Private Prison Companies Reject Resolutions to Fund Rehabilitative, Reentry Programs

On December 23, 2014, GEO Group, the nation’s second-largest for-profit prison firm, demonstrated it was a “grinch” by objecting to a shareholder resolution that would require the company to spend just 5% of its net income “on programs and services designed to reduce recidivism rates for offenders” in GEO-run correctional facilities. Corrections Corporation of America (CCA) filed an objection to a similar resolution in January 2015.

The resolutions were submitted by PLN managing editor Alex Friedmann, who also serves as associate director of the Human Rights Defense Center (HRDC). An activist shareholder, Friedmann owns a small amount of stock in both CCA and GEO Group; in the 1990s he served six years at a CCA-operated facility prior to his release in 1999.

“As a former prisoner, I know firsthand the importance of providing rehabilitative programs and reentry services,” Friedmann stated. “I also know firsthand the incentive of private prisons to cut costs – including expenses associated with rehabilitative programs – in order to increase profit margins.”

Citing data from the Bureau of Justice Statistics, the resolutions note that “Recidivism rates for prisoners released from correctional facilities are extremely high, with almost 77% of offenders being re-arrested within five years of release.” Further, “[t]he need to reduce recidivism rates for offenders held in [private prisons] is of particular importance, as two recent studies concluded that prisoners housed at privately-operated facilities have higher average recidivism rates.” [See: PLN, Feb. 2014, p.14; Dec. 2009, p.11].

The shareholder resolutions state that they provide CCA and GEO Group with an opportunity “to do more to reduce the recidivism rates of offenders ... and thus reduce crime and victimization in our communities.”

The funds specified in each resolution, amounting to 5% of CCA and GEO’s annual net income, “may be used to expand or enhance rehabilitative programs or services already provided in the Company’s correctional facilities; to establish new rehabilitative programs or services; or as donations to non-profit organizations that provide rehabilitative or reentry programs and services for prisoners or released prisoners,” and “shall be in addition to any funds the Company already spends, intends to spend or is required to spend on rehabilitative or reentry programs and services pursuant to the Company’s contracts with government agencies.”

GEO filed a formal objection with the Securities and Exchange Commission (SEC), seeking to exclude the resolution from its 2015 proxy materials distributed to shareholders. In its objection, the company argued that the resolution relates to a “personal grievance” or would further a “personal interest”; that it concerns ordinary business operations; and that the company had “substantially implemented” the resolution because it already provides some rehabilitative programs and services.

CCA also objected to the SEC, arguing that the resolution relates to “ordinary business operations” and comparing it to other shareholder resolutions that have sought, for example, to require companies to “test and install showerheads that use limited amounts of water.” In a statement to The Tennessean newspaper, the company referred to the resolution as “activist gamesmanship.”

According to its website, GEO claims it “believes that inmates and detainees should be given the greatest opportunity to improve their health and welfare through rehabilitation and educational programs.” And in a press release issued by CCA in September 2014, the company announced “a series of commitments” to rehabilitative programming, saying it would “play a larger role in helping reduce the nation’s high recidivism rate.” At the time, CCA CEO Damon Hininger stated that “Reentry programs and reducing recidivism are 100 percent aligned with our business model.”

“If GEO Group truly believes that prisoners in its for-profit facilities should have the ‘greatest opportunity’ for rehabilitation, then the company should have no objection to devoting just 5% of its net profits towards that worthy goal,” said HRDC executive director Paul Wright. “But apparently being able to retain 95% of its profits is not enough, since GEO has objected to the resolution – which clearly demonstrates its focus on the bottom line. The obvious conflict of interest between the company’s financial interests and that of public safety is the higher the recidivism rate, the higher the company’s profits due to more people returning to prison.”

“If CCA was serious about investing in rehabilitation and reentry programs for prisoners who will be released from the company’s for-profit facilities, then it would not have objected to this resolution,” Friedmann added. “But it did, so we can draw our own conclusions.”

The SEC will determine whether the resolutions will be submitted to the companies’ shareholders. This is the fourth time Friedmann has filed resolutions with CCA and/or GEO Group; previous resolutions have addressed issues related to rape and sexual abuse in private prisons, the conversion of CCA to a real estate investment trust, and the high cost of phone calls made from privately-operated detention facilities. [See: PLN, July 2014, p.52; Jan. 2014, p.44; May 2013, p.32; June 2012, p.32; March 2012, p.18].

Sources: HRDC press releases (Dec. 29, 2014 and Jan. 12, 2015); The Tennessean