The Prison-Industrial Complex

Correctional officials see danger in prison overcrowding. Others see opportunity. The nearly two million Americans behind bars—the majority of them nonviolent offenders—mean jobs for depressed regions and windfalls for profiteers

The Bobby Ross Group, based in Austin, Texas, has proved to be one of the more troubled private-prison companies. The company's founder, Bobby Ross, was a sheriff in Texas and a successful bed broker before starting his own business, in 1993. He eventually set up operations at seven Texas facilities and one Georgia facility, signing contracts to accept inmates from states including Colorado, Hawaii, Montana, Missouri, Oklahoma, and Virginia. It did not take long for problems to begin. In January of 1996 nearly 500 Colorado inmates, many of them sex offenders, were transferred to a Bobby Ross facility in Karnes County, Texas; two later escaped, and a full day passed before state authorities were notified. At the Bobby Ross prison in Dickens County, Texas, fights broke out between inmates from Montana and Hawaii that spring. A few months later a protest about the poor quality of food and medical care turned into a riot, and the warden ordered guards to shoot live rounds. The warden was replaced.

Montana canceled its contract with the Bobby Ross Group in September of last year. Three Montana inmates had escaped, and one had been killed by an inmate from Hawaii. Montana investigators found that many of the inmates at the Dickens County prison were going hungry and waiting days to see a doctor. "We really dislike losing a customer," an attorney representing Bobby Ross said to a reporter. In October an inspector for the Texas Commission on Jail Standards gave the Dickens County prison the highest possible ratings. A month later the same inspector acknowledged that in addition to his official duties he worked as a "consultant" for the Bobby Ross Group, which paid him $42,000 a year. In December eleven inmates from Hawaii escaped from their dormitory at the Newton County facility operated by Bobby Ross, released nearly 300 other inmates, and set fire to one of the buildings. In February of this year inmates rioted again at Newton and set fire to the prison commissary. In brighter days, before the riots and fires, Bobby Ross had explained the usefulness of employing William Sessions, the former director of the Federal Bureau of Investigation, as a "special adviser" to the company. "He goes with us on sales calls to potential clients," Ross told a reporter for the Colorado paper Westword. "That kind of thing."

The U.S. Corrections Corporation, for years the nation's third largest private-prison company, has encountered legal difficulties even more serious than those of the Bobby Ross Group. In 1993 an investigation by the Louisville Courier-Journal discovered that the company was using unpaid prison labor in Kentucky. Inmates were being forced to perform a variety of jobs, including construction work on nine small buildings at the Lee County prison; construction work on one church and renovation work on three others attended by company employees; renovation work on a company employee's game-room business; painting and maintenance at a country club; and painting at a private school attended by a prison warden's daughter. The Courier-Journal concluded that "U.S. Corrections has repeatedly profited financially from its misuse of inmate labor." Although the state Department of Corrections confirmed these findings, it took no action against the company. A year later J. Clifford Todd, the chairman of U.S. Corrections, pleaded guilty to a federal charge of mail fraud, admitting that he had paid a total of roughly $200,000 to a county correctional official in Kentucky. In return for monthly payments, which for four years were laundered through a California company, the official sent inmates to U.S. Corrections. Todd cooperated fully with an FBI investigation, but later became embittered when a federal judge denied his request for a term of house arrest. The head of the nation's third largest private-prison company was sentenced to fifteen months in a federal prison.

The nation's second largest private-prison company, Wackenhut Corrections, has operated with a far greater degree of professionalism and discretion. Its parent company, the Wackenhut Corporation, has for many years worked closely with the federal government, performing various sensitive tasks such as guarding nuclear-weapons facilities and overseas embassies. Indeed, the company has long been accused of operating as a front for the Central Intelligence Agency—an accusation that its founder, George Wackenhut, has vehemently denied. In the early 1950s Wackenhut quit the FBI, at the age of thirty-four, and formed a private-security company with three other former FBI agents. He went on to assemble the nation's largest private collection of files on alleged "subversives," with dossiers on at least three million Americans. During the 1970s the Wackenhut Corporation diversified into strike-breaking and anti-terrorism. The company, headquartered in Palm Beach Gardens, Florida, has branch offices in forty-two states and in more than fifty foreign countries. Its annual revenues exceed $1 billion. George Wackenhut remains the chairman of the company, but the day-to-day operations are handled by his son, Richard. Over the years Wackenhut's board of directors has read like a Who's Who of national security, including a former head of the FBI, a former head of the Defense Intelligence Agency, a former CIA director, a former CIA deputy director, a former head of the Secret Service, a former head of the Marine Corps, and a former Attorney General. After the company decided to enter the private-prison industry, it hired Norman Carlson, who had headed the Federal Bureau of Prisons.

Last year Wackenhut Corrections became the first private company ever hired by the Federal Bureau of Prisons to manage a large facility. The federal government's long-standing relationship with Wackenhut has developed an odd equilibrium: one wields the power while the other reaps the financial rewards. Kathleen Hawk Sawyer, the current director of the Federal Bureau of Prisons, is responsible for the supervision of about 115,000 inmates, including drug lords, international terrorists, and organized-crime leaders. Her salary last year was $125,900. George C. Zoley, the chief executive officer of Wackenhut Corrections, is responsible for the supervision of about 25,000 state and federal inmates, mostly illegal aliens, low-level drug offenders, petty thieves, and parole violators. His salary last year was $366,000—plus a bonus of $122,500, plus a stock-option grant of 20,000 shares. At least half a dozen other executives at Wackenhut Corrections were paid more last year than the head of the Federal Bureau of Prisons.

The Corrections Corporation of America is the nation's largest private-prison company; it recently participated in a buyout of the U.S. Corrections Corporation, thereby obtaining several thousand additional inmates. CCA was founded in 1983 by Thomas W. Beasley and Doctor R. Crants, Nashville businessmen with little previous experience in corrections. Beasley, a former chairman of the Tennessee Republican Party, later told Inc. magazine his strategy for promoting the concept of private prisons: "You just sell it like you were selling cars, or real estate, or hamburgers." Beasley and Crants recruited a former director of the Virginia Department of Corrections to help run the company. In 1984 CCA accepted its first Texas inmates, before it had a completed facility in that state. The inmates were housed in rented motel rooms; a number of them pushed the air-conditioning units out of the wall and escaped. A year later Beasley approached his good friend Lamar Alexander, the governor of Tennessee, with an extraordinary proposal: CCA would buy the state's entire prison system for $250 million. Alexander supported the idea, saying, "We don't need to be afraid in America of people who want to make a profit." His wife, Honey, and the speaker of the Tennessee House, Ned McWherter, were among CCA's early investors; between them the two had owned 1.5 percent of CCA's stock; they sold their shares to avoid any perceived conflict of interest. Nevertheless, the CCA plan was blocked by the Democratic majority in the legislature.

CCA expanded nationwide over the next decade, winning contracts to house more than 40,000 inmates and assembling the sixth largest prison system in the United States; but it never lost the desire to take over all the prisons in Tennessee. In order to achieve that goal, CCA executives established personal and financial links with figures in both political parties. During the spring of last year CCA's allies in the Tennessee legislature began once again to push for privatization. Crants said that letting CCA run the prisons would save the state up to $100 million a year; he did not specify how these dramatic savings would be achieved. George Zoley, the head of Wackenhut Corrections, argued that handing over the Tennessee prison system to a single company would simply turn a state monopoly into a private one. Wackenhut employed the law firm of the former U.S. senator Howard Baker to lobby on its behalf, seeking a piece of the action.

By February of this year a compromise of sorts had emerged in Tennessee. New legislation proposed shifting as much as 70 percent of the state's inmate population to the private sector; CCA and Wackenhut would both get a chance to bid for prison contracts. The new privatization bill seemed a sure thing. It was never put before the legislature for a vote, however. On April 20 CCA announced plans for a corporate restructuring so complex in its details that many Wall Street analysts began to wonder about the company's financial health. The price of CCA stock—which in recent years had been one of the nation's top performers—began to plummet, declining in value by 25 percent over the next several days. At the annual CCA shareholders meeting, last May, Crants compared Wall Street investors to "wildebeests" stampeding out of fear, and blamed the stock's plunge on a single broker who had sold 640,000 shares.

Crants neglected to tell CCA shareholders a crucial bit of information: he himself had sold 200,000 shares of CCA stock just weeks before the announcement that sent its value tumbling. By selling his stock on March 2, Crants had avoided a loss of more than $2.5 million. When asked recently to explain his CCA financial dealings, Crants declined to comment. The timing and the size of that stock transaction are likely to be of interest to the attorneys who have filed more than half a dozen lawsuits on behalf of CCA shareholders.

Although conservatives have long worried about the loss of American sovereignty to international agencies such as the United Nations and the World Bank, the globalization of private-prison companies has thus far eluded criticism. A British private-prison company, Securicor, operates two facilities in Florida. Wackenhut Corrections is now under contract to operate Doncaster prison, in England; three prisons in Australia; and a prison in Scotland. It is actively seeking prison contracts in South Africa. CCA has received a good deal of publicity lately, but few of the articles about it have mentioned that the largest shareholder of America's largest private-prison company is Sodexho Alliance—a food-service conglomerate whose corporate headquarters are in Paris.

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A contributor to The Atlantic since 1994, Eric Schlosser is the author of Fast Food Nation, Reefer Madness, and Chew On This. He has also written for The New Yorker, Rolling Stone, and others.

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