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Canada Studying Private Firms for Prisons as Budgets Fall

Canada is studying the use of private companies to deliver some prison services as it cuts spending and imposes tougher sentences on criminals, which may benefit companies like GEO Group Inc. (GEO)

Correctional Service Canada, which oversees federal prisons, “may consider” partnerships with private firms to provide “basic institutional services such as cleaning and food preparation,” says a memo prepared for Public Safety Minister Vic Toews in advance of a May 14 meeting with Crispin Blunt, U.K. Minister of State for Prisons in London.

Officials in the department urged Toews to discuss Canada’s “interest in considering the privatization of penitentiary services on a limited basis,” according to the memo obtained by Bloomberg News under Canada’s freedom-of-information law.

Public Safety officials were lobbied by the GEO Group as the government was preparing legislation to introduce or lengthen mandatory sentences for some types of crime. The annual budget of Correctional Service Canada, which reports to Toews, will fall to C$2.86 billion ($2.81 billion) by the year beginning April 2014 from C$3.03 billion in the current fiscal year, according to agency planning documents.

The new law will “invariably lead to more people behind bars serving longer sentences,” compounding capacity challenges federal prisons already face, Canada’s Correctional Investigator Howard Sapers told a parliamentary committee in November.

‘No Appetite’

“We have no appetite to pursue fully privatised prisons,” said Julie Carmichael, a spokeswoman for Toews. The government “has no intention of building new prisons, nor have we built a single new prison to date,” she said in an e-mail.

Conservative Finance Minister Jim Flaherty has pledged to eliminate the federal deficit by the year starting April 2015, partly by reducing annual program spending by C$5.2 billion. Toews said April 19 the government would save C$120 million per year by closing two federal prisons, including the maximum- security Kingston Penitentiary in Ontario.

“From unjustified closures to opening the door to privatisation, the Conservatives’ approach to correctional services is plagued by mismanagement,” said Rosane Dore Lefebvre, a New Democrat lawmaker and deputy spokeswoman for public safety issues, in an e-mailed statement.

Growing Revenue

GEO Group’s revenue has almost tripled over the last decade to $1.66 billion last year as it expanded the number of facilities it owns or manages. The Boca Raton, Florida-based company’s stock has surged 39 percent this year even though Florida’s Senate rejected in February a plan to expand the state’s private-prison system. The shares fell 0.7 percent to $23.05 at 3:01 p.m. in New York after earlier rising as much as 1 percent.

Government lobbying records and documents released under the Access to Information Act show Toews was lobbied by a consultant representing GEO Group in October, and company officials met two senior Public Safety officials in August to promote GEO Group’s services.

GEO Group representatives met in August with Mary Campbell, director general of corrections and criminal justice at Public Safety, and Heather De Santis, director for North America in the department’s international affairs directorate.

International Operations

GEO Group chief executive officer George Zoley was scheduled to attend the meeting, according to e-mails released under the Access to Information Act. A spokesman for the company, Pablo Paez, declined to confirm if Zoley attended. “Our international services division regularly meets with officials from countries around the world in different forums,” he said in an e-mail.

GEO Group “is not currently pursuing any new business opportunities in Canada,” Paez said.

Patrick Gagnon, managing partner with the lobbying firm The Parliamentary Group, said he was hired by GEO Group and approached the government to inform officials of the company’s operations in Australia and the U.K.

Gagnon also lobbied John McBride, the chief executive officer of Public-Private Partnerships Canada, in June 2011, according to lobbying records. PPP Canada is a federal agency that manages a C$1.2 billion fund that invests in public infrastructure projects involving the private sector.

The meeting was “for information purposes only,” Lisa Mitchell, PPP Canada’s director of strategy and policy, said in an e-mail. “Any federal prison procurement would be the responsibility of Correctional Service Canada,” she said.

Private Facilities

If Canada turned to the private sector, it would follow countries such as the U.S., U.K. and Australia that have relatively larger prison populations.

There are 209 prison facilities managed by private companies worldwide, with 181 in the U.S., according to data from the Association of Private Correctional and Treatment Organizations. There were 44 privately-run facilities in the U.S. in the late 1980s, according to research by Management and Training Corporation, a closely held company that manages prisons.

Public Safety officials recommended Toews ask Blunt about lessons the British government learned in hiring companies to manage prisons, according to the memo. Companies manage 16 prison facilities in the U.K., according to APCTO.

While the performance of contractors in the U.S. has been “a mixed bag,” using private companies to provide prison services has the potential to save money, said Curt T. Griffiths, a criminology professor at Simon Fraser University in British Columbia who has studied the Canadian corrections system.

Program Types

The results will depend on whether employees are unionized and what kind of rehabilitation programs the contractor delivers, Griffiths said in a phone interview. The business case may be stronger in provincial prisons, where inmates tend to serve shorter sentences than in federal institutions, he said.

A number of publicly traded companies own and manage prisons, including Geo Group, Corrections Corporation of America, G4S Plc (GFS) and Serco Group Plc. (SRP)

GEO Group provides cleaning and maintenance at a detention center for youth in Miramichi, New Brunswick, run by the provincial government. It is the only facility in Canada to have a contract with a private operator, according to APCTO.

Private jails have generated controversy because of unease with “punishment for profit” and questions about the accountability of companies that run prisons, Griffiths said. “Proponents of privatization say ‘Look, you’ve got a much better chance holding the institution and its staff accountable than you do under a public system.’ If they don’t meet the contracted standard, well, you don’t renew their contract.”

To contact the reporter on this story: Andrew Mayeda in Ottawa at amayeda@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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