Creative Financing of Private Prisons
By: Linda Gross
According to an article in SMART MONEY about the creative financing used to fund private prisons, municipal bonds issued to pay for the construction of private prisons and detention facilities may be instruments of self destruction for cities and towns who buy off on the sales pitch of the prison developers who take their profits off the top.
Trust Me, It Won't Cost A Thing
Bob Libal, who coordinates a non profit group opposing for-profit prisons, and operates a blog – Texas Prison Bid’ness”, says the developers of for-profit prisons tend to”…go after towns without a lot of sophistication and resource to do the due diligence.”
“… the development groups that get paid up front for building detention centers …saddle the bond-issuers (usually special public facilities corporations created solely for those projects) with risky debt.”
The Emerald Corporation wants you to believe that building a $75 million dollar prison here in Globe will not cost you and I a dime. They have sold this idea lock-stock-n-barrel, to our local EDC and the Chamber of Commerce who are leading the charge to tout this new “clean industry” (prisoners) and their new found favorite partnership with both Emerald Corp. and James Parkey with Corrections Corp. of America as the solution to economic prosperity.
Yet it has proven otherwise for many communities which have bought the promise. And before we go much further, perhaps it would be wise to truly understand just how Emerald is proposing to finance this project and who really gets left holding the bag if the assumptions on this investment are off the mark.
When asked to provide something in writing as to how the project is going to be financed, Emerald provided the following document. It brings to mind the old adage:
“Oh what a tangled web we weave, when first we practice to deceive.” Sir Walter Scott
If, after reviewing this chart, you don’t really understand any of this – you can join the crowd.
Including those on City Council and the EDC who have been asked to explain the financing. The MCM group is the bond under witer for much of the private prison projects built around the country.
They specialize in derivatives which Warren Buffet has said “…are time bombs, both for the parties that deal in them and the economic system.” Buffet continued to explain that, “…derivatives also create a daisy-chain risk that is akin to the risk run by insurers or re insurers that lay off much of their business with others” He has gone on to say, “The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in variety and number until some event makes their toxicity clear. Central banks and governments have so far found no effective way to control, or even monitor, the risks posed by these contracts. In my view, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.”
Are we willing to Trust in the Man who says, “Just trust me.” It appears some of our local leaders are willing to do so. But it is local taxpayers who pay the price of creative financing when it comes to for-profit prisons.
(Part Two of Prison Finance: Next Week)
Perhaps we should offer a free tour of Alcatraz to any local, elected official who can explain this flow chart to citizens of Globe-Miami-San Carlos?
I’m still laughing at that flow chart, though it borders on the grotesque.
What sort of mind creates a mess such as that?
They may’ve fooled the EDC and City Council, but they haven’t pulled one over on the People.
That pattern of these FOR PROFIT PRISONS going after towns, (read their little leaders) “without a lot of sophistication and resource to do the due diligence” is really the crux of the whole problem here in our community. Will our local leaders search in the history of this for themselves? Will they read in “Gulags: A History” by Anne Applebaum that the Russian Gulags were also started out as a profit making enterprise?? Or can they even dig just a little on the internet and find out how the prison industry has surpassed manufacturing for the creations of new jobs? At Homeland Security Research dot com they are forecasting a record sales of their products and services of $11.1 BILLION by 2014. Or will our little leaders here just wave their little flags and play out their unconscious roles to the detriment of the whole.
Why in an economic downturn, do the profits increase for “security?” Thanks to all who uncritically support the “war on terrorism” the weapons manufacturers have been able to build more horrific devices for “control of the masses.” Now, these manufacturers see both public and private prisons as a new outlet for “defense” technology. That’s how. So in addition to stun grenades, pepper spray, advanced tasers, long-range acoustic devices (LRADs), and rubber bullets that are used in prisons, we now have a Raytheon special: an Assault Intervention Device (AID) being tested at Los Angeles County at the Pitchess Detention Center. It emits a focused, invisible ray that causes an unbearable heating sensation in its targets. Ca-ching, Ca-ching.
Yet wait folks, there’s even more profits to be had from this prison industry. How about the “private transport companies with lucrative contracts to move prisoners within and across state lines? Or health care companies to supply jails with doctors and nurses and food service firms provide prisoners with meals? High-tech firms are also moving into the field; the Que-Tel Corp. hopes for vigorous sales of its new system whereby prisoners are bar coded and guards carry scanners to monitor their movements. Phone companies such as AT&T chase after the enormously lucrative prison business.” http://www.corpwatch.org/article.php?id=867
Do these little leaders of ours now understand why the big names in finance are entering into the profit from imprisoned people game? American Express has invested millions of dollars in private prison construction in Oklahoma and General Electric has helped finance construction in Tennessee. Goldman Sachs & Co., Merrill Lynch, Smith Barney, among other Wall Street firms, have made huge sums by underwriting prison construction with the sale of tax exempt bonds, this now a thriving $2.3 billion industry.
Are our leaders really even competent enough to understand the bigger picture? If not, then from those of us in our community who DO CARE AND DO UNDERSTAND, let’s gather together more and brainstorm on SOLUTIONS. Let’s build some synergy and work in teams to find and research avenues of economic sustainability for the good of the whole. We can do it because it’s our GLOBE!
[...] Creative Financing of Globe’s proposed private prison has most scratching their head The Emerald Companies have supplied the following chart to show how the prison would be financed. Except no one seems to beable to truly understand it. The City Council wants citizens to believe this will bring a “clean industry” and easy money without costing taxpayers a thing. Yet the experience of other communities have proven otherwise. [...]