Wall Street Journal
By Zusha Elinson
July 02, 2018
The Trump administration’s new push for more federal detention facilities for immigrants awaiting asylum hearings or deportation has brightened the outlook for the country’s two largest private prison operators.
Tennessee-based CoreCivic Inc. and Florida-based Geo Group had already been helped by higher federal spending on Immigration and Customs Enforcement. Now, the Trump administration is seeking $2.8 billion in the 2019 budget year to increase the number of beds in immigration detention centers to 52,000—49,500 adult and 2,500 family beds—from about 40,000 now, a spokeswoman said.
Shares in both companies rose last month after ICE issued a notice that it may seek 15,000 new beds for families. An ICE official said it made the request for information on potential facilities and providers “in anticipation of the potential need to house a large number of family units” after Mr. Trump ended his policy of separating children at the southern border. So far this year, Geo’s shares are up 18%, while CoreCivic’s have risen 5.5%, according to Factset.
Geo declined to comment on any upcoming contracts. A CoreCivic spokesman said the company—formerly known as Corrections Corporation of America—is ready to accommodate the federal government’s changing needs and would review the request for information.
Last month, CoreCivic CEO Damon Hininger told investors that “this is probably the most robust kind of sales environment we’ve seen in probably 10 years.”
In a first-quarter earnings call in April, Geo Group CEO George Zoley said he expects opportunities for new contracts “as the president will be asking for a significant increase in the detention bed capacity for ICE” in the next budget cycle.
Immigrant detention has become an increasingly important source of revenue for private prison companies since the Obama administration, as the number of detainees grows and state prison populations decline. ICE uses both private companies and local governments to house detainees.
The share of CoreCivic’s revenue from ICE has risen to 25% in 2017 from 13% in 2007, while for Geo Group, the share expanded to 24% last year from 10% a decade earlier, according to the companies. The rest comes from operating federal and state prisons as well as other sources.
Geo Group’s revenue has risen every year since 2011, reaching $2.3 billion last year. CoreCivic’s revenue fell 4.5% last year to $1.77 billion after reaching a high in 2016. Both companies operate as real estate investment trusts.
Private prison operators took a hit in 2016 when the Justice Department’s inspector general found that private prisons were more dangerous than government-run facilities, prompting the agency to announce it would begin phasing out contracts for federal prisons, though not for ICE detention centers. The companies disputed the report’s findings.
The Trump administration revoked the plan to cut private prison use.
Both Geo Group and CoreCivic backed the Mr. Trump with political donations. Each donated $250,000 for Mr. Trump’s inauguration festivities and Geo Group held an annual leadership conference last year at a Florida golf resort owned by Mr. Trump.
With the Trump administration’s crackdown on undocumented immigrants, the number of people detained by ICE on a daily basis has now risen to more than 40,000, higher than average for any previous year, according to federal data.
Between Oct. 1 and June 17, the U.S. Border Patrol arrested roughly 273,000 people, a 17% increase over the same period a year ago, according to government data obtained by The Wall Street Journal.
The companies which each operate multiple immigration detention get paid a daily rate for each immigrant they detain. Both companies told investors that fewer beds have gone unused as border apprehensions rise.
“As a service provider and partner to the federal government, we do not take a position on, or advocate for or against, criminal justice, sentencing, immigration enforcement or detention policies,” said Geo spokesman Pablo Paez.
The rising number of people being detained “is increasing the chances of new business wins that are not the product of long and often delayed public procurement processes,” analysts at SunTrust Robinson Humphrey wrote in a report last week.
As their business has grown, these private contractors have come under increasing scrutiny for the conditions at their detention centers. Human Rights Watch last week released a report criticizing the medical care in both privately and publicly run facilities after ICE reported 12 in-custody deaths in fiscal 2017, the most since 2009.
Human Rights Watch researchers highlighted the case of Jose Azurdia, a 54-year-old Guatemalan man who died in December 2015 at the Adelanto Detention Facility run by Geo Group in Southern California. Mr. Azurdia wasn’t attended to quickly enough while having a heart attack, says the report.
Geo spokesman Mr. Paez said that he couldn’t comment on specific cases, but said the company delivers “high-quality around-the-clock medical care.”
Meanwhile, the company is waiting to hear whether it will win two contracts that it submitted proposals for last year: a pending procurement for the management of the government-owned, 700-bed Florence, Arizona processing center, and an ICE contract for secure transportation services in the San Antonio, Texas area.
For more information, go to: www.beverlyhillsimmigrationlaw.com
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