On the cover of the July PLN we reported that the nation's largest private prison owner and operator, Prison Realty/CCA, verged on bankruptcy and that one of its principal shareholders, Pacific Life Insurance Co., planned to infuse a $200 million equity investment into the ailing company. When the July PLN when to press the deal had been agreed to but not yet finalized. Just days later the deal fell through.

On June 30, Prison Realty announced that the deal had been "mutually terminated." For its part, Pacific Life was dissatisfied over key conditions that Prison Realty failed to meet. Pacific Life wanted Prison Realty to obtain a four-year extension on its bank credit and settle pending lawsuits for an amount not higher than the company's insurance coverage. Instead, Prison Realty arranged with its bank lenders to extend their credit line 18 months, and failed to resolve pending lawsuits.

The deal with its bankers also allowed Prison Realty to borrow $55 million to meet immediate funding needs. That, and a $760 million 10-year contract with the Bureau of Prisons to operate two federal prisons, gave Prison Realty management the confidence to restructure the company without outside help.

Wall Street analyst Robert ...

Wackenhut Wracked By Sexual Abuse Scandals

by Ron Young

After a decade as a leading operator of corporate-owned prisons, Wackenhut Corrections has become a prisoner of its own problems.

In New Mexico, a 500-page legislative report written by five consultants calls for a near-total overhaul of state prison operations, including two run by Wackenhut. After an August 31, 1999, riot that left a prisoner and guard dead [see PLN Dec. 1999],Wackenhut was faulted for having inadequate and ill-prepared staff earning Wal-Mart wages. Four prisoners have died in Wackenhut prisons in Santa Rosa and Hobbs since their opening in 1998. Three were stabbed to death, and one fatally pummeled with a laundry bag containing two rocks. But it was the murder of guard Ralph Garcia last August 31 at the Santa Rosa prison that put Wackenhut on the hot seat.

In Fort Lauderdale, Fla., five guards at a Wackenhut work-release facility were fired or punished for having sex with prisoners in the summer of 1999. No charges were filed, but Sheriff Ken Jenne wants to renegotiate contract terms with Wackenhut. Wackenhut operates two medium-security prisons in Florida-one in South Bay and one in Moore Haven. In June 1999, the American Civil ...

In March, 2000, six teenage boys, brutalized by guards in a Wackenhut prison in Jena, Louisiana, were removed by the judge who sentenced them.

State Judge Mark Doherty of Orleans Parish Louisiana was so appalled by their treatment that he made a special trip to the Jena facility to check on the welfare of twelve other boys he had sentenced. He eventually released five more, describing Jena as "a place that drives and treats juveniles as if they walked on all fours."

One of those released was a 17-year-old whom a guard had pinned face down on the floor. The youth had recently undergone an operation for gunshot wounds to the stomach and was wearing a colostomy bag when the guard held him to the ground by placing a knee in his back.

Judge Doherty is not the only one taking action. On March 31, 2000, the Justice Department filed a federal lawsuit against the Jena Juvenile Justice Center. It is the first time the DOJ has sued a private prison company.

In this original action, U.S. District Judge Frank Polozola has been asked to add the Jena facility to a November 1998 lawsuit filed against the state of Louisiana. ...

A private prisoner transport company agreed to pay $50,000 to the state of North Dakota to defray the state's expenses for recapturing a prisoner who spent three months as a fugitive after escaping from one of its buses.

Convicted child killer Kyle Bell was being transported from North Dakota to Oregon by TransCor America, Inc. when he escaped October 13, 1999, while the transport bus was refueling at Santa Rosa, New Mexico. TransCor guards failed to notice his absence for nine hours.

Bell was recaptured January 9, 2000 after authorities received a tip from a Dallas couple about his whereabouts. The couple collected a $50,000 reward posted by the state for information leading to Bell's recapture.

The settlement which TransCor paid May 31, 2000, is less than half the $102,127 the state billed the company in January. That bill includes the $50,000 reward as well as the salaries of nine state employees involved in the search for Bell.

TransCor (a subsidiary of Corrections Corporation of America) initially offered to cover $10,000 of the $50,000 reward. Attorney General Heidi Heitcamp threatened to sue the company if the full $102,127 bill was not paid.

North Dakota Gov. Ed Schafer said the settlement ...

On March 31, 2000, Prison Realty Trust, Inc. announced operating losses of $62 million for the year ended December 31, 1999. Its largest subsidiary and chief tenant, Corrections Corporation of America (CCA), reported a net loss of $203 million for 1999. Independent auditors of both Prison Realty and CCA indicated that "there is substantial doubt about the ability of either company to continue as a going concern."

According to some industry analysts, CCA's troubles began in July 1997 when it spun off a new corporation, CCA Prison Realty Trust Inc., which was structured as a real estate investment trust (REIT) [See: The Poor Get Poorer -- The Rich Get Prisons, PLN Dec. '97]. At that time CCA was a darling of Wall Street, its stock having doubled in value in the first six months of 1997 alone.

In its initial public offering, Prison Realty sold 18.5 million shares at $21/share, raising a whopping $388 million. The newly formed REIT immediately shelled out $308.1 million to purchase nine prisons from its parent, CCA, which it then leased back to CCA.

Some Wall Street analysts expressed concern about the incestuous relationship between Prison Realty (whose stock ticker letters are PZN) and its ...

In 1990, Dale Rinicker, then Sheriff of East Carroll Parish (county), Louisiana, saw a lot of money being made in the private "rent-a-jail" business and decided he wanted a piece of the action. So cooked up a scheme that would eventually net him close to half a million dollars before landing him in federal prison.

In April 1990, Sheriff Rinicker asked local attorney and businessman "Captain Jack" Wyly to finance the construction of a private prison in the parish to house state prisoners. Wyly agreed and later that month he formed a corporation, East Carroll Correctional Systems, Inc. (ECCS), which issued 100 shares of stock to Wyly cronies and family members. Thirty-five of the 100 shares were issued to 62-year-old Dorothy Morgel, Wyly's legal secretary of 35 years. Five of those shares were hers, the other thirty were earmarked for Sheriff Rinicker.

Soon after its incorporation, ECCS borrowed money from another of Wyly's corporations, purchased an abandoned school building, and began renovating it into the East Carroll Detention Center (ECDC). That same day, ECCS and the Sheriff's Office entered into a lucrative lease agreement whereby the latter would pay the former from the funds it received from the Louisiana Department ...

By Ronald Young

The court of appeals for the Tenth Circuit held that it was plain error to instruct a jury that, to find a prison guard liable on excessive force claim where the guard allegedly raped prisoner, it had to find both that he forced the prisoner to have sexual intercourse and that the use of force was applied maliciously and for the purpose of causing harm. This was an appeal of a case previously reported in PLN. See: Giron v. Corrections Corporation of America, 14 F.Supp.2d. 1252 (D.N.M. 1998).

Tanya Giron, a prisoner at the New Mexico Women's Correctional Facility (NMWCF), brought a 42 U.S.C. § 1983 action against NMWCF prison guard Danny Torrez, Warden Thomas Newton, and Corrections Corporation of America (CCA) which operates the NMWCF under contract with the State of New Mexico. Ms. Giron alleged, among other things, that her being raped by Torrez "constituted excessive force in violation of her Eighth Amendment rights."

A jury returned a verdict for the defendants and the district court entered judgement. Ms. Giron appealed, contending among other things that the jury instruction on her § 1983 claim was improperly given by the district court. The jury instruction stated ...

Two Alaska state prisoners on trial for a 1996 escape from a private prison were acquitted by an Arizona jury. The prosecution was undoubtedly stunned by the verdict in what was considered to be an open and shut case. However, the prosecutor in the case had no post-verdict comments for the press.

Jurors returned the not guilty verdicts on February 18, 2000, after Mark Hartvigsen testified that he had to escape from the Central Arizona Detention Center, run by Corrections Corporation of America, because his life was in danger, said his attorney Richard Gierloff.

Hartvigsen told jurors that he has a heart condition requiring medicine but that CCA guards would often withhold his medication for "disciplinary reasons." He also testified that CCA medical personnel gave him the wrong medication for a while, causing him to have a stroke.

Acquittals from escape charges are rare. The "duress defense" presented by Hartvigsen's attorney almost never succeeds. Under Arizona law, a prisoner has to convince the jury that he faced immediate life-threatening danger and that he had tried legal means to fix the problem.

The prosecutor in the case told the jury that Hartvigsen's allegations of medical mistreatment were not true, according to ...

Private Prison Contract May Be Invalid

The Colorado state court of appeals remanded a case to the trial court for a determination of the validity of a private prison contract. The court implied that the contract may be invalid but failed to indicate what, if any, remedy may exist if it is.

William Arnold, was transferred from a Colorado Department of Corrections (CDOC) facility to a privately operated prison in Dickins County, Texas. He was then moved to a private prison in Karnes County, Texas, and finally to a private prison in Colorado.

Arnold filed a motion in the trial court asserting numerous challenges to his transfer, but the court summarily denied the action, finding that Arnold had been transferred to Texas under the Interstate Corrections Compact, (ICC).

The court of appeals found that there was no evidence in the record to support the trial court's finding that Arnold was transferred pursuant to the ICC. The court also observed that the ICC relates to agreements between states, not to agreements between a state and a county of another state.

The court rejected Arnold's argument that the CDOC Executive Director lacked the authority under Colorado law to enter into contracts with ...

Sodexho-Marriot is a huge transnational corporation mainly consisting of hotel and food service operations. Marriott Dining Services, a subsidiary of Sodhexo- Marriott, operates the American University Tavern on the Washington D.C. campus of AU.

On February 15, 2000, a hip-hop concert was booked at the Tavern by AU Students for Sensible Drug Policy (SSDP). The show, "No More Prisons," was scheduled to coincide with many other events held around the country to protest the U.S. prison and jail population reaching two million, which had been estimated to occur on or about that date.

But a few minutes before the show was supposed to begin, AU SSDP vice president Dave Epstein announced from the stage that the management staff of the Tavern would not allow the show to happen.

Earlier that day AU and George Washington University's chapters of SSDP held an anti-drug war vigil in front of the U.S. Capitol. At the Tavern, several representatives from both AU's and GW's SSDP, as well as the Drug Reform Coordination Network, were distributing pamphlets outlining the increased cost of imprisonment and the decrease in spending on education.

"We had a hip-hop show planned," Epstein told a packed house from the stage of ...