Decision to phase out use of 14 contract prisons after investigative report found increased violence in facilities, fewer resources and ineffective cost
The Obama administration said on Thursday that it planned to end the federal government’s use of private prisons, after an inquiry found they were drastically more unsafe than publicly run facilities.
Deputy attorney general Sally Yates announced the decision in a memo to Thomas Kane, the acting director of the federal prisons bureau, which was published on the justice department’s website.
“I am eager to enlist your help in beginning the process of reducing – and ultimately ending – our use of privately operated prisons,” Yates said. Officials were directed to not renew or substantially downscale contracts with prison operators as they expire.
The decision immediately prompted a sharp decline in the share prices of America’s biggest private prison companies.
Yates said in her memo that research had found private prisons “simply do not provide the same level of correctional services, programs, and resources” and “do not save substantially on costs” either. Essential government education and training programs for prisoners “have proved difficult to replicate and outsource” in the private sector, she said.
The decision was announced days after the Department of Justice’s inspector general released a damning investigation report. It found instances of inmate-on-inmate assaults were 28% higher in contract prisons than in government-run facilities, and that the confiscation of contraband mobile phones occurred eight times more frequently.
Federal inmates in private prisons were found to be nine times more likely to be placed on lockdown than those at other federal prisons, and were frequently subjected to arbitrary solitary confinement.
Inmates at two of the three contract prisons routinely visited by inspectors were automatically placed in solitary confinement as a way of combating overcrowding, rather than for disciplinary issues, the inquiry found.
The 14 private prisons currently contracted by the federal government almost exclusively incarcerate low-risk inmates who were convicted of immigration offenses. The prisons house around 22,000 people at an annual cost of $600m.
Yates said in her memo that the use of at least three private prisons would be phased out over the next year and that the private prison population would be reduced to less than 14,200 by May 2017.
Private prisons are operated for the federal government by three companies: GEO Group, Corrections Corporation of America (CCA), and Management and Training Corporation.
CCA is the largest private prison operator, with a market cap of $3.2bn. Within an hour of the news on the government’s decision on Thursday, its shares had fallen in value by 52%, dropping from $27.06 per share to $13.
Shares of GEO group, the second-largest private prison firm, also fell by more than 45% during that time. With its shares dropping to $17.30 from $32.32, nearly $700m was shaved off GEO group’s earlier $2bn market valuation.
By noon on Thursday, trading on stocks in both companies had been halted due to their volatility and then reopened again.
In a statement Jonathan Burns, CCA director of public affairs, said the company continued to “value our partners, and we will continue to work with them”.
“It’s important to note that today’s announcement relates only to [Federal Bureau of Prisons] BOP correctional facilities, which make up seven percent of our business,” he said.
Burns said the inspector general’s report had “significant flaws”. “The report’s authors freely admit that they ‘were unable to evaluate all of the factors that contributed to the underlying data,’ and they failed to account for the impact of elements such as population demographics or the scope and efficacy of efforts to mitigate contraband. The findings simply don’t match up to the numerous independent studies that show our facilities to be equal or better with regard to safety and quality, or the excellent feedback we get from our partners at all levels of government,” he said.
In a statement for GEO Group, vice-president for corporate relations Pablo Paez said that while the firm is disappointed in the DOJ’s announcement, “the impact of this decision on GEO is not imminent”.
“As acknowledged in the announcement, the BOP will continue, on a case-by-case basis, to determine whether to extend contracts at the end of their contract period,” Paez said.