N.Y., Other State Pensions Slow to Divest From Private Prisons

By Ayanna Alexander

State public pensions are taking their time divesting from three companies that own, operate, or have ties with private prisons and immigration detention centers, despite pressure from unions, investors, and protesters.

Public pension plans in New York, California, and Ohio are among the top 100 investors in Geo Group, CoreCivic and General Dynamics Information Technology Inc. Now, there’s a push in several states to pull the plug on the pensions’ investments in the companies. The American Federation of Teachers has called on pension funds—including the California State Teachers’ Retirement System and the California Public Employees’ Retirement System—to comb their portfolios for asset managers invested in companies it says are profiting from detaining families.

Geo Group, a Florida-based private prison contractor, manages 12 U.S. Immigration and Customs Enforcement processing centers in seven states, according to a company spokesman. CoreCivic Inc., formerly Corrections Corp. of America based in Tennessee, has eight ICE-contracted detention centers, a spokesman told Bloomberg Law.

General Dynamics Information Technology Inc., a subsidiary of defense contractor General Dynamics Corp., has a contract with the U.S. Health & Human Services Office of Refugee Resettlement, or the ORR, to monitor cases for youth immigration detention centers. It’s worked with the agency since 2000.

Divestment is coming at a leisurely pace, though, as the funds consider what’s best for plan participants. Even the New York State Teachers’ Retirement System pension is going slow on divestment, despite the state’s ban on private prisons, which like privately owned immigration detention centers are run by companies hired by a government agency. Illinois and Iowa also have barred private prisons, but neither has investment restrictions on them, according to their state laws. The pensions from these states were not among the top 100 investors in the three companies.

New York announced last month that one of its biggest public pension funds—New York State Common Retirement Fund—sold nearly $10 million worth of pension investments in Geo Group and CoreCivic. The fund still has nearly 815,000 shares with General Dynamics as of June.

The New York State Teachers’ Retirement System, another big plan, hasn’t divested from the three companies. The fund’s investment policy doesn’t “specifically address” divestment, according to John Cardillo, a spokesman for the pension.

“We generally prefer to exercise our proxy voting rights to promote responsible corporate policies and activities,” he said.

Two California public pensions mentioned in the AFT report—CalPERS and CalSTRS—mirrored that sentiment, generally favoring engagement with shareholders over divestment, according to representatives for both plans. The State Retirement System of Ohio didn’t return requests for comment.

Patrick Menasco, a partner with Stroock & Stroock & Lavan LLP, told Bloomberg Law that fiduciaries must consider whether an investment is prudent and what will “best perform for the participants and beneficiaries in the system subject to investment guidelines and applicable law,” despite the state’s separate decision to ban private prisons.

Moral Judgment

Investments in other types of companies, such as gun manufacturers and oil and tobacco companies also have met with investor protests, Menasco said. Pension fund managers, however, are bound by fiduciary responsibility to grow assets.

“Increased public scrutiny will no doubt lead some states and public plan fiduciaries to consider divesting from private prison operators, either at the policy level or prudentially,” Menasco said. “The extent of actual divestment is anyone’s guess.”

The Chicago Teachers’ Pension Fund was investing in private prisons, despite Illinois’ ban on private prisons. But the fund added them and immigration detention centers to its list of prohibited investments on Aug. 16 and will remove funds from any company that owns or operates them. It had shares in the Geo Group and CoreCivic.

“We know these institutions disproportionately incarcerate people of color and those who live below the poverty line, house immigrant children and perpetuate the separation of immigrant families, and take advantage of and put at risk unprotected, low-wage employees, while lacking fiscal and operational transparency,” Jay C. Rehak, president of the fund’s board of trustees, said in a statement Aug. 17.

Companies Weigh In

The companies that own or operate the prisons and detention centers said that pensions shouldn’t let politics influence how they invest.

“These politically motivated attacks on our company and our employees are nothing but a deliberate attempt to advance a controversial public policy agenda aimed at abolishing ICE,” the Geo Group told Bloomberg Law. “They willfully ignore the fact that our company plays absolutely no role in passing immigration laws or setting immigration policies nor have we ever advocated for or against any immigration laws or policies.”

Steve Owen, CoreCivic’s managing director of communications, mirrored that sentiment, adding his company doesn’t “advocate for or against legislation or policies” concerning immigration and that its role in the U.S. immigration system is “valued, but limited.”

General Dynamics didn’t return requests for comment but said in a June 19 tweet that it doesn’t have any role in family separation at the border.