By David M. Reutter

With the expansion of the prison industrialization complex in recent decades, many communities have turned to prisons as a means to generate economic activity.
Considering the success of other small, rural areas in this endeavor, it comes as no surprise that the citizens of Hardin, Montana decided in 2006 to issue $27 million in tax-free bonds to build a 464 bed prison. What has surprised those citizens and the bondholders is that despite the prison being complete, it sits empty.

Hardin is a community with a population of about 3,300. To stimulate its economy, the City formed the Two Rivers Authority. While Hardin has no need for a big jail, it figured to cash in on the Montana Department of Corrections’ (MDOC) need for additional prison beds and treatment facilities. Barring that, the Authority saw the possibility of obtaining prisoners from outside local, state and federal government agencies.

The plan included allowing CiviGenics Texas, Inc. to operate the prison. The feasibility study prepared by GSA Ltd. of Durham, N.C. concluded that with an 80% occupancy level, enough revenue could be generated to cover all operational and debt service costs with a small profit. Of course, in ...

By David M. Reutter

The Michigan Department of Corrections’ (MDOC) efforts to comply with the requirement to deliver medical services are not effective. That is the conclusion drawn in an audit report issued in March 2008 by Michigan’s Office of the Auditor General. That conclusion comes as no surprise to those familiar with the MDOC. PLN previously reported on the continuing deficiencies in MDOC prisoner care, which has resulted in several prisoner deaths. See: PLN, May 2007, p. 1.

The Auditor’s report began by noting that MDOC spent $213.7 million for prisoner health care services in 2005-06, which equates to an annual cost of $4,223 for each of MDOC’s average of 50,595 prisoners. To provide those services, MDOC has a medical care contract with Correctional Medical Services (CMS) and a pharmaceutical company for delivery of prescription medicines, who receives a “fixed per prisoner per month rate plus the cost of pharmaceuticals.

It was found that efforts to provide prisoner with dental care were effective. The delivery of care to chronically ill prisoners, however, was found to be severely deficient. Chronic condition medical evaluations, routine annual health care screenings, and clinic visits resulting from prisoner requests for health care services were ...

Jose Sandoval, an illegal immigrant who suffered injuries to his arm and spinal column in an automobile accident after his arrest by the Border Patrol, has received a $200,000 settlement from the Corrections Corporation of America (CCA). CCA had subcontracted its transportation needs to the security firm of Wackenhut. Both CCA and Wackenhut are major players in today’s big-business world of privatized prisons.

A carpenter by training, Sandoval had come to this country to work in construction. Although a resident of Baja, California, he was arrested (in March 2008) in Yuma, Arizona. At the request of the Department of Homeland Security, he was being transported to Florence, Arizona in a van, along with five other detained aliens. When a flat tire caused the driver to lose control, the van rolled over, injuring Sandoval and causing him to be hospitalized. Notwithstanding the care he received at the hospital, Sandoval was in precarious health when he was later deported to Mexico. He got additional medical care after getting in touch with the Mexican consulate. The consulate, in turn, contacted an attorney, who ultimately filed suit in federal court on Sandoval’s behalf. After seven months, the case settled with Sandoval receiving $80,000 personally ...

In June, 2007, Roseland, New Jersey-based Community Education Centers, Inc, (CEC), the nation’s largest private provider of re-entry and rehabilitative services combined with Marlborough, Massachusetts-based CiviGenics, Inc., the largest provider of in-prison treatment in the country and the nation’s third-largest operator of private prisons. The combined company will have over 3,500 employees, operate 97 prisons, jails and halfway houses in 22 states with around 20,000 people in its programs and prisons and have projected annual revenues of over $200 million.

The buyout was made possible by a $53 million equity investment in CRC by private equity firms LLR Partners, Inc. and Primus Capital Funds. The cash infusion allowed CRC to purchase CiviGenics as a wholly-owned subsidiary.

CiviGenics operates 11 private prisons in Texas alone with over 100 treatment programs in 19 states. It provides treatment and rehabilitative services both in-prison and post-prison. Services provided include substance abuse counseling, life skills and work release. CEC operates halfway houses, six of which are in New Jersey, the largest of which houses 790 people. The combined company will focus on expansion of its halfway houses and rehabilitative efforts while maintaining the current CiviGenics level of prison management services. John Clancy, 59, CEO of ...

On March 3, 2011, American Service Group, Inc. (ASG) and Valitás Health Services, Inc. (VHS) announced a planned merger of the two companies that would create the largest contractor for healthcare services in prisons and jails in the United States.

Under the deal, VHS will acquire ASG for $26 per share, or about $250 million. Once the merger is complete the combined company will have around 11,000 employees serving more than 400 correctional facilities nationwide. It will have annual gross revenue estimated at $1.4 billion.

ASG and VHS are the parent companies of the largest players in the privatized prison healthcare industry. St. Louis-based VHS, formerly known as Spectrum Healthcare Services, is the parent of Correctional Medical Services, Inc. (CMS), while ASG owns Prison Health Services, Inc. (PHS) and Correctional Health Services, LLC (CHS). Those three subsidiaries provide medical, dental, mental health, pharmacy and electronic medical records services to prisons and jails.

“We’re doing this to take advantage of the growth opportunities that are available in the marketplace and to blend the companies to take advantage of their relative strengths,” said Dick Miles, VHS’s chairman and CEO. “We think that a lot of states are going to be considering outsourcing ...

A federal jury in Florida has awarded $1.2 million to a former prisoner who was paralyzed due to deliberate indifference to his serious medical needs while he was incarcerated at the Lee County Jail. The jury found that the jail’s for-profit medical provider, Prison Health Services (PHS), was solely liable. ...

by David M. Reutter

A Florida federal district court has rejected insider trading charges brought against a consultant for Correctional Services Corporation (CSC). The civil complaint, filed in September 2008 by the Securities and Exchange Commission (SEC), charged Dr. Zachariah P. Zachariah, his brother Dr. Mamen P. Zachariah, and his friend and colleague Dr. Sheldon Nassberg with using inside information to trade CSC stock.

On July 14, 2005 it was announced that GEO Group Inc., the nation’s second-largest private prison company, was acquiring CSC. The SEC alleged that the three defendants traded CSC stock from May to July 2005 based on non-public information concerning the acquisition. The evidence at trial showed the defendants periodically discussed securities transactions and traded in private prison company stock.

The evidence established that Dr. Zachariah had researched CSC, printed out information about the company on his computer on May 18, 2005, purchased his largest block of CSC stock the following day, and recommended it to others. The stock experienced a spike in trading volume the same day of his purchase. Zachariah was subsequently charged with insider trading. [See: PLN, Dec. 2008, p.36].

To prove its case, the SEC pursued a “multiple choice” theory at trial. ...

On December 29, 2010, the State Auditor of Hawaii released a report highly critical of the way the Hawaii Department of Public Safety (DPS) contracts for private prison beds on the U.S. mainland.

The report found that the DPS overstated the cost of housing prisoners in Hawaii while understating the cost of incarcerating them at private prisons in Arizona operated by Corrections Corporation of America (CCA). The audit also determined that the DPS used a sham inter-governmental contract with the City of Eloy, Arizona to circumvent open-bid procurement procedures that were required had the DPS contracted with CCA directly. The report noted that DPS personnel had been uncooperative and tried to obstruct the audit.

Hawaii has an unusual prison system in that the DPS runs the state police, state prisons and local jails. The state’s prisons have an operational capacity of 3,327 beds, leaving Hawaii more than 2,000 beds short of the number needed to house its prisoner population.

To address this persistent problem, beginning in 1995 the DPS started sending Hawaiian prisoners to privately-operated facilities on the mainland. Although introduced as a temporary measure to alleviate prison overcrowding, the outsourcing of prisoners to private facilities has become institutionalized and ...

by John E. Dannenberg

The Tenth Circuit U.S. Court of Appeals reversed the dismissal on summary judgment below and remanded to the U.S. District Court (D. N.Mex.) a pro per federal prisoner’s Environmental Tobacco Smoke (ETS) suit against private prison contractor Cornell Corrections, Inc. because Cornell’s grievance recordkeeping process was so inadequate that the question of administrative exhaustion could not be determined. In reversing, the Tenth Circuit noted that the intervening U.S. Supreme Court decision in Jones v. Bock, 127 S.Ct. 910 (2007) [see PLN, May, 2007, p. 36] now makes the burden of proving exhaustion an affirmative defense (overruling prior Tenth Circuit precedent).

Federal prisoner Ethan Roberts was housed in Cornell Corrections’ Santa Fe [New Mexico] County Adult Detention Center from April 1999 to June 8, 2000. He sued Cornell on June 9, 2003 in U.S. District Court under 42 U.S.C. § 1983 for irreparable lung damage caused by being exposed to saturated ETS 14-20 hours per day. Cornell defended on two grounds: that the statute of limitations had expired and that Roberts had not exhausted administrative remedies. The district court dismissed the case on summary judgment.

The Tenth Circuit found Roberts’ 3-year-and-one-day filing timely under controlling New Mexico ...

On June 1, 2011, Corrections Corporation of America (CCA), the nation’s largest for-profit private prison company, announced its most recent acquisition: Former federal Bureau of Prisons director Harley G. Lappin, who was hired by CCA as an executive vice president and the company’s Chief Corrections Officer.

Lappin retired from the BOP in May 2011, several months after his arrest on DUI charges by the Anne Arundel County Police Department in Maryland. According to a police report, his eyes were bloodshot, he had slurred speech and alcohol on his breath, and he failed sobriety tests. In addition to DUI he was charged with reckless driving, negligent driving and failure to obey the instructions of a traffic-control device. In an apologetic memo sent to BOP employees, Lappin cited “a lapse in my judgment ... giving rise to potential embarrassment to the agency.” [See: PLN, May 2011, p.20].

Lappin, who received probation on the DUI-related charges, joins another former BOP director already employed with CCA – J. Michael Quinlan, who was hired by the company in 1993. Quinlan is employed as a senior vice president who oversees CCA’s quality assurance program. He retired as director of the BOP in 1992, several months after ...