Private prison firms make big money in California

(Editor’s Note: This is the first of two parts)

In January 2020, Californians thought they were getting out of the private prison business.

They are, but under a new law, AB 32, which went into effect at the first of that year, the state remains heavily invested in backing for-profit correctional services — including facilities that resemble detention centers run by the same companies who operate private prisons.

After AB 32’s passage and even before it went into effect, the state voided existing contracts with the operators of private prisons — agreements worth more than $300 million annually in public money — and barred new contracts and renewals.

But while for-profit prisons were abolished, the new statute contained exemptions that allowed private-prison companies to focus on other lucrative “community corrections” programs, including day reporting centers, counseling facilities, half-way houses, rehabilitation centers, medical offices, and mental health facilities. These exemptions are currently worth about $200 million annually.

Bonta declined Capitol Weekly’s requests to discuss the legislation and referred inquiries to CDCR.

Exemptions for these ancillary operations, and others, were written into AB 32’s provisions  as it moved through the Legislature. And although the public’s perception of the bill focused on the elimination of private prisons, far less attention has been paid to the state’s continuing role in for-profit, corrections-related services.

Private-prison companies such as GEO Group and CoreCivic – who hold contracts for community corrections and reentry services with the Department of Corrections and Rehabilitation (CDCR) — no longer run for-profit prisons in California. They do, however, operate private prisons in dozens of states across the country, as well as some federal lockups. They oversee private detention facilities on three continents.

The author of AB 32 was then-Assemblymember Rob Bonta, an Alameda Democrat recently appointed the state attorney general by Gov. Gavin Newsom. Bonta declined Capitol Weekly’s requests to discuss the legislation and referred inquiries to CDCR.

During the consideration of the bill, Bonta criticized for-profit prisons.

“The built-in incentives for these businesses are all wrong,” Bonta wrote.  “A private, for-profit company that is traded on Wall Street will inherently be incentivized to maximize profits and minimize costs — including the important ‘cost’ of investments in programs, services and rehabilitation efforts for inmates — through warehousing our inmates.  These companies have a duty to shareholders, not to California.”

Rather than wait for CDCR’s contracts with such facilities to expire, California terminated its contracts early.

During his campaign for governor, Newsom called on the state to disengage from private-prison operations.

When he signed the new law, Newsom said, “During my inaugural address, I vowed to end private prisons, because they contribute to over-incarceration, including those that incarcerate California inmates and those that detain immigrants and asylum seekers These for-profit prisons do not reflect our values.”

Under AB 32, California is prohibited from entering into or renewing any “contract with a private, for-profit prison facility located in or outside of the state to provide housing for state prison inmates.”

Rather than wait for CDCR’s contracts with such facilities to expire, California terminated its contracts early, something it was allowed “without penalty and without cause, with a 30-day notice,” said CDCR spokeswoman Vicky Waters.

California voided one agreement prior to AB-32’s passage: An $82.1 million contract with GEO Group’s Central Valley Modified Community Correctional Facility, which was terminated in September 2019.

Through California’s Public Records Act, Capitol Weekly obtained over 370 contracts between CDCR and private, for-profit and non-profit contractors.

After AB 32 went live in January 2020, California quickly cut short it’s remaining GEO Group private prison contracts:  Desert View Modified Community Correctional Facility (February 2020), Golden State Modified Community Correctional Facility (March 2020), and McFarland Female Community Reentry Facility (September 2020).

Had California allowed these contracts with GEO Group to run their terms (July 1, 2018 – June 30, 2023), GEO Group would have made over $311 million, according to state financial documents reviewed by Capitol Weekly.

While early termination of the contracts cost GEO Group at least $223 million, it did not end the relationships that GEO Group and its main competitor, CoreCivic, have with the state.

Through California’s Public Records Act, Capitol Weekly obtained over 370 contracts between CDCR and private, for-profit and non-profit contractors.

Reviewing these contacts, this reporter found that California’s elimination of “private, for-profit prison facilities” did not end the state’s relationship with the world’s two biggest for-profit private-prison corporations, GEO Group and CoreCivic.

CoreCivic, meanwhile, has one $22.6 million contract with CDCR to run a program called Male Community Reentry Program, or MCRP.

While GEO Group and CoreCivic no longer operate private prisons for the state, they do hold an estimated $200 million worth of contracts with CDCR to provide reentry services to inmates and parolees.

GEO Group, through its subsidiary GEO Reentry Services (GRS), possesses 15 contracts with CDCR, valued at $184.4 million (or $45.9 million for 2021 alone).

Nine GRS contracts with CDCR – valued at about $63.9 million — are for day reporting centers, known as DRCs, which provide “‘one-stop shop’ comprehensive service delivery programs’ for parolees. DRCs also have “limited transitional housing.” Three contracts, worth $10.7 million, are for transitional housing programs, including reentry housing.

GRS runs a program known as STOP, or Specialized Treatment for Optimized Programming, from a series of regional offices. STOP offers counseling and education in such things as substance abuse, anger management and life skills, and provides emergency housing. These contracts are worth $97.1 million; GRS also has a CDCR-funded $12.8 million parolee service center.

Those who use “reentry services” or are enrolled in community corrections programs are parolees, not inmates or prisoners, an important distinction.

CoreCivic, meanwhile, has one $22.6 million contract with CDCR to run a program called Male Community Reentry Program, or MCRP, which allows inmates “committed to state prison to serve the end of their sentences in” community-based facilities. While CoreCivic runs the MCRP program, technically the inmates are “under the direct supervision of [the CDCR].

According to CDCR, two things make it possible for California to maintain contracts with private prison corporations.

First, is an amendment to AB 32 that creates an exception for “community corrections,” also called “reentry services.”

Those are defined as “any facility providing educational, vocational, medical, or other ancillary services to an inmate in the custody of, and under the direct supervision of, the Department of Corrections and Rehabilitation or a county sheriff or other law enforcement agency.”

Second, AB 32 focuses on inmates (or prisoners), not parolees. Those who use “reentry services” or enrolled in community corrections programs are parolees, not inmates or prisoners, an important distinction: State law defines inmates as “not paroled.”

But there is a question whether for-profit inmate-parolee programs such as day reporting centers and transitional housing are little more than detention facilities operating under a different name.

GEO Group’s Taylor Street Center in San Francisco, house both state parolees and federal inmates, often subjected to the same rules by a single management team.

State law defines a “detention facility” as “any facility in which persons are incarcerated or otherwise involuntarily confined for purposes of execution of a punitive sentence imposed by a court or detention pending a trial, hearing, or other judicial or administrative proceeding.”

In 2017, the Senate Committee on Budget and Fiscal Review defended privately run inmate-parolee facilities, citing “state policies put in place to closely monitor and oversee the running of the private facilities. For example, all inmates housed in private facilities must be supervised in the same manner and under the same rules as the state-run prisons.”

Reviewing the contracts, this reporter found inmate-parolees enrolled in these programs are subjected to daily searches and inspections, 24/7 surveillance, weekly drug and alcohol testing, limited visitation, controlled phone usage, mail inspection, and even a limit of five first-class letters sent per week – conditions that very much resemble house arrest.

Additionally, some facilities, such as GEO Group’s Taylor Street Center in San Francisco, house both state parolees and federal inmates, often subjected to the same rules by a single management team.

In January 2021, there was a COVID-19 outbreak at GEO Group’s Taylor Street Center, a transitional housing program in San Francisco, funded, in part, through a $6.6 million contract with CDCR.

Complaints about how GEO Group and other private prison contractors run inmate-parolee services are not new.

Taylor Center’s directors confined residents to their rooms, under threat of being returned to custody.

One resident, Keith “Malik” Washington, serving out three months on a federal sentence, contacted 48 Hills,  a San Francisco news website,  to report the outbreak.

After 48 Hills made inquiries about the story, Taylor Street silenced Washington: His “cell phone was confiscated and he was given a disciplinary write-up for ‘unauthorized contact with the public,'” according to 48 Hills. Washington also faced further discipline from GEO Group.

Complaints about how GEO Group and other private prison contractors run inmate-parolee services are not new.

Advocates such as Root & Rebound’s Katherine Katcher told East Bay Express that “mass supervision is not freedom. Being mandated to go to a day reporting center where you have to meet with people who are a part of a corporation and corrections at the same time is not the same as meeting with a community-based nonprofit organization that gives you hope and dignity and says, ‘We believe in you.'”

In 2020, CoreCivic reported $1.9 billion in revenue, 82.2% of that coming from its private prison operations.

While there is debate over whether day reporting centers, transitional housing programs, and Male Community Reentry Programs escape the definition of “detention facilities,” there is no argument that GEO Group and CoreCivic are major private prison corporations.

Although CoreCivic – formerly Corrections Corporation of America — has a limited but lucrative presence in California, it has a big footprint across the United States.

According to SEC filings, CoreCivic owns or controls 47 correctional and detention facilities, 27 residential reentry centers, and 15 properties that it leases to third parties. It is also involved in prisoner transport, electronic monitoring, and inmate case management.

Fifty-two percent of CoreCivic’s contracts are with the federal government, specifically U.S. Immigration and Customs Enforcement (ICE), the United States Marshals Service and the Federal Bureau of Prisons.  Its remaining business is with state or local governments. ICE is CoreCivic’s most important client.

In 2020, CoreCivic reported $1.9 billion in revenue, 82.2% of that coming from its private prison operations. Only 3.4% of CoreCivic’s revenue was generated through “Community” contracts, such as the one it holds with CDCR.

The majority of CoreCivic and GEO Group’s revenues come from their private prison business.

GEO Group – once known as Wackenhut – is worldwide, owning and running 64 prisons and 56 community corrections facilities in the United States, Canada, United Kingdom, and South Africa. In 2020, GEO reported $2.3 billion in revenues.

GEO’s U.S.-based private prisons and detention facilities are organized under a company called U.S. Secure Services. According to according to SEC filings, those facilities account for about 66.9% of its revenue. Fifty-six percent of USSS’s income stems from federal contracts. The rest comes from state and local governments.

GEO Care deals with inmate-parolee facilities and services under the brands “Continuum of Care,” GEO Reentry Services, and BI, Inc. – GEO’s electronic monitoring service. Combined, these operations make up 23.5% of its revenue. The rest of GEO’s revenue is generated internationally and through facilities construction.

The majority of CoreCivic and GEO Group’s revenues come from their private prison business. Over the last 15 years, however, both companies’ community corrections operations have grown, while their percentage of revenue from their detention operations have declined.

This shift in business is most evident with GEO Group, who, according to SEC filings, saw their GEO Care revenue jump from 5.3% in 2005 to 16.8% in 2010, and to 18.5% in 2015 and to 23.5% in 20202. During the same time span, GEO’s U.S. Secure Services – their detention division – saw its share of revenue decline from 77.3% in 2005 to 66.9% in 2020.

In 1997, to deal with a rapidly expanding prison population, Wackenhut signed contracts with the Department of Corrections to run three “modified community correctional facilities.”

GEO Group’s increased activity in community corrections was not unplanned.

As far back as 2006, GEO was telling its shareholders that “our successful expansion into the mental health and residential treatment services sector” warranted further action in privatization of areas formerly kept in the public section.

Outside of California, private prison companies, such as Wackenhut Corrections Corporation (now GEO Group) and Correctional Corporation of America (now CoreCivic), have been active since the early 1980s. However, strong opposition to private prisons by the California Correctional Peace Officers Association (CCPOA), the state’s powerful prison guards union, kept them from operating in the state.

In 1994, two things happened that enabled private prison companies to sell California on their services. On March 7, Gov.Pete Wilson signed AB 971, the “Three Strikes” law (which, as Proposition 184, was passed by voters that November). Three Strikes immediately led to a large increase in prosecutions and, in the long term, prison overcrowding.

One month prior to the passage of AB 971, Wackenhut established itself in California. In February 1994, the company signed a $33.2 million contract with the California Department of Correction to operate the McFarland Community Correctional Facility, which was initially intended to deal with parolees and inmates transitioning to the “outside.”

In 1997, to deal with a rapidly expanding prison population, Wackenhut signed contracts with the Department of Corrections to run three “modified community correctional facilities.” What made these facilities “modified” is that they dealt solely with inmates and not paroles, i.e. technically they were not community corrections programs.

“We are sending a powerful message that we vehemently oppose the practice of profiteering off the backs of Californians in custody…” — Rob Bonta

From 1994 until 2018, Wackenhut/GEO Group was to be paid over $962.6 million by California’s taxpayers. The Correctional Corporation of America/CoreCivic did even better.

In 2005, the federal government got involved in California’s prison overcrowding crisis.

That November, “Senior U.S. District Court Judge Thelton E. Henderson stripped the $1.2 billion CDCR healthcare authority from then Corrections Secretary Roderick Hickman” and put an “interim receiver in control” of the authority, the Prison Legal News reported.

Fearful of further federal action, the CDCR signed what was to become a $2.37 billion contract with Correctional Corporation of America/CoreCivic for “Offender Relocation,” which means housing California inmates in out-of-state private prisons.

The Wackenhut/GEO Group private prison contracts dealing with prison overcrowding provided the “in” that GEO and CoreCivic needed to enter California’s community corrections/reentry services’ marketplace. That space was formerly occupied by local, community and religious-based nonprofits.

“By ending the use of for-profit, private prisons and detention facilities, we are sending a powerful message that we vehemently oppose the practice of profiteering off the backs of Californians in custody…” Bonta said when Newsom signed AB 32.

AB 32’s $200 million loophole benefiting the world’s two biggest private prison companies begs to differ.
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Editor’s Note: Tomorrow: Part II, a look at the counties’ role.