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Prison Firm Confronts Operational Problems

By Matt Gouras

NASHVILLE, Tenn. - Troubles seem to keep mounting this month for the nation's largest operator of private prisons. Corrections Corporation of America suffered through two prison riots this week _ one in Colorado and another in Mississippi. The uprisings follow a July 7 homicide at a Nashville facility, which is still being investigated, and a smaller uprising in Oklahoma.

The spate of bad news is providing fodder for critics of privately run prisons and prompting a slight drop in CCA's stock price. In the prison industry, no news is often good news.

"I think the idea of privately operated prisons is one that is still controversial," said Richard Crane, a consultant in the industry and former CCA attorney. "(Bad incidents) give those who are opposed to privatization something to beat their drum about."

Nashville-based CCA, with roughly 62,000 inmates in 20 states and the District of Columbia, says it is confident nothing is wrong with its operations and believes it is adequately staffed. Problems, the company said, are simply bound to occur from time to time for the nation's sixth-largest corrections system.

"We feel highly confident in our capabilities as one of the nation's largest corrections systems," said Louise Chickering, a CCA vice president. "We do not feel that any of these are an indication of lack of quality of professionalism or expertise on the part of our experienced corrections staff."

The stock price started sliding Wednesday, and continued Thursday, off roughly 5 percent over the two days to $38.02 per share Thursday on the New York Stock Exchange.

Andy May, an analyst with Jefferies & Company Inc. in Nashville, said he doesn't believe the problems pose a long-term threat to CCA.

"The short answer is I don't think this is a material issue for earnings immediately. It has some negative impact at the margin on industry perception _ but over the long term not a very consequential one," said May, who has a hold rating on the stock.

Mayhem broke loose Tuesday at CCA's southern Colorado prison near Pueblo when hundreds of prisoners attacked cellmates, destroyed some units with fires and burned a vocational greenhouse to the ground.

Then on Wednesday, about 30 inmates at the Tutwiler, Miss., facility were involved in a similar riot, burning mattresses and clothes. Earlier this month, two inmates were injured at the CCA institution in Wantonga, Okla., after a disturbance there.

Perhaps more troubling is the ongoing criminal investigation into the death of a female inmate at a county detention center in Nashville. The woman was found dead with a skull fracture after an incident with guards. Nashville police said Thursday their investigation will result in "probable" grand jury consideration.

"I don't think you can put the death in Nashville in the same category as the others," Crane said. "The death in Nashville is something that is seriously wrong and outside the normal bounds of the operation of a prison."

Such news is prompting some to second-guess the logic of using private companies to run prisons.

Critics said the string of problems shows that privately run prisons are a bad idea, and that grouping prisoners from multiple states under the care of low-paid, often inexperienced guards will lead to trouble.

"Almost half of the employees in the facility have no experience whatsoever," said Ken Kopczynski, with the Private Corrections Institute Inc., an advocacy group opposing private prisons. "I just hope enough people will wake up to the bad idea of private prisons. It just goes against all the principles of democracy."

Crane said a private company like CCA is going to get far more publicity than if the problems were happening at public prisons in various states. And it's hard to compare the track records of the two.

"Without some sort of comparison it looks bad. It may be bad, I don't know," he said. "Without some apples to apples comparison we just don't know."

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