Latest News

The nation’s largest private prisons operator is based in Florida. And profits are up

South Bay Correctional and Rehabilitation Facility in South Bay, Palm Beach County.
South Bay Correctional and Rehabilitation Facility in South Bay, Palm Beach County. The GEO Group

Some 2.2 million Americans are behind bars. About 150,000 of those are in Florida.

That means the United States locks up more of its citizens than any other country in the world, including Russia, China and Iran, according to the World Prison Brief, a London-based advocacy group that tracks worldwide incarceration.

Another 4.4 million Americans are either on probation or out on parole, the group reports. In addition, the Department of Homeland Security reports that nearly 400,000 non-Americans passed through detension centers in 2018 as the Trump Administration tightened immigration policy.

The national tab for incarceration comes to $182 billion a year, according the Massachusetts-based Prison Policy Initiative. While most of that money is paid to public employees at public correctional facilities, a small but lucrative 4 percent goes to a lucrative and growing market for a myriad of private operators.

The country’s largest: Boca Raton-based The Geo Group. Long-time Miamians know it better by its previous name: Wackenhut.

The firm’s origins stretch back to 1954, when former FBI agent George Wackenhut and three of his bureau buddies co-founded a private detective agency in Coral Gables called Special Agent Investigations. Despite their credentials, the four sleuths got off to a rocky start. There were rumors of an in-office fist fight between Wackenhut and one of his partners. At one point, business was so slow that their bank account reportedly dropped as low $1.56.

Miami Beach State Rep. David Richardson concluded the pricing scheme approved by the Florida Department of Corrections resulted in at least $16 million in overcharges over the past seven years and was either the result of massive government inepti

In 1958, Wackenhut bought out his partners and renamed the company after himself. To keep the firm afloat, he pivoted from detective work to providing security guard services for private companies and wealthy individuals.

A staunch conservative, Wackenhut had deep connections within the Republican Party and the government’s law enforcement and military communities. Over the years, his management team and board of directors included former members of the FBI, CIA and elite military forces.

Armed with high-level connections, Wackenhut became one of the first entrepreneurs to win contracts to put private guards in jobs that had traditionally been filled by public employees. His company provided security at airports, U.S. embassies around the world and at highly-sensitive government facilities like the Atomic Energy Commission’s nuclear test site in Nevada and the Kennedy Space Center in Cape Canaveral.

But Wackenhut’s big break came in the early 1980s, when soaring rates of violent crime and tougher sentencing practices led to a crisis of prison overcrowding. Government officials looking for a solution turned to privatization. Wackenhut was there to help.

In 1984, the company formed a new division, the Wackenhut Corrections Corporation. Within a few year, the new division was regularly winning contracts to house federal and state prisoners as well as immigration detainees. It expanded internationally, started offering drug rehabilitation and mental health services, and even got into the prison design-and-construction business.

By 2003, Wackenhut Corrections had become a separate, publicly-held corporation. A Danish company named Group 4 Falck bought it for $570 million; half of that went to Wackenhut.

The company, renamed The Geo Group, today has the capacity to hold 96,000 detainees in 135 facilities located across the United States, Australia, South Africa and the U.K. It’s headquarters, near the I95 Yamato Road exit in Boca Raton, has 23,000 employees and a stock market capitalization of $2.4 billion.

In South Florida, the company operates the Broward Transition Center in Deerfield Beach and South Bay Correctional Facility in Palm Beach County, along with four other facilities with a total of 8,502 beds.

It also operates non-residential facilities that provide educational programs, vocational training and drug and alcohol rehabilitation services to juvenile offenders, parolees, probationers and pretrial defendants.

Along with prisons, Geo Group operates immigration detention centers for the federal government in California, Colorado, Florida, Louisiana, Texas and Washington. That makes the U.S. Immigration & Customs Enforcement agency (ICE) the company’s largest customer followed by the Federal Bureau of Prisons, the United States Marshals Service and the state of Florida.

U.S. Reps. Debbie Wasserman Schultz, Donna Shalala and Debbie Mucarsel-Powell speak to the media after being denied entrance to the Homestead Temporary Shelter for Unaccompanied Migrant Children by the Trump administration in Homestead, FL on Monday.

PRIVITIZATION DEBATE

In the 1980s, private prisons became an expedient solution to a tangled web of political problems.

Lawmakers were waging a war on drugs and violent crime — a battle that led to prison overcrowding. But at the same time, lawmakers were also promising to lower taxes and reduce the size of government.

Private prison operators offered an attractive solution. They would absorb the cost of building new, modern prisons in exchange for guaranteed, long- term contracts. And, because private prison companies avoid the wages and benefits demanded by unionized labor, they could offer to run the prisons for less than public institutions.

But several studies claim private prisons are only cost effective because they hold inmates that are healthier and require lower levels of security than the norm at public prisons.

For instance, a recent audit in Georgia found that on an apples-to-apples basis, it cost the state $49.07 per person per day to house people in private prisons compared to $44.56 in public prisons, according to the newspaper Atlanta Journal-Constitution.

Research by the Arizona Department of Corrections in 2011 found the same thing there. A report issued by the ACLU came to a similar conclusion based on data from Hawaii, New Jersey and Florida.

And many critics believe that a profit motive is at odds with the imperative to treat inmates humanly and work toward their rehabilitation. The complexities are graphically illustrated in a 2016 Mother Jones article by a journalist who worked undercover at a private prison run by CoreCivic, previously known as CCA.

CoreCivic, a public company based in Nashville, Tenn. and the private Management & Training Corporation (MTC), based near Salt Lake City, Utah, are Geo Group’s chief competitors. All three companies have been repeatedly accused of abusing prisoners and providing inadequate food, sanitation and healthcare.

In a 2011 report called, “Prison Profiteers,” the American Civil Liberties Union blasted The Geo Group claiming, “the company’s record of neglect and abuse is second to none.”

After a National Public Radio investigation revealed violent conditions at Mississippi’s Walnut Grove youth correctional institution in 2011, The Geo Group’s contract with the facility and others in Mississippi was terminated.

Private prisons are exempt from the Freedom of Information Act, meaning they are subject to less public scrutiny than state or federally run prisons. But a Justice Department report issued in 2016 found that private prisons are less safe than comparable public facilities. According to the report, inmates suffered more assaults, were subject to more disciplinary force, had greater access to drugs and were more likely to be placed in solitary confinement than in comparable public prisons. It went on to recommend that the government do a better job of monitoring medical services and guard staffing levels.

The Geo Group is a defendant in dozens of lawsuits, according to the news site ThinkProgress. The company faces allegations that it permits deplorable conditions at some of its facilities including physical and sexual abuse, insufficient food, lack of health care and unsanitary cells.

The company faces a class action lawsuit alleging that mentally disabled inmates at a correctional facility in New Castle, Indiana were forced to work without pay under threat of punishment.

According to the company’s 2018 SEC 10K filing, such lawsuits are par for the course in the private prison industry and are not likely “to have a material adverse effect on its financial condition.”

But there’s also the court of public opinion and other opponents believe that private prison themselves are immoral.

“A business model rooted in the oppression and anguish of people is always going to be a problem,” said Dwight Bullard, political director of the New Florida Majority, who represented Miami-Dade County in the Florida legislature from 2008 through 2016. Bullard’s views were echoed by Miami-based staff at the American Civil Liberties Union, the Florida Immigrant Coalition and the Community Justice Project.

Last year, the Florida civil rights group Dream Defenders led a coalition of anti-mass-incarceration organizations that convinced all four Democratic candidates for Florida governor to refuse campaign contributions from The Geo Group. Republican candidates continued to accept campaign contributions from the company.

The U.S. Border Patrol released video of a brief tour they gave reporters inside a detention facility in McAllen, Texas, where it holds families arrested at the southern U.S. border. The video shows adult and children housed in cages.

GROWING PROFITS

For The Geo Group, business is good — and getting better. Revenues for 2018 climbed to $2.33 billion, resulting in $618.5 million in net operating income, a 4.3 percent improvement over 2017, according to the company’s public financial statements.

“We are pleased with our overall operational and financial results,” said company chairman and CEO George Zoley, during the company’s February earnings call with Wall Street analysts. Zoley, who has led the company since its inception, reported that 2018 was the “most active with respect to contract renewals and extentions in the company’s history.”

Over the past 52 weeks, Geo Group’s stock price is up 8.7 percent — a healthy uptick when compared to the 1.9 percent increase of the Standard & Poor’s 500 Index. The company also paid annual dividends of $1.92 per share, further rewarding shareholders, 90% of which are institutional investors such as mutual, pension and hedge funds. Its shares closed at $19.39 Thursday, up 13 cents, in advance of the Good Friday holiday.

Company executives see even better financial news on the horizon, thanks to more prisons and more detainees.

The company’s most expensive facility to date, a $120 million, 1,000-bed ICE detention center near Houston, Texas, opened late last year and is now under a new contract worth $44 million annually. It also has reopened the 985-bed Bay Correctional and Rehabilitation Facility in Panama City, Fla., which was forced to close due to damage caused by Hurricane Michael last fall.

In addition, Trump Administration immigration detention policies are meaning more business opportunity. In the compromise over President Trump’s border wall, the ICE detention budget was increased by 12%, which means thousands more people will likely end up in detention centers operated by Geo Group and its two main competitors, CoreCivic and MTC.

Based on these two factors, management expects 2019 revenues to climb $100 million to $2.4 billion and earnings per share to improve between 6 percent and 14 percent, according to guidance provided on the February earnings call.

But not everyone’s convinced the outlook is quite so bright.

Mark Strouse, a research analyst who covers The Geo Group for J.P. Morgan, wrote in a February report that while the company yields strong dividends and will benefit from new contracts, its future could be affected by “political headline risk, particularly approaching the U.S. elections in 2020.”

Other analysts agree. Paul Meierdierck, managing director at LaSalle Securities, told the Wall Street Journal, “You’ve got to gauge appetite for the utilization of private prisons as the political climate shifts.”

Their concerns may be well founded. In August 2016, The Geo Group and CoreCivic suffered 35 percent stock price drops when the Obama administration instructed the Department of Justice to stop using private prisons, citing the Justice Department report released that year.

But soon after his inauguration, President Trump rescinded the Obama directive, sending both Geo Group and Core Civic’s stock prices to all-time highs.

Yet these days, prison reform is gaining widespread support. In December, Congress passed, and President Trump signed, the First Step Act, which reduces some mandatory sentences for drug-related federal crimes and puts more emphasis on rehabilitation.

The bill was applauded by both Republicans and Democrats. Advocacy groups acknowledged it as a step in the right direction. President Trump touted it in his State of the Union address.

But The Geo Group is not concerned. They even came out in support, “We enthusiastically endorse the recidivism reduction strategies featured in the First Step act,” they wrote in a press release.

During the earnings call, David Donahue, head of the company’s U.S. corrections and detention business, explained, “In our Bureau of Prisons contracts, we serve criminal alien populations and the First Step Act really doesn’t have direct implications to those criminal aliens. So, we don’t see a significant impact in our lane.”

POLITICAL RISKS

Long term, however, Geo Group knows it faces political risks. In its Securities and Exchange Commission 10K filing they wrote:

“Public resistance to the use of public-private partnerships for correctional, detention and community-based facilities could result in our inability to obtain new contracts or the loss of existing contracts, which could have a material adverse effect on our business.”

Like any smart business, GEO group is hedging its risks. Its strategy includes heightened focus on rehabilitation services, focused on helping people successfully re-enter society.

Last year, the company’s Geo Care division helped thousands of people earn high school equivalency degrees, obtain critical job training certificates and overcome addictions to drugs and alcohol, according to the company’s earnings report.

The expansion into rehabilitation services is paying off: Revenues at its Geo Care unit have surged from $394 million in 2016 to $580 million in 2018 and now account for 25 percent of its annual revenues.

Like other controversial industries, and as its done since the early Wackenhut days, Geo Group has also sought to build political influence.

The company says it’s “never taken a position on criminal justice or immigration policies.” But in 2017, it spent $3.2 million in fees to professional lobbyists and $4.7 million on political contributions, half of which were channeled through the company’s political action committees. Forty percent went to state and local candidates; the remainder went to federal legislators in Washington, including 100 members of the house and senate.

The company also contributed $250,000 to the Trump inaugural committee and held its recent annual meeting at Trump’s golf resort in Doral.

In Florida, the company gave hundreds of thousands of dollars to campaigns and political organizations benefiting former governor and now U.S. Senator Rick Scott. Florida Governor Ron DeSantis, who’s known as a tough-on-crime politician, accepted $150,000 from the Geo Group between 2017 and 2018, according to public records.

But the tide in Florida also could be turning. Last November, Florida voters approved a constitutional amendment automatically restoring voting rights to former felons. In January, DeSantis appointed criminal justice reformer Simone Marstiller to head the Department of Juvenile Justice. And a Florida version of the First Step Act, which would give judges greater discretion over sentencing for non-violent crimes and move away from mandatory minimum sentences, has been filed by Republican State Sen. Jeff Brandes of St. Petersburg.

Will any of this impact The Geo Group’s business? It’s hard to say. So, it’s understandable that Mark Strouse, the J.P. Morgan analyst, has taken a wait and see approach. He moved his Geo Group stock recommendation from positive to neutral and on March 5th the bank he works for announced that it will no longer finance the private prison industry.

Adam Snitzer is a business consultant. He’s also a writer and the publisher of MiamiActivists.org where you can read profiles of local people who are working hard to make Miami a better place.

PRIVITIZATION DEBATE

GROWING PROFITS

POLITICAL RISKS

Geo in Florida

The company operates the Broward Transition Center, contracted by the U.S. Immigration & Customs Enforcement (ICE), at 3900 N. Powerline Road in Deerfield Beach. It has a capacity of 700. The contracted was awarded by ICE in 2002 to provide a transition center for short-term non-criminal and low-security detainees. GEO was rewarded the contract in July 2008 for a five-year period. This new contract increased services to provide for additional female residents. A sizable and upscale recreation area was recently made available to detainees, the company says on its website.

The company also has five correctional and rehabilitation facilities in the state:

1. South Bay Correctional and Rehabilitation Facility

Year built: 1997

Capacity: 1,948

Security levels: minimum, medium and close

Location: South Bay, Palm Beach County

2. Moore Haven Correctional and Rehabilitiation Facility

Year built: 1995; expanded in 2007

Capacity: 985

Security levels: minimum and medium

Location: Moore Haven, Glades County

3. Graceville Correctional and Rehabilitation Facility

Year built: 2005

Capacity: 1,884

Security levels: minimum, medium and close

Location: Graceville, Jackson County

4. Bay Correctional and Rehabilitation Facility

Year built: 1995

Capacity: 985

Security levels: minimum and medium

Location: Panama City, Bay County

5. Blackwater River Correctional and Rehabilitation Facility

Year built: 2010

Capacity: 2,000

Security levels: minimum, medium and close

Location: Milton, Santa Rosa County

Source: Geo Group

The Geo Group, Inc.

Headquarters: Boca Raton

Operates in: The United States, Australia, South Africa and the United Kingdom

Employees in Florida: 2,000

No. of facilities and beds in Florida: Six, with 8,502 beds

Employees worldwide: 23,000

CEO: George C. Zoley

Annual revenues: $2.4 billion

Market cap: $2.8 billion

Source: Geo Group

  Comments