Corrections Corporation of America wants to reduce its federal and state corporate tax liability to zero.

Last spring, the nation's largest private prison owner and operator, Corrections Corporation of America (CCA), announced its plan to assess the feasibility of a Real Estate Investment Trust (REIT) conversion.
Over the last quarter, Tennessee-based CCA publicized its potential REIT conversion as a way to "increase long-term shareholder value" by reducing both its federal and state corporate tax liability to zero. In exchange for such a handsome tax rate, CCA must meet REIT guidelines by distributing at least 90 percent of its taxable income to shareholders annually in the form of dividends.

Although an REIT conversion would likely benefit CCA's shareholders - 7 percent of whom are insiders - it would undoubtedly harm small communities, and states in some cases, that rely on CCA for tax revenues. By converting the company to an REIT, CCA insiders would not only slash their company's effective tax rate from 37.2 percent (equivalent to about $92 million in 2011) to zero, but would actually pay themselves an additional $7 million next year.  And so long as Republicans and Democrats can agree on a tax-cut extension before December, that $7 million would be subject to a tax rate of 15 percent.

Despite vaunting its commitment to public safety and community partnership, CCA's interest in an REIT conversion demonstrates that the communities in which CCA does business are wholly subordinate to the enrichment of its management.

Fifteen years ago, CCA bet that an REIT conversion would produce enough surplus cash on hand necessary for its ambitious expansion plans. To this end, CCA Prison Realty Trust, an REIT registered in Maryland, went public in July 1997 and raised more than $400 million from its initial public offering (IPO). Most of the IPO proceeds were used to purchase nine facilities from CCA, which then leased them back and continued operating them under government contracts. Nine months after CCA Prison Realty Trust was established, it and CCA announced a plan under which the REIT would acquire CCA, the management company.

By operating as a subsidiary of the REIT, CCA could be controlled by insiders and freed from the direct obligation of reporting quarterly earnings growth, while CCA Prison Realty Trust would enjoy REIT tax benefits as the owner of CCA's prisons.

In the immediate aftermath of the merger/REIT conversion, CCA launched what then appeared to be a full-fledged prison speculation campaign. In July 1999, CCA announced plans to build a 2,000-bed, $100 million facility in California City, California, despite not having secured a contract with the state to fill the prison. CCA made similar speculative choices in Georgia and Utah months later. 

Predictably, CCA's speculative binge prevented the firm from meeting its REIT dividend obligations, and CCA Prison Realty Trust soon fell into default under the terms of its $1 billion credit agreement. In June 2000, the company shed its REIT classification, and when the dust had finally settled, CCA reported that it had lost an astounding $730 million, or 85 percent of its market capitalization.

Don't believe me? At the beginning of 2000, CCA's shares were valued at $1.  And to add insult to injury, CCA's poor performance cost the company an additional $120 million in shareholder lawsuit settlements.
http://truth-out.org/news/item/11965-is-corrections-corporation-of-america-about-to-embark-on-another-round-of-prison-speculation

Private prison bought by Corrections Corporation of America violates state rules.

A recent audit of the Ohio prison bought by Corrections Corporation of America (CCA) found the private prison is only meeting 66.7 percent of the state’s standards. The report found a total of 47 violations in the CCA-owned prison, which the state government sold to CCA last year as part of a privatization push set out in Ohio’s 2012-13 budget.

The news comes slightly more than two weeks after CityBeat published a story looking at the many problems presented by Ohio’s policy to privatize prisons (“Liberty for Sale,” issue of Sept. 19). “It was apparent throughout certain departments that DRC policy and procedure is not being followed,” the audit said. “Staff was interviewed and some stated they are not sure what to do because of the confusion between CCA policy and DRC policy. Some staff expressed safety concerns due to low staffing numbers and not having enough coverage. Other staff stated that there is increased confusion due to all the staffing transitions.”
The report says “there has been a big staff turnover,” and only one staff person was properly trained to meet Ohio Risk Assessment System standards. The audit found that a workplace violence liaison wasn’t appointed or trained. Inmates complained they felt unsafe and that staff “had their hands tied’” and “had little control over some situations.”
The local fire plan had no specific steps to release inmates from locked areas in case of emergency, and local employees said “they had no idea what they should do” in case of a fire emergency.
The audit also found all housing units provided less than the required 25 square feet on unencumbered space per occupant. It found single watch cells held two prisoners with some sleeping on the floor, and some triple-bunked cells had a third inmate sleeping on a mattress on the floor.
Searches in general seemed to be a problem for CCA.
Documentation showed that contraband searches were only done 16 days in August. When the searches were done, the contraband was not properly processed to the vault and was sometimes left in desks. The private prison also could not provide documentation that proved executive staff were conducting weekly rounds to informally observe living and working conditions among inmates and staff.
These findings, although major, are only the tip of the iceberg: Inmates claimed laundry and cell cleaning services were not provided and CCA could not prove otherwise, recreation time was not always allowed five times a week in segregation as required, food quality and sanitization was not up to standards, infirmary patients were “not seen timely,” patients’ doctor appointments were often delayed with follow-ups rarely occurring, the facility had no written confined space program, the health care administrator could not explain or show an overall plan and nursing competency evaluations were not completed before the audit was conducted. Many more issues were found as well.http://www.citybeat.com/cincinnati/blog-4028-private_prison_violates_state_rules.html