Teachers' Union Targets Private Equity's Role in Prison Industry

(Bloomberg) -- The American Federation of Teachers is encouraging pensions to consider avoiding private equity investments in companies that profit from mass incarceration.

Investing in companies in the prison business carries financial, headline and regulatory risks, the group said in its second report on the topic, released Tuesday morning. The AFT, the country’s second-largest teachers’ union, represents 1.7 million members participating in pension funds with an estimated $3 trillion under management.

“This is, first and foremost, a humanitarian and civil rights issue -- but it is also a financial issue that brings the misaligned incentives of our justice system into stark relief,” said AFT President Randi Weingarten. “Private prisons and private equity firms that invest in corrections companies are profiting from jailing people -- disproportionately people of color -- and are a major contributor to the United States’ world-leading incarceration rate.”

As debate about U.S. criminal justice reform intensifies, some large public pensions have begun divesting direct stock holdings in the industry. The AFT’s latest report is designed to draw public pension trustees’ attention to private equity with a watch list of firms invested in areas such as privatized prison health care, commissary services and bail bonds.

“Although private equity firms acquire corrections companies in an attempt to make money for their principals and investors, the cost-cutting involved has led to allegations that some of these companies neglect, mistreat or abuse prisoners and take advantage of the families of the incarcerated,” the report says.

The group’s first report, issued in August, focused on risks including those associated with immigrant detention.

Previously: California Teacher Pension Votes to Divest Private-Prison Stocks

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