Privatization: CCA’s No-Bid Family Immigrant Detention Contract Pays Off Whether They House Detainees or Not

By David Dayen, author of Chain of Title: How Three Ordinary Americans Uncovered Wall Street’s Great Foreclosure Fraud.

A while back I wrote a long piece for Talking Points Memo about the privatization of the criminal justice system. And one thing I learned is that it’s a misnomer to call the two big shots of this industry, Corrections Corporation of America and Geo Group, “private prison companies.” Because prisons are not their most lucrative business line; in fact, they only hold around 8 percent of all U.S. prisoners. In recent years, these companies have diversified into a number of associated businesses, from transportation to electronic monitoring to community corrections.

But their biggest growth opportunity – and if you listen to their earnings statement calls they’ll tell you – comes from federal contracts for warehousing migrants. As much as 45 percent of CCA and Geo revenue comes from the federal government now. And while we don’t normally see the terms of these agreements, the Washington Post unearthed one that is breathtaking in how it slathers private operators in taxpayer dollars. Privatization watchers take note.

The contract in question gives CCA the right to operate the South Texas Family Residential Center, a 2,400-bed facility for women and children asylum seekers in the remote scrubland of Dilley, Texas, that has been nicknamed “baby jail.” Women and children were never detained before; they were just given a summons to appear in court. But with the influx of migrants in 2014, the Obama Administration reacted to public pressure by effectively jailing families fleeing Central American violence.

Not only was this a no-bid contract handed to CCA for four years and $1 billion, but under the terms, they would get paid whether the beds were filled or not. From WaPo:

In hundreds of other detention contracts given out by the U.S. Immigration and Customs Enforcement agency, federal payouts rise and fall in step with the percentage of beds being occupied. But in this case, CCA is paid for 100 percent capacity even if the facility is, say, half full, as it has been in recent months. An ICE spokeswoman, Jennifer Elzea, said that the contracts for the 2,400-bed facility in Dilley and one for a 532-bed family detention center in Karnes City, Tex., given to another company, are “unique” in their payment structures because they provide “a fixed monthly fee for use of the entire facility regardless of the number of residents.”

The rewards for CCA have been enormous: In 2015, the first full year in which the South Texas Family Residential Center was operating, CCA — which operates 74 facilities — made 14 percent of its revenue from that one center while recording record profit. CCA declined to specify the costs of operating the center.

Lockup quotas written into contracts are somewhat common, but this is a large facility getting paid out at 100 percent, not some guaranteed minimum.

Incidentally, these are awful facilities, likened by one former Japanese internment camp survivor as identical to her experience. As of May, CCA’s camp in Dilley had been cited for twelve different state regulatory violations, including failing to provide medical care to a woman suffering multiple seizures.

Awful facilities is par for the course for CCA and Geo. A Justice Department Inspector General report released a few days back confirms that private detention facilities are more violent and unsafe than their publicly-run counterparts. Anyone who read Shane Bauer’s epic inside investigation of a CCA facility (where he worked undercover as a guard for four months) would already know this.

Immigrant detention has been a lifeline for CCA, which teetered near bankruptcy as recently as 15 years ago. And with sweetheart deals like this, you can see why. The deal had to be routed through the city of Eloy, Arizona, where CCA already ran an immigrant detention center for men. ICE got Eloy to modify their contract to allow CCA to build the facility in Dilley, freeing ICE from having to bid out for the project, a truly insidious loophole. Eloy, a city of 17,000, got a cut of the profits (about $1.8 million of the $1 billion, 4-year contract).

Mark Fleming, an attorney at the National Immigrant Justice Center, who has reviewed hundreds of federal ICE contracts, said the deal was “singularly unique” and was designed to “avoid transparency.” The center obtained copies of the financial agreements through Arizona open-records laws and gave them to The Post. Several other experts on federal procurement said that while the government can avoid bidding laws in urgent or national security cases, they had never before seen a facility in one state created with the help of a recycled contract from another.

“This is the arrangement of a no-bid contract by twisting and distorting the procurement process past recognition,” said Charles Tiefer, a University of Baltimore law school professor, former solicitor and deputy general counsel of the House of Representatives, who reviewed the deal at the request of The Washington Post.

CCA winds up with $20 million a month guaranteed, even when Dilley is almost empty, which is has been recently, mainly because the facility doesn’t comply with federal law. Unbelievably, ICE worked with the state of Texas to get Dilley and the companion Geo Group facility in Karnes designated as child care facilities, to comply with a federal lawsuit requiring children to be held in non-secure licensed facilities. Given that the kids can’t leave, it’s hard to call them non-secure, and so this has been blocked. As a result, families have to be released quickly or not detained at all.

So because ICE made a rash decision to establish a legally dubious set of facilities, taxpayers are locked into propping up a predatory company with an execrable history. And that, friends, is maybe the ultimate lesson in the insanity of mass privatization of public services.