For-Profit Prisons Could See Boost With Trump’s Executive Order To Open New Detention Centers

While much of today’s news about President Trump’s latest executive order is the directive to build his often-promised wall along the border between Mexico and the U.S., the order also directs the federal government to get to work immediately on building — or contracting out — detention centers along that border, providing a potential boon to the for-profit prison industry.

Section 5 of today’s order directs new Homeland Security Secretary John Kelly to “take all appropriate action and allocate all legally available resources to immediately construct, operate, control, or establish contracts to construct, operate, or control facilities to detain aliens at or near the land border with Mexico.” [Note: bolded for emphasis]

This “or establish contracts” condition is important, as it would allow for private operators of detention facilities to sell their services to the federal government.

That may be expedient, but it would also be a complete course-reversal from the last administration, which had recently moved to stop doing business with many for-profit prison services.

Last August, then-Deputy Attorney General Sally Yates announced plans to phase out the federal government’s use of private prisons. These facilities account for around 15% of all federal prisoners, at a cost to taxpayers of around $639 million.

A report [PDF] by the Justice Department’s Office of Inspector General concluded that contract prisons had more incidents of lockdowns, discipline, contraband, assaults (on prisoners and staff), and grievances per capita than facilities operated by the Federal Bureau of Prisons. The report also claimed that prisoners at contract prisons were eight times more likely to be found with contraband cellphones.

As a result, the DOJ said it would likely not renew contracts with the few remaining private prison operators, with expectation of cutting the number of inmates at these facilities in half by May 2017.

However, since President Trump was elected in early November, the fortunes of the nation’s largest private jailers has turned around.

The stock price for CoreCivic, previously known as Corrections Corporation of America, was at a 5-year low just before the election, with shares trading at less than half of what they were worth a year earlier.

Immediately following Trump’s electoral win, Core’s share price soared. It received another bump after Nov. 18, when Jeff Sessions was nominated for Attorney General. The stock is now more than double where it was on Nov. 8:
corechart

Another large private prison operation, GEO Group has seen a similar reversal of fortune, and is now a just short of its 5-year high share price:
geogroup

Even before today’s announcement, some analysts were predicting higher earnings for GEO and others in the private prison industry.

GEO also made not insubstantial donations to Rebuilding America Now, a super-PAC supporting Trump’s candidacy. The day after the DOJ report was released, the company donated $100,000 to the organization. This was followed by a $125,000 donation on Nov. 1, according to data from the Center for Responsive Politics.

As Bloomberg recently pointed out, the DOJ’s decision to phase out federal inmates at these facilities did not necessarily impact their use by Homeland Security, a separate agency whose cabinet-level Secretary reports directly to the President. Weeks after the DOJ allowed a contract with CoreCivic for one of its facilities to lapse, the company signed a deal with DHS to house immigrants.

In fact, if the DOJ is to continue or expand its use of private prisons, some of these companies could benefit twice: First by being paid to house illegal immigrants who have been convicted of federal crimes; then again later for hold those same people after they have been released, but have not yet been deported.

The U.S. Immigration and Customs Enforcement agency (ICE) currently has around 30,000 beds at its disposal on any given day to house detainees. Former ICE chief John Sandweg told the NY Times last spring that in order to meet the demand needed by then-candidate Trump’s proposals, ICE would need about ten times that number of spots to house detainees. CoreCivic and GEO already bring in a combined $1.3 billion from ICE contracts annually.

Today’s executive order also raises questions about the locations for these detention centers. The order specifies that they be “at or near the land border with Mexico.” However, critics of Trump’s border plan have pointed to nonpartisan research from Pew showing that — as of 2012 — illegal border crossings from Mexico appeared to be at their lowest level in decades.