Big House Inc.

CCA's Florence, Arizona, jail.
Jackie Mercandetti

Arizona is a tough-on-crime state.

Between 1977 and 2003, the number of Arizona prison inmates increased nearly 1,000 percent, from 3,229 to 30,083.

But as legislators and policy leaders toughened sentencing requirements, they failed to provide enough money for housing these prisoners.

As of February 2003, the Arizona Department of Corrections had 3,733 more inmates than its facilities could handle.

The overcrowding crisis has powered a new movement in the state Legislature prison privatization.

The idea: Let private companies build lots more prisons. Let private companies manage the prisons. Let private companies staff the prisons.

Or, pay a private prison in another state to house inmates from Arizona.

All these ideas have either been implemented or are on the table here. And several legislators are pushing for further privatization to help alleviate the state's $1.3 billion budget shortfall.

Prison privatization is a brain child of free-market economists. Businesses run more efficiently than governments. Competition is good. Competition will drive down the price of prisons while at least maintaining the quality of service.

But while privatization of government services has been successful in some areas, it's proven disastrous when correctional facilities are involved. In place of savings and quality of service, a New Times investigation shows, states that privatize are often confronted with profiteering, inmate and guard assault and abuse, sub-poverty wages for employees and political scandals.

In Arizona, it's no different.

One of the most troubled private prison companies in the United States, Correctional Services Corporation, already houses 636 Arizona inmates in a facility in Newton, Texas. CSC also operates a minimum-security prison in Arizona for the DOC and has bids out to house thousands more inmates.

Last month, CSC was fined a record $300,000 by the New York (state) Lobbying Commission for failing to report free transportation, meals and other gifts it had given to legislators in an effort to keep more than $22 million in contracts.

In Arizona, CSC gave legislators $5,849, making it by far the largest campaign contributor among private prison corporations. Other prison companies combined for only $550 in contributions.

CSC has one full-time lobbyist in Arizona, and several key legislators have received campaign contributions from the company. CSC's president James Slattery and his wife gave $4,404 to legislators before the 2002 Arizona election. Together, they rank fifth in the amount of money given by any general business interest.

Besides a history of heavy-handed lobbying, the company has attracted the attention of government regulators for providing substandard services.

For example, in Florida, besides a litany of guard abuse and inmate escapes, investigators discovered CSC was holding inmates past their release dates so the company could collect more per diem dollars from the state.

Closer to home, CSC guards just a month after Arizona sent its first group of inmates to an out-of-state private prison failed to control a riot of 84 Arizona prisoners in January at the company's Texas facility.

When Hawaii investigators came to Florence, Arizona, to investigate severe problems with the housing of Hawaiian inmates at the jail operated by another large firm, Corrections Corporation of America, company officials told female investigators they could not enter the facility because guards, according to a report, "could not ensure their safety."

Still, the privatization idea and the influence of Correctional Services Corporation and companies like it grow in Arizona. Private prisons have already housed more than half a million inmates in the state, and proponents are rabid for more privatization.

Senate Bill 1126, introduced by senators Robert Burns and Robert Blendu, calls for the sale of all Arizona medium-security prisons to the highest bidder. That bill probably will die in committee, but proponents have said the idea is sure to appear later in other legislative budget proposals.

According to campaign finance reports, Burns received $774 from private corrections companies, $514 of that from CSC. The Slatterys together were Burns' largest contributor other than his own election committee.

Another bill proposing the state build a private prison in Mexico to house Mexican nationals convicted of crimes in Arizona also was narrowly defeated.

But the state is in the process of finding a private prison corporation to build and manage a 1,400-bed prison for Arizona's minimum-security inmates, as well as a 3,200-bed prison to house female inmates of all classification levels. If built, that women's facility would be the largest prison in Arizona.

And some legislators want more.

"I can see us going private with all the medium security," says state Representative Russell Pearce, chairman of the House Appropriations Committee and a longtime proponent of prison privatization. "Look, competition is good. And private companies have proven they can do it cheaper while meeting our standards. Why not move forward?"  

Apparently, campaign contributions are also good. Pearce received $812 from CSC alone in 2002, including $220 from the company's senior vice president, Russell Rau.

"Of course we would love to serve the state of Arizona in any capacity we could," Rau, who oversees the company's operations in the western United States, tells New Times. "We could save the taxpayers of Arizona a lot of money."

Nothing could be further from the truth, opponents say. The director of a national clearinghouse on privatization claims both Pearce and Rau are ignoring the facts.

"They're so full of crap," claims Brian Dawe of Corrections USA. "This is all about companies making a buck to the detriment of public safety. [Prison privatization has] proven itself time and time again to be a horrible idea."

In the early 1980s, President Ronald Reagan promised to "get tough on crime."

At the same time, Reagan promised to "get government off our backs and out of our pockets."

And so the private prison industry was born.

Executives in the fledgling field promised to revolutionize corrections. Tom Beasley, one of the founders of CCA, which operates the large facility in Florence, promised that all aspects of prison management would be improved. He vowed there would be higher wages for guards and improved programs and better living conditions for inmates. He said tight security and safety for inmates and guards would be given the highest priorities.

All this, he promised, could be accomplished at a savings to taxpayers.

Into the 1990s, research seemed to show that the experiment was working. While anecdotal evidence mounted that private prisons were more dangerous than public institutions and just as expensive a University of Florida professor was able to keep privatization on the front burner.

Charles Thomas, the only researcher who had extensively studied the issue at the time, claimed that private prisons were saving Americans between 10 percent and 20 percent over public ones.

In 1996, however, a report by the U.S. General Accounting Office concluded there was no clear evidence of cost savings.

That same year, Thomas was brought in by Arizona officials to analyze the cost-effectiveness of Management and Training Corporation's Marana facility, a private prison that handles minimum-security DUI inmates for the state Department of Corrections.

Thomas had the "credibility the state sought," one official recalls.

Thomas studied the private Marana facility and found that it was saving 13.8 percent to 16.6 percent over what a public prison would cost.

State government leaders cited the report as proof that privatization was the bright future for Arizona prisons.

Then, just two months after Thomas submitted his report to the state, the Florida Ethics Commission filed its first complaint against the professor.

It was later discovered that, among other indiscretions, Thomas had attended an MTC board meeting in Hawaii at the company's expense which apparently was small potatoes for him.

On October 21, 1999, Thomas was forced to pay the Florida Ethics Commission $20,000 because of his unsavory relationship with the private prison industry. State officials forced him to shut down his university research institute.

By 1999, it had become known that Thomas had received more than $3 million in consulting fees from private prison corporations, including several like MTC and CCA that operated in Arizona.

Thomas denied that he had done anything unethical.

With Thomas' research tainted, several independent researchers began taking a closer look at the private prison industry.

They soon came to vastly different conclusions than Thomas'.

Indeed with data collected by the U.S. Justice Department, as well as studies conducted by university criminal justice researchers, such as Judith A. Greene, James Austin, Ira Robbins and Frank Smith the truth came out:

• Private prisons, on average, operate only 1 percent more cheaply than public prisons, according to a Justice Department study. Most of the cost savings come from reduced salaries.

• In the United States, 49 percent more assaults on staff members occur in private prisons than in public ones.

• Inmate-on-inmate assaults are 66 percent higher in private prisons versus public prisons.

• The employee turnover rate in private prisons is 53 percent each year, compared to 16 percent for public prisons. This means that, on average, a private prison will have completely new staff every two years.

• Fifty-seven percent of all inmates in a private prison are released into the community where the prison is located rather than sent back to the jurisdiction they came from.

• From 1994 to 2000, 37 prisoners escaped from private transport companies. In the same time, the U.S. Marshal's Office transported twice the number of inmates without a single escape.  

• From 1995 to 2000, at least 251 of the 122,871 inmates held in private prisons across America escaped. California houses about the same number of inmates as private prisons hold nationally. Of the 160,606 inmates housed in secure California prisons during the same period, 11 escaped. That's one escape per 489 inmates in private prisons compared to one escape per 14,601 inmates in public facilities.

• According to the 2000 Corrections Yearbook, a yearly publication of corrections statistics from the Criminal Justice Institute in Maryland, private prison guards receive 35 percent fewer pre-service training hours than public corrections cops.

What's more, none of these numbers begin to touch on the fraud, political payoffs and scandals involving some of the nation's private prison companies.

Correctional Services orporation was one of the fastest-growing private prison outfits in America through the 1990s.

When the company went public in 1994, its stock traded at $7.50 a share. But investors soon became hot for private prisons. By 1996, CSC stock had tripled to $20.50.

Then came a rash of scandals and continued operating losses, and a pall was cast over CSC. Its stock hit an all-time low last year at $1.50 a share.

But hope was on the horizon. The company began to restructure by selling off losing assets, including its 600-bed prison in Florence, which the state is continuing to allow it to manage.

CSC now operates 37 detention centers nationwide that house up to 8,100 inmates, and its Youth Services international subsidiary operates 25 facilities with 3,600 juvenile prisoners. CSC's stock has rebounded a little to above $2 a share.

The company's western operations have helped fuel the resurgence. In addition to its contract to house the more than 600 Arizona prisoners in Texas, CSC has been approved to build a prison in Washington state. The company has several bids out for more contracts, including one to house 1,400 inmates in northern Arizona.

Arizona began transferring inmates to the CSC facility in Texas in December of last year.

Two months later, the company was pounded with the $300,000 fine by New York state the largest ever by that state's Lobbying Commission.

In New York, gifts to state lawmakers of more than $75 must be reported to the commission. But former CSC vice president Franklin Chris Jackson apparently ignored that law.

Jackson was found to have violated the statute on at least six occasions, giving plane tickets to one lawmaker, a $113 fruit basket to another and treating several lawmakers to fine wines and extravagant dinners.

In addition to the fine, district attorneys in Albany and Manhattan are criminally investigating CSC's activities, and the state's ethics committee and elections board are probing the company's business practices.

As might be expected, CSC's executives are distancing themselves from Jackson's activities.

"I like to call that a case of one bad apple in the Big Apple," CSC western operations director Rau says. "That is absolutely not how CSC conducts business in [the western United States]. The New York case is an isolated case."

Pearce, Arizona's House appropriations chair, maintains that, to his knowledge, CSC and other private prison corporations aren't engaged in unethical lobbying practices in Arizona. Though beside the point in a discussion of prison privatization, Pearce contends that the most aggressive lobbying efforts in Arizona are by lobbyists representing state agencies.

"I haven't seen anything like what you're talking about in New York," he says.

Interestingly, though, when first asked if he had received campaign contributions from private prison corporations or executives, Pearce said, "Not that I know of."

Asked if he had heard of Correctional Services Corporation, he said, "I get their names mixed up. I don't remember that name specifically."

When told that, in fact, his campaign finance records show contributions from five different CSC officials, he asked that the names be read off to him:

CSC president Slattery; Bernard Wagner, its business development head; John Mentzer, its chief financial officer; and Russell and Diane Rau are listed in the records. Rau provided Pearce with his fourth-largest contribution before the 2002 election.

"I know Mr. Rau," Pearce finally admitted. "He came to my office. Nice gentleman.

"But that doesn't mean I've been courted anywhere. They don't need to court me. I've been supportive of private prisons for longer than most of these companies have existed. And as you can see, I don't favor one over the other."

Senators Burns and Weiers, the pro-privatization legislators who also received large campaign contributions from prison corporations, did not return telephone calls from New Times.

Other state lawmakers who have received campaign contributions from prison corporations are House Speaker Jake Flake (R-Snowflake) and Senator Carolyn Allen (R-Scottsdale).  

According to data from the National Institute on Money in State Politics, a nonprofit campaign contribution watchdog organization based in Montana, CSC was by far the largest contributor in the state among for-profit corrections companies.

"All we're doing in Arizona is standing on the sideline trying to provide information to legislators," Rau says. "We are not trying to push and pry. That just isn't our style."

"Private prisons really do provide a quality product," Representative Pearce insists. He says Arizona only works with corrections companies with a history of providing said "quality product."

In sizing up CSC, Pearce must have failed to check out the company's track record in Florida, where it has done business for many years.

Its most troubled facility in that state is the Pahokee Youth Development Center, which a Florida juvenile court judge compared to a "Third World country that is controlled by . . . some type of evil power."

In 1998, a consultant for the Florida Department of Juvenile Justice reported that CSC had kept 10 juveniles "beyond their release dates for the sole purpose of making more money." According to the consultant, CSC officials had issued a memorandum telling staff to hold teenagers so they would be counted on the quarterly head count that determines how much education and juvenile-justice money the company receives from the state.

As of late 1999, state officials had confirmed 15 cases of abuse of inmates by staff at the facility.

CSC fought accountability in the case, refusing to release prison documents to ACLU attorneys. CSC lawyer Debra Dawn argued that the records weren't public documents because CSC is a private corporation, forcing the ACLU to file suit to win access.

In 1999, the Pahokee Center scored an abysmal 37 on a scale of 100 on its yearly state inspection. The facility, investigators pointed out, hired counselors with no experience, paid $16,000-a-year salaries (about $10,000 less than at public facilities) and offered little training. Inspectors also found scant supervision of employees and limited supervision of inmates.

Later in 1999, CSC sold the facility.

It, however, continued to run the Polk Youth Development Center.

In 2001, an employee of the Polk center won a $14,000 verdict in a whistle-blower lawsuit against the company. The employee and six others claimed they were fired after telling state officials their supervisors had instructed them to falsify documents. The other six didn't receive money because a Florida judge ruled that they had followed orders to falsify records. The workers said they were told to forge signatures and back-date reports so the company wouldn't lose its $31.3 million contract with the state.

In 2001, the state of Maryland forced CSC to repay $600,000 for services it had promised but never delivered. The payment came after state officials audited the Victor Cullen Center, where they found chronic understaffing, a failing education system, inadequate mental-health services and far too many incidences of staff abuses of inmates.

In Nevada in 2001, a CSC subsidiary, Youth Services International, was fined $41,500 for having too few employees on duty to meet required staffing levels. Annual salaries at the facility were $9,000 lower than at state-run institutions, which had caused more than 80 percent of the original staff to leave. On June 1, 2001, 50 inmates of the Summit View Youth Correctional Center run by CSC escaped to the roof and pelted guards below with debris.

One of Summit's employees was a former probation officer who, at the time of his hiring, was awaiting trial on six felony counts of having sex with a juvenile he was supervising.

In 2001, CSC decided to end its contract with the state of Nevada two years early. A Reno city councilwoman had called conditions at the CSC Summit View facility "absolutely appalling."

In Louisiana, where guards were paid $6 an hour by CSC, 18 guards staged a walkout in 1999. Late that year, an assistant U.S. attorney found that in a span of two months, there had been 104 inmate injuries at the firm's 276-bed Jena location.

"These [CSC] guys are charming," Brian Dawe of Corrections USA says sarcastically. "They are a civil attorney's dream come true."

Arizona law dictates that private prisons must operate at a standard nearly identical to that of Department of Corrections facilities. The DOC has three inspectors in each private facility to ensure compliance with state standards.

"Arizona is one of the stricter states on private prisons," Rau says. "So we have to find other ways to save."

Opponents admit that Arizona is fairly strict on private prisons wanting to come into the state. But once a company gets a foothold, they say, the firms find ways to get around regulations.  

Indeed, Pearce already says he would like to reduce the number of state inspectors overseeing the private prisons.

"Yes, three inspectors is too much," he says. "It's too much government. I'm not sure what the right number is, but [private prison industry officials] have proven they can be trusted more than that."

Rau says, "There are ways we could bring even more cost savings to the taxpayers of Arizona."

CSC's lobbyist in New York had been pushing lawmakers to loosen regulations before the company was fined $300,000 for its lobbying efforts there. CSC and CCA, the companies with the strongest presence in Arizona, both have well-documented histories of pushing local and state authorities to lessen government oversight of their operations. Like Rau, the company's other lobbyists have argued that less regulation means more savings to taxpayers.

But once regulations are diminished, national statistics show, the real trouble for local and state governments begins.

In states such as Florida, Maryland, Oklahoma, Texas, Tennessee and Louisiana, the negative effects of entrenched and underregulated private prisons become clear.

It costs state and local governments millions to clean up the mess when a prison doesn't run properly. For example, state and local law enforcement dealt with the 251 escapes reported between 1995 and 2000 (240 more than in the same-sized California prison system). Manhunts of dangerous felons typically cost local police agencies about $10,000 a day.

In several cases, the escaped inmates committed additional crimes. In a late 2001 incident, CiviGenics officials took four hours to alert police that convicted felon Sherman Lamont Fields had escaped from the company's facility. Meanwhile, authorities discovered, Fields had proceeded to his former girlfriend's house and shot her to death.

When inmates at the CCA facility in Florence rioted in 2000, CCA guards actually called 911 for help from local police. The Tactical Support Unit of the state Department of Corrections was finally called in to quell the uprising. In 2001, the CCA facility's warden was replaced after complaints by Hawaiian officials that the facility was unsafe for that state's inmates housed there. Besides the riot, the Florence prison had been plagued with numerous inmate beatings, as well as the April 2001 drug-overdose death of an inmate.

In 1998, four convicted killers escaped from CCA's prison in Youngstown, Ohio. Investigators later discovered that the CCA facility, which was supposed to be handling only medium-security inmates, was in fact holding more than 100 prisoners that should have been in a maximum-security prison. The dangerous inmates were then moved to a non-CCA facility.

"Everybody else pays for the private prison's problems," says Joe Masella, president of the Arizona Correctional Peace Officers Association, which represents more than 1,500 corrections officers in the state.

"In some cases, they've paid with their lives," Dawe says.

But escapes and assaults don't seem to cut into a private prison's profits. In fact, Dawe points out, the company usually benefits because years are added onto the sentences of inmates who attempt and succeed at escapes, which means more money for the corrections firm.

Of course, all these extra assaults and escapes cause extra lawsuits. And unlike in public prisons, guards in private facilities are not protected to some degree from litigation under state and federal law. This means that the costs of the suits are passed on to governments.

"Private prison companies have promised states that they will reduce or eliminate government liability," says Ira Robbins, an American University law professor and author of The Legal Dimensions of Private Incarceration. "But it's absolutely clear [under federal and state laws] that the states cannot divest themselves. If companies make that promise, it's an absolutely false promise."

New Times asked Robbins to critique the Senate bill supported by Burns and Pearce that would order the sale of several public prisons to private companies.

"Some of the things in this bill are incredible," Robbins says. "It appears to me that, through SB 1126, the state is throwing up its hands and saying, Bail us out.' But clearly the law does not allow the state to sell off its liability in this manner."

Joe Masella and the members of his organization are vehemently opposed to privatization of the state's prisons.

Masella says that wholesale prison privatization in the state would, over time, become a financial disaster rivaling the Legislature's alternative-fuels debacle.

"Except this will also take down public safety in the state," he warns.

"Simply put, all privatizing prisons would do is put the people of Arizona in greater danger," agrees Matt Knowles, a lobbyist to the state Legislature for Arizona's police and corrections officers.  

Pearce says Masella and Knowles are wrong. He says that "like anyone, I think a lot of corrections people are just fearful of change."

As might be expected, Masella and other state corrections officers are worried about salaries, because of the lower pay that correction officers in private prisons get both locally and nationally.

In 2000, the last year in which U.S. private prisons were willing to report salary information to the publishers of Corrections Yearbook, beginning employees at private firms made 23.4 percent less than those at public institutions, and employees at the top of the pay scale at private companies made 39.4 percent less than their public counterparts.

The average starting rate at private prisons was $8.48 an hour. Public prisons offered $11.05. The average maximum hourly pay for private prisons was $10.59. Public prisons offered $17.47.

Rau admits that CSC pays its employees less than public institutions. In Arizona, though, he says salaries are "nearly comparable." He says CSC and other companies in this state have good reason to keep pay near the levels of those at public facilities.

"If we're too much less," he says, "we just become a training ground for the public institutions. People would just leave when they got a chance to work at the DOC.

"And if our salaries were higher, we'd start pulling staff directly away from the client we're supposed to be serving."

Indeed, salaries in Arizona for private prison guards are closer to state corrections officers' salaries than in most states.

Private prison executives like to note the situation in Florence, 40 miles southeast of Phoenix. Florence is home to several private and public prisons. Surrounded by facilities draped in razor wire, the town is known as the Arizona Gulag.

Frank Smith, a Kansas-based criminal justice scholar who studied Arizona while writing about national corrections issues, says companies like CCA must offer competitive wages in that town to compete with the state for workers.

CCA can still make a profit in Florence for one reason -- it is housing the most highly subsidized prisoners in the country from Hawaii and Alaska.

Those states pay $58 per inmate per day. Comparatively, Arizona pays $38 per inmate per day to house its prisoners in Texas.

"Private companies might point to that as an example of quality wages, [but] it is far from the norm," Smith says.

What usually happens is that private prison companies, such as CCA or CSC, come in promising nearly comparable wages. But as time goes by, employees get minimal raises. While the maximum salary for an experienced officer at a public facility averages $36,328, the maximum salary for an experienced officer at a private firm averages $22,028, according to 2000 statistics from the Criminal Justice Institute.

So once a private prison takes over a public institution, experienced corrections officers leave for better jobs. On average, a private prison in America will turn over 90 percent of its staff every two years.

Which leaves prisons with guards too inexperienced to properly do their jobs.

Also, CSC and CCA, the two major operators in Arizona, have been known nationally to understaff their facilities. CSC, for example, has lost contracts in Florida, Maryland and Texas partly because the company did not meet staffing requirements set by the states.

Instead of cutting staff, some private prison companies overcrowd their prisons.

CSC appears to have tried to play this game at its Phoenix West DUI facility.

Phoenix West can house 445 inmates in eight dormitories, with 55 inmates in each dorm. Each dorm contains three toilets and three showers.

Last year, the prison's warden proposed increasing the inmate population of each dorm by 16 people. The warden did not seek legislative approval for the increase, which is required under Arizona law. Recently, inmates at the facility sent a letter to Governor Janet Napolitano protesting the attempts to add inmates to an already overloaded facility.

Rau, the CSC executive, denies his company cuts staff to dangerous levels or overcrowds facilities. And it is not true, he says, that his company makes its profits solely by undercutting wages and slicing staff.

Private prisons are able to turn a profit -- and save taxpayers money -- because they don't have to get bogged down in state regulations when purchasing buildings and equipment, Rau says.

But national data show that any savings generally aren't passed on to states.

Further privatizing prisons "is the worst idea to come along in a long, long time," Masella says. "I don't think Arizonans can completely fathom yet what troubles would follow."  

Like Pearce, Rau says such are the concerns of people afraid of change. He insists that companies such as CSC, not public prisons, are Arizona's future.

Rau ends on a high note:

"I love your great state!"

If many state legislators have their way, he may soon love it even more.

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