A Family Affair
Forrest Wilder at the Texas Observer has a story on the Lucio family's relationships to a private prison firm, which has hired state Rep. Eddie Lucio III to lobby the city of Weslaco for a private prison deal. His father, a sitting state senator, performed consulting work for the same company in 2003-2004.
Debt, Risk and the Geo Group
Texas Prison Bidness brings word that the Geo Group gobbled up yet another competitor, adding to its already enormous debt load and making it the second largest private prison company on the planet, behind Corrections Corporation of America. Reported the Financial Times:
The Geo Group offered about $385m for Cornell Companies in a mixture of cash and stock, valuing the company at about $24.96 a share. The company will also take on about $300m of Cornell debt.The Geo Group's most recent 10K statement is really quite an amazing read, for anyone interested, particularly the lengthy section on risk factors, where the possibility is raised that a quarter-billion dollars in unsecured bonds issued privately last fall might be considered a "fraudulent conveyance" if the company defaults and a bankruptcy judge ever takes a close look at the deal.
Facing a mountain of debt, mostly from acquiring competitors, this appears to be a pretty critical year for the Geo Group, with contracts up for renewal on almost one in five beds they operate. According to the 10-K: "As of January 3, 2010, eleven of our facility management contracts representing 10,407 beds are scheduled to expire on or before December 31, 2010, unless renewed by the customer at its sole option. These contracts represented 19.3% of our consolidated revenues for the fiscal year ended January 3, 2010."
Other risks identified in Geo's 10-K include:
- Our significant level of indebtedness could adversely affect our financial condition and prevent us from fulfilling our debt service obligations.
- A decrease in occupancy levels could cause a decrease in revenues and profitability.
- State budgetary constraints may have a material adverse impact on us.
- Public resistance to privatization of correctional and detention facilities could result in our inability to obtain new contracts or the loss of existing contracts, which could have a material adverse effect on our business, financial condition and results of operations.
- Adverse publicity may negatively impact our ability to retain existing contracts and obtain new contracts.
- We may face community opposition to facility location, which may adversely affect our ability to obtain new contracts.
- We may not be able to obtain or maintain the insurance levels required by our government contracts.
What they need is a sweetheart deal to operate a prison outside of America in support of the Global War on Terror (or whatever they're calling it these days). The Obama Administration could give the Gitmo prisoners to these guys, who could get assured no-bid contracts to hold them, much like so many other contractors have no-bid contracts to "rebuild" Afghanistan and Iraq and supply our troops. Financial problem solved. Meanwhile, Obama could say that he closed Gitmo and got the prisoners out of there, and be technically telling the truth, without having done anything significantly different from Bush, even though he promised change we could believe in!
ReplyDeleteROFL!
Really, there are things that the private sector should be doing, and things that the private sector should not be doing. In the first category, I think, go education, health care, welfare, and in the second category go prisons and war. But, there are bucks to be made by politicians for doing it all bass-ackwards.