Private Prison Stocks Crash On News DOJ To Phase Out Their Use

Tyler Durden's picture

Shares of GEO and CXW are crashing to multi-year lows after The Washington Post reports that The Justice Department says it will end the use of private prisons.

Corrections Corp is crashing...


And The GEO Group is down 35%


As we noted previously,

States now have quotas to meet for how many Americans go to jail. Increasing numbers of states have contracted to keep their prisons at 90% to 100% capacity. This profit-driven form of mass punishment has, in turn, given rise to a $70 billion private prison industry that relies on the complicity of state governments to keep the money flowing and their privately run prisons full, “regardless of whether crime was rising or falling.”


As Mother Jones reports, “private prison companies have supported and helped write … laws that drive up prison populations. Their livelihoods depend on towns, cities, and states sending more people to prison and keeping them there.” Private prisons are also doling out harsher punishments for infractions by inmates in order to keep them locked up longer in order to “boost profits” at taxpayer expense. All the while, the prisoners are being forced to provide cheap labor for private corporations. No wonder the United States has the largest prison population in the world at a time when violent crime is at an all-time low.

As a reminder, we have more people in prison than any other nation on the planet.  We also have a higher percentage of our population locked up than anyone else does by a very large margin.  But has all of this imprisonment actually made us safer?  Well, the last time I checked, crime was still wildly out of control in America and for the most recent year that we have numbers for violent crime was up 15 percent.  The number of people that we have locked up has quadrupled since 1980, but this is not solving any of our problems.  Clearly, what we are doing is not working.

Here is U.S. imprisonment rate per 100,000 people since 1880:

Screen Shot 2015-02-12 at 3.05.01 PM

Land of the free indeed...

And now, as WaPo details, it appears this cronyism is coming to an end...

The Justice Department plans to end its use of private prisons after officials concluded the facilities are both less safe and less effective at providing correctional services than those run by the government.


Deputy Attorney General Sally Yates announced the decision on Thursday in a memo that instructs officials to either decline to renew the contracts for private prison operators when they expire or “substantially reduce” the contracts’ scope. The goal, Yates wrote, is “reducing — and ultimately ending — our use of privately operated prisons.”


“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,” Yates wrote.

According to the Inspector General’s report, private prisons housed roughly 22,660 federal inmates as of December 2015. That represents about 12 percent of the Bureau of Prisons total inmate population, according to the report.

In her memo, Yates wrote that the Bureau of Prisons began contracting with privately run institutions about a decade ago in the wake of exploding prison populations, and by 2013, as the federal prison population reached its peak, nearly 30,000 inmates were housed in privately operated facilities. But in 2013, Yates wrote, the prison population began to decline because of efforts to adjust sentencing guidelines, sometimes retroactively, and to change the way low-level drug offenders are charged. She said the drop in federal inmates gave officials the opportunity to re-evaluate the use of private prisons.


Yates wrote that private prisons “served an important role during a difficult time period,” but they had proven less effective than facilities run by the government. The contract prisons are operated by three private corporations, according to the Inspector General’s report: Corrections Corporation of America, GEO Group and Management and Training Corporation. The bureau of prisons spent $639 million on private prisons in fiscal year 2014, according to the report.


Yates said it was “really hard to determine whether private prisons are less expensive” and whether their closure would cause costs to go up, though she said officials did not anticipate having to hire additional Bureau of Prisons staff.


“Bottom line, I’d also say, you get what you pay for,” Yates said.

One quick question - what will happen to all those prisoners? Ironic on the day that Turkey's Erdogan decides to release 38,000 prisoners from his nation's jails to make room for the coup assailants.

We suspect Senator Tom Cotton will not be pleased... as the only thing on Cotton's mind is filling up jail cells, because now the Senator wants to enlarge US prisons so they can be filled up further. At a speech at the Hudson Institute, Cotton said that if anything, the US has an under-incarceration problem.

"There's a bill in congress now that would sharply reduce mandatory minimums for a slew of federal crimes. The bill's advocates contend that we're locking up too many offenders, for too long, for too little, and we can't afford it anyway, and we should show more empathy toward those caught up in the criminal justice system. These arguments put simply are baseless. Take a look at the facts. First, the claim that too many criminals are being jailed, that there is over-incarceration, ignores an unfortunate fact. For the vast majority of crimes, the perpetrator is never identified, or arrested, let alone prosecuted, convicted, and jailed. Law enforcement is able to arrest or identify a likely perpetrator for only 19 percent of property crimes and 47 percent of violent crimes. If anything, we have an under-incarceration problem."

Chris Hedges sums up the private prison debacle in America best...

Corporations have privatized most of the prison functions once handled by governments. They run prison commissaries and, since the prisoners have nowhere else to shop, often jack up prices by as much as 100 percent. Corporations have taken over the phone systems and charge exorbitant fees to prisoners and their families. They grossly overcharge for money transfers from families to prisoners. And these corporations, some of the nation’s largest, pay little more than a dollar a day to prison laborers who work in for-profit prison industries. Food and merchandise vendors, construction companies, laundry services, uniforms companies, prison equipment vendors, cafeteria services, manufacturers of pepper spray, body armor and the array of medieval instruments used for the physical control of prisoners, and a host of other contractors feed like jackals off prisons. Prisons, in America, are a hugely profitable business.


Our prison-industrial complex, which holds 2.3 million prisoners, or 25 percent of the world’s prison population, makes money by keeping prisons full. It demands bodies, regardless of color, gender or ethnicity. As the system drains the pool of black bodies, it has begun to incarcerate others. Women—the fastest-growing segment of the prison population—are swelling prisons, as are poor whites in general, Hispanics and immigrants. Prisons are no longer a black-white issue. Prisons are a grotesque manifestation of corporate capitalism. Slavery is legal in prisons under the 13th Amendment of the U.S. Constitution. It reads: “Neither slavery nor involuntary servitude, except as punishment for crime whereof the party shall have been duly convicted, shall exist within the United States. …” And the massive U.S. prison industry functions like the forced labor camps that have existed in all totalitarian states.


Corporate investors, who have poured billions into the business of mass incarceration, expect long-term returns. And they will get them. It is their lobbyists who write the draconian laws that demand absurdly long sentences, deny paroles, determine immigrant detention laws and impose minimum-sentence and three-strikes-out laws (mandating life sentences after three felony convictions). The politicians and the courts, subservient to corporate power, can be counted on to protect corporate interests.


Corrections Corporation of America (CCA), the largest owner of for-profit prisons and immigration detention facilities in the country, had revenues of $1.7 billion in 2013 and profits of $300 million. CCA holds an average of 81,384 inmates in its facilities on any one day. Aramark Holdings Corp., a Philadelphia-based company that contracts through Aramark Correctional Services to provide food to 600 correctional institutions across the United States, was acquired in 2007 for $8.3 billion by investors that included Goldman Sachs.


The three top for-profit prison corporations spent an estimated $45 million over a recent 10-year period for lobbying that is keeping the prison business flush. The resource center In the Public Interest documented in its report “Criminal: How Lockup Quotas and ‘Low-Crime Taxes’ Guarantee Profits for Private Prison Corporations” that private prison companies often sign state contracts that guarantee prison occupancy rates of 90 percent. If states fail to meet the quota they have to pay the corporations for the empty beds. 

CCA in 2011 gave $710,300 in political contributions to candidates for federal or state office, political parties and so-called 527 groups (PACs and super PACs), the American Civil Liberties Union reported. The corporation also spent $1.07 million lobbying federal officials plus undisclosed sums to lobby state officials, according to the ACLU.


The United States, from 1970 to 2005, increased its prison population by about 700 percent, according to statistics gathered by the ACLU. The federal Bureau of Justice Statistics, the ACLU report notes, says for-profit companies presently control about 18 percent of federal prisoners and 6.7 percent of all state prisoners. Private prisons account for nearly all newly built prisons. And nearly half of all immigrants detained by the federal government are shipped to for-profit prisons, according to Detention Watch Network.


But corporate profit is not limited to building and administering prisons. Whole industries now rely almost exclusively on prison labor. Federal prisoners, who are among the highest paid in the U.S. system, making as much as $1.25 an hour, produce the military’s helmets, uniforms, pants, shirts, ammunition belts, ID tags and tents. Prisoners work, often through subcontractors, for major corporations such as Chevron, Bank of America, IBM, Motorola, Microsoft, AT&T, Starbucks, Nintendo, Victoria’s Secret, J.C. Penney, Sears, Wal-Mart, Kmart, Eddie Bauer, Wendy’s, Procter & Gamble, Johnson & Johnson, Fruit of the Loom, Motorola, Caterpillar, Sara Lee, Quaker Oats, Mary Kay, Microsoft, Texas Instruments, Dell, Honeywell, Hewlett-Packard, Nortel, Nordstrom’s, Revlon, Macy’s, Pierre Cardin and Target. Prisoners in some states run dairy farms, staff call centers, take hotel reservations or work in slaughterhouses. And prisoners are used to carry out public services such as collecting highway trash in states such as Ohio.


States, with shrinking budgets, share in the corporate exploitation. They get kickbacks of as much as 40 percent from corporations that prey on prisoners. This kickback money is often supposed to go into “inmate welfare funds,” but prisoners say they rarely see any purchases made by the funds to improve life inside prison.

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Bill of Rights's picture

Ya we deiced were just gonna go all in  and kill people instead....


COPS do your best work



Looney's picture


They should’ve invited one of the Clintons for a speech.

They didn’t.

Now, they’re out.   ;-)


jcaz's picture

Whew- the 7 bankers they've locked up since the beginning of time should be relieved to hear this......

Looney's picture


Speaking of prisons…

Is medical care in prisons covered by 0bamacare?


jcaz's picture

Heheheh- only if they're paying for it....  I wonder how many toilets they have to clean to cover the non-payment penalty?

1000 splendid suns's picture


Thanks Kankles.

LowerSlowerDelaware_LSD's picture
LowerSlowerDelaware_LSD (not verified) 1000 splendid suns Aug 18, 2016 11:28 AM

Great.  More government unions filled with lazy, corrupt, snowflakes, expanding like mad, making the rest of the country poor.

Government is NOT the answer.  Sorry.

ACES FULL's picture

Prisons (govt or private) are just money making ventures of some sort these days. Guess the .gov is tired of competition in this area now.

wombats's picture

As elsewhere, .gov HATES to share $ and demands a monopoly on power.

Trogdor's picture

You mean the ones who didn't mysteriously "die" in prison - followed by a closed funeral with no viewing and subsequent family moving out of country? ... oh .. wait ... that was Enron...

csmith's picture

Clintons got all their money from private COLLEGES instead. More lucrative - much bigger market.

ACES FULL's picture

Only if they are Democrats.

sharonsj's picture

Cute, but completely not factual.  Many states take away voting rights from all prisoners, even after they've served their time.  Of course a dickhead like you wouldn't realize how unconstitutional that is.

ACES FULL's picture

Only applies to felons and some states allow felons to vote after they have finished their sentence including probation/parole. How do you feel about taking felons 2nd amendment RIGHTS,even after they have finished their sentence completely they NEVER get those rights back even if their crime had nothing to do with guns OR violence. What were you saying about that Constition thingy that we used to follow?

Flagit's picture


They got the message.


From July 2015: Private Prison Lobbyists Are Raising Cash for Hillary Clinton by


54m54 minutes ago

From June 2016: Private prison CEO unconcerned about Hillary Clinton's pledge to end his industry by



Group shares halted again for volatility, down 30.5% after WashPost says DOJ will stop using private prisons

Thom_333's picture

WTF! Do away with one of the best inventions outta the US of fucking A...? Are you crazy?

AGuy's picture

Ha! The reported is confused. The DoJ said "Private Pensions" not "prisions". As Private Pensions will be phased out. /sarc



HedgeJunkie's picture

"No wonder the United States has the largest prison population in the world at a time when violent crime is at an all-time low."

"Well, the last time I checked, crime was still wildly out of control in America and for the most recent year that we have numbers for violent crime was up 15 percent."

Make up your bullshit mind.  Which is it?


Thom_333's picture

"Death solves all problems. One man - one problem. No man - no problem"

J.V. Stalin

GeezerGeek's picture

.GOV taking over another private industry! Damned SOCIALISTS!

t0mmyBerg's picture

No.  This is the only good thing this administration has done in 8 years if true (if Obama is for it, no matter what IT is, I place a 90% probability that it is really really bad).  If you are going to have a government at all, criminal justice is one of the few things they are supposed to do.  The cost of administering that system must be borne by the polity, not pawned off on private corps who have no incentives wrt to the outcomes.

Herd Redirection Committee's picture

Prisons are meant for "rehabilitating people to re-enter the real world", aren't they?  LOL

I used to believe that, when I was 12!  I also believed "Crime doesn't pay", though!  And look at the Clintons, the Federal Reserve, the politicians...

Bunga Bunga's picture

Probably they feel what is coming. Private prisons are to harsh for them, so they are preparing the Federal VIP prisons.

SomethingSomethingDarkSide's picture

There is a god..  at least Jesus.

Doom Porn Star's picture

Cue the Fema Camp tin foil???

Or, are the new prisons going to be not-for-profits managed by the children of high ranking politicians for outrageous sums just like some charitable foundations are?

jcaz's picture

Coming soon-  Chelsea Clinton,  Prison Czar.......

tenpanhandle's picture

Coming soon- Chelsea Clinton, Prison inmate # 123XYZ.

Joebloinvestor's picture

Now that they have the secret prison in Utah under the data center done, they can start filling it.

Bastiat's picture

Yes the prisoners will be providing electricity for the "data center."  It will be generator bicycles and treadmills until they get the whole Matrix pod thing worked out.

any_mouse's picture

Incarceration Quotas are the wrong way to run a "justice" system.

Next maybe the Drug War will end and the DEA will have to become National Park Hosts. Cleaning vault toilets.


ParkAveFlasher's picture

There's so much weed planted in the in national park system, you might be onto something legit.

besnook's picture

this is bullshit. it is the smart thing to do. .gov doesn't do the smart thing........unless .gov wants to use it for its own revenue enhancement.

tenpanhandle's picture

Current .gov is trying to implement things before the Trumpster gets in office and does it.  Adds to Ozero's legacy (currently at zero) and takes away from Trumps future legacy.

mary mary's picture

GEO and CXW exemplify fascism.  Good riddance, a-holes!  Now go get a real job.

KickIce's picture

What could go wrong when it's in the company's best interest to keep people locked up?

directaction's picture

Why didn't that war-loving, Wall Street waterboy, Obama, do this seven and a half years ago? 

Elvis87's picture

The prison where paying Obuma the agreed upon fees then. Now the prison must have cut there bribes down and see what happens when you dont pay the fee. Im sure that the prisons will make a huge donation to the Clinton Foundation shortly if Clinton wins and there will be a new white only prisons for Clinton to fill up.

any_mouse's picture

The prison work gangs take the jobs that non-criminals could do.

Notice they aren't wait staff or bartenders. Those jobs are reserved for non-criminals.

Slavery still exists in the USA. The destruction of the Constitution and States Rights were for naught.

assistedliving's picture

looks like good news for citizens but actually bad....first clue DOJ wont be indicting any banksters

youngman's picture

Let my people go.....and Obama the doors and let them vote...welcome to Hell

Al Bondiga's picture

Fucking good. Getting rid of private prisons can't happen soon enough. Though, I'll believe it when I see it.

Omen IV's picture


Steps to Distopia:


A - obama lets them out of prison in mass

B - end private prisons

C - limit the cops range of actions allowed at federal level for local policing

D - cops standdown in protection of white population and assets

E - eliminate weapons in private hands - no way for white people to defend themselves

F - overwhelm the immigration by the tens of millions  - legal and illegal brown people

G - no jobs or jobs at Mexican level $1-$2.00 per hour

H - white people cut back on birth rate

I - black and brown accelerate birth rate

J = mass chaos

K - true meaning of exceptional americans is now defined

JohnFrodo's picture

His plan all depends upon the Fifth Element arrival.

Herd Redirection Committee's picture

Segregation is not genocide.  Those are my thoughts on the subject...

America is headed for civil war.  My question is not IF the country will split, but into how many countries will it split? 2, 3, 6?

America, the 21st century's Yugoslavia.

KickIce's picture

I think Obama's idea of transforming America is a government similar to North Korea with BLM types running the country.

bluskyes's picture

Buying opportunity. Now freed up for FEMA contracts.

JohnFrodo's picture

The shadow brokers are liqidating and now selling T's instead of incarceration.