankruptcy code by splitting Corizon Health into two firms, putting its profitable assets into one called YesCare and saddling another called Tehum Care Services with its liabilities—then declaring it in bankruptcy to avoid paying damages owed to prisoners and their loved ones, as reported elsewhere in this issue. [See: PLN, Oct. 2024, p.60.] See: The Secret History of the Carceral State, Maryland Law Review (April 2024).  

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