Behind bars hotels

IssueDecember 2001 - February 2002
Feature by Tikiri

Internationally, the role of the private sector in the criminal justice system is now substantial and set to expand. On top of contracted services such as food, cleaning, laundry and medical care, the last 20 years have seen private companies take charge of designing and building prisons as well as managing them, particularly in the US, Australia and Britain; with Puerto Rico, Canada and South Africa following closely.


A cheap deal?

In the US, the prison-industrial complex is now able to offer privately-financed prison beds for all local, state or federal inmates: welcome to “B&B (Behind Bars) Hotel”! And they are brilliant competitors, as they are prisons designed to be run cheaply and more efficiently than a those built by the same companies but designed for a higher operational cost under state or local authority management.

But “behind the bars hotels” are not seen yet as the best profit-making system: “obstacles include the short-term nature of contracts, absence of assurances on prisoner populations and uncertainty about future increases in per diem operating costs”. The 6 September edition of The Wall Street Journal confirmed this: Wackenhut Correction Corporation (WCC), one of the world's two leading companies in the sector, has threatened to make the State of Mississippi pay for empty beds. Mississippi is moving prisoners from local jails to the private prisons to make up the shortfall!

New prisons for new "criminals"

The US prison population has increased massively during the last 20 years but recently began to stabilise - though the “war on terrorism” may get it back on the rise. The contracts for two new detention centres for “criminal aliens” in Georgia have just been announced, with more expected to come. The financial experts know it: the share value of the Corrections Corporation of America (CCA) tripled over the month following the “11 September events”. Ten years ago opponents were saying that the prison-industrial complex might lobby to maintain unneeded prisons - just as the military won't get rid of unnecessary military bases and weapons systems - now Wackenhut have just announced that they have the best and fastest proposals to turn a military base into a detention camp for illegal aliens. Such a contract may be needed, as the company's shares traded at their lowest price this year, and which is still (October 2001) less than 28% of their value four years ago!

Private finance

In Britain, Private Finance Initiatives (PFI) offers huge amounts of public money towards private contracts for providing public services. Contracts are typically for a 25-year period. The development of new private prisons is still definitely on the agenda, with the number of inmates rising by 50% during the last eight years combined with the biggest clampdown on immigrants ever seen in Britain. In a joint venture with the huge monsters that are Wackenhut Correction Corporation and Corrections Corporation of America, Serco) and Sodexho Alliance SA entered the market through UK Detention Services and Premier Prison Services. Along with Securicor Custodial Services and Group 4 Prison Services, they share the market and are hungry for further contracts!

A risky business?

Let's have a look at the PFI scheme for custodial services at Lowdham Grange won by Premier Prison Service (WCC and Serco) and the Kvaerner construction company. The contract is worth £130m (at today's prices) over its 25-year lifetime, with projected costs of £37m. Using fast-track construction methods, the prison at Lowdham Grange was built in 14 months and became fully operational in May 1998, with capacity for more than 500 men. According to the British newspaper The Observer, “Premier was fined £83,000 for failures at Lowdham, including assaults on staff, inadequate responses to prisoners' complaints, indiscipline and the discovery of drugs. The Chief Inspector of Prisons found that staff morale had never been worse.” In the case of HMP Blackenhurst (formerly managed by UK Detention Services - a company 100% owned by Sodhex - and for which Premier and Securicor have also been unsuccessfully bidding) the British government has intervened to bring the management back into the hands of the public sector.

Follow the money

Several companies have discovered that owning prisons is a huge investment, when profits are really made from managing them and exploiting the inmates. In the US the Corrections Corporation of America (CCA) and Wackenhut Correction Corporation (WCC) have created trusts, Prison Realty Trust and Correctional Properties Trust respectively, which are buying prisons from their parent companies and also directly from the state. Though it is not always the case, don't be surprised to hear that a company can make a profit on the sale of a correctional facility to its own trust! CCA were proud to announce to their shareholders how much money was brought back into the company through the sell-off of three facilities, even though in practice CCA still operates them.

Another financial concern for the private sector is the fines that companies may have to pay if they are imposed by governments in response to breaches of contract. These are typically in relation to the provision of substandard facilities, violence within the facilities and escapes: in the US, Cornell Corrections have been forced to pay out a total of $500,000 in fines relating to such problems with the provision of service. In extreme cases it can also mean the premature end to operating contracts in which large investments have been made. In Britain, Securicor were fined £809,213 and lost three directors following a string of problems at their first PFI prison scheme at Bridgend.

Keeping prisoners in!

While those who support the idea of private prisons agree that responsibility for sentencing individuals is certainly a purely governmental function, in reality inmates often lose accumulated credit (remission time) for “good behaviour” when they are disciplined by prison staff or if they're placed in segregation cells for minor infractions.

The usual stock option system means that prison staff are also stockholders. This creates a bizarre self- interest: more days in prison for a inmate means more money to the company and thus more money to the stockholder. No-one is surprise to learn that studies showed up to eight times more “good time loss” in some private facilities than in similar state run detention.

Exploiting your captives!

Paid either on a management contract or on a per diem based contract, private companies are making the most out of their inmates. Correctional companies in the US recruit private industry to establish factories within their facilities under Federal Prison Industry Enhancement Program (PIE) certification. They offer assistance in obtaining financing for planned facilities and can provide expert consultation on tax and bond-related financial options. These value-added services give a strong competitive advantage to the client industries in seeking new business. They can also build and own the factory that they rent cheaply in order to attract medium-range companies not big enough to relocate their production in cheap-labour countries.

Knowing that PIE certification requires companies to pay inmates a minimum wage, it sounds very good for the client industry and the inmates, and not so good to WCC, CCA and their friends. But then again, inmates earning money have more to give to the facility: a for-profit payphone in a pub or office seems ok because anyone can choose to make their call from another, cheaper, place. Prison inmates don't have the choice and - like most services available in prison - the price of a call is often a nasty surprise.

According to the Albuquerque Journal in Jan 2000, the private prison operators received “commission- kickbacks” as high as 60 percent of their gross revenue generated by the collect-call telephone services in prisons.

When adding up all the public money, business money and cash back from inmates, operating in the private prison sector can still be a good deal for some companies.


Private companies are cheaper because of the competition the market then provides. Well take a look at it: CCA and Sodexho Alliance SA are partners in Britain as well as WCC and Serco, Sodexho Alliance SA and Serco are partners in Australia and before a student and activist campaign against Sodexho- Marriot, Sodexho Alliance SA owned 8% of CCA! Incestuous and confusing. The interlocking directorates of former government officials and corporate boards look alarmingly like the more familiar military-industrial version. As they explain themselves, private companies draw upon a wealth of experience and expertise: most of their management personnel have had careers in government prison systems, but it also means a network of links building bridges between public bodies and private prison companies.

Private prison and antimilitarism

When freedom and peace are a leitmotiv to you, you don't need any special reasons to oppose the prison system. As an antimilitarist, the connections between several companies involved in private prisons and the defence sector are not so surprising. Wackenhut Corporation (WCC being its subsidiary) was formerly an intelligence company, which metamorphosised into a “guard” company (an 1883 law forbids the US government from hiring private eyes).

In the US, Wackenhut and Serco are responsible for the security of military nuclear missiles and systems respectively, and in Britain. Serco is part of the consortium managing the Aldermaston Atomic Weapon Establishment - though not for its security which is provided by Ministry of Defence police (see PN 2442 p22-23 for background).

Sodexho Alliance SA also as its own defence subsidiary, called Sodexho International Defence Services, which in Australia is part of a joint venture with Serco: Serco Sodexho Defence Services. They specialise in providing “leading edge” support management and logistic services to armed forces on a global basis and work for Britain, Mexico, Australia, and NATO.

In the end, let's not forget that whether under private or public management, prisons are always a useful tool for locking up the opponents of the dominant system. The promotion of private prisons is only carried out in response to the public authorities deciding who should be locked up in the first place: either direct opponents - as political prisoners - and many conventional criminals but also indirect opponents, such as asylum seekers who are fleeing from devastated countries.

Topics: Corporations, Prison