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A former Corrections Corporation of America (CCA) lobbyist is suing the company and its chairman and chief executive officer, Doctor C. Crants, over an alleged share holding agreement that was not honoured.

In the 1980s, when CCA was starting out in business, one of the people the company hired to help it expand was Mr Bill Cornelison, a Chattanooga-based lobbyist. Mr Cornelison takes credit for finalising a bill enabling prison privatisation and ensuring that it was passed by the Tennessee state legislature. Mr Cornelison admits that CCA paid him “an astronomical fee” - some $82,000 - for this service and he continued to work successfully on behalf of the company.

Mr Cornelison claims that in 1992, in recognition of his work for the company, Doctor C. Crants, one of CCA’s founders, promised him 6,000 shares in the company. There was no written contract, just a verbal agreement. Under Tennessee law, such an arrangement is legally binding. But the shares have not been forthcoming and Cornelison has filed a lawsuit against Crants and CCA claiming $12.7m in compensation.

Mr Cornelison does not understand why he has been refused the shares. He says he was always faithful to CCA, even when he testified in front of a federal grand jury which, in 1993, investigated the company’s legislative activities in New Mexico, Tennessee and Nevada. “My testimony made them look real good,” he says.

But now he is resentful. In papers filed for his lawsuit, Mr Cornelison makes allegations about some of CCA’s past practices. As well as claiming that Hamilton County, Tennessee was defrauded over a $25m insurance policy, he alleges that the company:

n wire-tapped a former Silverdale [facility in Chattanooga run by CCA] chief of security;

n engaged in a criminal conspiracy to violate US narcotics law “by and through agents of Corrections Corporation of America Inc.”

n fired a former shift supervisor at Silverdale because he refused to remain silent about CCA’s alleged criminal conduct.

What these allegations have to do with Mr Cornelison’s substantive claim remains to be seen. It is public record that, on 16 December 1996, Silverdale was raided by federal agents following an 18 month undercover operation. This resulted in a grand jury indicting a number of CCA employees and two prisoners on drugs charges.

A number of pre-trial hearings into Mr Cornelison’s case have already taken place and a date for the full trial will be set in Nashville on 10 October 1997.

n On 15 September 1997, analysts Joshi & Associates Equity Research put an “aggressive sell” rating on CCA’s shares, suggesting that about three‑quarters of CCA’s earnings come from ownership of property. They say that CCA’s core operating earnings excluding returns from property ownership are less than five per cent pre‑tax.

n CCA’s prison Real Estate Investment Trust (REIT), which was launched last July to buy prison buildings and profitably lease them back, “represents the third milestone in the growing private prison industry”, according to analysts Montgomery Securities. The analysts’ Annual Investment Conference on growth stocks and other investment vehicles in San Francisco in September was attended by over 1,000 institutional investors. Montgomery described CCA’s REIT as a popular way of investing in commercial property and a creative, low cost new source of financing for CCA. Montgomery believes that due to projected incarceration rates and the lack of public funding for new prisons, the US private prison market could grow to $9bn by the year 2007 from the current level of $1.5bn.

Legal argument over contract

Trade unions have launched a final effort to halt plans by the Prison Service in England and Wales to privatise the industrial functions at Coldingley prison in Surrey.

A concession agreement was due to be signed with Wackenhut (UK) Ltd on 1 October 1997. But this has been delayed pending investigation of the unions’ claims that the proposals for prisoners’ employment contravene the International Labour Organisation (ILO) Convention on forced or compulsory labour.

Under Prison Rules, which comply with the Convention, work is compulsory only for convicted prisoners, such as at Coldingley. The crux of the issue now is whether prisoners will be coerced into work if Wackenhut is to meet its commercial targets.

The Convention defines forced or compulsory labour as “all work or service which is extracted from any person under menace of any penalty and for which the said person has not offered himself voluntarily”.

The draft concession agreement between the Home Office and Wackenhut places an obligation on the prison governor to “use all reasonable endeavours” to ensure that a sufficient number of prisoners are available for work while the company is “obliged” to provide work. The unions also believe that the concession agreement gives other powers to the governor which could lead to prisoners being forced to work.

The proposals could also fall foul of Article 2 (2c) of the Convention which states that prison work does not amount to forced labour provided it is carried out under the supervision and control of a public authority and the prisoner is not hired to or placed at the disposal of private individuals, companies or associations.

n Despite claims by the Prison Service to the contrary, the unions now believe that if privatisation at Coldingley goes ahead, the rest of the services providing employment and training opportunities to prisoners will be privatised. Over 1,000 jobs could be transferred to the private sector.

Profits posted

Two companies operating private prison, court escort and electronic tagging contracts in the UK have filed accounts for the 1996 financial year. Following two years of pre-tax losses, Premier Prison Services Ltd made a pre-tax profit of £1.25m on income from the Prison Service of £18.4m in the year ended 31 December 1996. The company employed an average of 837 staff compared to 473 in 1995. Directors reported that they were “confident that 1997 will be another successful year”.

For the year ended 30 September 1996, Securicor Custodial Services Ltd, which has prisoner escort and electronic tagging contracts and will soon be operating HM Prison Parc at Bridgend, made a pre-tax operating profit of £935,699 on income from the Prison Service of £21.97m. Directors noted that the Bridgend contract had started up successfully and “future results will reflect improvement” once the prison is open.

n The Prison Service is planning yet another new private prison. An 840 place prison is to be built at Peterborough. It will be the first purpose-built prison to house both men and women. But its development through the planning process could be hindered since thousands of local residents have signed a petition against the prison being built. Meanwhile, the Scottish Prison Service is considering two more private prisons.

n According to the recently published report of the Prison Service’s director of health care, there is “unlikely” to be immediate action on privatising primary health care services but the Private Finance Initiative will be considered for any major new schemes for the building or refurbishment of health care premises.

AUSTRALIA

Immigration detention centres

Australia’s federal Department of Immigration and Multicultural Affairs is negotiating with Australasian Correctional Management (ACM - owned by Wackenhut and Thiess Contractors) over an initial three year contract to provide immigration detention and transportation services.

ACM will run the four existing facilities at Port Hedland in Western Australia, Perth Airport, Maribyrnong in Melbourne and Villawood in Sydney. Together, these facilities hold around 1,100 detainees. It is thought that the contract, which will include a provision for infrastructure development, is worth around A$15m a year to ACM. The handover could be completed by 1 January 1988.

The Australian Protective Service, which has provided the service up until now, did not bid for the contract. ACM was chosen ahead of four other companies.

The Refugee Council of Australia is concerned that privatisation will lead to the erosion of services provided to asylum seekers, many of whom are traumatised and fearful of authority.

NEW ZEALAND

Designers wanted

New Zealand’s Department of Corrections has called for registrations of interest in providing design services for its proposed new private prison. The 275 bed facility is to be built on the site adjacent to the existing Mount Eden prison in Auckland.

Going for brokers

‘120 beds. Male and female. Minimum security. Four‑person rooms. No history of violent or sex offenses. (Exceptions on a case‑by‑case basis.) Constructed in 1988. Renovated in 1995. Per diem negotiable.’ - Bed Space Locator.

The United States’ dual crisis of overcrowded prisons and lack of corrections funding has spawned another market for the private sector - bed brokering. Firms such as Dominion Management of Oklahoma, which has matched 8,000 prisoners with prison places since 1993, and Inmate Placement Services (IPS) of Nashville are cashing in. With many states under court orders to limit overcrowding and new legislation such as ‘three strikes’ increasing the rate of incarceration, IPS - motto ‘a bed for every inmate and an inmate for every bed’ - is one of a growing number of bed brokers matching prisoners to either private or publicly run prisons with spare capacity.

IPS negotiates prices, draws up contracts and arranges transfers. Each month, the IPS newsletter Bed Space Locator advertises current availability and is mailed to all prison wardens and private prison operators. For those who cannot travel to inspect a facility, IPS can send a video.

Brokers get paid on a flat fee per bed basis. No rates have been published so it is difficult to estimate how much authorities spend on such services.

Bed brokering is now causing an increasing number of prisoners to be transferred to prisons away from their home states. Even with the expense of a bed broker, authorities can generate income by transferring their own prisoners to cheaper facilities while renting out the newly-emptied spaces to other authorities willing to pay the asking price.

But in Pennsylvania there is concern that income generation is taking precedence over the needs of prisoners. Angus Love of the Pennsylvania Institutional Law Project has referred to bed brokering as “a modern‑day slave trade”. Meanwhile, the Pennsylvania Prison Society believes that sending prisoners to out of state prisons affects their ability to organise a legal defence and places greater stress on their families.

There are also untested legal implications, such as which authority is responsible if a prisoner escapes or is abused and which state’s regulations apply in a facility where prisoners come from two or three states.

Correctional Services Corp.

Correctional Services Corporation (formerly Esmor) has finalised a contract with Grenada County to operate a 160 bed jail in Grenada, Mississippi. This will be the first private prison in the state. In September, the company was also selected to negotiate a 52 bed contract with the Martin Hall Juvenile Consortium of nine counties in Washington State. The facility will hold juveniles aged 12 to 17. The company has also temporarily taken over the operation of a 56 bed juvenile facility in Sweetwater, Texas. Nolan County Juvenile Board asked Correctional Services Corp. to run the facility after the previous operator’s contract was cancelled.

The company has 18 contracts to manage facilities in Florida, New York, Arizona, Texas, New Mexico and Washington State.

Mississippi mental health

The East Mississippi Correctional Facility Authority has chosen Wackenhut Corrections Corp. to negotiate a contract to design, construct and manage a 500‑cell mental health correctional facility in Lauderdale County, Mississippi. The facility will be capable of housing up to 1,000 state prisoners. Construction is expected to be completed by the end of 1998. The company believes that this will be the first privatised mental health prison for state prisoners. It also estimates that it will receive $52 per prisoner per day for the initial 500 prisoners to cover operating and debt service costs.

Florida plan resurfaces

Plans to privatise Florida's prison system have resurfaced after the legislature initially rejected the idea. A senate criminal justice subcommittee is collecting information to find out if the proposal will be beneficial.

CCA and Wackenhut want to privatise the state’s five regions at one go, rather than one at a time as previously proposed. Legislation would have to be changed to allow existing prison to be privatised. The state has around 65,000 prisoners and employs 26,000 workers. The annual corrections budget is $1.5bn.

Texas repaid

In the past year, the Texas Department of Criminal Justice has collected $15,553 from three firms and is still owed $6,344 by two others for providing state help to private prison operators. Wackenhut has paid $10,872 for guards, horses and tracker dogs supplied to find an escapee from the Lockhart Correctional Facility; Capital Corrections Corp. paid $1,939 for help capturing an escapee from the Limestone Detention Centre in Groesbeck. The Bobby Ross Group paid $2,741 for state help in finding two escapees from the Karnes County Correctional Facility and now owes $1,550 for help following an escape from the Newton County Detention Center.

The Dove Development Corp., the former operator of the Frio Detention Center in Pearsall, owes $4,794 for state help in quelling an uprising in September 1996 and apprehending an escapee. Unfortunately for taxpayers, the company has gone out of business.

n The Texas Commission on Jail Standards, which supervises private prisons, is increasing scrutiny and is now employing a prisoners’ complaints investigator.

Privatizing Prisons: Rhetoric and Reality, by Adrian James, Keith Bottomley, Alison Leibling and Emma Clare, Sage Publications. This book is centred around the authors’ study of the first two years of the operation of Wolds, the UK’s first privately run prison, and a comparison with Woodhill, a new publicly run prison.

Private Prisons and Public Accountability, by Richard Harding, Open University Press. Harding’s view is that private prisons are here to stay and the public sector is no less in need of regulation than the newly emerging private sector. But if properly regulated and sensitively administered, private prisons could raise standards and increase accountability across the total prison system.

Privatization and the Provision of Correctional Services: Context and Consequences, edited by G. Larry Mays and Tara Gray, Anderson Publishing Co. and Academy of Criminal Justice Sciences. The premise of this book is also that privatisation is here to stay and, as the editors say: “for the most part we have gotten beyond the public-private dichotomy in talking about the delivery of correctional services. The question is no longer over whether privatisation will exist. Today the debate is more likely to be framed in terms of: What will be privatised? To what extent? What will it cost? And what levels of service are acceptable, desired and expected?”

Can Business Really Do Business: The Answer Is Yes, by Stephen Goldsmith, Harvard Business Review, May/June 1997. This article focuses on Indianapolis, Indiana being at the forefront of the trend towards efficiency in government. Includes a discussion on CCA’s private prison proposals which, according to the author, “completely changed the terms of the public debate.”

Privatization: Lessons Learned by State and Local Governments, Report to the House Republican Task Force on Privatization. US General Accounting Office, March 1997 (Ref: GAO/GGD-97-48). This paper discusses privatisation in Michigan, New York, Georgia, Massachusetts, Virginia and Indiana and highlights the six key lessons common to those governments’ privatisation initiatives.

Privatizing Corrections: Changing the Corrections Policy-Making Subgovernment, by Barbara Ann Stoltz, US GAO, in The Prison Journal, Vol 77 No.1, March 1997. This article suggests that privatisation changes the corrections policy-making process and that monitoring and accountability of private prisons needs further research.

Private Jails: Locking Down the Issues, by Dale K. Sechrest and David Schicor, in American Jails, March/April 1997. The authors argue that there are “some unsettled and troubling issues that remain to be resolved.”

Thinking About Private Prisons, by Richard L.Lippke, in Criminal Justice Ethics, Volume 16, No.1, Winter/Spring 1997. This article aims to show how “the normative theoretical frameworks provided by different theories of punishment lead us to look at and think about private prisons.”

Privatizing Discretion: “Rehabilitating” Treatment in Community Corrections by Karol Lucken, in Crime & Delinquency, Vol.43 No.3, July 1997. This article examines the trend of using private treatment agencies to provide mandated counselling services to probationers.

Private Prisons in New South Wales: Junee - Year Three, Research Publication No.38, July 1997, NSW Department of Corrective Services, GPO Box 31, Sydney 2001. This is the third in a series examining the state’s only private prison. It gives no details of cost efficiency or contract compliance and the data is to 31 March 1996.

Commercial Confidentiality, Criminal Justice and the Public Interest, by Prof. Arie Frieberg, University of Melbourne,paper presented to the Australian Institute of Criminology Conference, July 1997. Prof. Frieberg notes that privatisation has “had a significant impact upon the nature and extent of government accountability” and that “there are inherent conflicts between the interests of individuals, governments and the public interest.” He concludes: “The ultimate question is not whether contracts are proper or adequate but whether or not they are secret.”

Steering From a Distance?The Challenge of Second Wave Privatisation, by Prof. Mark Considine, Deakin Human Services Australia, Toorak Campus, Glenferrie Road, Malvern, Australia. This paper argues that policy corruption and the enfeeblement of democratic institutions are inevitable unless there is a major investment in information, training and new forms of accountability.

Prison Privatisation Report International