… GEO Group Runs Out of Banks …
All of the existing banking partners to private prison leader GEO Group have now officially committed to ending ties with the private prison
and immigrant detention industry.
These banks are JPMorgan Chase, Wells Fargo, Bank of America, SunTrust, BNP Paribas, Fifth Third Bancorp, Barclays, and PNC.
This exodus comes in the wake of demands by grassroots activists — many under the banner of the #FamiliesBelongTogether coalition
— shareholders, policymakers, and investors.
Major banks supporting the private prisons behind mass incarceration and immigrant detention have now committed to Not renew $2.4B in credit lines
and term loans to industry giants GEO Group and CoreCivic.
This shift represents an estimated shortfall of 87.4% of all future funding to the industry, which depends on these bank credit lines and loans
to finance their day to day operations.
Together, these banks commitments — alongside a federal judge’s block on the Trump administration’s plans to expand family detention this weekend,
new policy initiatives such as California ending all contracts with private prisons, and Democratic primary candidates publicly raising the idea of a federal ban
on for-profit incarceration — lead many to speculate a threat to the survival of the private prison industry all together.
Five bankshave not yet made the commitment to stop extending their credit lines and term loans to CoreCivic:
Regions (headquartered in Birmingham, AL), Citizens (Providence, Rhode Island), Pinnacle Bank (Nashville, TN), First Tennessee Bank (Memphis, TN),
and Synovus Bank (Columbus, GA).
In response to an inquiry, Pinnacle President and CEO Terry Turner said “while we don’t discuss details of client relationships,
we base commercial credit decisions on several factors.
In general we lend to businesses based in our markets that have strong leadership teams, sound credit histories and good operating leverage so they can create jobs
and enhance the economic health of our markets.”
Additionally, a spokesperson from Regions wrote “we recognize that people have differing views about the private sector’s involvement in prisons.
This is a complex issue that government officials and policymakers are in the best position to address directly.”
Even with these remaining partners still at the table, international credit rating agency Fitch downgraded CoreCivic from stable to negative,
and stock prices for both companies now near historic lows.
The one year returns to investors for both GEO Group and CoreCivic are down nearly 30%, which classifies them as significantlyunderperforming when compared to
other entities in their investment class of US Real Estate Investment Trusts (a designation that initially allowed private prisons to reap major tax benefits).
As a brief historical recap: the American private prison industry is a relatively new phenomenon, with the first private prison opening in 1984.
Given their business model depends on keeping a consistent and increasing number of people incarcerated, it’s been speculated and critiqued that this is why GEO
Group and CoreCivic have spent $25M on lobbying over the past three decades to push for harsher criminal justice and immigration laws.
A cycle emerges when one follows the money: everyday people put their money in banks, banks lend that money out to the private prison industry, the private prison
industry uses that financing for their day to day work including lobbying, which successfully funnels more detainees into their facilities, and banks reap a payoff from
Banks are only one piece of the wider financial lives of private prison companies, which include share ownership, bond underwriting,
the purchase of bonds, and others.
Still, in the wake of reputational risk and falling share prices, it is questionable at best if new partners will take the leap to join GEO Group and CoreCivic
in business and fill their financing gaps.
In addition to the #FamiliesBelongTogether coalition representing over 10 million people nationwide, asset owners and managers of the Interfaith Center on Corporate
Responsibility and the Confluence Philanthropy network, representing over $2B in AUM, added their voices to a public letterdemanding that banks stop financing the
private prison industry.
Among others, these signatories include Akonadi Foundation, Edward W. Hazen Foundation, Mary Reynolds Babcock Foundation, The Libra Foundation, Zevin Asset
Management, and Veris Wealth Partners.
Investors are increasingly asking about, and when possible avoiding, other exposures they have to the industry beyond banks.
GEO Group has already noted the critical impact of the banks committing to end their financial relationships with them.
In a recent SEC filing the company noted that “if other banks or third parties that currently provide us with debt financing or that we do business with decide in the
future to cease providing us with debt financing or doing business with us, such determinations could have a material adverse effect on our business, financial
condition, and results of operations.”
In the meantime, there’s speculation about what the remaining five banks — Regions, Citizens, Pinnacle, First Tennessee, and Synovus — will do about their ties to
private prisons and immigrant detention.
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Thanks to Jasmine Rashid for her contributions to this piece. Full disclosures related to my work here.
The author’s firm, Candide Group and their associated non-profit initiative, Real Money Moves, is a member of the #FamiliesBelongTogether coalition referenced in this piece.
……. Ginger Baker RIP ……………w
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