Posts tagged Chief Investment Officer
CalPERS Engages Private Prison Companies

The review could lead to divestment of CoreCivic and The GEO Group.

The chairman of the investment committee of the California Public Employees’ Retirement System (CalPERS) says investment officials are engaging management of two private prison companies, CoreCivic and The GEO Group, as well as defense contractor General Dynamics.

Henry Jones’ comments come as a California state legislator, Democratic Assemblyman Rob Bonta, has introduced legislation that would force CalPERS to divest from the two prison companies.

The companies have been the subject of controversy because of their housing of children and their families caught up in the Trump administration immigration crackdown. Other major pension systems, including the California State Teachers’ Retirement System (CalSTRS), The New York State Common Fund, and The New York City pension systems, have divested from CoreCivic and The GEO Group.

General Dynamics, whose holdings have not been sold off by the other pension systems, does not house prisoners but does provide case management services for youth detained under the Trump administration policies. Advocates want CalPERS to pressure General Dynamics to stop its contracts with the federal government, but generally have not called for outright divestment.

Jones made his comments about engaging CoreCivic and The GEO Group at CalPERS’s Dec. 17 investment committee meeting, following speeches by individuals and representatives of several groups supporting divestment.

“We appreciate your concerns,” Jones said, noting that CalPERS staff was engaging the companies on issues raised by the speakers and is continuing to follow up on developments in accordance with fund policy.

Under the rules of the largest US pension plan, CalPERS must engage companies over its policies before the investment committee can take a formal vote on divestment.

One of those speaking on Dec. 17, Emily Claire Goldman, the founder and director of Educators for Migrant Justice, said she understood that CalPERS has historically resisted shareholder demands for divestment, arguing that a voice at the table is the best way to change corporate conduct.

“This argument doesn’t hold for companies like CoreCivic and The GEO Group, whose for-profit prison model, where the companies have a financial incentive to incarcerate as many people as possible, is inherently incompatible with the concept of corporate social responsibility,” she said. “No amount of pressure from investors can persuade a company to abandon its business model.”

Goldman presented the investment committee a petition singed by 240 CalPERS members calling for divestment of the two companies.

“This level of divestment makes it more difficult for these migrant abuse companies to underwrite debt, access capital, and lobby for contracts and pro-incarceration anti-immigrant policies,” she said.

Another speaker, Mya Dosch, an assistant professor at Sacramento State University and a CalPERS member, expressed concern about Cibola County Correction Center in New Mexico run by CoreCivic, which has a unit housing transgender women.

Dosch cited the case of a transgender woman, Roxana Hernandez, who died from complications of HIV, pneumonia, and dehydration at a hospital in May after being detained at the correctional facility. Hernandez was at the CoreCivic facility for 12 hours before being transferred to a hospital after her medical condition became known.

 “We take the health and well-being of those entrusted to our care very seriously,” he said.  “Whenever there is a death in custody, CoreCivic immediately notifies our government partners and all appropriate authorities with oversight responsibility. We cooperate fully with those investigations.”

He also said CoreCivic was committed to providing a safe environment for transgender detainees. “Our ICE-contracted facilities are contractually required and held accountable to federal Performance-Based National Detention Standards (PBNDS), which include guidelines for the safe and appropriate accommodation of transgender detainees,” he said.

Hernandez was part of a caravan of migrants from Central America seeking asylum in the US in May. She was detained by US Immigration and Customs Enforcement officials at the San Ysidro Port of Entry between San Diego and Tijuana, Mexico.

New Mexico Sens. Tom Udall and Martin Heinrich, and Sen. Kamala Harris of California, have sent a letter to border and immigration officials asking for an investigation into the circumstances leading to Hernandez’s death. Immigration officials say Hernandez wasn’t abused while in custody.

“I do not want to invest in this,” said Dosch of the two private prison companies. 
 “I do not want my retirement tied to those corporations whose profit from the suffering of women of color and the most vulnerable among us. It is not a sound investment, either.”

Both private prison companies insist they do not make policies regarding the housing of immigrant detainees but provide services under their contracts with the federal government. The private prison companies also contract with state and local authorities, including the state of California, to hold prisoners because of overcapacity issues in state and local prisons.

If CalPERS chooses not to divest from the two private prison companies, officials of the pension system would likely have to make their case in the state legislature at a public hearing.

Bonta’s bill to divest from CoreCivic and The GEO Group will begin to be considered by state lawmakers after the state legislature reconvenes on Jan. 7. The bill came after the Trump administration’s immigration detention policies earlier this year shined the spotlight on CoreCivic and The GEO Group. Each company runs a facility housing adults and children detained in the immigration crackdown, as well as facilities housing adult detainees.

CalPERS has around $12 million in holdings in the two companies, not major for such a large pension plan, but divesture by the biggest US pension system would shine more attention on issues surrounding the private prison corporations and their for-profit model.

Bonta’s bill also calls for CalSTRS to divest from the two private prison companies, but the CalSTRS investment committee already approved divestment in an emotional 6-5 vote last month.

CalSTRS to Divest of Private Prison Companies

The two US companies running private prisons, whose detainees including immigrants caught crossing the US-Mexico border, will no longer be part of the CalSTRS portfolio.

The investment committee of the California State Teachers’ Retirement System (CalSTRS) has approved divesting its holdings in CoreCivic and GEO Group, the two US publicly held companies running private correctional facilities.

The action by the committee on Nov. 7 makes CalSTRS the third major US public pension fund to divest from the private prison companies. In July, the New York State Common Pension Fund divested from the two correctional companies upon orders from its sole trustee, New York State Controller Thomas DiNapoli.

In 2017, the New York City Pension Funds also divested its holdings in CoreCivic and GEO Group.

While CalSTRS’s global equities and fixed income portfolio holdings in the two companies were worth only around $12 million as of November 6, the divestment by such a large pension plan is expected to shine more light on the companies and their practices. Advocates against private prisons and the federal governments policy of using the private facilities to house immigrant detainees have been pressuring other institutional investors to divest.

CalSTRS is the second-largest pension system in the US with almost $230 billion in assets under management. Combined, CalSTRS and the New York State and New York City plans have almost $600 billion in assets under management, a powerful trio of institutional investors that have said no to private prison companies.

The vote by the CalSTRS Investment Committee comes after CIO Chris Ailman ordered CalSTRS investment staff to conduct a divestment review in July. This came after the Trump administration’s zero tolerance border crossing policy highlighted children being separated from their parents and the housing of detainees, both adults and children, in facilities run by the two private corrections companies.

Several dozen protesters calling on CalSTRS to divest from the two companies had appeared at the July 20 investment committee meeting. It was the same meeting at which Ailman made his decision to conduct the review.

“The board conducted a review of the staff research; we agreed that the engagement efforts were thorough and listened to our expert investment consultants,” said Investment Committee Chair Harry Keiley in a press release issued after the vote on Wednesday. “Based on all the information and advice we were provided, the board decided to divest according to the policy criteria.”

The divestment is scheduled to be completed within six months.

Keiley wasn’t more specific, but the committee wasn’t acting on a recommendation from the investment staff. The CalSTRS investment staff review released Nov. 7 did not take a position either way as to whether the pension system should divest from the private prison companies. The review looked at whether CalSTRS’s investments in the two companies violated its environmental, social, and governance (ESG) policy, which includes respect for human rights and whether the investments in the companies would be jeopardized.

“Staff does not take a position on whether or not private prisons violate the ESG policy to the point of justifying implementation of the CalSTRS Divestment Policy,” the review said. “Staff realizes the operation of prisons (public or private) pose noteworthy risks under the CalSTRS ESG policy. However, in several cases it is the contracting agency, such as the US Government, that creates and carries the risk.”

On the human rights issues, the investment staff report split down the middle pro and con on arguments that the companies were violating detainees’ human rights.

“While staff has been informed by both companies that they were not directly involved in the separation of the family, they did provide capacity for the detention of the parents,” the CalSTRS review noted.

The review said while neither GEO Group nor CoreCivic have facilities to house unaccompanied minors, both have a facility to house detained families. It said the two facilities operate outside San Antonio, Texas, and are designed to keep children with one of their parents.

CalSTRS officials said they toured the facilities and noted detainees were able to roam the grounds, the living units were not locked, and there was no razor wire or weapons carried by staff.

“While staff was not able to obtain evidence that these companies violate the respect for human rights, private prisons do add capacity, and help facilitate a system, that may be viewed as violating the Risk Factor,” the review said.

In an emailed comment to CIO, a GEO Group spokesman defended the company’s practices.

“We believe [CalSTRS’s] decision was based on a deliberate and politically motivated mischaracterization of our role as a long-standing service provider to the government,” the statement said. “Our company has never played a role in policies related to the separation of families, and we have never provided any services for that purpose. We are disappointed that misguided, partisan politics were able to jeopardize the retirement security of California’s educators.”

Officials of CoreCivic could not be immediately reached for comment.

The CalSTRS review disputes GEO Group’s contention that California educators’ retirement security would be affected by divestment. The review said removing the private prison companies from the CalSTRS portfolio does “not pose a significant risk or benefit to the portfolio because they are so small relative to the US equity and fixed income allocations.” CalSTRS’s combined allocations to the asset classes total more than $150 billion compared to its approximate $12 million in holdings of the two prison companies.