PRIVATE PRISONS (Part 2 of 2)

Given all the pennypinching, it would seem that C.C.A. should easily be
able to demonstrate significant savings at South Central. Instead, a study
of costs conducted by the state in 1995 found that the company provided
almost no savings compared with its two public rivals. The studycited by
the General Accounting Office as "the most sound and detailed comparison of
operational costs"actually showed that the C.C.A. prison cost more to run
on a daily basis. Even after the state factored in its longterm expenses,
C.C.A. still spent $35.38 a day per prisoneronly 38 cents less than the
state average.

The study contradicted what is supposed to be the most compelling rationale
for prison privatization: the promise of big savings. But the industry
champion dismissed its defeat by insisting, much to the amazement of its
challengers, that it hadn't tried very hard to save tax dollars. "When
you're in a race and you can win by a few steps, that's what you do," said
Doctor R. Crants, who cofounded C.C.A. and now serves as chairman and
chief executive officer. "We weren't trying to win by a great deal."

The comment by Crants, as remarkable as it seems, exposes the true nature
of privatization. When it comes to savings, the prison industry will beat
state spending by as narrow a margin as the state will permit. To a prison
company like C.C.A., "savings" are nothing but the share of profits it is
required to hand over to the governmentanother expense that cuts into the
bottom line and must therefore be kept to a minimum, like wages or the
price of potatoes. At its heart, privatizing prisons is really about
privatizing tax dollars, about transforming public money into private profits.

That means companies are actually looking for ways to keep public spending
as high as possible, including charging taxpayers for questionable
expenses. The New Mexico Corrections Department, for example, has accused
C.C.A. of overcharging the state nearly $2 million over the past eight
years for operating the women's prison in Grants. The company fee of $95 a
day for each inmate, it turns out, includes $22 for debt service on the
prison.

Last summer, a legislative committee in Tennessee calculated that state
prisons contribute nearly $17.8 million each year to state agencies that
provide central services like printing, payroll administration and
insurance. Since company prisons usually go elsewhere for such services,
states that privatize unwittingly lose money they once counted on to help
pay fixed expenses.

The "chargebacks," as they are known, came to light last spring when C.C.A.
once again proposed taking over the entire Tennessee prison system. This
time the company offered to save $100 million a yeara staggering sum,
considering that the annual budget for the system is only $270 million.

Like many claims of savings, the C.C.A. offer turned out to be based on
false assumptions. Crants, the company chairman and C.E.O., said he derived
the estimate from comparing the $32 daily rate the company charges for
mediumsecurity prisoners at South Central with the systemwide average of
$54. But the state system includes maximumsecurity prisons that cost much
more to operate than South Central. "It's almost like going into a rug
store," says State Senator James Kyle, who chaired legislative hearings on
privatization. "They're always 20 percent off. But 20 percent off what?"

Yet the sales pitch, however absurd, had the intended effect of getting
Kyle and other lawmakers into the store to look around. Once there, the
prison companies kept offering them bigger and better deals. Given an
opportunity to submit cost estimates anonymously, firms offered fantastic
savings ranging from 30 percent to 50 percent. Threatened by the
competition, even the state Department of Corrections went bargain
basement, offering to slash its own already low cost by $70 million a year.
Despite opposition from state employees, legislators indicated after the
hearings that they support a move to turn most prisoners over to private
companiesa decision that delighted C.C.A. "I was pretty pleased," Crants
said afterward. The governor and legislators are wrangling over the
details, but both sides have agreed informally to privatize roughly
twothirds of the Tennessee system. A few prisons will be left in the hands
of the state, just in case something goes wrong.

Lawmakers didn't have to look far to see how wrong things can go. South
Carolina decided last February not to renew a oneyear contract with C.C.A.
for a juvenile detention center in the state capital. Child advocates
reported hearing about horrific abuses at the facility, where some boys say
they were hogtied and shackled together. "The bottom line is the staff
there were inexperienced," said Robyn Zimmerman of the South Carolina
Department of Juvenile Justice. "They were not trained properly."

Once again, though, such stark realities proved less influential than the
political connections enjoyed by C.C.A. The chief lobbyist for the company
in the Tennessee legislature is married to the Speaker of the state House.
Top C.C.A. executives, board members and their spouses have contributed at
least $110,000 to state candidates since 1993, including $1,350 to Senator
Kyle. And five state officialsincluding the governor, the House Speaker
and the sponsor of the privatization billare partners with C.C.A.
cofounder Thomas Beasley in several Red Hot & Blue barbecue restaurants in
Tennessee.

The political clout extends to the national level as well. On the
Republican side, Corrections Corporation employs the services of J. Michael
Quinlan, director of the federal Bureau of Prisons under George Bush. On
the Democratic side, C.C.A. reserves a seat on its sevenmember board for
Joseph Johnson, former executive director of the Rainbow Coalition. The
Nashville Tennessean points to Johnson as evidence that the company "looks
like America.... Johnson is AfricanAmerican," the paper observes, "as are
60 % of C.C.A.'s prisoners."

Johnson played a pivotal behindthescenes role earlier this year, using
his political connections to help C.C.A. swing a deal to buy a prison from
the District of Columbia for $52 million. It was the first time a
government sold a prison to a private company, and C.C.A. hopes it won't be
the last. Earlier this year, with backing from financial heavyweights like
Lehman Brothers and PaineWebber, the company formed C.C.A. Prison Realty
Trust to focus solely on buying prisons. The initial stock offering raised
$388.5 million from investors to enable C.C.A. to speculate on prisons as
real estate.

Why would cities or states sell their prisons to the C.C.A. trust?
PaineWebber cites the lure of what it calls "free money." Unlike many
public bond initiatives earmarked for specific projects like schools or
sewage systems, the broker explains, "the sale of an existing prison would
generate proceeds that a politician could then use for initiatives that fit
his or her agenda, possibly improving the chances of reelection."
Companies building their own prisons certainly receive friendly treatment
from officials. Russell Boraas invited companies bidding on a private
prison to a meeting and asked what he could do to help. "I said, 'Guys, I
know quite a bit about running construction projects, but I don't know much
about private prisons. What are you looking for? What can I do to make this
userfriendly for you?' They said it would be nice if they could use
taxexempt bond issues for construction, just like the state." So Boraas
allowed companies to finance construction with help from taxpayers, and a
local Industrial Development Authority eventually aided C.C.A. in getting
$58 million in financing to build the prison.

Such deals raise concerns that private prisons may wind up costing
taxpayers more in the long run. Although governments remain legally
responsible for inmates guarded by public companies, firms have little
trouble finding ways to skirt public oversight while pocketing public
money. Instead of streamlining the system, hiring corporations to run
prisons actually adds a layer of bureaucracy that can increase costs and
reduce accountability. Prison companies have been known to jack up prices
when their contracts come up for renewal, and some defer maintenance on
prisons since they aren't responsible for them once their contract expires.

Even more disturbing, private prisons have the financial incentiveand
financial influenceto lobby lawmakers for harsher prison sentences and
other "get tough" measures. In the prison industry, after all, locking
people up is good for business. "If you really want to save money you can
lock prisoners in a box and feed them a slice of bread each day," says Alex
Friedmann, the prisoner at South Central. "The real question is, Can you
run programs in such a way that people don't commit more crime? That should
be the mark of whether privatization is successful in prisonsnot whether
you keep them locked up but whether you keep them out."

C.C.A. officials dismiss such concerns, confident the current boom will
continue of its own accord. "I don't think we have to worry about running
out of product," says Kevin Myers, the warden at South Central. "It's
unfortunate but true. We don't have to drum up business."

Perhapsbut Corrections Corporation and other company prisons already have
enormous power to keep their current prisoners behind bars for longer
stretches. Inmates generally lose accumulated credit for "good time" when
they are disciplined by guards, giving the C.C.A. stockholders who serve as
officers an incentive to crack the whip. A 1992 study by the New Mexico
Corrections Department showed that inmates at the women's prison run by
C.C.A. lost good time at a rate nearly eight times higher than their male
counterparts at a staterun lockup. And every day a prisoner loses is a day
of extra income for the companyand an extra expense for taxpayers.

Some C.C.A. guards in Tennessee also say privately that they are encouraged
to write up prisoners for minor infractions and place them in segregation.
Inmates in "seg" not only lose their good time, they also have thirty days
added to their sentencea bonus of nearly $1,000 for the company at some
prisons. "We will put 'em in seg in a hurry," says a guard who works at the
Davidson County Juvenile Detention Facility in Nashville.

The prison holds 100 youths"children, really," says the guardmost of
them teenage boys. "They may be young, but they understand what's going
on," he adds. One day, as a 14yearold boy was being released after
serving his sentence, the guard offered him some friendly advice.

"Stay out of trouble," he said. "I don't want to see you back here."

"Why not?" the kid responded. "That's how you make your money." *

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