Justice Department Reverses Obama Private Prison OrderBy and
Company shares rise in after-hours trading following decision
Obama’s move ‘impaired’ future prison needs, Sessions says
Attorney General Jeff Sessions rescinded an Obama administration order directing the Federal Bureau of Prisons to phase out its use of private prisons, justifying investor bets on the impact of President Donald Trump’s plans on crime, immigration and deportation.
In a memo signed Feb. 21 but published Thursday, Sessions breathed new life into a decade-long experiment in hiring private companies to help manage the U.S. population of federal prisoners. Two key private prison operators, CoreCivic Inc. and Geo Group Inc., rose in after-hours trading.
The Obama administration’s September 2016 decision “changed long-standing policy and practice, and impaired the Bureau’s ability to meet the future needs of the federal correctional system," Sessions wrote in his memo. "I direct the Bureau to return to its previous approach."
Shares in the prison operators had jumped after Trump’s November election on investor expectations that his vow to ramp up deportations of illegal immigrants would require expanded facilities. The Department of Homeland Security -- which under the Obama administration had begun a review of whether to stop using private detention facilities -- this week began releasing details of Trump’s immigration policies, including proposals to detain undocumented migrants until they can be deported.
CoreCivic traded as high as $36 on Thursday after closing at $34, and Geo Group traded as high as $48.50 after closing at $47.37.
“The Attorney General’s announcement validates our position that the department’s previous direction was not reflective of the high quality services we have provided to the federal government for decades,” Jonathan Burns, a spokesman for CoreCivic, said in an e-mail.
Pablo Paez, a spokesman for Geo Group, said in an e-mail that “we are proud of our long-standing partnership with the Federal Bureau of Prisons and our strong record of providing safe, secure, and humane care to the men and women entrusted to us.”
Prison operators had been seeking to stave off, and then reverse, the Obama decision since at least the middle of last year. Geo Group hired a pair of former Sessions aides, David Stewart and Ryan Robichaux, to lobby for the firm in August 2016. They lobbied Congress over the federal government’s use of "contract correctional facilities," among other issues, according to disclosures that their firm, Bradley Arant Boult Cummings LLP, filed with the Senate Office of Public Records.
In addition, Geo gave a total of $225,000 to Rebuilding America Now, a pro-Trump super political action committee. The company also donated $200,000 to the Senate Leadership Fund, a Republican super PAC.
CoreCivic donated $250,000 to Trump’s inauguration committee in December, according to lobby disclosure forms.
Just a few months ago, the outlook for those companies wasn’t bright. The Obama administration said it was phasing out the contractors because of poor performance, insufficient cost savings and falling inmate population. The Justice Department under Obama found that private prisons were more dangerous and less hygienic than government facilities, citing higher instances of assault, inappropriate use of solitary confinement and inadequate medical treatment.
"They already have a terrible record," Judy Rabinovitz, deputy director of the ACLU Immigrants’ Rights Project said Thursday in a phone interview. There’s a "good chance" that cramped prison conditions resulting from the crackdown on undocumented immigrants could result in lawsuits, she added.
The U.S. prison population increased by almost 800 percent between 1980 and 2013, often at a far faster rate than the Bureau of Prisons could handle at its own facilities, then-deputy Attorney General Sally Yates said in August. By 2013, with both the federal prison population and the proportion of federal prisoners in contracted facilities reaching their peak, the bureau was housing about 15 percent of prisoners, or almost 30,000 inmates, in privately operated facilities.
— With assistance by Kartikay Mehrotra, Katia Dmitrieva, Lauren Etter, and Erik Larson
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.