Just perfect. Why wouldn't they hire gangs to do their dirty work? After all, the for-profit prison industry is run by crooks. Why would the Corrections Corporation of America draw the line at working with violent criminals to save money?

A new lawsuit brought by eight inmates of the Idaho Correctional Center alleges that the company is cutting back on personnel costs by partnering with violent prison gangs to help control the facility. Court documents and an investigative report issued by the state’s Department of Corrections show how guards routinely looked the other way when gang members violated basic facility rules, negotiated with gang leaders on the cell placement of new inmates, and in one instance may have even helped one group of inmates plan a violent attack on members of a rival gang.

Rather than working with corporate headquarters or local authorities to combat the growing threat of gangs, CCA officials at the prison — the state’s largest, with more than 2,000 beds — used those same gangs as a way to control the rest of the inmates and save money:

The inmates also contend that CCA officials use gang violence and the threat of gang violence as an “inexpensive device to gain control over the inmate population,” according to the lawsuit, and that housing gang members together allows the company to use fewer guards, reducing payroll costs.

“The complaint alleges that CCA fosters and develops criminal gangs,” attorney Wyatt Johnson, who along with T.J. Angstman represents the inmates, said in a statement. “Ideally, the lawsuit should force this to come to an end.”

The CCA has operated the prison in partnership with the Idaho corrections department since 2000, at the beginning of a boom period when the number of inmates detained in CCA’s private prisons nationwide climbed nearly 50 percent between 2000 and 2009. States have invited private prison corporations to run some of their facilities as a cost-cutting measure, even though recent studies show that private prisons ultimately cost states millions more than public ones.

Gawker released over 950 pages of documents relating to Bain Capital and Mitt Romney's investments, mostly for the years 2008-2010. While I haven't gone through even a fraction of them yet, one entity leaped out at me -- Brookside Capital Partners Fund.

Mitt Romney's Relationship to Brookside Capital Partners Fund, LP (BCPF)

We've heard a lot about Bain Capital and Sankaty Investors, but not too much about BCPF. However, it was listed as an asset on Romney's 2006 disclosures filed while governor of Massachusetts with ownership set at 3 percent.

BCPF goes back much farther than 2006, however. In 1997 and 1998, when Romney was still an active partner in Bain Capital, the structure of Brookside and related entities looked like this, according to the first SEC filing I could find for it:

Brookside Capital Investors, L.P., a Delaware limited partnership ("Brookside Investors"), is the sole general partner of the Brookside Fund. Brookside Capital Investors, Inc., a Delaware corporation ("Brookside Inc."), is the sole general partner of Brookside Investors. The executive officers of Brookside Inc. are set forth on Schedule A hereto. Mr. W. Mitt Romney is the sole shareholder, sole director, President and Chief Executive Officer of Brookside Inc. and thus is the controlling person of Brookside Inc.

To translate that labyrinth a bit, Mitt Romney was the sole shareholder of an entity that was the sole general partner of the investment partnership, BCPF. As general partner, Romney could expect the following:

Pursuant to the terms of a partnership agreement, Brookside Investors as general partner of the Brookside Fund receives a percentage of profits generated by the Brookside Fund. Brookside Inc., as general partner of Brookside Investors, receives a percentage of profits from Brookside Investors. Mr. W. Mitt Romney receives a percentage of profits from Brookside Investors.

This was the structure of Brookside in 1998, at a time where CCA Realty Investors found itself in need of a restructuring.

CCA Realty Investors, CCA, and the Private Prison Industry

Originally, Corrections Corporation of America (CCA) was two separate, publicly traded entities. There was the prison management side of the business (CCA), and the real estate piece (CCA Realty Investors). Both were publicly traded but after a period of fairly steady growth, trouble was brewing.

PrisonPolicy.org has a good recap of the history (PDF):

CCA sought a way to extract even more investment capital from the stock market to pay for its ambitious expansion plans. The solution it hit on was the real estate investment trust. REITs are publicly-traded entities that own and manage real estate but do not pay corporate income taxes. However, these tax avoidance entities must distribute 95 percent of their operating income as dividends to shareholders. These characteristics are intended to boost the price of REIT shares and thereby help raise even more capital.

In July 1997, CCA Prison Realty Trust, a REIT registered in Maryland, made an initial public offering of 21.3 million shares, priced at $21, raising more than $400 million. Most of the proceeds of the offering were used to purchase nine facilities from CCA, which leased them back and continued operating them under government contracts. This process improved the look of CCA’s finances but amounted to the kind of off-balance-sheet transactions that would later become notorious in connection with the fall of Enron. Back in 1998 an investment banker told the financial magazine Investment Dealers’ Digest that REITs such as Prison Realty were “an off-balance-sheet financing vehicle if you want to pursue more acquisitions.” The fact that Prison Realty owned only properties connected to CCA made it a captive REIT.

The use of off-balance-sheet financing was also at the center of numerous deals in which construction of CCA’s prisons was financed through the issuance of tax-exempt lease-revenue bonds (or certificates of participation). These financing vehicles involve the creation of a non-profit entity that issues the bonds and acts as the titular owner of the facility. The bonds are backed by lease payments made by the correctional agency, which also pays CCA an operating fee. More than a dozen CCA facilities were built using this arrangement, which amounts to a form of taxpayer-subsidized low-cost financing for what is essentially a private facility. This financing is only one of the ways in which CCA (and other private prison operators) have received state and local economic development subsidies. It has also received tax abatements (in Youngstown, Ohio, for example), infrastructure assistance and other incentives.

[Side note: This is a perfect example of "You didn't build that."]

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Privatization has nothing to do with saving money and everything to do with giving kickbacks to politically connected contractors like Corrections Corporation of America:

Sheriff Michael Page of Hernando County, Florida, is the latest in a line of Sheriffs to inherit the headache that is the county jail. After being operated by CCA for 22 years, the facility had fallen into exceptional disrepair, after CCA had neglected to perform millions of dollars worth of required maintenance. The county took over the facility a little more than a year ago and started the long process of upgrading the security, staff, and conditions of the jail.

Initial projections by then-Sheriff Richard Nugent hypothesized that the county could save up to $200,000 compared to what CCA would have charged. It turns out that de-privatizing the jail has actually saved Hernando County taxpayers more than $1,000,000 this year. Maybe Ric Scott and JD Alexander ought to reconsider their bullheaded push to privatize half the state’s prison system.