United States: think private prison companies are going away under Biden? They have other plans

For the second time in four years, fears that a Democrat would be elected president sent private prison stocks plummeting earlier this month. To the casual observer, the prospect of President-elect Joe Biden—who promised to “stop corporations from profiteering from incarceration”—presented an existential threat to the multi-billion dollar industry.

But the big players in private prisons, CoreCivic and Geo Group, are not panicking—and rumors of their impending demise have been exaggerated. That’s because they’ve been steadily diversifying, placing their bets on a future that includes revenue from commercial real estate, electronic monitoring, and halfway houses.

On a quarterly earnings call just two days after the election, CoreCivic CEO Damon Hininger was asked about the possibility that a Biden administration may end the company’s contracts with the federal Bureau of Prisons. He replied confidently, “We think our risk is pretty minimal there.” He noted that back in 2010, the agency accounted for 15 percent of the company’s revenue. Today it’s just 2 percent.

The companies still care which party controls the government: A Newsweek analysis of political contributions from GEO and CoreCivic’s political action committees found that both heavily favored Republicans in political donations during the 2020 cycle. About 95 percent of GEO’s nearly $1 million in donations went to GOP candidates and the party, as did more than 87 percent of CoreCivic’s $181,000.

That makes sense given that the Democratic party has recently coalesced around banning private prisons, but the reality is that mass incarceration has been increasingly unpopular for even longer. The related political headwinds have been clear to corporate leaders for years, and have encouraged a pivot towards providing a broader, less-controversial mix of services to the government.

Like other big companies, CoreCivic and Geo Group “protect against risk with diversification,” said David Fathi, director of the ACLU’s National Prison Project. “They have taken steps to insulate against a major loss of incarceration business from the federal government. Whether it’s enough remains to be seen.”

New and expanded forms of community supervision are byproducts of recent efforts to curb mass incarceration and reduce prison populations, according to Lauren-Brooke Eisen, the director of the Justice Program at the Brennan Center, a public policy think-tank at New York University. “But those people need case management,” Eisen said.

“Those people need to pay fees. Those people have electronic monitoring. Those people are in drug treatment…so that’s become hugely lucrative and will continue to be so.” It’s a phenomenon that some observers have termed the “treatment industrial complex.”

In a 2014 report by that name, Caroline Issacs, Program Director of the American Friends Service Committee in Arizona, predicted that the companies’ pivot had begun and would intensify. “They were selling whatever they think states are buying,” Issacs told The Marshall Project this month. “So as soon as they got wind of sentencing reform, they set about to figure out how to monetize that for themselves.”

Industry defenders counter that they are merely in the business of providing whatever capacity the government needs. For a long time, the government was locking up more people than it had space for—hence private prisons. As the government’s priorities change, so will the business strategy.“

Government partners have been increasingly looking for alternatives to incarceration, including expanding residential and non-residential services,” said CoreCivic spokesperson Steve Owen. “Our commitments to reentry and reducing the national crisis of recidivism reflect that we are part of the solution, though not the only one.”

GEO Group and CoreCivic are certainly listening when Biden says, as he did in October, that people who use drugs should be sent to centers built for mandatory rehabilitation, and not to jail.

To be sure, corrections and detention still make up the lion’s share of both companies’ bottom line. Both GEO and CoreCivic derive about half their revenue from contracts with the federal government—mostly by providing detention facilities for Immigration and Customs Enforcement (ICE). But the alternative business sectors are all growing while the old core business stays flat or decreases.

The detention business remains lucrative. Both companies secured multiple 10-year contracts with ICE this year that experts say would be difficult to suspend, and would theoretically extend past the end of even a two-term Biden presidency. Unlike the Bureau of Prisons, neither ICE nor the U.S. Marshals Service (which holds people awaiting federal trials) has the capacity to just move people from private to public facilities. Without a substantial, rapid reduction in immigration and pretrial detention, private companies are here for the near-term.“

The federal government, and certainly ICE, can’t stop using private prisons tomorrow, it’s going to have to be over time,” said the ACLU’s David Fathi. “So if nothing else, the private companies have some time to adjust to the new world.”

In the meantime, GEO Group and CoreCivic are touting their commitments to re-entry and rehabilitation. In late October, CoreCivic announced its support for restoring Pell Grants for incarcerated individuals and voting rights for people who completed their sentences. On November 9, GEO announced a new, “dynamic” Washington, D.C.-based reentry program.

Whether all of that brand management will be enough to burnish the companies’ image remains to be seen. Both firms will soon have to confront decisions of several major banks—including Chase, Bank of America and Wells Fargo—to stop lending them money. On top of that, institutional investors are increasingly under public pressure to divest from companies that profit off of incarceration.

As You Sow, a nonprofit that promotes shareholder advocacy, recently published an online tool that lets people check if their investments and retirement accounts are invested in private prisons. “The amount of traffic that we’re seeing from people that are checking: ‘Am I profiting from private prisons?’ is pretty extraordinary,” said Andrew Behar, CEO of As You Sow. “People want to know, and people are not happy about it.”