The private prison industry was crashing — until Donald Trump’s victory

By Chico Harlan      November 10, 2016 

The Otay Mesa detention center near San Diego, Calif., is operated by Corrections Corporation of America, under contract with Immigration and Customs Enforcement. CCA is one of the largest private prison company in the country.

Only two months ago the private prison industry was reeling. The Justice Department had announced a plan to end the use of the private facilities for its federal inmates. Stocks of the corrections companies nosedived. The presumed next president, Hillary Clinton, used the debate stage to advocate for an even broader move away from the facilities at the state-level.

But the election of Donald Trump has quickly revived the fortunes of one of America’s most controversial industries.

Investors are now betting heavily that, in Trump’s administration, the private facilities will be an essential component in a mass-scale deportation plan. They also say that Trump, given his background in private business, could push to undo the Justice Department plan. Trump’s new attorney general — Rudy Giuliani is one name that has commonly surfaced — could take that step fairly easily, by continuing and extending contracts with the private companies rather than letting them expire without renewal, as the current plan calls for.

“You’ll have a new attorney general who might have a new view of that dynamic,” said Ryan Meliker, managing director at Canaccord Genuity who analyzes the private prison industry. “It seems like there is less confidence from the market that those earnings [from Justice Department contracts] are going away.”

In the hours after Trump’s victory, the U.S.’s two largest private prison companies, CoreCivic and the Geo Group, saw their stocks soar like few others on Wall Street. Shares of CoreCivic, known until last month as Corrections Corporation of America, jumped 43 percent Wednesday and maintained those gains on Thursday. (Still, the price is down from the start of the year.) GEO’s shares bumped up 21 percent.

Sign up

Those companies hold a variety of prisoners and detainees, including those supplied by state governments, by the Justice Department, and by the Department of Homeland Security. Though the Justice Department announcement in August didn’t apply to immigrant detention, Homeland Security said two weeks later that it was considering a pullback of its own, with an advisory council looking at whether private immigrant detention “should be eliminated.”

During the Obama administration, the detention of immigrants has become an increasingly important part of the business model for GEO and CoreCivic. The U.S. Immigration and Customs Enforcement agency holds more than 60 percent of its 400,000 annual detainees at private facilities, and nine of the 10 largest detention centers are private.

Analysts expect that the use of immigrant detention could skyrocket under Trump, and his election strongly signals that ICE won't reduce its reliance on the private sector. Currently, ICE has about 34,000 beds at its disposal per night. In a New York Times article published in May, John Sandweg, a former acting ICE director under Obama, estimated that facilities would have to be expanded to fit at least 300,000 people in order for Trump to carry out deportations on the scale he has pledged. Deportees are often held for weeks or months while awaiting final approval from judges.

Though Trump does not mention private prisons or immigrant detention as a part of his official platform, he had pitched himself to voters as a tough-on-crime “law-and-order” candidate.

“This means that more and more criminals will likely find themselves behind bars,” said an article on CNA Finance, which follows market news. “At the end of the day, Corrections Corp Of America generates the most profits when its system of prisons and jails are full. o, Trump's win is a big win for [the company] and its investors.”

From The Washington Post