Federal pension plan invested millions in U.S. private prisons

Crown corporation’s purchase came amid growing pressure on funds to divest from sector

A Canadian Crown corporation has invested millions of dollars in two U.S. private prison giants, financial filings reveal, a move one federal union decried as “abhorrent.”

In the last half of 2020, the Public Sector Pension Investment Board (PSP) bought a total of more than 600,000 shares of CoreCivic and the Geo Group, two of the largest providers of private prisons, jails and immigration detention centres in the United States, according to documents filed with the U.S Securities and Exchange Commission.

The moves came even as other large pension funds around the world — including the Canada Pension Plan — have sought to sell off their shares in the private prison sector in recent years amid an escalating backlash from activists and plan members.

CoreCivic, Geo and other private prison companies were harshly criticized during the Trump administration for jailing migrants and would-be refugees, including some parents who had been separated from their children while crossing the border from Mexico.

“The idea that Canada would want to be associated with these terrible practices I would hope would be an absolute outrage for the average Canadian citizen who was part of this pension fund,” said Morgan Simon, a managing partner at Candide Group, a socially responsible investment group in California.

“You have a country that is kind of known globally, I think, for having high moral standards … And from that perspective, I would think that it would be pretty shocking that a Canadian pension fund would choose to invest in American private prisons.”

PSP, a federal body that operates at arm’s length from the government, manages the pension investments of federal employees, members of the RCMP and the Canadian military.

The fund has been criticized over the past year for its investments, including its sole ownership of Revera, one of Canada’s largest providers of for-profit long-term care.

The fund also recently entered into a $700-million (U.S.) joint investment with Pretium Partners, a Wall Street private equity firm, to purchase and develop single-family rental (SFR) housing in the American Sun Belt. The American SFR industry, which grew out of the ashes of the foreclosure crisis, has been linked by researchers to a host of bad outcomes for tenants.

The decision to invest in the American private prison sector, though, may prove to be PSP’s most controversial. Over the last four years, activists have aggressively pushed banks and institutional investors to exit the industry, with considerable success.

Since 2017, some of the largest pension funds in the United States have sold off their shares in CoreCivic and Geo Group. Pension funds representing public employees and teachers in California, New York and New Mexico have all divested from the sector, which New York City’s comptroller called “financially risky and morally bankrupt” in an interview with the Financial Times.

“This industry’s business model is fundamentally premised on taking criminal justice backwards, and their reported human rights abuses pose enormous long-term financial and reputational risks to our pension fund portfolio,” Scott Stringer said.

Pension funds from Denmark and Canada have also recently fled the industry.

The Canada Pension Plan Investment Board sold off its stakes in Geo and CoreCivic in 2019, after a series unflattering stories about its ties to the industry.

PSP, though, is moving in the opposite direction. According to SEC filings, the fund owned no shares in Geo Group or CoreCivic as of May 14, 2020. Over the next three months, the fund acquired about 43,000 CoreCivic shares, worth about $410,00 million (U.S.) and then another 272,000 shares of CoreCivic and 307,000 shares of the Geo Group.

Combined, the fund owned about $4.8 million (U.S.) worth of the two companies as of Feb. 12, according to a 13F holding report filed with the SEC.

In a statement, a spokesperson for PSP said the fund “has a significant allocation to public markets which we manage internally and externally, using a combination of actively-managed and index-replication strategies. Our CoreCivic investment is held in our passive index replication portfolio which follows the S&P 600 index.”

(PSP did not reply to a request for comment on the GEO Group before deadline.)

In a statement, a spokesperson for CoreCivic said in part that the company “plays a valued but limited role in America’s immigration system, which we have done for every administration — Democrat and Republican — for nearly 40 years.”

“While we know this is a highly charged, emotional issue for many people, much of the information about our company being shared by special interest groups is wrong and politically motivated, resulting in some people reaching misguided conclusions about what we do. The fact is our sole job is to help the government solve problems in ways it could not do alone — to help manage unprecedented humanitarian crises, dramatically improve the standard of care for vulnerable people, and meet other critical needs efficiently and innovatively.”

Amanda Gilchrist, CoreCivic’s director of public affairs, added that none of the company’s facilities provide “housing for children who aren’t under the supervision of a parent.”

“Lastly, the false narrative out there is being spread by special interests with a political, not problem-solving agenda. We’ve stepped up our leadership to solve problems — to align with and respond to the needs of our government partners and to find ways to get better at our profession and offer even more innovative solutions,” Gilchrist said.

For the union that represents many federal employees, though, PSP’s decision to invest in the private prison industry is an outrage. In a statement, the Public Sector Alliance of Canada called on PSP to sell off the investment.

“Our members are telling us that they do want to be involved in investments of this nature,” said James Infantino, a PSAC pensions and disability insurance officer.

“There’s a moral aspect to it, but there’s also an issue about whether, from a pension perspective, these are actually good, long-term investments for our pension funds. And our answer is no, they’re not.”

Over the last 12 months, CoreCivic’s stock has fallen from a high of more than $16 (U.S) per share to less than $8.