The U.S. Justice Department announced Thursday it has seen enough of private prisons, and will phase them out as soon as possible.
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It reorganized into a real estate investment trust in 2013 and has prisons in 20 US states and the District of Columbia, according to its website.
Shares of the two leading US private prison companies plummeted on the announcement.
Stock prices of the country’s two biggest private prison companies – Corrections Corporation of America and GEO Group – nosedived by almost 25 percent Thursday morning.
Deputy Attorney General Sally Yates sent a memo on Thursday that said officials must not renew, or at least must significantly scale back, their contracts with private prisons.
The practice has become increasingly controversial, proving more problematic but no less expensive than the use of state-run correctional facilities.
Last month, a federal inspector general’s report said conditions in 13 private prisons under contract with the Bureau of Prisons were found to be significantly less safe than in prisons operated by the bureau.
“The fact of the matter is that private prisons don’t compare favorably to Bureau of Prisons facilities in terms of safety or security or services, and now with the decline in the federal prison population, we have both the opportunity and the responsibility to do something about that”, Yates said.
Mr Hanson said both companies would need to update their financial outlooks after the Justice Department news.
Corrections Corp spokesman Jonathan Burns said Thursday’s announcement only affects 7 percent of CCA’s business and that the inspector general’s report “has significant flaws”.
They are not as safe or as well run as government correctional facilities, the Justice Department concluded after an extensive review process.
Pueblo County Commissioner Liane “Buffie” McFadyen was perhaps the loudest opponent of private prisons when she served in the General Assembly from 2003 to 2011. There has been pressure at the state level to end contracts with for-profit private prison operators as well.
The Justice Department has no direct authority over the privately run state prisons that housed more than 91,000 inmates as of 2014.
“And I think there have been questions about the economics of the private facilities versus the federal facilities”, she said “There have been issues about security and safety, and there have also been issues raised about the services provided”.
The private prisons on the chopping block are operated by three private companies – Corrections Corporation of America, GEO Group Inc., and Management and Training Corp.
Yates’ memo does not apply to state prisons, even the ones that are privately run, and it does not apply to Immigration and Customs Enforcement and US Marshals Service inmates.
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The statement made no mention of a move to close privately run migrant detention facilities.
