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Corrections Corporation of America Message Board

  • r7ualj r7ualj Jun 10, 1999 1:55 PM Flag

    CCA'S PARENT FACES 8 LAWSUITS

    06/09/1999
    The Commercial Appeal Memphis, TN

    Final
    Page C2
    (Copyright 1999)


    Prison Realty Trust of Nashville, the parent of prison
    manager
    Corrections Corporation of America (CCA), faces
    at least eight
    shareholder lawsuits over fees it
    paid to CCA since Jan. 1 that weren't disclosed until
    mid-May.

    Meanwhile, the price of the real estate
    investment trust's stock
    continues a 17-month decline,
    and it faces higher than expected costs on a smaller
    than planned bond issue.

    CCA owns and operates
    the West Tennessee Detention Facility at
    Mason
    from which two Montana inmates escaped last month.
    The
    Tennessee Highway Patrol and the Shelby and
    Tipton County sheriff's departments's work in the
    seven-day search for the inmates cost $67,000 to $72,000,
    officials estimated.

    During the last full week in
    May, at least eight law firms filed suits against
    Prison Realty Trust in Nashville courts, bidding to
    represent shareholders in class actions against the
    company.

    "On May 14, 1999, Prison Realty disclosed that it
    would retroactively increase the management fees paid
    to CCA by approximately $80 million," said lawyers
    from Wechsler Harwood Halebian & Feffer of New York,
    one of the law firms that filed suit.

    On May
    17, executives said costs for building and marketing
    jails increased. They said as of Jan. 1, they began
    paying CCA at the rate of $39,000 a year per bed, up
    from the $35,000 listed in the merger
    documents.

    From $19.75 on May 14, the price of the stock
    fell to $13.25 on May 26, when the first of the suits
    was filed. It had been $22.125 on May 10, after the
    profit report was released but before the quarterly
    report to the SEC was filed.

    Prison Realty also
    ran into difficulty with a debt issue they put out
    early this month. The company filed to sell $300
    million in bonds, hoping to pay a 9.25 to 9.5 percent
    rate of interest on the debt. On June 4, when the
    issue came to market, only $100 million was sold and it
    carried an interest rate of 12 percent. On that day,
    Prison Trust shares fell another 14 percent in value.

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    • I have counted 9 law firms to date that have
      announced their intent of filing a class action suit
      against PZN. See yahoo news relating to PZN. The 9th firm
      announced today. What a mob of lawyers! Among all the
      speculation, the sound analysis, the debate, and the poison, I
      continue to search for a small bit of good news. Maybe we
      will be up 1/16 today. Ah yes.

 
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