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  • mcprison mcprison Jul 25, 2000 2:41 PM Flag

    Forbes article on WHC 1


    August 7, 2000

    SECTION: Companies, People, Ideas; Pg. 070

    652 words

    HEADLINE: Boys Will Be Boys

    BYLINE: Mark Tatge

    Wackenhut says
    its prisons are no worse than the public ones. Is
    that good

    CORRECTIONS, the nation's number two private prison
    insists it does not have an image problem.

    Sure, there have been stabbings, riots and sexual
    assault indictments at
    Wackenhut-run lockups. But
    this stuff happens at prisons, the company says.

    Maybe, but investors have reason to wonder. Once
    a Wall Street darling,
    Wackenhut, with 48
    prisons and 1999 revenues of $438 million, has fallen
    Wackenhut's stock is down 65% in the past year
    from a high of $21. There's
    probably no better
    sign that Wackenhut is hurting than its recent hiring
    of Los
    Angeles crisis p.r. man Michael Sitrick.
    He's the guy who helped Food Lion
    battle ABC and
    wrote the book Spin: How to Turn the Power of the Press
    to Your
    Advantage" (see "Gotcha!"). "There are
    violent people in these prisons. This
    isn't summer
    camp," says Sitrick. "Are these guys [Wackenhut] any
    better or
    worse than public prisons?" That's a
    switch. This, after all, is the industry
    that several
    years ago said it would do a better job than the public
    sector: Not
    only will taxpayers save a bundle, but
    they'd teach government something about
    hooligans. Easier said than done. In Texas, 12 former
    employees have been indicted on charges that
    they raped or had sex with female
    inmates at a
    state jail in Austin. Texas officials have taken
    control of the
    lockup. In Louisiana, the U.S.

    Justice Department sued Wackenhut, alleging that
    guards were beating young
    boys, throwing gas
    grenades into their barracks and holding them for long

    periods in isolation. Wackenhut, which surrendered the
    prison, disputes the

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    • And if that wasn't bad enough, two prisons in New
      Mexico that Wackenhut was
      hired to run were plagued
      by stabbings and deaths last year. State police
      rushed in when 300 inmates rioted. Wackenhut
      blames the state for sending it
      rival gang members
      who had scores to settle.

      Wackenhut Chief
      Executive George C. Zoley says that such problems are
      part of running prisons. "If someone wants to get
      in a food fight at one of our
      prisons there is
      very little we can do to stop that," he says. "We have
      had some
      operational issues at our higher
      security prisons, but those issues have settled
      Wackenhut, 56% owned by Wackenhut Corp., the Palm Beach
      Gardens, Fla.
      security firm, has added an ombudsman,
      an investigative arm, cameras to monitor
      prison staff, and regional vice presidents to monitor
      facilities. All this
      costs money, which is one reason why
      expenses have been rising faster than
      revenue at

      About 60% of the cost of running a prison is
      labor. Wackenhut and the
      industry leader,
      Corrections Corp. of America, have had more than their share
      problems because they ineptly managed the
      prisons, among other things hiring
      poorly trained
      guards. At one CCA prison in Youngstown, Ohio, for
      example, six
      prisoners escaped after finding out
      motion detectors weren't working.

      All this bad
      publicity comes when voters are pressuring elected
      officials to
      spend less on prisons and more on
      education. Crime is down, and the trend is
      keeping drug offenders and nonviolent criminals out of

      Recognizing this, Zoley is steering
      Wackenhut toward opening higher-security
      prisons paying
      more per prisoner -- a daily average of $44.58 per
      inmate, up
      from $38.43 in 1996. But that's no panacea
      for a weak bottom line; high-security
      cost more to build and operate. Moreover, accounting
      rules now dictate
      prison companies' expense salary
      and training related to opening a facility up

      front rather than spreading them over time. Which is
      one reason why earnings are
      Wackenhut's revenues rose at an annual compound rate of 39%
      1994 and 1999, while profits grew even faster at
      58%. This year earnings will be
      flat at $1 per
      share. For the growth-stock fans Wackenhut used to have,

      • 1 Reply to mcprison
      • It is incredible to think that the other
        prissions local state and federal don't have problems, all
        you have to do is read the local newspaper here in
        Abilene, Texas and find out that some of the same type of
        stuff has taken place, it would be wrong to think that
        the pop. of inmates at WHC and CCA would be any
        different than the others, would it not..?

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