Private prison operator CoreCivic has reached a $ 56 million settlement with shareholders accusing the company of misrepresenting the quality and value of its services.
The Denver Post reports that the lawsuit was filed in 2016 shortly after the Justice Department issued guidelines instructing the federal prison office not to renew private prison companies or to award new contracts.
In its policy, the Justice Department stated that privately owned prisons are less secure and less secure than those administered by the federal government.
CoreCivic’s stock slumped after the division’s announcement. One of the lead plaintiffs in the lawsuit, Amalgamated Bank, lost more than $ 1.2 million in just a few days.
In court, however, CoreCivic found that President Donald Trump had overturned the Justice Department order that had expired in the final days of the Obama administration. In addition, CoreCivic stated that its quality and value claims are of a general nature and therefore not fraudulent.
As part of the settlement, CoreCivic pays $ 56 million in consideration for plaintiffs dropping a securities fraud suit and all other claims.
“We are pleased to resolve this issue and leave it behind to focus on the company’s business,” said Damon Hininger, President and CEO of the company, last Friday.
Ball and chain. Image via Pixabay / User: skeeze. Public domain.
“While we continue to believe the allegations were unfounded in this case, we also believe that eliminating the litigation risk, cost and distraction is in the best interests of CoreCivic and its shareholders,” said Hininger.
A trial was due to begin on May 10th.
Corene Kendrick, assistant director of the American Civil Liberties Union’s National Prison Project, said CoreCivic may have tried to save the face.
“I can’t speculate on what their lawyers thought, but usually when you settle in right before a trial, it’s because you feel like there is a higher risk of going to court,” Kendrick said.
Kendrick suggested that since the trial was a jury trial, CoreCivic may have been concerned that there is “negative public opinion on private prisons and mass detention.”
CoreCivic, The Associated Press added, tried to dismiss the lawsuit but was dismissed by U.S. District Judge Aleta Trauger.
In her previous decisions, Trauger believed that CoreCivic’s internal communications indicated that the company was aware of external criticism. In an email exchange between CoreCivic executives, one executive expressed surprise that a federal audit was less critical than expected.
“What shocked me,” wrote the executive, “is that they completely overlooked the consequences of our vacancies.” You mentioned the staff at the end, but could have been much more critical. “
According to The Associated Press, CoreCivic owns or manages 54 prisons across the country. They have a total capacity of more than 75,000 beds and work with federal, state and local governments.
As LegalReader.com previously reported, CoreCivic and other private prison companies have been regularly criticized – and sued – for grossly inadequate staffing and neglecting inmates’ most basic security needs.