CCA, the Sequel | The Nation


CCA, the Sequel

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The lack of evidence hasn't stopped public officials from turning to private prisons like CCA. The company added more than 18,000 beds last year, thanks in no small part to its generosity. In Wisconsin, which has shipped more than 2,100 inmates to CCA prisons, the governor and six key legislators received $4,000 in campaign contributions from company chairman Doctor R. Crants. In Ohio the governor's brother received the contract to build the CCA prison in Youngstown.

About the Author

Eric Bates
Eric Bates is a staff writer for The Independent, an alternative weekly in Durham, North Carolina.

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Research assistance was provided by the Investigative Fund of The Nation Institute.

Beverly Enterprises controls more than 60,000 nursing-home beds, more than any other company worldwide.

Such friends in high places have helped CCA profit handsomely from crime. Net income for the first nine months of last year topped $60 million, up 63 percent from 1997. In April 1998 the company bought US Corrections Corporation, its second-largest rival, further securing its hold on the industry. But as competition declines, officials warn, so does the incentive for private prisons to offer competitive contracts. "CCA is so overwhelmingly bigger than everybody else, they'll win hands down," says Russell Boraas, who oversees private prisons for Virginia. "That's not good for the industry, and that's not good for taxpayers."

In reality, "CCA" now exists only as a brand name. The company stopped trading on the stock market in January, when it "merged" with a real estate trust it had formed. Prison Realty Corporation essentially operates as a tax shelter, enabling the company to evade paying any corporate income taxes. Under the arrangement, the trust rents its prisons to a management subsidiary run by the chairman's son. The subsidiary pays as much rent as possible, transforming its profits into tax-exempt "operating expenses" that it pays to the parent firm. The real estate trust, meanwhile, turns almost all of the rent money over to shareholders, thus sheltering its income from taxes as well. The scheme saves the trust $50 million a year in taxes--at the expense of CCA. On May 14 Prison Realty announced it would spend $86 million to prop up its troubled subsidiary. Its stock plummeted, and former shareholders filed a class-action lawsuit.

The real estate trust made out especially well in Youngstown. City officials eager to bring jobs to their depressed valley gave CCA 101 acres of land, free utility hookups and a five-year tax abatement for the prison. The company then sold the facility to the trust, pocketing $70 million. "This shows what private prisons are all about: profit," says Robert Hagan, a state senator from Youngstown. "That prison is nothing but a gulag."

The CCA prison in Youngstown stands on a hillside once home to several thriving steel-related industries. The area is now home to four major new prisons and a host of jails. "Prisons have become Youngstown's new economic base," says labor historian and activist Staughton Lynd. "It's so pathetic to see this working-class town, which has quite a proud history of militant unionism, become one more rural backwater living off the presence of prisons."

Like other nonunion operations, private prisons make most of their money by hiring fewer people and paying them less. Former guards say two-thirds of the Youngstown officers never worked in corrections before, and starting wages were $1,300 a year less than those of their counterparts at state-run prisons. "They don't care about the corrections officers, and they don't care about the inmates," former guard Daniel Eshenbaugh told the Cleveland Plain Dealer. "Everything there is about money." Another former guard explained how CCA got workers to take food from inmates to boost profits. "They gave us a rundown saying two slices of bread per inmate costs this much," he said. "If you can cut corners here, it would mean a possible raise for us."

While Youngstown represents some of the worst abuses at CCA prisons, it is also the scene of the biggest victory for inmates since privatization began. On April 20 a federal judge in Akron approved a landmark settlement of the class-action lawsuit filed by prisoners. The company has agreed to make cash payments of up to $1,000 to every inmate and create a common fund to settle claims by those with serious injuries--for a total of $1.65 million, the second-highest award ever paid to inmates in a class-action lawsuit. Even more startling, the prisoners were joined in their suit by the City of Youngstown, which will now employ two independent monitors to oversee conditions and medical treatment at CCA. The monitors have the power to order the warden to fix inadequacies and to fine the company if it fails to act.

"This is the first serious attempt to develop a way to hold a private prison accountable," attorney Al Gerhardstein said before the judge approved the settlement. "The inmates and the city are working together to hold them to the level of staffing and medical care and programs they promised. That raises a question: If you refuse to wink and let them get away with abuses as long as they come in under budget, can they still make a profit?"

Some activists feel the settlement doesn't go far enough. "We need to shut private prisons down," says Lynd. "The care and rehabilitation of prisoners is not consistent with the profit motive."

But until profiteering from prisons is stopped, inmates welcome any step that reins in firms like CCA. "They run this place like GM or Ford," says James Neal, who urged the judge to approve the settlement. "It's like the defects in the Pinto. A $12 piece of steel would have corrected the problem, but their accountant showed it was cheaper not to fix it, even if people burned to death. That's the same way CCA runs prisons. If someone gets killed, so what? They just pay the family and give them some roses. They'll still be making millions off of misery.

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