A Los Angeles policy of awarding exclusive contracts to jail service providers is a benefit to the multibillion-dollar private equity firms that control the companies, but the costs are borne by prisoners who have no alternatives, according to a proposed class-action lawsuit.
(Bloomberg) — A Los Angeles policy of awarding exclusive contracts to jail service providers is a benefit to the multibillion-dollar private equity firms that control the companies, but the costs are borne by prisoners who have no alternatives, according to a proposed class-action lawsuit.
The complaint filed Tuesday against Los Angeles County and its sheriff’s department seeks restitution for inmates and a court order to stop the renewal of contracts under which the county gets a commission.
A statement by former Los Angeles County Supervisor Zev Yaroslavsky is quoted in the complaint: “Everyone’s making a lot of money at the expense of inmates’ families. They’re in jail. They’re paying their debt to society. That doesn’t give us the right to fleece them.”
The two companies at the center of the case are jail phone service provider Global Tel*Link Corp., owned by Ascribe Capital LLC with $23 billion of assets, and Keefe Commissary, part of the Keefe Group which is owned by H.I.G. Capital LLC, with $34 billion of assets.
LA County declined to comment on the lawsuit. None of the companies responded to emailed requests for comment.
Read more: Prison Food Is Latest Target in Campaign to Divest Holdings
Los Angeles County has the largest jail population in the US. The majority of inmates are minorities, with 54% Latino and 30% African American, according to the complaint.
Keefe entered into a contract with Los Angeles County in 2007 to provide commissary services and products for inmates in county jails, agreeing to pay the county 53% of all gross revenue received from sales, according to the complaint. The company paid the county more than $29 million in 2020, according to the complaint.
But the inmates covered the costs, according to the complaint. While the Sheriff’s Department paid $3.51 for “Keefe’s Instant Coffee,” inmates were charged $7.47. An eight-ounce bag of “Flamin’ Hot Cheetos” cost the Sheriff’s Department $2.51, but the inmates paid $5.33.
Under a 2011 contract, GTL agreed to pay the county 67.5% of revenue it got for specified charges, which totaled more than $20 million in 2020, according to the complaint.
Private equity firms providing prison services were targeted in 2019 by a group of politicians, including US Senator and then-presidential candidate Elizabeth Warren, as well as advocacy groups that urged pension funds to stop investing in the for-profit prison industry.
The California Public Employees’ Retirement System and the California State Teachers’ Retirement System, two of the biggest public pensions in the US, sold their investments in prison operators CoreCivic Inc. and Geo Group Inc. at that time.
GTL amended its agreement with Los Angeles County in 2021, lowering the minimum annual guarantee it would pay for the contract from $15 million annually to $6 million, according to the complaint.
The case is Johnson v. County of Los Angeles, Superior Court of California, County of Los Angeles.
(Updates with LA declining to comment)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.