When For-Profit Prisons Become the Crime

Prison Lawsuit Sealed Documents
AP/Charlie Litchfield
According to Idaho state law, defendants found guilty of the crime of false imprisonment can be punished by as much as a year in prison, or a fine of up to $5,000, or both. One company found guilty of breaking the law whilst imprisoning people, however, has been getting paid $29 million a year for its services.

Over the course of the past decade, private prison-operator Corrections Corporation of America (CXW) -- one of several for-profit prison operators that have been grabbing headlines in America lately -- has been accused of mismanaging the 2,080-bed Idaho Correctional Center south of Boise.

In March 2010, the company was sued by the ACLU , which alleged that CCA guards at the Correctional Center were permitting violent convicts to beat up other inmates with impunity. In one notable instance, video was obtained showing inmates beating a fellow inmate unconscious, while guards looked on, and made no attempt to interfere.

In a separate lawsuit in 2012 , eight inmates at the Center sued CCA, alleging prison staff collaborated with violent prison gangs with names like The Aryan Knights and The Severely Violent Criminals, using the gangs to enforce discipline at the facility. According to the ACLU, the situation at the Center was so bad that inmates had taken to calling it "Gladiator School." (CCA denies the allegations.)

In September of last year, a federal judge held CCA in contempt of court for violating a legal settlement it had entered into, under which it promised to hire more prison guards to remedy understaffing at the Center and improve inmate safety -- both of which it failed to do.

White-Collar Crime? Now This Is Serious!

Allegations have also touched on possible white-collar crimes. CCA is alleged to have falsified its payrolls, showing the state staffing reports that reflected thousands of hours worked by prison guards in jobs that were actually unfilled. IN fact, CCA admits these accusations, but argues they amounted to only "a fraction" of the company's payrolls.

Yet this "pocketbook issue" may have been the one that finally gotten somebody's attention. On Friday, Idaho Gov. C.L. "Butch" Otter confirmed that he's taking the Center back under state control.

Crime Pays

In exchange for keeping watch over its prisoners (or failing to), CCA collects $1.7 billion in annual revenues, earning a staggering 17 percent profit margin on the business.

For comparison, that's twice the profit margin earned by Exxon Mobil (XOM). Prisoners are nearly as profitable for CCA as smartphones and Internet ads are for Google (GOOG) -- netting it more than $300 million in profit last year.

And despite the loss of its Idaho contract, CCA remains a major player in the national for-profit prisons industry. Across the country, in 19 other states and the District of Columbia, Corrections Corporation of America owns and manages some 47 prisons -- and manages an additional 19 that it does not own. Even after the 2,080-bed Idaho Correctional Center reverts to state management, more than 90,000 prisoners will continue to reside within walls patrolled by CCA employees.

And, in one final twist, though Gov. Otter has acted to protect some of his citizens by reasserting control over the Idaho Correctional Center, he's not protecting all of his state's felons from physical violence sponsored under CCA's corporate umbrella. Within Idaho borders, prisoners may no longer have cause to fear, but the company still has a contract to house up to 800 Idahoan inmates in its Kit Carson Correctional Center in Burlington, Colo. Unless the state decides that violations at the Idaho Correctional Center justify terminating the outsourcing contract too, that one still has at least six months left to run.

Motley Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Google. The Motley Fool owns shares of Google.

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The Supreme Court ruled in Citizens United that a corporation is entitled to the rights of a person under our Constitution. Now were a person to commit the kind of fraud CCA is accused of, they would probably be tried, cinvicted and go to jail. But, in a case of corporate fraud, how do you put a corporation like CCA in jail? You cannot. CCA is not a person. Here we have CCA that is apparently incorporated in Maryland accused of committing fraud in Idaho, Why is this not prosecuted as interstate fraud in Federal court, with revocation of corporate charter as punishment in lieu of jail?

January 09 2014 at 9:01 PM Report abuse +2 rate up rate down Reply

For profit prisons are the dumbest idea of the century. It will only continue to propagate the high rate of recidivism in the US and abuse our citizens.

January 09 2014 at 1:13 PM Report abuse +1 rate up rate down Reply

This is the republican way. Time to send them home in the next election. Proven fact they are not good for the country or people, look to the right to work states and where they stand.

January 09 2014 at 4:19 AM Report abuse +3 rate up rate down Reply

white collar crimes...hmmm. I also believe the for-profit prison owners are greasing palms. A few days ago they had a report where 40-50% of young men (of all races) under age 23 were arrested. This for-profit prisons, stop and search laws, and more are going to change the future

January 08 2014 at 11:01 PM Report abuse +2 rate up rate down Reply

Private prisons are a magnate for human marketing.Does anyone honestly think the wardens/Owners are not going to grease the palms of Judges, for sending prisoners to them.
Selling human beings for incarceration is no different then selling humans for labor.Its still slavery.

January 08 2014 at 10:27 PM Report abuse +4 rate up rate down Reply

Crime is big business. Just ask the wealthy prison unions.

January 08 2014 at 5:19 PM Report abuse -3 rate up rate down Reply

what year did this country start prison out-sourcing?

January 08 2014 at 4:48 PM Report abuse +2 rate up rate down Reply
Jah Live!

Can anyone see this glaring conflict of interest in having For- profit- prisons???? The more people that are locked up, the more they get paid...how can we call that a correction facility??? Who ever came up with this idea clearly has an agenda, and its morally and ethically wrong and I'm putting that very nicely....

January 08 2014 at 3:59 PM Report abuse +7 rate up rate down Reply
1 reply to Jah Live!'s comment

Same people who want to destroy public education for for profit schools.

January 08 2014 at 4:53 PM Report abuse +2 rate up rate down Reply

And if corporations have rights shouldn't they be charged and sent to prison if found guilty?

January 08 2014 at 3:12 PM Report abuse +8 rate up rate down Reply

probably the biggest lobby against weed legalization......wait till they start throwing college loan defaults in the can...."coming to a prison near you"......along with.. it don't take long to realize that if I'm a prison guard..look at the endless stream of cash I can take from well to do prisoners to supply them with contraband...who's watching the store....

January 08 2014 at 2:40 PM Report abuse +4 rate up rate down Reply