GEO Group, the largest private prison company in the United States, is in trouble. 100% of its banking partners have pledged to stop financing the exploitative private prison and immigration detention industry.
These banks include: JPMorgan Chase, Wells Fargo, Bank of America, SunTrust, BNP Paribas, Fifth Third Bancorp, Barclays, and PNC.
The public pledges now mean these banks will not renew $2.4 billion in credit lines and term loans to industry giants GEO Group and CoreCivic. It also means the for-profit prison industry faces a of 87.4% gap in future funding, which is key to their daily operation. If that wasn’t enough, both firms are facing lawsuits for allegedly subjecting detainees to forced labor.
Forbes reports that not all banks have yet to follow their peers’ lead, still lending to CoreCivic, the second largest for-profit prison firm in the country:
Five banks have 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 significantly underperforming 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).
If you follow the money, as Forbes explains, there’s a clear cycle of how bank customers are linked to private prisons.
“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 their loans.”
In addition to public pressure and activist coalitions pushing for bank divestment, responsible investors have also been turning up the heat on for-profit prisons.
Asset owners and managers of the Interfaith Center on Corporate Responsibility and the Confluence Philanthropy network, which represents over $2 billion in assets under management, signed a public letter demanding that banks stop financing the private prison industry.
We also know that GEO Group sees this as a huge risk to their business model.
In a recent SEC filing GEO Group wrote 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.”