Corrections corporation of america class action lawsuit

A federal judge has granted class action status to shareholders suing Nashville-based CoreCivic for securities fraud in a lawsuit that reveals new details about the company's operations and staffing issues. 

The lawsuit, filed in August 2016 against the company and four executives, alleges CoreCivic, formerly named Corrections Corp. of America, made false and misleading statements about its operations related to safety, security and effectiveness and committed securities fraud violations.

In an order filed Tuesday in U.S. District Court of Middle Tennessee, Judge Aleta Trauger granted the lawsuit class action status. Trauger had denied the status in January, and the plaintiffs subsequently filed a motion for reconsideration and submitted new evidence.

Among the executives named in the lawsuit are CEO Damon Hininger, David Garfinkle, Todd Millenger and Harley Lappin.

CoreCivic said it does not comment on active litigation.

The lawsuit concerns an announcement made Aug. 18, 2016, that the U.S. Department of Justice would phase out contracts with private prison operators. Then-Deputy Attorney General Sally Q. Yates had instructed the Bureau of Prisons to end or reduce contracts with privately run prisons and cited concerns about safety and security in privately run facilities outlined in a separate report from the Office of the Inspector General.

The OIG report said that privately run prisons had more safety and security incidents per capita than those run by the bureau of prisons and that CoreCivic prisons had the highest rates of fights and inmate-on-inmate assaults. 

After Yates' announcement, CoreCivic shares tumbled by 39 percent, and shareholders suffered financial losses because of the company's acts and omissions, the shareholders allege.

Hininger in March 2016 told shareholders that its facilities "meets the needs of our government partners" and that the company has a "strong record of operational excellence," according to the new order. The order also referred to other company reports in which the company claimed to be compliant with government standards.

The order says the BOP regularly notified CoreCivic about "inadequate staffing and its failure to provide sufficient medical services to its inmates."  In 2015, the BOP said unless conditions related to health services are cured, the government may terminate its contract. 

In October 2015, according to the order, a CoreCivic executive wrote in an email to Hininger, "apparently we had a bad day today with BOP medical audit at Cibola," a detention center in New Mexico.  Another email said the matter "is going to kill us at both Cibola and Eden," a facility in Texas.  In June 2016, as the BOP reviewed medical services at Cibola County Correctional Center, an executive wrote, "We're dead."

That same month, Hininger said at an investor forum, "We have operationally made sure that we are providing high quality and standard and consistent services to our partners."

When CoreCivic employees were given an advance version of the 2016 OIG report, an executive wrote, "What I'm shocked over is they totally overlooked the consequences of our staff vacancies. They mentioned staffing at the end but could have been much more critical," according to the order.

In a separate order filed in December 2017 that denies CoreCivic's motion to dismiss,  an affidavit by a correctional officer describes a 2012 incident that resulted in the death of another employee at a CoreCivic prison in Mississippi. The correctional officer said she was instructed to climb onto a roof after being warned about inmates planning "something big" and to eventually deploy gas canisters at inmates climbing a ladder to the roof, according to the court filing, citing the affidavit. The inmates threw the canisters back at two staff members, along with garbage cans and rocks before beating a staff member with a metal pan and food tray. That correctional officer said after she gained consciousness, she saw the other staff member lying motionless on the roof.

She and her coworkers had told Corecivic officials on numerous occasions that they lacked the staff needed to control inmates and the shortage created a dangerous environment. She said she was told to “put my big girl panties on and get back to work," according to the order, citing the affidavit.

The BOP sent CoreCivic several notices about staffing shortages and health services deficiencies at the Mississippi facility and a separate facility, Cibola, in New Mexico, according to the 2017 court filing. "Unsatisfactory" reviews were given to both sites. The company's Eden Detention Center in Texas received notices related to health services deficiencies and the BOP said its response to tuberculosis had been "inadequate."

Reach Jamie McGee at 615-259-8071 and on Twitter @JamieMcGee_.

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