SunTrust cuts off prison operators
The action follows the outcry over migrant detention facilities.
SunTrust Banks Inc., the lender merging with BB&T Corp., said it won’t provide future financing to companies that manage private prisons and immigrant-holding facilities.
“This decision was made after extensive consideration of the views of our stakeholders on this deeply complex issue,” the Atlantabased bank said in a statement Monday.
SunTrust’s decision follows similar moves by Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. Protesters and politicians including Sen. Elizabeth Warren (D-Mass.), who is running for president, have urged bank executives and investors to back away from the business as immigrant detentions have soared.
Shares of the two biggest for-profit prison companies, Geo Group Inc. and CoreCivic Inc., have fallen more than 13% since mid-June. Senate Finance Committee ranking member Ron Wyden (D-Ore.) introduced legislation that would deny the companies tax benefits from their status as real estate investment trusts, and Warren said she would end federal contracts with the prison operators.
“This decision is about caving to political pressure,” CoreCivic spokeswoman Amanda Gilchrist said in an emailed statement. “These banks have kowtowed to a small group of activists rather than engaging in a constructive dialogue.”
Detention centers have become a flashpoint amid reports of substandard conditions at facilities for migrants. For example, last week investigators from the Department of Homeland Security inspector general’s office issued a scathing report citing “dangerous overcrowding” at Border Patrol temporary lockups they visited in Texas’ Rio Grande Valley last month. It said that migrants were held by the Border Patrol for up to a month without enough food, hygiene or laundry facilities and that the situation required “immediate attention and action.”
Neither CoreCivic nor Geo Group runs facilities for unaccompanied minors. They each operate a family detention center for migrant children with a parent. They also build and operate adult prisons under contracts with states and the federal government.
“It’s unfortunate that misleading political activism has been allowed to impact a decade-long banking relationship,” Geo Group said in a statement. The company said it “has never managed any facilities that house unaccompanied minors, nor have we ever managed border patrol holding facilities.”
Both companies’ shares took a hit in the last months of the Obama administration, when the Justice Department said it would phase out their use, then climbed in the months after President Trump was elected in November 2016.
SunTrust shares fell 0.7% on Monday. The bank has helped arrange bonds for Geo Group and CoreCivic.
Geo Group shares slid 1.5%. CoreCivic shares slipped 0.6%.
The prison operators are increasing their business with states, including construction of a new prison in Kansas. CoreCivic borrowed $159.5 million at 4.43% to pay for construction of the center, which it will lease to the state for 20 years. When the lease is up, the prison will belong to the state.