Friday, July 06, 2007

Meet the Geo Group: Texas' largest private prison contractor

After writing about Idaho pulling its prisoners out of a Geo Group prison unit in Texas, it hit me where else I'd seen Geo in the news recently - they run the downtown jail in Beaumont where an inmate used a paper gun to hold two people hostage last week.

With Geo Group (formerly Wackenhut) twice this week in the news, I decided to take a look at their 10-K statement, which is a corporate document publicly traded companies must file with the Securities and Exchange Commission. The company is based in Boca Raton, Florida, but has a "central regional office" in New Braunfels, halfway between Austin and San Antonio.

The first thing that jumped out at me in Geo's 12/31/06 10-K filing was the section titled "Discontinued operations"
Through our Australian subsidiary, we previously had a contract with the Department of Immigration, Multicultural and Indigenous Affairs, or DIMIA, for the management and operation of Australia’s immigration centers. In 2003, the contract was not renewed, and effective February 29, 2004, we completed the transition of the contract and exited the management and operation of the DIMIA centers.
In early 2005, the New Zealand Parliament repealed the law that permitted private prison operation resulting in the termination of our contract for the management and operation of the Auckland Central Remand Prison or Auckland. We have operated this facility since July 2000. We ceased operating the facility upon the expiration of the contract on July 13, 2005.
Hmmmm ... I wonder what the Aussies and New Zealanders (and the Idaho Department of Corrections) know about Geo Group that we don't here in Texas? Whatever it is, nobody has told the feds yet. According to the 10-K:
In February 2004, CSC [a company Geo has since purchased] was awarded a contract by the Department of Homeland Security, Immigration and Customs Enforcement, or ICE, to develop and operate a 1,020 bed detention complex in Frio County, Texas. South Texas Local Development Corporation, referred to as STLDC, a non profit corporation, was created and issued $49.5 million in taxable revenue bonds to finance the construction of the detention complex.
So who are these guys? To give you an idea how closely associated they are with the feds, one of their "international" contracts is to operate a "Migrant Operations Center" in Guantanamo Bay, Cuba. But about 1/3 of their facilities are actually in Texas, though no prominent Texans serve on its board of directors or management team. According to their 10-K:
As of December 31, 2006, [Geo] operated a total of 62 correctional, detention and mental health and residential treatment facilities and had over 54,000 beds under management or for which we had been awarded contracts. We maintained an average facility occupancy rate of 96.1% for the fiscal year ended December 31, 2006. For the fiscal year ended December 31, 2006, we had consolidated revenues of $860.9 million and consolidated operating income of $64.2 million.
So Geo/Wackenhut operates a prison system all told that's roughly the same size as the prison system of a medium-population state.

About 20 Geo facilities accounting for around 14,500 of those beds are in Texas, making Geo's Texas operations about 1/10th the size of the entire state prison system. By comparison, Texas operates 106 state institutions, contracts for perhaps a dozen more, and houses a total of roughly 150,000 people in the state prison system, ballpark. Here's a spreadsheet I compiled from Geo's 10-K listing their facilities and clients in Texas:

Geo Group Private Prison Facilities in Texas

How many of these facilities have problems similar to the one in Dickens County? No way to tell. We do know the company lost a lawsuit last September in South Texas (Raymondville) for a big chunk of change. Said the 10-K:
On September 15, 2006, a jury in an inmate wrongful death lawsuit in a Texas state court awarded a $47.5 million verdict against us. Recently, the verdict was entered as a judgment against us in the amount of $51.7 million. On December 9, 2006, the trial court denied our post trial motions and we filed a notice of appeal on December 18, 2006.
We also know Geo guards receive less training than COs at Texas state facilities. Geo's 10-K reports that the company "generally require[s] at least 160 hours of pre-service training before an employee is allowed to work in a position that will bring the employee in contact with inmates in our domestic facilities" That's better than at the Dallas County Jail, but a far cry from the 300 hours required for TDCJ guards.

Even more troubling in the short term, the company has a "significant level of indebtedness that could adversely affect our financial position," mostly spent to buy competing private prison companies. And how might this debt "adversely" affect Geo? First and foremost, the company says, it could "require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness." Translated, that means they've got so much debt they're going to have to divert funds from their facilities they're operating to help pay it off!

I wonder if siphoning off funds for debt payment contributed to worsening conditions at the Dickens County unit?

The 10-K declares that Geo relies on "distributions" (i.e., "profits") from its subsidiaries to pay its increasingly large debt. Profits from subsidiaries made up more than 28% of Geo revenue last year, but the 10-K cautions that "Our subsidiaries are separate and distinct legal entities and are not obligated to make funds available for payment of our other indebtedness in the form of loans, distributions or otherwise."

In other words, we're not solvent without payments we can't ensure will keep coming, and our subsidiaries are "separate and distinct legal entities" who we don't control. That works out nicely for Geo if they go bankrupt, doesn't it? Here's the list of Geo's subsidiaries - I can't tell from the 10-K which if any have facilities in Texas.

For running an unprofitable business, Geo's chief executive George Zoley makes a base salary of 3/4 of a million dollars plus an annual "incentive bonus" of 150% his base salary.

I'm not sure what if any point there is to this post; I just thought I'd take a closer look at a company that's a major player in the private prison business, and which has appeared in negative news stories more often than anybody would like in the last short while.

Looking at their corporate structure and finances, I'm left with more questions than answers - mostly about what all those subsidiaries do and whether they're likely to continue covering Geo's debt. That may or may not have anything to do with what's happening at units on the ground. Make of it all what you will.


Anonymous said...

billt wrote:

i pity the poor inmates who are in the geo facilities if the company gets in more dire straits. What happens to them if geo runs out of money?

Anonymous said...

What gets me is the folks that are running TYC actually think contract care is good for Juveniles.

Who in their right mind would want their kid in one of these facilities?

If the staff are required not to have a felony or a misdemeanor in the past 5 years and no domestic violence or drug charge period, where will they hire the staff. Are they under the same rules to work with juveniles are are they exempt from these standards.

If they are held to these same standards (and they should be) everyone knows contract beds make money based upon paying their guards peanuts. This is a disaster waiting to happen, but does anyone really care since the sesion is over with and the media scrutiny is over?

Grits are contract facilities required to abide by the same standards that TYC correctional officers must abide by??

Gritsforbreakfast said...

Anon, I don't know the answer to that question, but you'll notice one of the facilities Geo runs in Texas IS a TYC facility, the one in Coke county. See the embedded chart.

A retired warden in the previous string said TDCJ gives "variances" from rules to privates that state run prisons can't get. I'd love to see the details of those variances and also to know whether the same is true for TYC contract care.

BTW, I had some problems with the embedded chart and had to repost this and also yall's two comments, so billt, that's why yours is formatted as anonymous. Sorry about that. Doing it over was easier than figuring out what was wrong!

For any technically minded person, the embedded Google spreadsheet gums up Blogger to where you can't edit after you publish it. It's kind of weird because it's the same company. Anybody who's run into that, let me know if there's a fix. Thanks!

Anonymous said...

10:45, there's a big difference between a for-profit contract care operation, like Geo Group, and a non-profit contract service provider.

Anonymous said...

What is a variance? A variance is an exception to policy.

Documentation indicating a private prison requested and was granted authorization to violate a TDCJ Security Policy would not look good in the media. But a variance is such a soft, non-offensive term.

Me: If a private prison requests and is granted any exception to a TDCJ security policy why couldn't the TDCJ units be exempt? The policy must not be needed so let's just do away with it!

Admin: No; the policy is a sound security requirement.

Me: If the security policy is so great why do we allow the private prisons and exemption (oops; I mean a variance)?

Admin: Because privates are run differently than TDCJ units; they have to show a profit.

Me: Don't you think we are "sleeping" with these people? It is like managed Health Care; we are not making sound correctional procedures; our decisions are based on what is best for their profit margins.

Admin: When I you planning on retiring?

Retired 2004

Anonymous said...

Corrections to my previous post:

We are not making sound correctional "decisions" . . .

When "ARE" you going to retire?

I got dizzy up on my soapbox.

Retired 2004

Don said...

The GEO facility where I worked has 2 weeks of training before going on duty. guards start at $7 or $7.50. They never have enough guards, either on duty or on the payroll. Texas Jail Standards Commission are the overseers, not TDCJ. They can get variances from things like guard/inmate ratio, or they can just ignore the rules. Nothing will happen about it.

Anonymous said...

Who says the folks that are running TYC think contract care is good for juveniles? GEO has successfully avoided coming into compliance with TYC policies for years - much to the frustration of those who used to run TYC. GEO is protected at a very high level - much higher than TYC or TDCJ.

Anonymous said...

The Geo Facility that I work at starts at $9 something an hour. This place is a joke, when new hires are brought in they are told to shadow somebody, they do get a week of training but I don't believe it's much. The union that we have is a joke also I thought that unions were suppose to back there members. Geo can't keep people on the payroll. This place is so crooked that it isn't funny. There was a Capt that was caught pocketing some cash and admin did nothing about it. A inmate died at the facility and they cover it up saying that he didn't die at our place that he died at the hospital when they know that he was dead on the floor. Inmate have had to sleep in our exercise and so called library room on the floor. They've put 30 plus men in a pod that is meant for 24. The surrounding counties that we house for laugh at us because this place is such a joke. You may have 4 people working on a midnight shift to watch 200 plus inmates and that just 1 on the floor, 1 in control and 1 in booking plus the supervisor. Thankfully they are leaving and another company is coming in, but who's to say if it will be any better

Anonymous said...

one way the geo group saves money is they dont feed the inmates hardly anything.they have cockroaches in the kitchen at bridgeport tx. this is fact.kasurge

Anonymous said...

This unit is in trouble. However, they choose to ignore it. Texas Jail Standards call for a 1 to 45 officer to inmate ratio and they can't meet it. They run people thru their system like Midway Airport. Why, try a 12 hr. day plus 4 Hrs mandatory over time and mandatory call-ins.
There is more, supervision need training in personnel management as do the wardens (both female)..

Eddie G. Griffin said...

Thanks for the update. I've been telling Jerry Madden for a long time to do away with TYC and get GEO out of our coffers.

Anonymous said...


Anonymous said...

GEO needs to be SHUT DOWN! They opened their new FCCC facility and it isn't even ready! They have poor plumbing, no drinking water, no privacy whatsoever. There is much more going on and I plan to do something about this. If anyone wants to help, please let me know!!!

Anonymous said...

Why hasn't anyone checked the great corruption going on here? GEO is run by lawyers and politicians, and they've openly given jobs to other politician's relatives and spouses. They've made tremendous campaign contributions all over the place. Right now, there are a few strong lawsuits against them for inmate abuse, neglect and wrongful death. This is a corporation which should not exist. The media, I suppose has been silenced on the great injustice being done through GEO. Nazi Germany all over again!

Anonymous said...

Newton County Correctional Center needs to be closed down. The facility is a mess and is also ran by alot of people who think that they know everything and they don't. The place is ran really short and the employees are worked to death. We have to work so many hours. At one point we had to work 160 hours and pay-period. You have supervisors sleeping with officers and there is no anything done about it. (Lt. Scott) he needs to be investigated and FIReD. Even though he is married to another Lt. he still does what he does. The inmates and treated like shit and the facility can't keep any workers. Tdc monitors come in all the time and I don't see how that place is still open. I really think that they pay under the table to keep the place open.

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