Homeland Security Agency to Study Ending Use of Private Prisons

  • Review follows Justice Department decision to phase them out
  • Shares of private prison operators fall on news of the study

The Homeland Security Department will review whether to end the use of private prisons for detained immigrants, a move that caused shares of prison operators to plunge.

Homeland Security Secretary Jeh Johnson announced Monday that an internal advisory council will study whether U.S. Immigration and Customs Enforcement should move in the same direction as the Justice Department, which has decided to phase out its use of private prisons.

The panel will "review our current policy and practices concerning the use of private immigration detention and evaluate whether this practice should be eliminated," reporting back by Nov. 30, Johnson said.

Corrections Corp. of America fell 9.7 percent to $15.81 at 1:28 p.m. New York time, and the GEO Group Inc. was down 6.5 percent to $20.49.

For a Bloomberg Intelligence analysis of revenue risks, click here.

The Justice Department announced earlier this month that the Federal Bureau of Prisons will phase out the use of privately-operated prisons with the goal of ultimately ending contracts for them.

At the time, that announcement had an immediate impact on companies that profit from prison contracting, including Corrections Corp. and GEO Group. The stocks pared losses however, as analysts said the impact may be less severe than initially expected.

Federal actions won’t affect contracts with individual U.S. states, and larger state-level contracts are “arguably more important” for the private prison operators, Daniel Hanson, an analyst at Height Securities, wrote in a report when the Justice Department decision was announced.

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