SEC Rejects CCA, GEO Group Shareholder Resolutions to Reduce Prison Phone Rates

On February 18, 2014, the Securities and Exchange Commission (SEC) granted a request filed by for-profit prison company GEO Group to exclude a shareholder resolution that sought to reduce the high cost of phone calls made by prisoners at GEO-operated facilities. Ten days later, the SEC granted a request by Corrections Corporation of America (CCA) to exclude a similar shareholder resolution.

The resolutions, filed by Alex Friedmann, managing editor of PLN and associate director of the Human Rights Defense Center (HRDC), would have required the companies to forgo “commission” kickbacks from prison phone service providers. [See: PLN, Jan. 2014, p.44]. Such kickbacks are typically based on a percentage of revenue generated from inmate telephone services (ITS) – revenue that is mostly paid by prisoners’ families.

Specifically, the shareholder resolutions stated that GEO and CCA “shall not accept ITS commissions” at their facilities, and that when the companies contract with prison phone service providers they “shall give the greatest consideration to the overall lowest ITS phone charges among the factors [they consider] when evaluating and entering into ITS contracts.” CCA and GEO both filed no-action requests with the SEC seeking to exclude the resolutions from their proxy materials.

According to its SEC filings, GEO Group received $608,108 in prison phone kickbacks in 2012. The shareholder resolution submitted to CCA noted that one of the company’s jails, the Silverdale Detention Facility in Chattanooga, Tennessee, received a commission of 48% of prison phone revenue, and that a 15-minute call from that facility cost as much as $9.75.

On February 11, 2014, a Federal Communications Commission (FCC) order went into effect that caps the cost of long distance prison phone calls nationwide at $.25 per minute for collect calls and $.21 per minute for debit and prepaid calls. The order does not apply to intrastate (in-state) prison phone rates, however, which remain high at many correctional facilities. [See: PLN, Feb. 2014, p.10; Dec. 2013, p.1].

Research has consistently found that prisoners who maintain close connections with their families while incarcerated have better post-release outcomes and lower recidivism rates. As stated by FCC Commissioner Mignon Clyburn: “Studies have shown that having meaningful contact beyond prison walls can make a real difference in maintaining community ties, promoting rehabilitation, and reducing recidivism. Making these calls more affordable can facilitate all of these objectives and more.” [See: PLN, April 2014, p.24].

GEO Group objected to the shareholder resolution by arguing that Friedmann had a “personal grievance” or would personally benefit from reducing prison phone rates at the company’s facilities; that the resolution did not address an issue significantly related to the company’s business; that it lacked the power or authority to implement the resolution; that the proposal concerned GEO’s ordinary business operations; and that the resolution constituted “multiple proposals.”

“GEO Group basically threw the kitchen sink at the resolution seeking to exclude it, and was ultimately successful,” said Friedmann. “This is what happens when essential public safety and criminal justice services, such as operating prisons, are contracted out to a private corporation without a conscience that is only interested in making money.”

He added, “Make no mistake, when GEO claims it is interested in rehabilitating offenders, as it does on its website, it is merely providing lip-service. GEO Group had an opportunity to make a real difference in terms of increasing the ability of prisoners to stay in touch with their families, which would benefit our communities through lower recidivism rates and thus less crime and victimization. Instead, the company protected its profits from prison phone kickbacks.”

Similarly, with respect to CCA, Friedmann said: “The company claims that it’s interested in rehabilitating offenders, but when faced with a resolution that would have reduced phone rates at its for-profit facilities, thereby having a rehabilitative effect on prisoners and resulting in less recidivism, CCA decided its profits from prison phone kickbacks were more important. Which demonstrates that despite its corporate PR rhetoric, CCA cares little about rehabilitation or public safety.”

Friedmann was ably represented before the SEC by attorneys Jeffrey Lowenthal and Jon Burke with the New York-based law firm of Stroock, Stroock & Lavan.

Source: HRDC press releases (March 3, 2014 and Feb. 19, 2014)