Mass Incarceration for Profit

Brian Dolinar and James Kilgore

MIGUEL SAUCEDO REMEMBERS as an eight-year-old the five-hour drive to visit his older brother, incarcerated downstate at Menard Correctional Center, a high security fortress in the town of Chester, Illinois which bills itself as the “Home of Popeye the Sailor Man.”

His family loaded into a rented van for a day-long trip from their Latino neighborhood of Little Village in Chicago. Now almost 30, Miguel recalls those journeys as traumatic, the family at times pulled over and harassed by local police along the way.

The expense and inconvenience of the visits has meant they’ve often relied on the phone to communicate with his brother. Miguel guesses his family, over the two decades his brother has been locked up, has spent an average of about $100 a month in prison phone charges. Miguel’s quick calculation: “Can we just round it out and say it’s twenty thousand dollars?”

Currently this money goes to Securus Technologies, which has an exclusive phone contract with the Illinois Department of Corrections. Miguel identifies Securus as “just another key player in this system of the prison industrial complex.”

Based outside Dallas, Texas, Securus is a leading force in a billion dollar prison phone industry. The company has amassed a fortune by charging families like the Saucedos about four dollars (plus additional fees) for a 15-minute phone call. But it doesn’t stop there. Securus has become a new corporate species: a carceral conglomerate.

Quickly swallowing up smaller companies and buying out its competitors, Securus owns an entire supply chain of existing and emerging prison technologies. They stand at the cutting edge of video visitation, electronic monitoring and prison surveillance systems, constantly finding new products and markets across the landscape of mass incarceration.

In turn, the company’s profitability has made it a target for high finance corporations specializing in takeovers.

Roots of a Carceral Conglomerate

Back in 1986 when president Ronald Reagan was launching the “War on Drugs,” a Colorado-based company called “Tele-Matic” was formed. In 1995, the company changed its name to T-Netix, rapidly winning contracts for many large prisons. In 1999, they bought out their main competitor, making T-Netix the biggest “inmate calling services” provider at the time.

H.I.G. Capital, a global investment firm headquartered in Miami, Florida, purchased T-Netix in 2004 for $70 million. That year H.I.G. also bought Evercom, T-Netix’s main competitor, then merged the two and formed today’s Securus. The dual acquisition was a “solid investment” according to H.I.G.’s Lewis Schoenwetter, and would be “an engine of growth for the future.”

Securus stock has proven virtually recession proof. In 2011 the investment firm Castle Harlan added Securus to its portfolio for an estimated $440 million. In 2013, Securus was bought by another big investment company, Abry Partners, who paid a reported $640 million for the company. According to Securus president Richard A. Smith, the company saw record revenue highs in 2013.

Securus operations in the state of Illinois provide an excellent example of how the company uses its monopoly to leverage profitable phone contracts. Phone contracts are won by companies offering large “site commissions” or “kickbacks” to cash-strapped state and county governments. A percentage of income collected from phone calls goes back to the authorities for the exclusive right to extract money from a captive population.

According to the Federal Communications Commission, these kickbacks amounted to around $460 million in 2012.

The kickback has been crucial to Securus gaining its foothold in Illinois. The previous contract holder, Consolidated Communications, a small firm based in Charleston, Illinois, provided a commission rate of 56%.

Using the millions of dollars in their coffers, Securus significantly overbid (contrary to the market logic of underbidding) their competition by offering a commission of 87.1%, at the time the highest in the country. This was actually a violation of state codes and was lowered to the current rate of 76% by Illinois regulators.

This means that three out of four dollars paid for a phone call by Miguel Saucedo’s family actually go back to the state of Illinois. In 2012, nearly $12 million in kickbacks was awarded to the Illinois Department of Corrections thanks to the high commission rate offered by Securus. When questioned, IDOC was unable to provide any accounting for this $12 million, other than saying it went back into the general fund.

However, Securus’s carceral presence in Illinois is not limited to prisons. They have contracts with nearly 80% of county jails as well. This includes the lucrative contract with Cook County, home to Chicago and the site of one of the nation’s largest jails.

Campaign for Prison Phone Justice

Since the days when eight-year-old Miguel Saucedo was traveling to Menard, activists and family members of those incarcerated have been pressing for regulation of the practices of Securus and other phone service providers.

Most recently the Campaign for Prison Phone Justice, led by the Media Action Grassroots Network (MAGNet), Working Narratives, and Prison Legal News Fund, have been advocating before the Federal Communications Commission, urging them to regulate carceral phone rates. A number of other groups such as the Prison Policy Initiative and Helping Education to Advance the Rights of the Deaf (HEARD) have also joined the effort.

In February 2014 the campaign scored its first major victory, when the FCC agreed to put a cap on interstate calls at $.25 a minute for collect calls, and $.21 a minute for debit and pre-paid calls. The campaign also includes state-based organizing in several locales including California, Illinois, Minnesota, New Jersey, Texas and Washington. (nationinside.org/campaign/illinois-for-prison-phone-justice)

More recently, the campaign has pressured the FCC to regulate intrastate calls, which the commission is currently considering. This could mean lowering the cost of some 85% of all phone calls made from inside prisons and jails.

Securus CEO Richard Smith, whose annual salary package comes to over $1 million, responded by claiming that regulation of rates could present a security issue that may lead to “the deaths of inmates, witnesses, friends/family members of victims, and of officers that protect us.”

Secure-Us

While Securus is feeling the heat in their phone business, they are moving into new sectors to secure their profits. Their most lucrative investment appears to be video visiting, a new technological frontier where the company already has a foothold.

Video visits from home can be of much benefit to families, especially for those who have loved ones incarcerated in the remote locations where so many prisons lie. However, as with phones, Securus’s main focus is not providing access but making money.

According to a report compiled by the Prison Policy Initiative, Securus not only stands at the cutting edge of this market, but is also implementing the most draconian contractual terms. Key to this has been their insistence that county jails which implement video visiting must eliminate options for face-to-face visits. The report notes that Securus is the only firm pushing such a policy. (http://static.prisonpolicy.org/visitation/ScreeningOutFamilyTime_January2015.pdf)

Further, Securus has by far the highest rates for video visiting, reaching as high as $1.50 a minute in some instances. The company’s practice of banning face-to-face visits became the target of a national mobilization in Dallas, Texas last year. The efforts by prison phone justice activists prompted a local court to reject Securus’s request to eliminate in-person visits.

Securus has also gained a foothold in another carceral technology that lies outside the realm of regulation: electronic monitoring. In the last year and a half, Securus has acquired two firms which specialize in providing the GPS-linked ankle bracelets used for monitoring. In 2013 they bought up Satellite Tracking of People (STOP), which bills itself as the largest monitoring provider in the U.S. Then in 2014, they bought out the General Security Services Corporation (GSSC), which in addition to providing monitors offers a range of other technology.

At present the electronic monitoring sector pulls down an estimated annual revenue of $300 million. However, with increasing pressure to cut back on corrections costs, the use of ankle bracelets may escalate. This can provide a lucrative revenue stream, especially since in most instances the people wearing the bracelets have to pay a daily user fee ranging from five to forty dollars. (http://www.truth-out.org/news/item/25232-the-spread-of-electronic-monitoring-no-quick-fix-for-mass-incarceration#)

Other Technologies

Securus’s investment web doesn’t stop there. Their software engineers are also creeping into surveillance work with the launch of THREADS, an analytical tool which according to the company website, “examines billions of records to provide focused leads by detecting patterns, anomalies, linkages and correlations both inside and outside of prison walls.” A particular area of specialization is detecting cell phones inside prisons and analyzing the calls made to “reveal more connections.”

Their most recent platform is “Connect Us” which Richard Smith claims will “provide those incarcerated with a multitude of services never seen before in corrections.” ConnectUs promises to “completely manage an inmate’s experience” by overseeing not only phone calls and video visits but “inmate forms grievances, videos, commissary ordering, third party website access, job applications, education programs and any number of services.”

In the face of growing public criticism and improved technologies, companies like Securus search for new ways to remain competitive while marketing themselves as providers of a quality service that keeps the public safe. Yet with the involvement of global financial houses in the prison industrial complex, the pressure mounts to produce value for shareholders.

Ultimately, this systematically incentivizes mass incarceration. While we often hear about the activities of private prison providers like Corrections Corporation of America (CCA) and the GEO Group, corporate interests are immersed in every aspect of criminal justice.

As Paul Wright, founder and editor of Prison Legal News, puts it, “Securus and their government business partners have perfected the science of monetizing human contact and ruthlessly exploiting people’s love and desire for family communication to further engorge the coffers of their hedge fund owners.”

Until carceral conglomerates like Securus are reined in, poor families will continue to pay not only with the absence of their loved ones but to sustain the bottom lines for the benefit of investors and CEOs like Richard Smith.

This is a version of an article that originally appeared in Truthout (2/13/15, http://www.truth-out.org/news/item/29095-carceral-conglomerate-makes-millions-from-incarcerated-their-friends-and-families).

July-August 2015, ATC 177