Corporate divestment from the U.S. private prison sector could major a big impact on the industry — even if it’s mostly symbolic.
WASHINGTON — Three corporations considered major investors in the U.S. private prison industry are moving to dump their holdings in the sector, apparently in response to newly stepped-up pressure from civil society.
The total divestments add up to about $60 million, and organizers say more divestment announcements are on the way. Two of the three companies — Amica Mutual Insurance and Dutch chemicals manufacturer DSM North America — have reportedly offloaded all of their shares in the Corrections Corporation of America and Geo Group, the country’s two largest for-profit corrections companies.
“In accordance with [U.N.] principles … with respect to the protection of internationally proclaimed human rights, the [DSM Netherlands] pension fund has divested from the for-profit prison industry,” Hugh Walsh, president of DSM North America, said in a statement late last month.
Walsh told MintPress News in an email: “The board of the Dutch pension fund of DSM acknowledges the social role it plays as the steward of participant’s pension capital. It does not believe that that exclusion of entities that show a willful disregard for human rights, labor rights, the environment, or business ethics hamper the performance of the pension fund.”
The third company, Scopio Capital Management, previously one of the most significant institutional investors in private prisons, has been in the process of divesting from Geo Group since 2012. Organizers of the new civil society push say Scopio has committed to a complete withdrawal from Geo Group, a process that should be complete this year. (Neither Scopio nor Amica agreed to discuss the issue with MintPress.)
“This campaign has been incredibly hard. Many companies simply come back and say there’s nothing they can do, that this is their investors’ money,” Rashad Robinson, the executive director of Color of Change, a civil rights group and prominent online organizer, told MintPress. “So these first three announcements are big news and mark a big shift in this movement.”
Of course, the $60 million loss from these three companies’ divestment is largely symbolic for Corrections Corporation of America and Geo Group, companies that bring in billions of dollars each year and are currently seeing business surging overseas.
Yet Robinson says the announcements represent “the first chip in terms of having companies speak out and say they’re divesting. That, combined with similar decisions at the state level, will work to make this an industry increasingly less interesting to investors.”
For-profit prisons began operating in the United States during the 1980s. By 2011, the United States held the world’s largest number of prisoners in private facilities, around 131,000.
As profit-driven entities, private corrections companies have an explicit requirement of cutting costs. These groups tend to explain the rationale for their operations in terms of efficiency of service. The Corrections Corporation of America, a founder of the sector and the United States’ largest such operator, says it “combine[s] the efficiency and effectiveness of business with the standards, regulation and oversight of government … at less than it costs public agencies to operate.”
Yet partly because of this, critics say these facilities have broadly poorer services and worse conditions than publicly run penal systems. In recognition of this record, the Israeli Supreme Court halted Israel’s attempt to open a private prison in 2009, warning that doing so would lead to “harsh and grave damage to the basic human rights of prisoners.”
Watchdog groups and government agencies have called into question the sector’s broader claims to efficiency, as well. In 2010, for instance, a government oversight office for the state of Arizonafound that for-profit prisons were costing the state some 16 percent more than public facilities. Earlier this year, the Idaho state government ended its contract with Corrections Corporation of America at the state’s largest private corrections facility, citing a decade of mismanagement, including falsified staffing reports.
Last year, Color of Change started pushing 150 major investors to divest from private corrections companies, joining more than a dozen other groups as part of the National Prison Divestment Campaign. The group says the announcements by Amica, DSM and Scopio are likely the first instances of institutional investors both confirming a divestment strategy and publicly condemning private prisons as an industry.
Further, the announcements constitute only the first three divestment decisions that Color of Change has been able to independently verify. Robinson, the group’s executive director, says a number of other investors have approached the organization on the issue, but these divestment plans have yet to be fully verified.
He says the entire process has proven particularly complex. Corporate management bodies have needed to educate their own members on the issues surrounding private corrections — and the extent of their own investments in the sector.
“Many companies started off surprised or even denying that they would ever have money in private prisons. Since then they’ve put their own research teams on the issue, both to check their own investments and to check the claims we were making about the related rights concerns,” Robinson noted.
“Many asset managers and banks already have people who specialize in fossil fuels divestment or human rights violations, but this is a new area of practice. So they’ve needed to move people into this area.”
While the process is taking extra time, Robinson says the results validate Color of Change’s approach: privately educating institutional investors rather than publicly shaming them.
“There is a history of divestment in this country — around apartheid, around the environment — that has consistently shown that companies do have the ability to act when they believe their marketing strategies are in danger,” Robinson said.
“So we won’t accept that companies’ hands are tied. We just have to make the stakes high enough so investment leaders decide they don’t want this industry to be part of their business any longer.”
A list of 36 of the top remaining institutional investors in the for-profit prisons sector — including JPMorgan Chase, Vanguard and Wells Fargo — can be foundhere. Together, these companies reportedly own around two-thirds of Corrections Corporation of America and Geo Group.
The private corrections industry in the United States took off at the start of the “tough on crime” era of the 1980s. That era is now rapidly coming to a close, as law enforcement, criminal justice practitioners and lawmakers have increasingly come to agree that “zero tolerance” anti-crime approaches have been relatively ineffective, sapped public coffers and led to potentially adverse effects on society.
Yet analysts note that the private prisons industry has built itself into a formidable lobby. It is said to be making itself heard on congressional proposals on immigration reform, mandatory minimum sentencing requirements and other bills that could impact the industry’s revenues.
Industry lobbying has already translated into a slew of favorable federal policies for private corrections companies. Both Corrections Corporation of America and the Geo Group made around $1.5 billion last year alone — almost all in state and federal contracts. And following a designation last year by the Internal Revenue Service generally allotted to large-scale land trusts, these companies no longer have to pay corporate income taxes.
More importantly, the industry’s most significant contracts are with the federal government, which relies particularly heavily on private prisons in the country’s massive immigration detention system. Following changes to the law in 2009, Congress currently mandates that at least 34,000 people be kept in immigration detention at any given time. This so-called bed quota has helped to double valuations for both the Corrections Corporation of America and Geo Group since 2010.
“The U.S. government needs to get away from policies that unnecessarily drive incarceration and mass detention, and a perfect example is the immigration bed quota,” Antonio Ginatta, advocacy director for the U.S. program at Human Rights Watch, told MintPress. “That type of driver may well encourage the growth of private prisons. The bed quota is a completely arbitrary number and we think it should be abolished.”
Human Rights Watch released areport on Tuesday, noting that the United States continues to have the world’s highest incarceration rate. The group traces this fact back to the preponderance of U.S. laws that mandate particularly harsh penalties, including far longer prison time, the group says, than would be required by mere punishment for wrongdoing.
While Human Rights Watch has been critical of private prisons in the past, Ginatta cautions against broad-brushed analysis of the sector, noting that some private prisons have been run well, with few of the safety or rights concerns found elsewhere. Likewise, some public prisons have experienced horrific conditions.
Rather, Ginatta says, the problem continues to be differing systemic mechanisms for accountability. For instance, private corrections facilities are not subject to mandated disclosure under the federal Freedom of Information Act. A Supreme Court decision in 2011 says prisoners also can’t sue private facilities over conditions.
“The savings that governments claim they can find by contracting with private prisons come at the cost of giving up on issues of openness and transparency,” he said. “If governments want to work with private prisons, the conditions need to be the same and accountability needs to be the same.”