Boca Raton’s GEO Group Sued by Investors After DOJ Decides to Phase Out Private Prisons
It's been a bad couple of weeks for the Boca Raton-based GEO Group, the country’s second largest operator of private prisons.
After the Department of Justice announced August 18 that it would discontinue the use of private prisons, stock prices plummeted. Now, investors are suing. A lawsuit filed against the GEO Group claims the company essentially lied to shareholders by advising them that it expected to continue to derive nearly half its revenue from the federal government.
It's hard to feel bad for anyone who had invested in private prisons. Just do a cursory Google search for “GEO Group,” and you’ll learn that the company has been held negligent in the death of an inmate who was hit in the skull with a rolling pin, sued by detainees who say they were forced to do unpaid janitorial work, and protested by inmates who were denied access to asthma inhalers and other medications, just to name a few recent examples.
Last year, the company was audited by the U.S. Department of Justice's Inspector General, who concluded that the company had wasted at least $3 million at a troubled Texas prison known for rioting and allegations of medical neglect. Meanwhile, multiple studies have concluded that private prisons don’t actually save states any money.
Even if you weren’t concerned about the ethics of investing in a company with a documented record of human rights abuses, surely you could have guessed that there would be some risk involved given that GEO Group openly admitted that contracts with federal agencies accounted for 45 percent of its revenue.
But at least one person was taken aback by the DOJ’s announcement, which noted that private prisons do not provide the same level of safety and security as government-run facilities. His name is John J. Mulvaney, and he’s the plaintiff leading the lawsuit against the GEO Group. He is seeking class action status.
Unfortunately, lawyers from Pomerantz LLP, which is representing the suit in court, didn’t return New Times’ calls, so we don’t know much about Mulvaney. But the complaint does note that he bought 500 shares of GEO Group stock on July 12, a little over a month before the DOJ’s announcement, at a total cost of $17,195. After the DOJ’s announcement, that same stock was worth only $9,755.
So far, the GEO Group has not responded to requests for comment. You can view the full complaint here:
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