There is a codependent relationship between the private prison industry and the federal government’s immigration enforcement apparatus. Immigrant detention jumpstarted the two largest prison companies—Corrections Corporation of America (CCA) and GEO Group—in the prison industry.

The Immigration & Naturalization Service (INS) contracted CCA in 1983 and GEO (then Wackenhut Services, Inc.) in 1987 to provide prison beds for detained immigrants. These INS immigrant detention centers were among the first private prisons in the United States.

Although the federal government initiated the privatization of prisons, state governments quickly followed the INS lead. Throughout the late 1980s and the1990s state outsourcing of prisoners drove the expansion of the prison industry. Harsh sentencing laws, ever-increasing drug-related convictions, and the deepening taxpayer reluctance to approve tax increases to pay for prison construction created a favorable climate for the private prison boom.

While INS led the way, other Justice Department agencies soon followed. The U.S. Marshals Service (USMS) and the Federal Bureau of Prisons (BOP) began privatizing their imprisonment responsibilities in the early 1990s. BOP’s first private prison contract was in 1991 with Wackenhut Corrections.

By the year 2000, however, a spate of private prison deaths and escapes leading to some states to canceling contracts and the inability of CCA and others to find enough inmates to fill the "speculative" prisons it was building caused the industry’s profits and the stock to tumble. But after a brief scare, the industry saw its fortunes soar again as INS and USMS began issuing new contracts for immigrant detention.

In 2000 the INS contracted the CCA to house 1,000 detainees at the company’s San Diego Correctional Facility. The contract, in which the INS agreed to pay $89.50 per diem for each occupied prison bed, was hailed by CCA as "one of the largest contracts ever awarded to the private corrections industry." BOP also came to CCA’s rescue when in 2000 it entered into an agreement with CCA to send "criminal aliens" to the speculative prison that CCA had built in California to house state prisoners that never arrived.

"The private prison industry was on the verge of bankruptcy in the late 1990s, until the feds bailed them out with the immigration-detention contracts," said Michele Deitch, an expert on prison privatization with the Lyndon B. Johnson School of Public Affairs at the University of Texas in Austin.

A San Diego Union-Tribune special report (May 4, 2008) on the prison industry summed up the conjuncture: "Fortunately for the industry, the federal government began seeing a surge in demand around this time, fueled by federal drug-sentencing laws that had created more inmates and tougher 1996 immigration laws that made more immigrants deportable."

Today, federal government contracts to detain a thousand or more detained immigrants are common, and have sparked a new wave of private prisons, particularly in the Southwest. Immigration and Customs Enforcement (ICE), the INS legacy agency that forms part of the Department of Homeland Security, now contracts all new detainee growth, as does USMS.

Through its Privatization Management Branch, BOP has over the past several years entered into five contracts with private prison operations to hold more than 10,000 "criminal alien residents." When it published its request for contract bids, BOP noted that the "officers" would be required to "house felony offenders, predominantly criminal aliens." BOP cites "flexibility" as the main attraction of prison privatization.

The BOP contract notice for the criminal alien prisons noted that privatization "provides the BOP with flexibility to meet population capacity needs in a timely fashion." Commenting on BOP’s decision to privatize criminal alien detention, BOP spokeswoman Felicia Ponce said that contracts with GEO Group and CCA give BOP the "flexibility to manage a rapidly growing inmate population and to help control overcrowding."

Reeves County Detention Century during inmate uprising. Photo: AP.

The BOP currently has five contracts to house 10,243 "criminal alien residents." The contracts are with GEO and CCA, and four of the five prisons are in remote areas of western Texas—the largest of which was a $187 million contract in 2007 for "contract beds" at the GEO-run 3,700-bed Reeves County Detention Center, where immigrant inmates have recently rioted to protest deficient medical care.

Commenting on the 2007 contract, GEO president George Zoley, said, "This new long term contract is indicative of a continuing trend of lengthy contracts being awarded by the Federal Bureau of Prisons, U.S. Immigration and Customs Enforcement, and the U.S. Marshals Service, providing for increased revenue certainty for our company and a continuity of services for our federal clients. Approximately 40 percent of our present revenues are generated through similar lengthy contracts involving the three federal detention agencies and GEO-care clients."

Zoley boasted that "the Reeves County Detention Complex (the ‘Complex’) is the largest detention/correctional facility under private management in the world."

Two years later, when GEO Group announced its fourth-quarter earnings on Feb. 12, 2009, Zoley told representatives of investment companies vested in the private prison industry that he "was very pleased" with 2008 results. When most economic sectors are suffering and shuttering stores, GEO, CCA, and other private prison firms reported record revenues and earnings. Net income rose at GEO from $41.8 million in 2007 to $58.9 million in 2008—an increase of more than 20%.

Zoley noted that federal contracts with ICE, USMS, and BOP accounted for 37% of 2008 revenues but 50% of earnings. GEO has more than 10,000 immigrants in its prisons, two-thirds of whom are classified as "criminal aliens." He assured investors that there was "solid bipartisan support to identify and deport criminal aliens." Zoley pointed out that in 2008 Congress added $200 million to President Bush’s $800 million request for ICE’s criminal alien program. In President Obama’s 2010 DHS budget, $1.4 billion is scheduled for programs to hunt down criminal aliens.

In its 2007 Security and Exchange Commission filing, CCA stated: "We are dependent on government appropriations." Then CCA Chairman William Andrews warned investors that the company’s high returns could be threatened by a change in the policy environment: "The demand for our facilities and services could be adversely affected by the relaxation of enforcement efforts … or through the decriminalization of certain activities that are currently proscribed by our criminal laws."

Although booming largely because of the surge in immigrant inmates, the private prison industry is also facing a barrage of criticism from immigrant advocates and civil libertarians.

Emblematic of the legal backlash against the private prison industry’s role in immigration imprisonment, a lawsuit filed in 2007 (and settled in June 2008) by the American Civil Liberties Union against ICE and CCA charged that the San Diego Correctional Facility—the same detention center that had help revive CCA in 2000—was grossly overcrowded and its unsafe conditions violated inmate civil rights. At the time immigrant inmates were obligated, among other things, to sleep on the floor near toilets and had little access to mental health care.

Jody Kent, public-policy coordinator for the ACLU’s National Prison Project, told the Wall Street Journal: "We have serious concerns about for-profit prison companies because they are notorious for cutting essential costs that need to be provided to maintain a safe and constitutional environment for prisoners." The lawsuit was settled in June 2008.

But neither lawsuits nor inmate protests seem to worry the private prison industry. Backed by hefty liability insurance policies—which are usually paid for by the county governments that actually own the immigrant prisons—private prison companies routinely offer investors rosy forecasts of future profits. Both GEO Group and CCA say that the deepening economic downturn has several silver linings for their business, including new incentives for government to privatize given increasing difficulty of securing tax income for prison construction and an increased supply of cheap labor.

As GEO’s Zoley sees it, the prison industry will benefit from a new "national imperative" in these difficult economic times "to protect American workers by detaining and deporting immigrants."

Download PDF