October 01, 2019

Warren, Pocan, and Ocasio-Cortez Investigate Private Equity Firms Profiteering Off Incarcerated People and Their Families

Reports show private equity-owned prison support services companies with government contracts provide dangerously deficient medical care, rotten food, and abhorrent service

Washington, DC - United States Senator Elizabeth Warren (D-Mass.), Representatives Mark Pocan (D-Wisc.), and Alexandria Ocasio-Cortez (D-N.Y.), wrote to five private equity firms -- BlueMountain Capital Management, H.I.G. Capital, American Securities, Apax Partners, and Platinum Equity -- that own companies providing support services to prisons, including health care, food service, and telephone services, highlighting how private equity firms deliver poor quality food and services at exorbitant prices, making huge profits off of incarcerated people, their families, and taxpayers.

These companies, responsible for providing medical, food, and phone services to prisons, jails, and detention facilities housing over two million incarcerated people across the country, often deliver low-quality services to incarcerated individuals and their families at exorbitant cost, collecting over $40 billion in taxpayer funds annually and much more from the loved ones of incarcerated individuals.
"The United States' criminal justice system, driven by a misguided 'tough on crime' approach that disproportionately targets Black and Latinx Americans, has allowed private prisons and companies providing support services to correctional facilities to rake in billions of dollars at the expense of incarcerated individuals, detainees, their families, and taxpayers for decades," the lawmakers wrote in their letters to the firms. "Private equity-owned prison support services use their market power to make millions of dollars off those who are incarcerated, their families, and their communities -- often while providing subpar products and services."

To counter these abusive practices, Senator Warren and Representative Pocan, along with a number of their Democratic colleagues including Representative Ocasio-Cortez, introduced the Stop Wall Street Looting Act, a comprehensive bill to reform the private equity industry by holding private equity firms jointly liable for the debts of companies under their control and by requiring greater transparency in private equity firms' practices.

In their letters, the lawmakers also asked the firms to provide the disclosure documents and information required in Sections 501 and 503 of the Stop Wall Street Looting Act, and to explain their role in the consolidation and deterioration of the prison services industry by October 14, 2019.

Senator Warren has been a vocal critic of private equity abuses throughout her time in the Senate and is fighting for reforms that protect students, workers, communities, and investors:

  • Senator Warren and Representative Pocan recently wrote to six private equity firms with current or recent holdings in for-profit colleges, highlighting private equity's destructive role in for-profit colleges, and asked the firms to provide information on their fees, returns, marketing, and other financial practices, as required under the Stop Wall Street Looting Act.
  • Senator Warren and Representative Dave Loebsack (D-Iowa) opened an investigation into private equity firms behind some of the country's largest manufactured housing communities to obtain information about their use of predatory practices to boost profits in the communities they own.
  • Senator Warren and Representative Ocasio-Cortez questioned Treasury Secretary Steven Mnuchin on his involvement in dubious financial engineering and other managerial decisions that enriched investment company executives while decimating Sears' long-term growth and sustainability -- ultimately resulting in Sears' bankruptcy and the loss of tens of thousands of jobs.
  • Senator Warren's requested answers from Vornado Realty Trust and five major hedge funds on their role in the liquidation of Toys "R" Us, which resulted in 30,000 workers losing their jobs without severance pay, after the company went into bankruptcy as the result of a leveraged buyout in 2005.
  • In June 2015, she was an original co-sponsor of the Carried Interest Fairness Act, legislation to close the carried interest loophole that allowed private equity fund managers to pay lower taxes. The legislation was re-introduced in March 2019 and is included in the Stop Wall Street Looting Act.