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Honolulu Lite
Charles Memminger
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Crime pays with private prisons
One of the problems with the "underground economy" is that it is hard to invest in it. You can't just go up to a dope dealer and say, "Dude, I like your management plan and long-range financial potential. Let me buy a few hundred shares of your enterprise."
Well, you could, but you'd probably get shot.
But there's obviously money to be made in illicit ventures, or there wouldn't be so many people engaging in them. Getting a piece of the action is the dangerous part. Say you bankroll a thriving burglary ring. The upside is that you get a good return on your investment. The downside, however, isn't bankruptcy, but a trip to the joint.
The state of Hawaii might have inadvertently uncovered a way for all of us to legally invest in the underground economy, to get rich off of all of our home-grown criminals.
Hawaii has agreed to pay $50 million a year to a company called Corrections Corp. of America to house a lot of our prison inmates in a private prison in Arizona. Hawaii's underground economy apparently is thriving, because we have such a bull market in criminals that we have to ship them off to the mainland to be incarcerated. We can't keep them in Hawaii because our islands are chiefly made up of back yards, and no one wants a prison in their own back yard. A lot of states have this problem, which is why private prisons have become a booming $50 billion industry. In fact, they call it the "corrections industry," but it's really just a way for the average citizen to get into the crime-investing game without ending up inside one of those private prisons.
Up to 2,500 Hawaii inmates will be housed in the spanking-new Saguaro Correction Center in tiny Eloy, Ariz., home to about 10,000 citizens and about 100,000 cactus. (Saguaro cactus, naturally. Saguaro cactus are those tall, Hollywood-casting-type cactus that, appropriately for the Saguaro Correction Center, look like they are holding their hands up during an arrest.)
Critics of sending our prisoners to the mainland focus on the wrong numbers: how much it costs a day to house our fallen men and women, which is about 60 bucks per prisoner a day. (I think that's the kamaaina rate.) The number they should focus on is $52, which is the current price of one share of Corrections Corp. of America.
While crime in America might be suffering a bearish downturn, the private corrections industry is thriving. Shares of CCA have more than doubled in the past few years, and they just hired an executive vice president who will be pulling down $250,000 a year plus perks.
This is a great opportunity for the little investor to get his foot in the prison door of the underground economy. Crime pays, including dividends.
But investing in private prisons is somewhat controversial.
CCA has had a checkered past. It has been accused of running shoddy prisons where inmates are abused, and there have been an annoying number of escapes. Students and teachers at Yale University recently forced the school's investment fund to divest itself of CCA stock because of its shady past and current efforts to increase its inmate supply flow.
Running private prisons for profit is like running any kind of moneymaking enterprise: You have to have a steady supply of product to offer consumers. CCA needs bodies, and lots of them. To that end, it apparently has been lobbying state governments to enact minimum mandatory sentences and "three strikes" laws to assure that limp-wristed judges won't put potential inmates out on probation. The more people going to prison, the more money CCA makes. (Private prison corporations refer to "three strikes" laws as "home runs.")
CCA has tried to improve its public image, but it's still a bit off-putting to think that an industry that basically deals in locking up people makes campaign contributions to powerful local politicians in the hopes of getting big contracts and more severe incarceration legislation.
Hawaii's deal with CCA specifies that our prisoners be treated humanely and have access to educational programs, family visitation and substance abuse treatment.
I have a few misgivings about the seamier side of investing in the underground economy, but I'll probably get over it as soon as I buy my first few shares of CCA.
Charles Memminger, the National Society of Newspaper Columnists' 2004 First Place Award winner for humor writing, appears Sundays, Tuesdays, Thursdays and Fridays. E-mail
cmemminger@starbulletin.com