Alabama has recently made national headlines as the future home of two CoreCivic mega-prisons. CoreCivic is the leading constructor and owner of private prisons and detention centers in the United States. Each of the top five owners of CoreCivic has links to Harvard University via employed alumni, and two of those five employ high-ranking executives who also serve as Harvard faculty members.
The company has 116 facilities located throughout the U.S. and plans to construct two more in Alabama following a deal signed by Governor Kay Ivey on February 1. According to its website, CoreCivic is a “socially responsible organization,” “committed to providing high quality, compassionate treatment to all those in our care.” The company cites its dedication to protecting incarcerated people’s rights and providing opportunities for them to participate in reentry programs. It claims to improve communities by providing “strong, active corporate citizenship” and job opportunities to the communities in which its prisons operate.
The practicalities are more complicated. CoreCivic, formerly the Corrections Corporation of America (CCA), has a storied history of abuse, neglect, and violence. The CCA was founded in 1983 and was first investigated for malpractice in 1998. A report from that investigation describes a CCA facility: “in a pattern of flawed security attributable to both corporate and institutional management deficiencies, NEOCC failed to accomplish the basic mission of correctional safety.” It also outlines a lack of work and educational programs, a low level of communication between staff and incarcerated individuals, and the systemic use of “unnecessarily harsh and humiliating procedures” during a period that followed two murders at the CCA prison.
The CCA rebranded to CoreCivic in 2016. The company adopted the slogan, “Better the public good,” and set up a sleek new website. Abuses continued within their facilities. A 2020 report from the Tennessean discusses various issues at CoreCivic-owned prisons in the state of Tennessee dating back to at least 2016. The report includes allegations about violence and sexual abuse, gang activity, understaffing, use of excessive force, and medical neglect. Another report from the Associated Press in January 2021 describes an ongoing lawsuit in Georgia, which argues that CoreCivic fails to protect individuals incarcerated in their facilities from COVID-19. And detainees at various ICE detention centers operated by CoreCivic have also alleged that they have experienced abuse at the hands of CoreCivic staff.
Given the negative track record of private prisons, why might people invest in them? In a recent article, investment advisor Dane Bowler analyzes the financial risks associated with investing in CoreCivic. He acknowledges that COVID-19 negatively impacted CoreCivic’s profits, as “inmate populations generally dropped,” and “every aspect of caring for detainees became a bit more difficult and a bit more expensive.” Bowler also draws attention to President Joe Biden’s campaign promises. He swore to end federal government contracts with the private prison industry and articulated the public’s growing distrust of the industry. But despite the political risks associated with investing in CoreCivic, Bowler concludes that investments will still turn a profit: “I think CXW is overly cheap and the risks are overemphasized. Reward to risk looks quite favorable at this price.”
One of the economic incentives for investing in the Prison Industrial Complex (PIC) is that it tends to continue to make money even when the economy at large is not doing well. During the COVID-19 pandemic, businesses, gyms, car dealerships, and restaurants have shut down and gone out of business—but prisons haven’t. Prisons essentially have a captive workforce in the form of incarcerated individuals who are paid little to nothing for their labor. Thus, even in global pandemics and economic recessions, prisons continue to turn profits. In the third quarter of 2020 alone, CoreCivic’s revenue totaled $468.3 million. CoreCivic CEO Damon Hininger reportedly makes a yearly salary of $5.3 million. And according to CNN, the top five owners of CoreCivic own shares that total a combined value of close to $290 million. Two of those top five owners, namely the Vanguard Group and Arrowstreet Capital LP, have high-ranking executives who also serve as Harvard faculty members.
Before looking into the investments in CoreCivic held by the Vanguard Group and Arrowstreet Capital, it is important to clarify the sources for the information presented. All the financial information in this article is public knowledge, and the investments the Independent analyzes are made by companies, not individuals. The individuals below are included for their associations with Harvard as former and active faculty members.
Dr. André Perold is the George Gund Professor of Finance and Banking Emeritus at Harvard Business School. After teaching at the University for over thirty years, Perold left his full-time job at the University in 2011 to found HighVista strategies and still serves as the company’s Chief Investment Officer. He also serves on the Board of Directors of the Vanguard Group, an investment management company aimed at “long-term investors looking to pair a buy-and-hold strategy with the lowest-cost offerings,” according to an article from NerdWallet. On its website, Vanguard proclaims its core values are integrity, focus, and stewardship. The last of those three values has inspired several community service initiatives ranging from improving community gardens to investing in local schools and communities. “In the end,” the website reads, “it’s not about us at all. Simply put, serving our communities is the right thing to do.”
Vanguard states that they have a formal procedure to “identify and monitor portfolio companies whose direct involvement in crimes against humanity or patterns of egregious abuses of human rights would warrant engagement or potential divestment.” CoreCivic, in Vanguard’s eyes, does not fit that profile. CNN describes Vanguard as the second-largest owner of CoreCivic. The company holds over 13.5 million shares, equivalent to a total value of a little over $97 million. The Independent spoke to the Vanguard Group’s Public Relations Office about the company’s investments in CoreCivic and whether the Biden administration’s decision to ban private contracts for federal prisons would affect investments.
“Private prisons make up a very modest portion of Vanguard funds’ portfolios and are largely held in index funds,” replied Vanguard representative Alyssa Thornton. “Vanguard’s index funds are compelled to hold the securities listed in the underlying benchmark; third-party index providers have full discretion over the composition (i.e., securities listed) of the benchmark index. Should the securities of an underlying index change, our funds would follow suit.” Between January and February 2021, Vanguard sold 5.2 million of its shares in CoreCivic.
When the Independent reached out to Dr. Perold for further comments on the Vanguard Group’s investments in CoreCivic, he did not respond.
Dr. John Campbell is the Morton L. and Carole S. Olshan Professor of Economics at Harvard College. He has been teaching at the College since 1994 and served as the Chair of the Economics Department from 2009-2012. In 1999, Campbell and colleagues Peter Rathjens and Bruce Clark founded Arrowstreet Capital LP, the fourth-highest investor in CoreCivic. Campbell still serves as a Research Partner for the trust fund.
In contrast to the Vanguard Group, Arrowstreet Capital makes no assertions about community stewardship. “We align our interests with those of our clients,” the About Us page on their website reads, “and strive to meet and exceed client investment objectives and service expectations.” Arrowstreet Capital currently holds 2.8 million shares in CoreCivic, which are valued at $20.5 million. The trust fund is also increasing its investments in CoreCivic, having purchased 827,346 shares in the opening months of 2021. When contacted for further comments on Arrowstreet Capital LP’s investments in CoreCivic, neither Dr. Campbell nor an Arrowstreet representative responded.
The University’s connections to CoreCivic do not stop at companies affiliated with faculty and alumni. Harvard University is itself indirectly invested in CoreCivic through an iShares ETF. The ETF in which Harvard Management Company (HMC) invests is the top mutual fund invested in CoreCivic, with about 7.7 million shares valued at nearly $51 million. BlackRock Fund Advisors manages iShares funds and holds the highest number of shares in CoreCivic. Harvard invests around $3.5 million into the iShares-managed small-cap ETF. Of that amount, only 0.09%, or about $3,100, goes to CoreCivic. Harvard also invests in two Vanguard-operated funds and two additional BlackRock-operated funds, though these have no direct ties to CoreCivic. When the Independent reached out to the Harvard Management Company for more information on Harvard’s investment in this particular ETF, Patrick McKiernan, Director of Communications, responded, “HMC does not comment on individual investments.”
The Harvard Prison Divestment Coalition (HPDC), a Harvard-based prison abolition group, claims that the University has multiple other financial holdings in the PIC in addition to the one admittedly small and indirect investment in CoreCivic. Derek Walsh ’23, a representative of the organization, stated, “HPDC exists because students recognize the significant role that Harvard has played, since the founding in 1636 up until now, in slavery and now the Prison Industrial Complex.” The group’s primary goal is to advocate for divestment from “companies that directly feed into the Prison Industrial Complex and the incarceration of Black and brown individuals who are disproportionately represented in prisons.” Along with advocating for divestment, HPDC emphasizes the importance of disclosure. “Being a school with the motto Veritas, meaning truth, I think it’s hypocritical that they don’t expose the truth about where they put their money,” said Walsh. “We want to know what they contribute to.”
In October 2019, HPDC released a report demonstrating Harvard’s involvement in the PIC. In this report, HPDC asserts, “Harvard has at least $3 million worth of holdings in the PIC across a variety of sectors.” These sectors include “federal, state, and local governments; weapons manufacturers; bail bondsmen; analytics and surveillance technology manufacturers; financiers; pharmaceutical corporations; telecommunications companies; and police and guard unions.”
Brian Highsmith is a Ph.D. student in Government and Social Policy at Harvard University who has extensively researched prison privatization in realms other than prison construction. “Nearly every function in our criminal punishment system has been privatized in some form, by some jurisdiction,” he told the Independent. Some examples of this non-construction privatization include communication, monitoring, commissary, healthcare, transportation, and financial transactions. As public opinion has turned against private prison construction, companies that previously focused on construction have started expanding into these other forms of privatization. “They are trying to come up with new ways to make money from the same population, and then pitching it in ways that are attractive to politicians interested in surface-level reforms,” Highsmith explained. One such company is CoreCivic, which has recently begun expanding into realms such as “electronic monitoring, supervisory centers, and residential reentry programming.”
Despite the negative scrutiny private prison companies like CoreCivic have received since President Biden’s announcement, they are still moving forward with construction plans. On Monday, February 1, 2021, Governor Kay Ivey of Alabama signed a deal with CoreCivic to build two new mega-prisons, costing the state $3 billion over the next 30 years. Governor Ivey cited “the failing state of the [Alabama Department of Corrections’] existing infrastructure and that the Department already is faced with more than $1 billion in deferred maintenance costs alone.” Thus, he claimed, “pursuing new construction without raising taxes or incurring debt is the fiscally sound and responsible decision.”
Disclosure: the author of this article is involved with Alabama Students Against Prisons and Harvard Prison Divestment Coalition. This article does not represent the views of ASAP or HPDC and was written with the goal of objectivity.
Cade Williams ’23 (cadewilliams@college.harvard.edu) is the Associate Editor of the Independent.