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Analysis

Resistance to Private Prison Industry Mounts Amid Debate Over Trump’s Immigration Detention Policies

Controversy over immigration policy is shining an unwelcome spotlight on the private prison industry, which runs detention facilities that house tens of thousands of immigrants.

July 31, 2019

The private prison industry is under renewed scru­tiny, and things are not going well for it. Prison compan­ies were already under fire, accused of putting profits above the well-being of incar­cer­ated indi­vidu­als and staff at the dozens of federal and state pris­ons and local jails they run around the coun­try. Currently, about 8 percent of state and federal pris­on­ers are held in privately oper­ated facil­it­ies across 27 states and the federal system.

But these compan­ies aren’t only in the busi­ness of hous­ing people convicted of crimes. As of July, U.S. Immig­ra­tion and Customs Enforce­ment (ICE) had almost 53,000 people in its custody, and private prison firms are respons­ible for detain­ing more than 70 percent of them. Now the industry is getting more atten­tion because of Pres­id­ent Trump’s immig­ra­tion deten­tion policies, such as separ­at­ing chil­dren from their parents, and because of the terrible condi­tions in many deten­tion facil­it­ies, many of which are run by the govern­ment and not private firms.

Iron­ic­ally, because of the Trump admin­is­tra­tion’s focus on build­ing a border wall and keep­ing immig­rants out, a Repub­lican admin­is­tra­tion thought to be a boon to the private prison sector has proved one of its biggest prob­lems. As resist­ance to current immig­ra­tion policies mount, here is a roundup of some of the high-profile actors target­ing the industry.

Pres­id­en­tial elec­tion polit­ics

At least 11 Demo­crats running for pres­id­ent want to elim­in­ate private pris­ons. Sen. Kamala Harris of Cali­for­nia recently tweeted, “One of my first acts of busi­ness as pres­id­ent will be to begin phas­ing out deten­tion centers and private pris­ons.” Sen. Eliza­beth Warren of Massachu­setts issued a sweep­ing plan to evis­cer­ate the industry by attempt­ing to phase out federal contracts for private pris­ons and by redu­cing states’ reli­ance on the industry through cutting federal fund­ing to states that contract with these compan­ies. Other candid­ates have expressed support for imme­di­ately canceling all federal contracts with the industry and phas­ing out the govern­ment’s reli­ance on private pris­ons.

Banks

One surpris­ing devel­op­ment in 2019 has been the bank­ing industry’s with­drawal of finan­cial support for two of the largest private prison firms, Geo Group and Core­Civic. These two firms restruc­tured in 2013 to become Real Estate Invest­ment Trusts (REITs), allow­ing them to bene­fit from a lower tax rate. But as I’ve writ­ten about in Inside Private Pris­ons: An Amer­ican Dilemma in the Age of Mass Incar­cer­a­tion, REIT status requires the compan­ies to distrib­ute a minimum of 90 percent of their profits to share­hold­ers. This leaves them with little cash on hand to cover costs, which is why they rely on finan­cial lenders to raise cash to oper­ate.

So what happened?

The big banks star­ted to distance them­selves from a sector that received a lot of negat­ive atten­tion amidst an outcry over the Trump admin­is­tra­tion’s deten­tion policies. It’s the latest example of big banks cutting ties with compan­ies in response to activ­ism, which we also saw when Bank of Amer­ica and Citig­roup announced they would limit busi­ness with gunmakers.

In Janu­ary, Wells Fargo announced that it would roll back its rela­tion­ship with the private prison industry. Two months later, JPMor­gan Chase made head­lines with its announce­ment that it would move away from finan­cing private prison firms. The news came days after Rep. Alex­an­dria Ocasio-Cortez (D-NY), who sits on the House Finan­cial Services Commit­tee, said that she wanted to hold banks “account­able” for their connec­tions to compan­ies that oper­ate immig­rant deten­tion facil­it­ies.

JPMor­gan Chase’s announce­ment was consequen­tial because it was one of the first Wall Street banks to take a public stance on private pris­ons. As of March, the move was considered mostly symbolic, or at least until other lenders or investors in prison compan­ies followed suit.

But that’s exactly what happened, and a domino effect ensued. In June, Bank of Amer­ica announced that it would stop lend­ing to the industry. A few weeks later, SunTrust became the fourth major bank to stop finan­cing private prison firms. And on July 12, France’s BNP Pari­bas became the first foreign bank to announce that it would no longer finance U.S. private prison firms.

Never­the­less, ties between banks and the private prison industry are not completely severed, as there are still outstand­ing loans to the compan­ies (in the form of revolving credit that provides them with cash­flow) that won’t be paid off for years.

State and federal legis­la­tion

Both federal and state poli­cy­makers have tried to rein in private prison industry this past year. In Congress, Sen. Ron Wyden (D-OR) re-intro­duced a bill in June that would stop private pris­ons from qual­i­fy­ing as REITs and receiv­ing tax subsidies unavail­able to other corpor­a­tions. Sen. Eliza­beth Warren, mean­while, recently opened an invest­ig­a­tion into the accred­it­a­tion process for private deten­tion facil­ity oper­at­ors.

Currently, only three states legis­lat­ively ban private firms from oper­at­ing state pris­ons: Illinois, New York, and Iowa. Illinois passed its ban in 1990. This year, the state went one step further by enact­ing a law that prohib­its state and local agen­cies from enter­ing into an agree­ment for the deten­tion of indi­vidu­als in a facil­ity owned, managed, or oper­ated by a private firm. The new law makes it diffi­cult for private firms to build an immig­rant deten­tion facil­ity in the state. The reason is that while ICE can still contract with private firms to manage facil­it­ies, these contracts tend to rely on local govern­ments to serve as an inter­me­di­ary between ICE and the corpor­a­tions, espe­cially if firms want to build a new facil­ity.

New York state law prohib­its private prison firms from oper­at­ing state correc­tional insti­tu­tions. The state legis­lature passed the law in 2007, partly out of concern about train­ing and wages offered to private guards, and about how privat­iz­a­tion would func­tion at times of “crisis.” This year, state legis­lat­ors focused their atten­tion on banks fund­ing the industry by attempt­ing to prohibit New York-chartered banks from invest­ing in or provid­ing finan­cing to private pris­ons. The state Senate passed legis­la­tion, but it failed in the Assembly.

Look­ing ahead

Despite the propos­als to curb our govern­ment’s reli­ance on private pris­ons, the banks running for the hills, and legis­lat­ors passing laws to make it chal­len­ging for the industry to oper­ate, its future appears to be a mixed bag.

Geo Group and Core­Civic can still use their revolving credit for the next four or five years to build more facil­it­ies. And if a Demo­crat takes the White House, it’s even possible that banks reverse their posi­tion once the furor over Trump’s immig­ra­tion policies die down.

Either way, shrink­ing the size of both our prison and immig­ra­tion deten­tion popu­la­tions is the most effect­ive and humane way to ensure that fewer people remain behind bars in Amer­ica. That can only be done by chan­ging state and federal policy.

(Image: Getty/RJ Sangosti/Medi­aNews Group/The Denver Post)