As President Trump embraces draconian criminal justice and immigration policies, Comptroller Stringer & the Pension Funds liquidate roughly $48 million in private prison company stocks and bonds
(New York, NY) — Today, New York City Comptroller Scott M. Stringer and the Trustees of the New York City Pension Funds announced that New York City has become the first major public pension system in the nation to fully divest from private prison companies. The move to liquidate the City’s investments in private prison companies follows reported incidents of alleged human rights abuses across the private prison industry, posing long-term reputational and financial harm.
As of 2015, there were 126,000 inmates housed in approximately 130 private prisons operating in 30 different states, and last year, federal investigators found in an audit that private prisons have far higher rates of security and safety incidents per capita than comparable public institutions. Federal authorities have found that some private prisons have sought to reduce overcrowding by improperly confining rule-abiding inmates in segregated units, which are similar to solitary confinement. Limited and poor-quality medical care is common in the industry — and recent lawsuits have indicated that individuals housed within private prisons are routinely denied medical care. One facility allegedly went without a single full-time doctor for over half a year, and in a separate 2012 incident, a corrections officer was killed after a riot over low-quality food and medical care.
In addition, private prison companies operate private immigration detention centers, at which as many as 65 percent of Immigration and Customs Enforcement (ICE) detainees are imprisoned. So far in Fiscal Year 2017, at least eight immigrant detainees have died while in those private facilities. The White House expects to expand the use of those prisons and private detention facilities to house immigrants it intends to hold and deport, as it embraces draconian immigration policies. At least two companies from which the Comptroller has divested — GEO Group and Corrections Corporation of America — operate immigrant detention centers.
“With Donald Trump in the White House, we’re seeing more and more industries try to profit from backwards policies at the expense of immigrants and communities of color. But because of this major new step, we are demonstrating that we will not be complicit. We are standing up for what’s right,” New York City Comptroller Scott M. Stringer said. “Our criminal justice system has failed a generation of Americans because, for decades, we built bigger prisons instead of greater schools, and we were ‘tough on crime’ instead of ‘smart on crime.’ Society used mass incarceration as an economic development strategy at the expense of communities of color. Today, we’re taking action. As President Trump ratchets up hateful rhetoric and steps up deportations, private prison companies are going to see enormous reputational harm — and that means they’ll become even riskier investments. Morally, the industry wants to turn back the clock on years of progress on criminal justice, and we can’t sit idly by and watch that happen. Divesting is simply the right thing to do — financially and morally.”
The Pension Funds’ Trustees voted to divest in mid-May, and since, the Comptroller’s Office and the Pension Funds have sold roughly $48 million of stock and bonds from three private prison companies — GEO Group, CoreCivic (formerly Corrections Corporation of America), and G4S. These first-in-the-nation moves come after the Trustees of the New York City Pension Funds voted to study divesting from private prison companies in September 2016, citing concerns about widespread health and safety violations as well as human rights abuses across the industry.
Because Comptroller Stringer and his fellow Trustees are fiduciaries, they are only able to consider divestment when an analysis finds that the move would add minimal to no risk to the pension funds. That study — conducted by the Comptroller’s Office and outside consultants — found that divesting would add minimal or no risk to the Pension Funds’ portfolios. This finding was substantiated by the Pension Funds’ counsel, which concurred that divestment would not violate the Trustees’ fiduciary duty.
An analysis conducted by the Comptroller’s office and outside consultants also found that there are inherent investment risks in for-profit prison companies. Reports have exposed a pattern of human rights issues in private prisons, including the physical and sexual abuse of inmates, wrongful deaths, and increased violence due to improper staffing. These failings can lead to reputational, legal, and regulatory risks — which could seriously harm investors. Because these risks are implicit in the industry, the Comptroller’s Office is unable to engage with private prison companies and encourage policies that would reduce them.
Examples of additional risks include:
As a result of these analyses, the Comptroller and Trustees voted in mid-May to divest from private prisons. Immediately after the vote, Comptroller Stringer directed the Pension Funds’ investment managers to liquidate all investments in companies that derive at least 20% of their revenue from private prisons, including both direct investments and stock owned as part of an index fund. That process was completed in late May.
On an annual basis, the Comptroller’s Office will analyze the Pension Funds’ portfolios to ensure no additional private prison investments have been added. If any have been, the Comptroller’s Office will make recommendations to the Boards of Trustees on divestment.
“It is time we put our money where our morals are,” said Public Advocate Letitia James. “For years, we have been working to support and protect the pensions of hardworking New Yorkers by investing in areas that are both financially and ethically sound – criteria that investments in private prisons no longer meet. Today, we are following through on our fiduciary responsibility and our values by divesting from an industry that hurts our City and our Country.”
“Our investments need to reflect our values. To that end, divesting our City’s pension funds from private prison companies reflects our belief that the abuses of this industry do not advance safety or justice in our society. As a NYCERS trustee, I was proud to cast my vote in favor of full divestment,” Brooklyn Borough President Eric L. Adams said.
“Privately-run, for-profit prisons are morally repugnant, incentivize corruption in our justice system, and are an obstacle to rational, compassionate sentencing reforms,” said Manhattan Borough President Gale A. Brewer. “This is an industry on the wrong side of history, and getting our money out of that industry was both financially prudent and morally just. I thank the Comptroller and other retirement system trustees for getting this done.”
“The City of New York should not incentivize the private prison business. For-profit prisons create a perverse incentive to lock away our citizens, especially from traditionally underserved minority communities, and today’s announcement that our city’s pension system will divest from this predatory industry is welcome. In the interest of justice, other municipalities and pension funds should consider our example on this issue and move to divest from the for-profit prison industry,” said Bronx Borough President Ruben Diaz Jr.
Comptroller Stringer serves as the investment advisor to, and custodian and a trustee of, the New York City Pension Funds. The New York City Pension Funds are composed of the New York City Employees’ Retirement System, Teachers’ Retirement System, New York City Police Pension Fund, New York City Fire Department Pension Fund and the Board of Education Retirement System.
In addition to Comptroller Stringer, the New York City Pension Funds’ Trustees are:
New York City Employees’ Retirement System: Mayor Bill de Blasio’s Representative, John Adler (Chair); New York City Public Advocate Letitia James; Borough Presidents: Gale Brewer (Manhattan), Melinda Katz (Queens), Eric Adams (Brooklyn), James Oddo (Staten Island), and Ruben Diaz, Jr. (Bronx); Henry Garrido , Executive Director, District Council 37, AFSCME; John Samuelsen, President Transport Workers Union Local 100; Gregory Floyd, President, International Brotherhood of Teamsters, Local 237.
Teachers’ Retirement System: Mayor Bill de Blasio’s Appointee, John Adler (Chair); Raymond Orlando, representing the Chairperson of the Panel for Educational Policy and Debra Penny, Thomas Brown and David Kazansky, all of the United Federation of Teachers.
New York City Police Pension Fund: Mayor Bill de Blasio’s Representative, John Adler; New York City Finance Commissioner Jacques Jiha; New York City Police Commissioner James P. O’Neill (Chair); Patrick Lynch, Patrolmen’s Benevolent Association; Michael Palladino, Detectives Endowment Association; Edward D. Mullins, Sergeants Benevolent Association; Louis Turco, Lieutenants Benevolent Association; and, Roy T. Richter, Captains Endowment Association.
New York City Fire Department Pension Fund: Mayor Bill de Blasio’s Representative, John Adler; New York City Fire Commissioner Daniel A. Nigro (Chair); New York City Finance Commissioner Jacques Jiha; James Slevin, President, Gerard Fitzgerald, Vice President, Edward Brown, Treasurer, and John Kelly, Brooklyn Representative and Chair, Uniformed Firefighters Association of Greater New York; John Farina, Captains’ Rep.; Paul Ferro, Chiefs’ Rep., and Jack Kielty, Lieutenants’ Rep., Uniformed Fire Officers Association; and, Thomas Phelan, Marine Engineers Association.
Board of Education Retirement System: Schools Chancellor Carmen Fariña; Mayoral: Issac Carmignani, T. Elzora Cleveland, Vanessa Leung, Gary Linnen, Lori Podvesker, Stephanie Soto, Benjamin Shuldiner, Miguelina Zorilla-Aristy; Michael Kraft (Manhattan BP), Debra Dillingham (Queens BP), Geneal Chacon (Bronx BP), April Chapman (Brooklyn BP), and Peter Calandrella (Staten Island BP); and employee members John Maderich of the IUOE Local 891 and Donald Nesbit of District Council 37, Local 372.