Another comment turned diary, spurred by Booman’s Black Male Unemployment: End the Drug War.
I’ve gotten through the first 4 parts of Catherine Austin Fitts’ 6 part series, Dillon, Read & Co. Inc. and the Aristocracy of Prison Profits, which is a wide-ranging insider’s look at the inter-relations to the drug war & prison populations between stock market investors, government officials, private prison contractors, black-market drug money laundering, investment & mortgage bankers, HUD contracts, Iran-Contra figures & ‘methods,’ & corporate leveraged buy-outs. She names names, starting with Part 1’s title, “Brady, Bush, Bechtel & ‘the Boys’ [CIA].”
Part 3 talks about how one private prison firm,
Cornell Corrections was created to take advantage of plans to privatize the government’s prison operations. The War on Drugs and its related mandatory sentencing were fueling an explosion in the U.S. prison population. The construction and management of new prison facilities was potentially big business for the construction industry — firms like Brown & Root [now Halliburton’s notorious KBR, who just received a contract to build immigration detention facilities for DHS] who Cornell used to build their first detention center — and those who financed them — like Dillon Read. {snip}
Prison stocks also are valued on a “per bed” basis– which is based on the number of beds provided and the profit per bed. “Per bed” is really a euphemism for people who are sentenced to be housed in their prison.
. . . for every contract Cornell got to house one prisoner, at that time, their stock went up in value by an average of $24,261. According to prevailing business school philosophy, this is the stock market’s current present value of the future flow of profit flows generated through the management of each prisoner. This, for example, is why longer mandatory sentences are worth so much to private prison stocks. A prisoner in jail for twenty years has a twenty-year cash flow associated with his incarceration, as opposed to one with a shorter sentence or one eligible for an early parole. This means that we have created a significant number of private interests — investment firms, banks, attorneys, auditors, architects, construction firms, real estate developers, bankers, academics, investors among them — who have a vested interest in increasing the prison population and keeping people behind bars as long as possible. link
The article is fine example of whistle-blowing; she’s a Republican financial conservative. Her bio reads:
Catherine Austin Fitts is the author of the Narco News series “Narco-Dollars for Beginners: How the Money Works in the Illicit Drug Trade.” She is a former managing director and member of the board of directors of Dillon Read & Co, Inc, a former Assistant Secretary of Housing-Federal Housing Commissioner in the first Bush Administration, and the former president of The Hamilton Securities Group, Inc. She is currenly president of Solari, Inc., an investment advisory firm (in formation) based in Hickory Valley, Tennessee.
I won’t begin to attempt to summarize it, but here’s a small taste from Part 4 that gets into privatization:
The Clinton Administration: Progressives for For-Profit Prisons
Much has been written about the use of the War on Drugs to intentionally disenfranchise poor people and engineer the centralization of political and economic power in the U.S. and globally, including an explosive rise in the U.S. prison population. The purpose of this story is not to repeat this fundamentally sound thesis. For those who are interested in more on this topic, I would refer you to my article and audio seminar “Narco Dollars for Beginners” as well as Michael Woodiwiss’ book Organized Crime and American Power (University of Toronto Press, 2001) and their associated bibliographies.
What most people miss is the extent to which the day-to-day implementation of this intentional centralism is deeply pervasive and therefore deeply bipartisan. It receives the promotion and support from all political and social spectrums that make money by running government through the contractors, banks, law firms, think tanks and universities that really run the government. My intention for this story is to make clear how the system really works. A system in which a small group of ambitious insiders — who more often than not were educated at Harvard, Yale, Princeton and the other Ivy League schools — enjoy centralizing power and advantaging themselves. Paradigms of Republican vs. Democrat or Conservative vs. Progressive have been designed for obfuscation and entertainment. An endless number of philosophies and strains of religious and “holier than thou” moralism are really put on and taken off like fresh make-up in the effort to hide from view a deeper, uglier face. One person who may have described it more frankly during the Clinton years was the former Director of the CIA, William Colby, who writing for an investment newsletter in 1995 said:
“The Latin American drug cartels have stretched their tentacles much deeper into our lives than most people believe. It’s possible they are calling the shots at all levels of government.”
The Clinton Administration took the groundwork laid by Nixon, Reagan and Bush and embraced and blossomed the expansion and promotion of federal support for police, enforcement and the War on Drugs with a passion that was hard to understand unless and until you realized that the American financial system was deeply dependent on attracting an estimated $500 billion-$1 trillion of annual money laundering. Globalizing corporations and deepening deficits and housing bubbles required attracting vast amounts of capital.
As the Omnibus Crime Bill was pending, some investors realized that:
[t]he potential impact on the private prison industry was significant. With the bill only through the house, former Attorney General Benjamin Civiletti joined the board of Wackenhut Corrections, which went public in July 1994 with an initial public offering of 2.2 million shares. By the end of 1998, Wackenhut’s stock market value had increased almost ten times. When I visited their website at that time it offered a feature that flashed the number of beds they owned and managed. The number increased as I was watching it — the prison business was growing that fast. {snip}
If you want to see a bi-partisan system at work, follow the money. In the middle of a Presidential election, a Democratic administration engineered significant equity value into a Republican firm’s back pocket. If you step back and take the longer view, however, what you realize is that many of the players involved appear to have connections to Iran Contra and money laundering networks. A surprising number of them went to Harvard and other universities whose endowments are significant players in the investment world. And as it turned out, while the U.S. prison population was soaring from 1 million to 2 million people and US government and consumer debt was skyrocketing, Harvard Endowment was also growing –from $4 billion to $19 billion during the Clinton Administration. Harvard and Harvard graduates seemed to be in the thick of many things profitable.
Her analysis of south central LA makes Tony Soprano’s real estate ventures look like that of a small-time amateur:
One of the maps we put up in the spring of 1996 was a map of the properties collateralizing defaulted HUD single-family mortgages in South Central Los Angeles, California. The map showed significant HUD defaults and losses in the same area as the crack cocaine epidemic that was the basis of Gary Webb’s allegations in Dark Alliance. Such heavy default patterns are symptoms of a systemic and very expensive problem — including systemic fraud. This could occur in situations such as those in which mortgages were being used to finance homes above market prices with inflated appraisals or where defaulted mortgages were being passed back to private parties at below market values, or where these types of mortgage fraud were supporting fraudulently issued mortgage securities that did not have real collateral behind them. This is the type of mortgage fraud that launders profits in a way that can multiply them by many times. Los Angeles was also the area with the largest flow of activities in the Department of Justice’s Asset Forfeiture Fund. Whether drug arrests and incarcerations, legal support for HUD foreclosures and enforcement or asset seizures and forfeitures — these maps were illuminating areas that were big business for “Sheriff of Nottingham-style” operations.
There’s much, much more in this rich, eye-opening series.
