Private prison roundup

Here are a number of private prison related items that deserve Grits readers' attention:

• Texas Prison Bidness: Geo's Karnes County Correctional Center found out-of-compliance for overcrowding, understaffing
• Texas Prison Bidness: Johnson County to foot bill for expanded LaSalle Southwest Immigration detention center?
• Texas Prison Bidness: GEO Group expands Laredo Detention Center by 400 beds for immigrant prisoners
• Texas Prison Bidness: Detention Watch Network: Canadian National dies at Houston Processing Center 
• Think Progress: GEO Group agrees to nationwide settlement after widespread claims of violence
• Politico: The Private Prison Racket: Companies that manage prisons on our behalf have abysmal records. So why do we keep giving them business?

Return to Sender: McAllen scuttles private jail bid without opening it

The McAllen Monitor reported Monday ("McAllen City Commission rejects sole bid for private jail," Sept. 23) that the City of McAllen will not move forward with a private prison project hatched in secret with the collusion of the local newspaper to keep things mum. Once the public found out about it, opposition quickly grew and the city commission now has backed off. Reported the Monitor:

The City Commission effectively killed McAllen’s private jail project Monday night, unanimously voting to reject GEO Group’s proposal without opening the hefty FedEx box.

McAllen started soliciting proposals for a privately operated jail, which would hold inmates under the city’s contract with the U.S. Marshals Service, during July. Two months later, only Boca Raton, Fla.-based GEO Group replied.

Police Chief Victor Rodriguez advised against opening the lone proposal.

“Given the discussion and debate we’ve had over the last few weeks on this, it’s my recommendation that we reject the single offer,” Rodriguez said, adding that if the Commission desired, the city could explore alternatives and seek new proposals later. That reversed an earlier recommendation from the city Purchasing Department.

If opened, the proposal would have become public, which weighed on the Commission’s decision. The Monitor and others had requested the document.

That last paragraph cracked me up! It's one thing to decline GEO's offer, but what might have been in the RFP response so embarrassing to city government that they don't even open their mail? Alas, we'll never know. Glad the project went down the tubes, though.

Even so, this may not be the last we hear of the idea. A local TV station reported that McAllen Police Chief Victor Rodriguez "told Action 4 News that he is for the prison and just wants more options."

MORE: From Texas Prison Bidness.

State paying bond interest on privatized forensic psych facility

Not only did the Legislature in 2009 approve a contract with a publc-private psychiatric facility in Montgomery County that the state Department of Health Services never requested (the GEO-Group run facility was tacked on during the budget conference committee), now it turns out the state is paying interest on the construction bonds. The Statesman's Andrea Ball reported ("Is state paying off bonds for county-owned psychiatric hospital?", Sept. 17):

The Department of State Health Services has spent more than $2 million on bond interest for a psychiatric hospital that it doesn't own and that was championed by Senate Finance Chairman Tommy Williams.

But that's not all the state is paying for, said Montgomery County Commissioner Ed Chance, who spearheaded the effort to build the Conroe facility. If its allocations remain the same, State Health Services will eventually pay off the entire $32 million Montgomery County borrowed to finance the hospital, he said.

"If they hadn't agreed to the funding behind it, we wouldn't have built it," Chance said.

The state maintains that it's not covering the total cost of the hospital's construction, just the interest. State Health Services pays the county $15 million a year for psychiatric services for patients accused of crimes and deemed incompetent to stand trial. 

Ball further observed that: "On its face, the state's contract with Montgomery County seems to prohibit any payments on the facility. 'Department funds must not be used to purchase buildings or real property,' the contract states. 'Any costs related to the initial acquisition of buildings or real property are not allowable.'"However, "State Health Services, however, says interest payments are acceptable because they are considered an ongoing expense of the facility." But think about it: If you take out a mortgage to build your house, isn't the interest part of the cost of construction? The same is true for this project.

This project was borne of a backroom deal at the Lege and never fully vetted - certainly in public hearings - before legislative budget writers surprised virtually everyone except insiders with its inclusion in 2009. But this seems too much: Montgomery County and the GEO Group should be required to repay the interest already forked over by state taxpayers and those payments should be ended going forward. Such deals are referred to as "privatization," but in reality only profits are privatized and costs are socialized.

See past, related Grits posts:

• GEO Group secretly snagged forensic psych hospital contract in budget conference committee
• Private psych hospital born of backroom deal fined, investigated
• Rocky start for private forensic psych facility

RELATED: ReportingTexas.com has a preview of a Texas House County Affairs Committee hearing today in Houston related to competency restoration services. Regrettably, since it's not happening at the capitol, the hearing won't be broadcast live online.

Immigration roundup: Deportation facts and fears

As Grits prepares to moderate a panel tomorrow at UT-Austin's LBJ School on alternatives to pretrial immigration detention, several recent stories caught my eye that merit readers' attention.

First, from the New York Times, see "Record number of foreigners were deported in 2011, officials say" (Sept. 7), which reported that "Immigration agents deported 391,953 foreign-born people during the 2011 fiscal year, the department’s Office of Immigration Statistics reported. They included more than 188,000 people who had been convicted of crimes in the United States — an “all-time high” for such deportations, the report found." What's more:

In addition to formal deportations, last year Homeland Security Department agents expelled about 324,000 foreigners back to their countries without formal court proceedings, according to the report. Most were illegal immigrants who agreed to leave voluntarily after they were detained, rather than be removed by the authorities. 

According to the new figures, Immigration and Customs Enforcement, which is known as ICE, detained about 429,000 immigrants last year, another record.

At the Mexican border, reported the NY Times, "2011, the Border Patrol captured about 335,000 migrants trying to cross illegally, the lowest number since 1971, and the figures are continuing to drop. High rates of unemployment here and intensified border enforcement have discouraged many migrants from Mexico and Central America from attempting illegal crossings, officials said."

Relatedly, via the TM Daily Post, I ran across this Los Angeles Times story ("Deportees to Mexico's Tamaulipas preyed upon by gangs," Sept. 8) depicting what happens to some Mexicans who're sent back, pointing out that around one-quarter of deportees to Mexico are sent to the state of Tamaulipas, though most of them aren't from there. Criminal gangs have begun targeting them for kidnapping.  "In the [bus] station, gang members sidle up to migrants and ask questions. Those with deep ties to the U.S. are deemed secuestrable, or 'kidnapable.' Young migrants are potential recruits." According to AP, this summer "The U.S. government has halted flights home for Mexicans caught entering the country illegally" as a cost saving measure, though they may resume soon in a redesigned program.

Finally, the Fort Worth Star-Telegram republished an exceptional (and lengthy) story out of Washington state depicting pretrial detention policies for immigrants held on civil infractions, honing in on political machinations by the GEO Group to build a pretrial detention facility in Tacoma (while ignoring state environmental regulations) and an individual case of an undocumented immigrant, brought here 18 years ago by his parents, who was arrested for driving with a suspended license and who's been held for more than a year awaiting the outcome of deportation proceedings. The story demonstrates in excruciating detail a factor Grits thinks is often under-emphasized: The extent to which immigration law is in many respects a complex subset of family law, implicating myriad familial relationships from the parents who first brought the fellow here to his ex-wife to whom (until his incarceration) he paid $900 per month in child support on behalf of their three children. The name of his oldest daughter: "America."

Private prison roundup: Investors betting on immigration detention boom continuing

I wanted to point out a few items related to private prisons that came out while Grits was on holiday. First, the media seems to have finally caught on to a trend this blog prophesied six years ago in a post titled "The Coming Immigration Detention Boom." See:

• Reuters: Immigrants are cash cows for private prisons
• Pittsburgh Post Gazette: Immigration detainees drive private prison growth
• Huffington Post: Private prison companies making big money off detaining immigrants

As is usually the case when it comes to law enforcement and prison pork, this trend is a bipartisan one, supported as much or more by the Obama Administration as his Republican predecessor.

Via the blog Texas Prison Bidness, we find coverage of efforts by advocates to combat the unholy alliance of xenophobia and corporate welfare in an item titled, "Groups working to Fight Private Prison Expansion and Immigrant Detention Host Webinar."

Here in Texas, the GEO Group's bid to operate a forensic mental hospital (in fact, they were the only bidder) has drawn criticsm; see: 

• Texas Prison Bidness: GEO group faces opposition in bid to run state hospital
• Texas Tribune: Advocacy groups don't want GEO to run state hospital

See related Grits coverage of the project here, here and here.

This business reporter from the Palm Beach Post commented on the growth in private prison revenues at the two largest players in the market: The GEO Group and Corrections Corporation of America, noting the recent dropoff in GEO stock despite rising revenues:

GEO Group’s revenue — which has risen every year for nearly 20 years — and steady profits make it a financial success story. It’s the second-largest operator of private prisons, trailing only Corrections Corp. of America (NYSE: CXW) of Nashville.

But investors clearly prefer CCA. While GEO Group’s revenue is similar to CCA’s, CCA is twice as profitable, and CCA’s market capitalization is twice GEO Group’s. A $10,000 investment five years ago in GEO Group would have dwindled to $8,667, while the same amount invested in CCA would have grown to $13,237.

The writer attributes the difference to scandals and lawsuits involving the GEO Group, which is certainly part of it, but Grits believes the underlying reason for the stock differences arises from more pedestrian sources. Both companies are overloaded with too much debt, but GEO's debt to equity ratio is higher and CCA enjoys greater value from real estate holdings from facilities it owns, whereas the GEO Group typically manages state-owned facilities instead of owning the units themselves. The current earnings boom is tenuous and could evaporate quickly if Congress ever gets around to passing comprehensive immigration reform. But real estate holdings could be spun off in that event, making CCA more valuable from an investor's perspective. Grits would like to think investors would devalue publicly traded private prison stocks because of human rights abuses, but in my heart of hearts, I doubt it.

MORE: A commenter pointed out this interesting exposition from Crooks and Liars of CCA's real estate holdings as they relate to Bain Capital and presidential candidate Mitt Romney. Whatever your partisan leanings, the detail on CCA's real estate investments (and methods for concealing property-related wealth from taxation) provide greater detail and insight into why the company has retained greater value than GEO.

Rocky start for private forensic psych facility

A bit more detail emerged on fines recently levied against a public-private forensic psychiatric hospital operated by the GEO Group in Montgomery County (see earlier coverage) in a report froms the Houston Chronicle ("Conroe psychiatric hospital may face big fines," July 28). The story by Lomi Kriel, opened:

Texas health officials recommended levying more than $100,000 in fines against the state's first publicly funded, privately run psychiatric hospital in Conroe for violations including the improper restraining and inadequate monitoring of patients and other infractions committed in its first year.

County leaders who oversee the Montgomery County Mental Health Treatment facility and officials with GEO Group, a prison company running the center for mentally incompetent defendants, met with state health officials last week. The company, based in Fort Lauderdale, Fla., contracts with the county, which has a two-year, $15 million-per-year agreement with the state. Since company officials said they have fixed the problems, the state tentatively agreed to halve the fines. 

The GEO Group portrayed the violations as mostly related to paperwork, but there were also allegations of under-qualified managers, improper restraints used on patients/inmates and "several" policies that "violated patients' rights":

According to a July 19 notice of alleged non-compliance and a May 11 notice of licensing violation, state investigators outlined a range of issues it deemed troublesome.

Among them: Half of 50 incidents where officials restrained or secluded patients were not accompanied by an "appropriate" doctor's order. Investigators found a "significant lack of compliance with physician orders for initiating restraint." State law says restraint can only be used when ordered by a doctor and when evidence of imminent harm exists.

Several hospital policies violated patients' rights, state officials found, including a prohibition on possessing items for reasons other than patient safety. Investigators detailed spotty record-keeping, including gaps suggesting patients were not properly monitored, and a lack of documentation related to patient consent for receiving psychoactive medications. The director of psychiatric nursing, meanwhile, had only an associate's degree, not the required master's degree in psychiatric mental health or related experience.

To be fair, state-run mental hospitals have certainly had their own problems. As the Austin Statesman recently reported, "Last month, former Austin State Hospital psychiatrist Charles Fischer was indicted by a Travis County grand jury on charges that he sexually abused five patients under his care at the facility." Still, for a project spawned in a back-room budget deal, the private facility in Montgomery County has gotten off to a rocky start.

Private psych hospital born of back-room deal fined, investigated

The Austin Statesman's Andrea Ball has a feature today on the GEO Group's public-private psych hospital in Montgomery County, which opens:

Sixteen months after the Montgomery County Mental Health Treatment Facility opened in Conroe, the state's first publicly funded, privately run psychiatric hospital is facing at least $53,000 in state fines for serious shortcomings in patient care.

The private operator, Geo Care, is a subsidiary of Geo Group, a private prison company that has drawn attention in recent years because of deaths, riots and sexual abuse at some units in Texas and other states. ...

Meanwhile, the facility's construction, by a different firm, is the target of a separate federal grand jury inquiry.

The new facility has been much cheaper than state-run hospitals, according to initial reports, but reviews by the Department of State Health Services has criticized the facility for problems "including unauthorized restraint and seclusion of patients, incomplete medical records, failure to show patient consent for medications and failure to report serious injuries to the state."

Grits agrees Texas needs more state mental hospital capacity, but given the company's record, the GEO Group partnering with county government would be among the last ways I'd advocate providing that extra capacity. There's a chance, though, that the GEO Group could become even more involved in managing Texas mental hospitals if the state privatizes one of its facilities:

The problems come to light as the Department of State Health Services prepares to privatize one of the 10 public psychiatric hospitals it oversees. If Geo Care bids on the ongoing privatization effort — and it has expressed interest to public officials in doing so — its work in Montgomery County could be a harbinger of what taxpayers can expect if a for-profit company wins control of a public state hospital.

This week, the agency will accept bids from contractors seeking to run one of those facilities for at least 10 percent less than the current cost, a move that could save the state millions of dollars each year. If an offer is accepted, a private company could be running a state hospital by the end of the year.

Finally, Ball reported on an investigation into possible improprieties in the Montgomery County hospital's construction:

In September 2009, Montgomery County commissioners hired Alliance Development Inc., to build the hospital. The Shenandoah-based company also constructed the Joe Corley Detention Facility, which is owned by the county and is run by Geo Group. It opened in August 2008.

Now, the construction of the jail and the hospital are part of a federal grand jury investigation. In May, the U.S. attorney's office in Houston issued a subpoena to the county, asking for records, contracts, subcontracts and other information related to the development of those projects. They also wanted to know how the county chose Alliance Development for the jobs.

The possibility of insider baseball on the contract jibes with the secretive origins of the facility. Funding was approved in 2009 as a last-minute addition to the state budget, added in conference committee even though DSHS hadn't asked for it and neither legislative chamber's budget included the measure. So this project had no public vetting by the Lege on the front end and hasn't operated up to state standards since it opened.

No doubt, Texas needs more forensic beds at state mental hospitals, but this back-room privatization deal was more about pork than policy. I'm not surprised things haven't gone smoothly.

Mississippi ousts GEO Group at three facilities

In Mississippi, "the state's corrections commissioner on Friday said that [the GEO Group] would no longer operate three [private prison] facilities in the state, which held 4,000 inmates," NPR reported recently. Regrettably, Mississippi is seeking another contractor instead of taking their management in-house or downsizing youth facilities, as Texas has done.

Now to be clear, a state that, in the 21st century, voted 2-1 to keep the Confederate battle logo as part of its state flag (you don't really see it flying much in any of the come-to-Mississippi tourism commercials, do you?) doesn't really care what us Texans, DOJ, or anybody else thinks about them. They ousted Geo out of their own self interest, so as another of GEO's customers, Texas should naturally consider why.

The decision comes in the wake of legal setbacks for the company in federal court involving abuse allegations at a juvenile facility, though GEO insisted their departure is unrelated and adamantly denied the charges. Even so, "the judge's [March settlement] order ... said an investigation by the plaintiff's counsel 'uncovered pervasive violations of state and federal civil and criminal law and a wholesale lack of accountability by prison officials. For example, staff of the [facility] and those responsible for overseeing and supervising the youth engaged in sexual relationships with the youth; they exploited them by selling drugs in the facility; and the youth, 'handcuffed and defenseless[,] have been kicked, punched, and beaten all over their bodies.''"

To make matters worse,"Staff at the center failed consistently to report and investigate claims about excessive use of force, even though they witnessed many of the acts, the judge wrote. 'Given that the facility employs correctional staffers affiliated with gangs, no more can be expected.'" Finally, "The judge also noted a Justice Department report, which confirmed many of the allegations and said the state of Mississippi was 'deliberately indifferent' to the constitutional rights of the young inmates."

Whatever proximate cause anyone wants to attribute it to, when federal judges start saying things  like that about your government contract, it's understandable one might decide it's time to pack up and leave town!

Texas has closed many of its juvenile facilities and may soon end up closing the rest of them, shifting juvenile supervision wholly to the counties and more aggressive community-based programming. It's too bad Mississippi looks like it will continue  contracting management of these facilities instead of taking the opportuntiy to pull them in-house or, better, downsize. I'm not sure  just finding another profit-driven management contractor will solve the problems the judge chastised them over.

RELATED: From Texas Prison Bidness, "GEO Group subject of lawsuit in prison death at Central Texas detention center." Also, "GEO guard indicted for contraband at Val Verde Correctional Center."

Bearish on private prison stocks if mass-incarceration bubble bursts

Over the past several years Wall-Street analyst types have been touting private prisons as a wise long-term investment, primarily for three reasons:

• The rise of mass incarceration over the last three decades, assuming the trend will continue
• State budget cuts reducing the likelihood that state governments will spend to build more prisons, and
• A massive increase in immigration detention policies that began under Bush II and escalated dramatically under Obama.

So I was interested to notice that Market Intelligence Watch, which has been bullish on private prison stocks for a quite a while, in the last couple of months issued statements about the two largest private prison firms - Corrections Corporation of America and Geo Group declaring both suffer from "bearish technicals," which would be much closer to my own assessment. Geo stock recently hit a 52-week low, down 30% from just a year ago.

For several years now, Grits has believed that, examining the underlying fundamentals, both firms (particularly GEO) are far too laden with debt to justify bullish advice to investors. GEO has warned in corporate filings that its debt load could soon require them to divert money from operations to pay for debt amassed to gobble up competitors. Similarly, CCA's latest 10-K report on file with the SEC says its large debt could "require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness."

Even more than their massive debt loads, though, a bigger potential problem for these companies may be the possibility that we're nearing the end of the largest incarceration boom (read: bubble) in the history of the planet. The three bulleted factors above all could easily reverse in the next few years. More states are contemplating de-incarceration measures because of budget shortfalls, for example, and states like Texas have seen their incarceration rates decline. If states implement such policy changes on a wider scale, it could reverse the upward trend mentioned in the first bullet and debunk the premise of the second - that incarceration rates will continue to increase even if states can't afford new prison construction.

Meanwhile, the boom in immigration detention is a short to medium-term phenomenon at best, driven largely by nativist sentiments that will not prevail long-term in political circles because of their radical impracticality. Even Rick Perry has suggested a program to let the 12-14 million undocumented immigrants get visas to stay here legally, while bipartisan proposals for comprehensive immigration reform, like the bygone McCain-Kennedy legislation, would likely go even farther. Immigration detention on its present scale is at best a short-term fix that will decline dramatically whenever a long-term political solution, of any sort, is finally reached. The companies' long-term debt, however, won't go away just because their number of contract beds decline.

If Grits is right that we're nearing the end of America's mass-incarceration bubble - and admittedly that may be wishful thinking, though I believe there are signs of a sea change in both elite and public opinion on the topic - then in coming years these companies' high debt loads will become entirely untenable. As CCA put it in their 10-K:

A decrease in occupancy levels could cause a decrease in revenues and profitability. While a substantial portion of our cost structure is generally fixed, a significant portion of our revenues are generated under facility management contracts which provide for per diem payments based upon daily occupancy. We are dependent upon the governmental agencies with which we have contracts to provide inmates for our managed facilities. We cannot control occupancy levels at our managed facilities. Under a per diem rate structure, a decrease in our occupancy rates could cause a decrease in revenues and profitability. When combined with relatively fixed costs for operating each facility, regardless of the occupancy level, a decrease in occupancy levels could have a material adverse effect on our profitability.

These companies' biggest nightmare would be a combination of drug legalization and comprehensive immigration reform. Again from CCA's 10-K:

The demand for our facilities and services could be adversely affected by the relaxation of enforcement efforts, leniency in conviction or parole standards and sentencing practices or through the decriminalization of certain activities that are currently proscribed by our criminal laws. For instance, any changes with respect to drugs and controlled substances or illegal immigration could affect the number of persons arrested, convicted, and sentenced, thereby potentially reducing demand for correctional facilities to house them.

Investing in private prisons basically is a wager that the United States has such a dysfunctional political system that we can't solve the immigration question or scale back the drug war, ever, and for many years that's seemed like a prescient gamble. Betting on the intelligence and competence of government officials will always get you poor odds. But if that longshot comes in and America's mass-incarceration bubble finally bursts, investors in both these companies will take a huge hit. The "bearish technicals" identified at CCA and the GEO Group may just indicate that, at this particular point in history, those long odds could be getting shorter. I certainly hope so.

Odds and Ends: On the harmlessness of being convicted of a non-existent crime

Here are a few odds and ends that deserve Grits readers' attention:

Praising Pat Lykos
Newsweek has an article this week praising Pat Lykos' transformation of the Harris County District Attorney's office that would make Murray Newman pull his hair out if he had any. (Just kidding, Murray, and my sincere condolences on your friend's recent tragedy.)

Everybody wants a piece of asset forfeiture money
The Department of Public Safety has $140 million in seized drug money that the Legislature would like to tap to help solve its budget woes, but Mario Carillo at Reporting Texas has a podcast declaring that Congressman Mike McCaul wants the feds to require that money be spent on border security.

DNA testing access expanded
The Senate this week passed a bill by state Sen. Rodney Ellis expanding access to postconviction DNA testing, eliminating procedural hurdles that have in the past delayed proving innocence in several cases. Said Sen. Ellis in a press release, "SB 122 will ensure that if there is DNA evidence available to prove someone's innocence, it can and will be tested. ... No longer will the door to justice be shut just because of a procedural error."

Budget crunch has Dallas deputies eating what they kill
In Dallas, the county commissioners court has created a "strike team" to go after ticket scofflaws with a twist: If they don't collect enough money, the officers will lose their jobs, which are only funded as long as they pay for themselves, reports Kevin Krause at the Dallas News. I've heard of nonprofit fundraisers who're required to raise their own salary - who "eat what they kill," in the lingo - but applying that scheme to cops seems like a bad idea. As for the scofflaws, adds Krause, those who don't pay will be taken to jail, despite the fact that the county has only recently "gotten the jail population under control after years of crowding. Officials don't want to throw misdemeanor offenders in the jail, but [Commissioner John Wiley] Price said they will manage it." The county budget office even proposed forcing judges to increase fine amounts, but Krause reported that "Judges say they're sympathetic to the county's budget woes but that it's not their duty to save the county money. They say dispensing justice is their role and that you can't get blood from a turnip." UPDATE: A commenter rightly declares this policy may violate Sec. 720.002 of the state Transportation Code. Under that statute, "A violation of this section by an elected official is misconduct and a ground for removal from office."

Another counterproductive graffiti enhancement
After two decades of passing bills "enhancing" penalties for graffiti crimes, you'd think if higher criminal penalties were going to solve the problem it'd have done so by now. But the Texas House passed yet another graffiti "enhancement" bill this week, making it a state jail felony to apply graffiti to historic structures. (Thanks to past enhancements, it is already a state jail felony to do graffiti at schools, churches and community centers.) But like schools, churches and community centers, graff on historic structures is more likely to be a one-off, while the repeat offenders typically look for more out of the way targets that are more difficult to buff. Meanwhile, despite tens of thousands of graffiti crimes each year, fewer than 300 people annually are actually arrested and convicted for the offense. So boosting penalties for the handful of people actually caught is among the least effective tactics because it only ever applies to a handful of taggers. Because of this limited impact, the most effective graffiti policies focus more on non-criminal justice solutions, but the Legislature has pretty much been a one-trick pony on this subject.

Error in convicting Enron chief of non-existent crime deemed "harmless"
Tom Kirkendall and Ellen Podgor have excellent discussions of the implications of the latest Fifth Circuit  decision finding "harmless error" in the Jeffrey Skilling/Enron case regarding so-called "honest services fraud," with Tom decrying "the "utter vacuity" of the latest ruling. The Supreme Court declared the honest-service fraud statute invalid, but the Fifth Circuit said the prosecutors' error in relying on it was "harmless" because jurors could have convicted on other counts. Tom calls that "Poppycock," citing "the absurd amount of time that the prosecution spent during trial on Skilling's alleged honest services violations in regard to Photofete." Doug Berman says the decision makes Skilling's recent win at the Supreme Court "pyrrhic," but there's still a long way to go before this saga is complete: Next up: Re-sentencing at the District Court.

Geo Group corporate debt downgraded
For several years this blog has been following the growing debt burden of the Geo Group (formerly Wackenhut), which is one of the largest private prison operators. In their SEC filings for the last several years, GEO warned that its debt burden could "require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness." So I was interested to learn via NPR that in January the company's "credit rating was downgraded to B+." Quite candidly, though, the dynamics that caused the debt downgrade have been evident for some time; lowering the company's credit rating was long overdue.

'Prison Pays'

The Houston Press has published an extensive feature by Craig Malisow on the Geo Group in Texas titled "Prison Pays," in which yours truly is briefly quoted. The story is subtitled, "Despite a history of abuse and bad conditions, private prison corporation GEO keeps getting contracts from the state."

See prior, related Grits posts:

• Purchasing Access: Examining the Geo Group's political expenditures
• GEO Group's purchase of Houston private prison company leaves it highly leveraged
• GEO Group secretly snagged forensic psych hospital contract in budget conference committee
• Meet the GEO Group: Texas' largest private prison contractor

Purchasing Access: Examining the GEO Group's Texas political expenditures

National Public Radio recently ran a story about how private prison companies helped write Arizona's controversial statute (currently being litigated in federal court) requiring local police to arrest and detain illegal immigrants. Private prison companies' interest in immigration law should come as little surprise for Grits readers: Nearly five years ago I wrote that the potential for expanded detention of illegal immigrants appeared virtually "limitless,"and this blog has long lamented the extra costs to county jails from such policies.

The NPR story inspired me this a.m. to look more closely at private prisons' political influence in Texas, and I plan to follow up with additional, related posts in the coming weeks. A 2006 public policy report (pdf) from the Institute on Money in State Politics identified Texas pols as the second largest recipient of private prison political spending after Florida.

The three big players in Texas' market are the GEO Group, Corrections Corporation of America (CCA), and a company called Management and Training Corporation (MTC) out of Utah. Of the three, only the GEO Group operates a state-level PAC in Texas. CCA and MTC's contributions appear to come mainly from individuals associated with the company, which are a bit more time consuming to track, so let's start with the Geo Group.

I went through the contribution reports for the Texas Geo Group Inc. PAC for this last election cycle and compiled a list of all Texas House and Senate members who both a) received contributions from GEO in 2009 and/or 2010 and b) won their elections and will be in the Legislature next year. Here's that list, with totals combined from multiple reports:

House:
Byron Cook: $500
Charlie Geren: $500
Armando Martinez:$250
John Zerwas: $250
Phil King: $500
Rob Orr: $500
Sid Miller: $500
Doug Miller: $1,000
Drew Darby: $1,000
Rob Eissler: $1,000
Brandon Creighton: $1,000
Garnet Coleman: $1,000
Jim Pitts: $2,000
John Otto: $1,000
Mike Hamilton: $1,000
Ralph Sheffield: $250
Rene Oliveira: $1,000

Senate:
John Whitmire: $3,000
Juan Hinojosa: $2,000
Judith Zaffirini: $2,000
Bob Deuell: $1,000
Steve Ogden: $1,000
Glenn Hegar: $500
Florence Shapiro: $500
Robert Nichols: $1,000
Tommy Williams: $2,000
Carlos Uresti: $1,250

In a pre-election post, Bob Libal at Texas Prison Bidness identified these additional donations from another entity, The GEO Group PAC, which I could not find on the Texas Ethics Commission website:

Gov. Rick Perry: $5,000
Lt. Gov. David Dewhurst: $2,500
Sen. John Whitmire: $2,500

GEO also gave money to a number of Democratic incumbents who failed to win reelection, and spread money around liberally in local races in Montgomery, Webb, and Val Verde counties, where the company has pressed local politicians to partner on detention facilities.

Notably, reports Texas Prison Bidness, the GEO Group has lost six contracts in recent years with the Texas Department of Criminal Justice, mostly to MTC.

In addition to campaign contributions, the GEO Group has hired a team of high-powered lobbyists in 2010 according to this list (xls) from the Ethics Commission:

• Michelle Wittenberg ($25,000 - $49,999)
• Lionel "Leo" Aguirre ($200,000 - $249,999)
• Luis E. Gonzalez (less than $10,000)
• Laura McPartland Matz (less than $10,000)
• William J. Miller ($25,000 - $49,999)
• Frank R. Santos ($50,000 - $99,999)

While certainly many companies hire more lobbyists than GEO every session, in the small pond of criminal justice politics this is significant: Certainly no reform group - and probably not all reform groups collectively - have six paid lobbyists opposing expansion of the prison-industrial complex.

Some of these lobbyists are themselves large donors. Bill Miller of Hillco Partners is a frequent campaign contributor, mostly to incumbent legislators, and Luis Gonzalez gave $50,000 to Rick Perry's reelection campaign, according to followthemoney.org, dwarfing GEO's gubernatorial contribution. 

Whether these insider advocates and GEO's campaign contributions can stem the company's recent losing streak regarding TDCJ contracts remains to be seen. But in 2009, the company's lobbyists demonstrated their clout by getting the conference committee on the state budget to include funding for a mental health facility in Montgomery County that neither chamber had previously approved, so these folks definitely have stroke.

See prior, related Grits posts:

• GEO Group's purchase of Houston private prison company leaves it highly leveraged
• GEO Group secretly snagged forensic psych hospital contract in budget conference committee
• Meet the GEO Group: Texas' largest private prison contractor

Geo Group's purchase of Houston private prison company leaves it highly leveraged

I noticed recent news that the Geo Group (formerly Wackenhut), a private prison company which has been expanding aggressively in Texas, saw its earnings increase last quarter not because its operations became more profitable but because they purchased yet another competitor, this time the Houston-based Cornell Group.

Geo's boosted earnings, though, also bring with them nine figures in additional debt for a company already leveraged to the hilt. In 2007, I'd quoted from their 10-K (which is an annual report filed with the Securities and Exchange Commission) which informed us that:

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!

The same warning was included in Geo's most recent 10K, but after the purchase of Cornell it deserves to be amplified. The more debt the company has, the greater risk they must "dedicate a substantial portion of our cash flow from operations to payments on our indebtedness." (They'll also be dedicating a portion of their revenue, btw, to pay the board chairman's son-in-law a fat $144K salary plus stock options, which is the kind of executive hire that to me raises a red flag.)

According to Texas Prison Bidness, Cornell operated 10 facilities around the state, many of them housing juveniles and/or focused on treatment programming. The acquisition beefs up Geo's Texas portfolio considerably after a spate of lost contracts around the state. Texas Prison Bidness recently observed that:

GEO has lost at least 5 contracts in Texas in the past several years.  GEO lost its Bridgeport TDCJ contract earlier this summer and the 2008 re-contracting of the Estes unit to MTC.  In 2007, the state of Idaho pulled its inmates from the Dickens County Correctional Center in the wake of the suicide of inmate Scot Noble Payne and a subsequent investigation into "squalid" conditions at the lock-up.  Idaho also cut its contract the Bill Clayton Detention Center in Littlefield, Texas after the 2008 suicide of Randy McCullough.  And, as the the article indicates, the Coke County Juvenile Justice Center was shuttered in October 2007 by the Texas Youth Commission after a damning investigation into conditions at the youth detention center.

Geo has six contracts up for renewal this year, according to its 10K, and at four are in Texas (Mineral Wells, North Texas ISF, South Texas ISF, and Bridgeport, which they already lost). About 1/3 of GEO's contracts end by 2012 and must be renewed or re-bid. Five customers including the State of Texas account for most of Geo's revenue:

We have provided correctional and detention management services to the United States Federal Government for 23 years, the State of California for 22 years, the State of Texas for approximately 22 years, various Australian state government entities for 18 years and the State of Florida for approximately 16 years. These customers accounted for 63.5% of our consolidated revenues for the fiscal year ended January 3, 2010.

The lull in the immigration detention market that's left competitor CCA with 12,500 empty beds is also affecting Geo on a couple of speculative construction projects, says their 10-K:

We are currently in the process of expanding two facilities to add additional beds that we do not yet have corresponding management contracts to operate. While we are working diligently with a number of different customers for the use of these remaining beds, we cannot in fact assure you that contracts for the beds will be secured on a timely basis, or at all. While these facilities are vacant, we estimate that we will incur carrying costs ranging from approximately $1.0 million to $1.5 million per facility, per fiscal quarter. Failure to secure management contracts for these projects could have a material adverse impact on our financial condition, results of operations and/or cash flows. In addition, in order to secure management contracts for these expanded beds, we may need to incur significant capital expenditures to renovate or further expand these facilities to meet potential clients’ needs.

I'd also pointed out back in 2007 that GEO making its debt payments required the company to rely on payments from subsidiaries that it could not guarantee:

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?

That was written when subsidiaries made up 28% of Geo's revenue. Today, according to Geo's 10K, "For the fiscal year ended January 3, 2010, our subsidiaries accounted for 50.1% of our consolidated revenue, and, as of January 3, 2010, our subsidiaries accounted for 59.0% of our total segment assets." If the Cornell acquisitions are treated as subsidiaries, that risk will be even further magnified. The Geo Group is a heavily leveraged company.

In closing, here are a few more Texas-specific tidbits culled from Geo's 10-K:

"On May 4, 2009, we announced that we executed a contract with Bexar County, Texas Commissioners’ Court for the continued operation of the 688-bed Central Texas Detention Facility located in San Antonio, Texas. This facility, which is owned by Bexar County, houses detainees predominately for the U.S. Marshals Service. We have managed this facility since 1988. The new contract will have a term of ten years, effective April 29, 2009."

Some of the company's gains were "offset by a decrease in revenues of $20.6 million due to the termination of our management contract at the Sanders Estes Unit in Venus, Texas, Newton County Correctional Center in Newton, Texas, Jefferson County Downtown Jail in Beaumont, Texas, Fort Worth Community Corrections Facility in Fort Worth, Texas, and the Tri-County Justice & Detention Center in Ullin, Illinois."

"Effective June 15, 2009, our management contract with Fort Worth Community Corrections Facility located in Fort Worth, Texas was assigned to another party. Prior to this termination, we leased this facility (lease was due to expire August 2009) and the customer was the Texas Department of Criminal Justice."

"On September 8, 2009, we exercised our contractual right to terminate our contracts for the operation and management of the Newton County Correctional Center, referred to as Newton County, located in Newton, Texas and the Jefferson County Downtown Jail, referred to as Jefferson County, located in Beaumont, Texas."

"[R]evenues increased $24.1 million in total due to the activation of three new contracts in Third and Fourth Quarter 2008 for the management of Joe Corley Detention Facility in Conroe, Texas, Northeast New Mexico Detention Facility in Clayton, New Mexico and Maverick County Detention Facility in Maverick, Texas ... [and] revenues increased $24.6 million in 2009 as a result of our opening of our Rio Grande Detention Center in Laredo, Texas in Fourth Quarter 2008."

"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. In October 2006, the verdict was entered as a judgment against us in the amount of $51.7 million. The lawsuit, captioned Gregorio de la Rosa, Sr., et al., v. Wackenhut Corrections Corporation, (cause no. 02-110)  in the District Court, 404th Judicial District, Willacy County, Texas, is being administered under the insurance program established by The Wackenhut Corporation, our former parent company, in which we participated until October 2002. Policies secured by us under that program provide $55.0 million in aggregate annual coverage. In October 2009, this case was settled in an amount within the insurance coverage limits and the insurer has now paid the settlement amount. On February 8, 2010, the Court of Appeals, 13th  District of Texas, entered judgment dismissing the appeal and the case has been concluded."

Family, debt, risk and private prisons

Coupla more private prison stories worth noting:

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.

Geo Group secretly snagged forensic psych hospital contract in budget conference committee

Amazing! Emily Ramshaw at the Dallas News reports that legislators inserted a provision into the state budget in conference committee to pay for a privately-run psych prison in Montgomery County to be run by the Geo Group, even though no state agency requested it and the idea didn't make it through the budget process in either chamber. According to Ramshaw ("Troubled prison firm's deal for new psychiatric hospital raises questions," July 11):

Lawmakers inserted an earmark into the state budget to fund the future Montgomery County facility starting in 2011. But they said they didn't know until this week that the county had selected the GEO Group to operate it, although GEO lobbyists were pushing for it as early as February.

The new facility came as a post-session shock to mental health advocates, who acknowledge the need for it. But they say they weren't informed about it and never would have signed off if they knew Florida-based GEO was operating it.

This is a complete surprise to me, and I'm sure to many others who watched Texas' legislative process closely. That said, I've been calling for years on this blog for the state to invest more money in competency restoration so mentally ill inmates don't sit around for months in the jail waiting for state hospital beds to open up. But the Department of State Health Services had chosen to address that problem by funding and promoting outpatient competency restoration, not building more inpatient beds, and they didn't ask for this facility. Again from Ramshaw:

state lawmakers say the psychiatric facility, which by 2011 is expected to house more than 100 criminal offenders awaiting trials or competency findings, will solve a major backlog. The Montgomery County jail has hundreds of inmates awaiting mental health treatment. The nearest state forensic mental hospital is more than 100 miles away, and when a bed opens up, it takes at least two deputies to take an offender there.

"It's a problem we sorely need to address, instead of leaving people who need mental health care in prison," said Sen. Bob Deuell, R-Greenville, one of the Senate's budget writers.

But the budgeting process and the choice of contractor have raised some eyebrows.

Department of State Health Services officials, who oversee psychiatric care in Texas, say the Montgomery County facility was not something they requested funding for in the budget. It was added to the budget in conference committee.

Mental health advocates, who track psychiatric hospital legislation closely, say they never heard any public discussion about it.

Me either! Much of Ramshaw's story details unfortunate incidents in the Geo Group's recent Texas past, several of which are listed in this sidebar accompanying the story, and it's true there's a long list of problems.

Particularly worrisome, in some instances Geo allegedly hasn't provided all the services its contracted for, which would be especially troublesome in a mental health environment. According to a DOJ report last year, in general "private prisons appear to do a poorer job at providing meaningful programming for prisoners than state run facilities."

Equally concerning, guards at Geo units are less well trained than at TDCJ. According to the company's 10-K, Geo guards receive just 160 hours of training before being assigned to a facility compared to 300 hours for state prison guards. That makes me wonder whether COs at the Montgomery County mental health facility would receive adequate training for what's sure to be an exceptionally challenging gig.

Interestingly, legislators all over the state this week are being asked questions about the Geo Group for which they find themselves lacking good answers. In South Texas, Geo was accused in court this week of misleading shareholders about whether it was "exonerated" for an ugly 2001 murder of an inmate for which the company lost a major civil suit. Geo's counsel in the case is the law partner of a Texas state legislator, according to the Brownsville Herald ("Sanctions against the Geo Group sought," July 6):

The family of the late Gregorio de la Rosa Jr., killed by two inmates in 2001 in a jail facility then-operated and managed by Wackenhut in Raymondville under contract with the state, is seeking the sanctions from the Thirteenth Court of Appeals.

The family claims in court records that GEO "continues its disgusting display of disrespect for Texas' civil justice system," by lying to the government, investors and the business community in an April 30 report filed with the U.S. Securities and Exchange Commission (SEC).

State Rep. Rene O. Oliveira's firm, Roerig, Oliveira & Fisher LLP of Brownsville and McAllen, represents The GEO Group.

Asked if the prison group lied and to comment about the claims, Oliveira, D-Brownsville, said, "I'm not qualified to answer that question. I have never done one minute of legal work for them."

"I am not even familiar with the case. It is being handled by my partner, David Oliveira; nor am I familiar with the allegations. ... David Oliveira was not available for comment.

Geo is clearly a well-connected company - getting your project inserted into the conference committee on the budget when neither chamber nor the contracting state agency wanted it is no mean feat, and it's not everybody who finds a state legislator dodging questions about your company's alleged misconduct in the newspaper.

At least the Montgomery County facility won't open immediately and there may still be time for belatedly vetting the proposal before the system actually comes online.

UPDATE: A commenter points out that Montgomery County commissioners last year made a conscious decision to substantially overbuild their jail beyond current needs on the assumption that the facility, to be run by the Geo Group, would make enough profit from immigration detention to "spare taxpayers additional costs." One supposes that immigration detention is no longer paying the bills if the county and Geo are seeking to use the Montgomery County Jail for competency restoration beds! I wonder if that's the facility they're talking about?

See other Grits posts related to the Geo Group:

• Massive judgment upheld against private prison over inmate murder
  
• Pecos prison dreams up in smoke
• Whistleblower alleges document fraud at Geo-run federal prison
• Revolving door at TDCJ: Give a contract, get a cushy job
• Geo lobby pressure inspires hearing on private prisons; what should they discuss?
  
• Idaho inmates housed in squalid conditions in Texas at Geo facility
• Scandals involving Idaho inmates in Texas Geo prisons
• Suicide aftermath reveals squalor at private rural Texas prison
• Mother of deceased inmate sues over Texas Geo unit conditions
• Rosy financial outlook for Geo, or will debt and scandals be its undoing?
  
• Meet the Geo Group: Texas' largest private prison contractor

Private prison news

These notable private prison stories showed up in the news over the weekend:

Laredo 'Superjail' launched.
Texas Prison Bidness informs us that the so-called Laredo Superjail - a controversial 1,500 bed facility that earlier drew staunch opposition - finally opened last week. TPB blogger Bob Libal offered this account:

I was able to attend the opening, and have to admit it was even more surreal than I could have imagined - complete with a high school mariachi band singing Spanish language ballads, a cake in the shape of the GEO Group's corporate logo, and a slew of new GEO Group prison guards (many of whom looked to be 18 or 19) wearing desert-camo style uniforms.

GEO Group executives George Zoley and Wayne Calabrese mingled with local politicos, including Laredo mayor Raul Salinas and Webb County judge Danny Valdez, who apparently have forgotten their respective councils' rejection of GEO money a little over a year ago.

The prison will hold pre-trial federal detainees for the U.S. Marshals - many of whom will be immigrants prosecuted for criminal violations under the program Operation Streamline. The facility was proposed back in 2003, and even before the official launch of Streamline, the Marshals capacity was being pushed almost exclusively by expanded criminal prosecution of immigration violations (PDF), a departure from the old style of dealing with immigration issues in the immigration court system.

Simply put, this $100 million gift to the GEO Group is almost exclusively due to the government holding border-crossers in criminal jail for 30-90 days before deporting them. Doesn't seem too "streamlined" to me.

Idaho's 'Virtual Prison' monitors oversee Texas facilities
Three prisoner deaths including two suicides in Texas are spurring a debate in Idaho over the state's reliance on out of state private prisons, according to a lengthy article in the Magic Valley Times News ("Families feel loss as out of state prison population grows," Sept. 21):

Idaho has so many prisoners scattered around the country that the IDOC last year developed the Virtual Prison Program, assigning 12 officers to monitor the distant prisons.

In 2007 Idaho sent 429 inmates to Texas and Oklahoma. This year; more than 700 - and by one estimate it could soon hit 1,000.

The Virtual Prison program is documenting problems, even if it's not necessarily solving them:

During recent visits to the Bill Clayton Detention Center in Littlefield, Texas - where about 371 Idaho inmates are now held - state inspectors found there wasn't a legal aid staffer to give inmates access to courts, as required by the state contract. Virtual Prison monitors also agreed with Aragon's assessment:

"No programs are offered at the facility," a state official wrote in a recently redacted Idaho Virtual Prison report obtained by the Times-News. "Most jobs have to do with keeping the facility clean and appear to be less meaningful. This creates a shortage of productive time with the inmates.

"Overall, recreational activities are very sparse within the facility. Informal attempts have been made to encourage the facility to increase offender activities that would in the long run ease some of the boredom that IDOC inmates are experiencing," according to a Virtual Prison report.

Arkansas prison system says privatization wrong overcrowding fix. Arkansas' prison system oversees a total 14,816 people, reports the Arkansas Democrat Gazette ("State still opposes private prisons," Sept. 20), but 1,247 are presently housed in county jails because the state doesn't have enough beds. In response, four legislators co-sponsored legislation last week to use private prisons for the overflow, but the state prison system is resisting the idea. Said a Department of Corrections spokesperson:

“I will say our department is not overly eager to step back into privatization.” [Dina] Tyler cited the state’s experience with the Wackenhut Corrections Corp., which ran the Grimes and McPherson units in Newport from 1998 to 2001.

“That experiment didn’t go well. The state had to assume management of those two facilities because the company couldn’t do what it said it could do,” Tyler said.

Wackenhut performed poorly in sanitation and maintenance issues, she said.

Tyler also pointed to a U. S. Department of Justice probe into the McPherson and Grimes units in November 2003 which characterized conditions at the two prisons as “unconstitutional” because of inadequate medical care and unsafe living conditions.

“That happened right after we stepped back in,” Tyler said.

[Privatization supporter Rep. Johnnie] Hoyt, who is in his first term as a state representative, said “if I’d been here a hundred years like everyone else, I’d know that. But is Wackenhut OK now ? Let’s revisit all aspects of that.” A subsequent agreement between the state and the Justice Department to remedy conditions at the prisons has been completed, releasing the state from federal oversight, Tyler said.

Whistleblower alleges document fraud at Geo Group-run federal prison

A whistleblowing prison guard at a private facility run by the Geo Group in Pecos was escorted off the site after he reported ongoing misconduct to the local Sheriff, he blogs at This Ain't My First Rodeo. The blog cites:

allegations of fraud committed under his direction in which case managers tricked functionally illiterate foreign nationals incarcerated at RCDC facilities into signing out-dated incident reports against them so that The GEO Group administrators would not incur the wrath of BOP officials for administrative negligence, a characteristic -- among others even more nefarious -- for which they have become infamous in GEO's central region which includes Texas. ...

The alleged fraud occurred five to six weeks after a "shake-down" in January of 2008, during which scores of illegal cellphones were confiscated from inmates. Disciplinary c itations were then issued; however, they were not presented to the inmates until March of 2008. But BOP policy required the citations to be issued and signed within 3 to 5-days of the confiscations or up to ten-days later on the warden's signature -- early February at the latest if they were to be in compliance with B.O.P. policy. Instead the alleged fraud was perpetrated up to six-weeks later showing signatures of the inmates to be in compliance with the original January dates required by policy.

The inmates allege they were never informed in their native languages of the discrepancy in dates when they signed the citations in March with the January date affixed fraudulently beforehand on the top of the form or next to their signatures . Furthermore, they adamantly report they were under the assumption that, being out of compliance as per Constitutionally related requirements for due process, that the citations from January could not be served at the later date in the first place. They were simply ordered to "Firma le aqi!" ["Sign here" ] not knowing what they were even signing. I personally witnessed one such attempt to defraud an inmate in late March and I reported it within minutes afterward to Security. After my report, I never received another word of direction or feedback. (emphasis in original)

The blogger also lets us know about a possible financial scandal involving the Geo Group, referencing

allegations heard all 'round this small community concern a company known only on paper as "Affordable Tools." Affordable Tools is alleged to have been more or less a ghost company operating out of an empty warehouse office. With nothing more than a phone and perhaps a fax machine, orders from the RCDC III Maintenance Department were "processed" by this "retailer" who then "tacked on a percentage" and passed on the Maintenance Department orders to legitimate wholesales with whom the Maintenance Department could have just as easily dealt with directly at the wholesalers' lower cost. The unnecessary middleman, Affordable Tools, apparently enjoyed the legal empowerment of the former County Commission who approved the contract on the recommendation of its County Judge, in whose name Affordable Tools is alleged to have operated.

At any rate, most of those involved -- or who knew about it but looked the other way -- were swept from office in the voter-directed purge of 2006. The GEO Group's local and regional administrators have, to date, remained unscathed by the scandal; however, despite that GEO continues to operate in Reeves County, they do so under increased scrutiny by a reform-minded county commission and county judge who have now taken over the financial reins at the prison, alert to GEO's history of shenanigans in wooing those who award and monitor county contracts.

To his credit, in his first months in office, County Judge Sam Contreras apparently refused to give further consent to a system of shady insider deals that might have involved him and the County Commission in the ethically dubious conflicts of interest set-up by their predecessors.

Despite that Affordable Tools -- and possibly other interlocutors of the same questionable ilk -- is now defunct, it is rumored that the FBI has the matter under investigation using a former maintenance clerk as a protected witness.

The Affordable Tools story sounds like it's not over yet, and if the description of its role is accurate the FBI should be investigating.

In related excellent blogging, Texas Prison Bidness analyzes a presentation last week to the Lehman Brothers investment bank by the Geo Group.

The Biggest Texas Private Prison Stories of 2007

Texas Prison Bidness gives us a link-rich account of the top five Texas private prison stories from 2007:

• Legislative actions on private prison regulation
• Local opposition growing to private prisons
• Scandals at GEO Group-owned facilities
• Lege hearings on expanding private prison oversight after closure of TYC's Coke County unit, and
• Controversy around and opposition to the Hutto family detention center housing immigration detainees in Williamson County

Good stuff! Check it out.

Grayson may turn to Geo Group for jail expansion

Having written yesterday that Texans taxation revulsion has begun to run up against their incarceration addiction at county jails and in the state prison system, I should mention that several other small to mid-sized Texas counties considering expensive jail expansions, starting with Grayson County, a rural/suburban county on the edge of the Red River bordering Oklahoma.

In Grayson the commissioners court is considering what I think is the worst case option for taxpayers in the medium to long-run: Expanding the jail through privatization instead of voter approval. Reported the Sherman Herald Democrat ("GC jail discussed," Oct. 14):

Grayson County Commissioners Court has said it does not believe taxpayers would vote to build the jail, which could add 30 cents per $100 property valuation to tax bills. So commissioners are looking at a private company to build it, and perhaps to run it.

A $140,000 study the court commissioned recommended changes and efficiencies in the county’s criminal justice system. These improvements could significantly reduce the jail population. However, the study concluded that even if the county adopted all those suggestions, the current jail is in poor condition and the county still would need to add maximum security cells.

As in most other counties in the state with overcrowded jails, pretrial detention is the main cause of Grayson's overcrowding woes, the paper reported. "The jail study the county commissioned says pretrial detainees (those who have not been convicted) comprise the majority of inmates in the jail at 73.2 percent."

Regular readers know that increased pretrial detention - a decision made on a case by case basis by local judges - is the main cause of local jail overcrowding in Texas, not increasing crime. In 1995, just 30.3% of Texas county jail inmates statewide were incarcerated awaiting trial. Today that figure is 51% statewide, but according to the consultant it's nearly half again higher in Grayson County.

These are people who have not yet been convicted of any crime and could be released on bail or personal bonds. Reported the paper, the consultant recommended the county "create or increase use of citation release (also called field release), pretrial release program, electronic monitoring, day reporting program, inmate case management and a case expediter, drug court, mental health court, community service work program, in-jail work program, weekend DWI program and a re-entry program."

But really, it's simpler than that: Judges in Grayson could resolve the problem immediately by releasing lower level, nonviolent offenders from the jail. They don't need any new programs, though some of the ones suggested would be helpful; judges can already release more defendants on bail or personal bond if they choose to do so. The only people who benefit from the current approach are the bail bondsman.

I'm also pleased to notice leaders in this growing, suburbanizing county expressing more fundamental concerns about a too-high incarceration rate:

Several audience members questioned whether Grayson County has an unacceptably high percentage of its population in jail. Tim McGraw, who was county judge in 2005 when the study was commissioned, said ... one of the things that shows that is you have Collin County that has a population that’s four times the size of Grayson and has around 750-800 prisoners. We’re a fourth their size and have about 400 prisoners. I don’t think we have that many extra criminals in Grayson County.”

Although McGraw was speaking off the cuff and without notes, he did not exaggerate the statistics. In fact, Collin County’s estimated 2006 population, according to the U.S. Census Bureau is about 700,000. Grayson County’s estimated 2006 population is 118,000. A check with Collin County Jail Administrator and Chief Deputy Randy Clark revealed that Collin County, which is projected to have a population of a million by 2011, just increased the size of its jail to 1,298 total beds. Friday morning’s prisoner census was 930.

Excellent points: IMO McGraw hits the nail on the head. Jail overcrowding in Grayson and most other counties is caused by local officials' decisions more often than increasing population or crime.

Finally, it's interesting to see that recent troubles at the Texas Youth Commission haven't prevented other elected officials from courting the Geo Group, which has been identified as the likely contractor if Grayson County decides to privatize the jail. Glenn Melancon, a professor at Southeastern Oklahoma State University, issued a handout I'll try to get ahold of that rightly criticized the idea:

Some questioned the wisdom of privatizing the jail. They said they feared a private group would be beyond public accountability. Private businesses that run prisons — particularly The Geo Group Inc. which has been mentioned as a possible firm to run the county would contract to run the jail — have come under fire recently.

Texas Youth Commission, a state agency, closed Coke County Juvenile Center in West Texas, citing squalid conditions and is conducting a criminal investigation of Geo, its operator. The state also canceled the $8 million annual contract it has held with Geo since 1996, the Associated Press reported Friday.

Melanon, in a handout at the meeting, stated that the Miami Herald reported that the state of Florida has accused Geo Group of over-billing and breaking its Sunshine (open government) Laws for not turning over audit records, lawsuit billings and court injunctions.

Tulsa County, Okla. contracted with Corrections Corporation of America to run its jail. The costs rose 42 percent from 2001 to 2005 and the county now has decided to avoid the $3.7 million budget deficit the increases created and run the jail itself, Melanon’s handout states.

Responding to jailers’ questions, Gary said that no contract could be entered with a private business unless he signed off on it.

And, he said, he wouldn’t do that unless the company agreed to hire all current jail staff at current salaries. However, he explained after further questions, a private firm would not be able to offer the state pension fund they have all paid into. It would have its own.

Others in the crowd said they concerned that when a private company needed additional workers, they would not pay enough to attract high quality professionals. Bynum said private businesses would be aware of what the labor market commanded in this area and would pay competitive wages and benefits.

The county has hired private consultant Herb Bristow of Waco to help negotiate a contract between the county and a private firm. Gary and Bynum agreed that the county cannot contract its liability for ensuring a constitutionally run jail. And Gary said that the county could still run the jail even it looked to a private company to build it.

Another aspect of private jails that worried some was the prospect it would lobby for rules that would increase jail populations to raise profit. Some questioned whether it would be more effective to spend money the jail would cost on prevention and treatment programs and the alternative strategies outlined in the study.

I've requested the consultant's report under the public information act, and will be interested in learning more about Grayson's problems and what the Waco consultant proposed. But I think it's a big mistake to hinge the county's carceral future on the Geo Group or any other private company.

To me, if a jail is needed, taxpayers should fund it and the Sheriff should operate it. But in Grayson's case the data shows there are many solutions to be tried before new jail building could be justified based on need. Rather, tuff-on-crime political calculations by local judges and prosecutors are the real cause of Grayson taxpayers spending more than $3,000 per day to rent jail cells outside the county. I disagree with the route the Grayson commissioners court is taking, but community angst should be aimed equally at those courthouse officials whose decisions actually caused the problem, not just the Sheriff and commissioners who must manage the expensive results.

RELATED: See Grits best practices for reducing jail overcrowding, Part 1 and Part 2.

ALSO RELATED: Local jails are full and shipping prisoners elsewhere in Hays and Navarro Counties.