The Attorney General of Washington Is Suing GEO!!! And So Are the Workers...

Aurora, Colorado, where GEO warehouses immigrants and forces them to clean the stock rooms on threat of solitary confinement.  Is the lawsuit a death knell to GEO's business model, or a possible small glitch?  The answer depends...on whether they're talking to an Appellate Court or their stockholders.

A district court judge in Colorado gave the green light in February for a class action lawsuit against the private prison firm GEO.   Next up was the the complaint filed in Otay Mesa, California on May 31, 2017.  Then, last week, a state government launched an historic lawsuit against the private prison firm.

On September 20, the Attorney General for the State of Washington stepped up to the plate, charging GEO with violating the state's minimum wage laws and also "unjust enrichment."

And as if that weren't bad enough for GEO, on September 26 a team of private attorneys in Washington came in to clean up on behalf of GEO Tacoma's detained employee Chen Chao, including Andrew Free, who is part of the original group suing GEO in Aurora (and the attorney who represents the DRC in our FOIA litigation).  

GEO's stock, now around $26.40, is continuing on a downward trend from its year high in April, 2016 of $34.  In light of the recent filing, it's surprising it isn't lower.  Maybe that's because GEO is telling the Appellate judges one thing and their stockholders something else. 

GEO in their 2016 annual report admitted being sued by the state of Mississippi.  The report states that they are being accused of... 

violations of various public servant statutes, racketeering activity, antitrust law, civil conspiracy, unjust enrichment and fraud. The complaint seeks compensatory damages, punitive damages, exemplary damages, forfeiture of all money received by the defendants, restitution, interest, attorneys’ fees, other costs, and such other expenses or damages as the court may deem proper. The complaint claims that between 2007 and 2014, the Company and Cornell Companies, Inc. received approximately $256 million in proceeds from public contracts paid for by the State of Mississippi. The Company intends to take all necessary steps to vigorously defend itself and Cornell Companies, Inc. The Company has not recorded an accrual relating to this matter at this time, as a loss is not considered probable or reasonably estimable at this preliminary stage of the lawsuit.

In the SEC update released for the period ending June 30, 2017, GEO noted the Aurora litigation:

On October 22, 2014, nine current and former civil immigration detainees who were detained at the Aurora Immigration Detention Center filed a purported class action lawsuit against the Company in the United States District Court for the District of Colorado (the “Court”). The complaint alleged that the Company was in violation of the Colorado Minimum Wages of Workers Act and the Trafficking Victims Protection Act, and claimed that the Company was unjustly enriched as a result of the level of payment that the detainees received for work performed at the facility, even though the voluntary work program as well as the wage rates and standards associated with the program that are at issue in this case are authorized by the Federal government under guidelines approved by the United States Congress. On July 6, 2015, the Court granted the Company’s motion to dismiss the claim against the Company under the Colorado Minimum Wages of Workers Act but otherwise denied the Company’s motion to dismiss. On February 27, 2017, the Court granted the plaintiffs’ motion for class certification. The Court ordered the parties to file a revised Proposed Stipulated Scheduling and Discovery Order by March 27, 2017 to proceed with the case. On March 13, 2017, GEO filed for permission to appeal this class certification order directly to the 10th Circuit Court of Appeal. On April 11, 2017, the 10th Circuit Court of Appeal granted GEO’s petition to hear the case. As a result, GEO has filed a motion to stay the proceedings in the trial court. Fact discovery in the case has not yet begun. The plaintiffs seek actual damages, compensatory damages, exemplary damages, punitive damages, restitution, attorneys’ fees and costs, and such other relief as the Court may deem proper. The Company intends to take all necessary steps to vigorously defend itself and has consistently refuted the allegations and claims in the lawsuit. The Company has not recorded an accrual relating to this matter at this time, as a loss is not considered probable nor reasonably estimable at this state of the lawsuit. If the Company had to change the level of compensation under the voluntary work program, or to substitute employee work for voluntary work, this could increase costs of operating these facilities. (Emphasis added.)

How can it be the case that on June 30, 2017 the company calmly reports that changing the level of compensation "could increase costs of operating these facilities" even though in March, GEO filed an apoplectic petition with the 10th Circuit asserting a very different risk scenario:

[T]he district court's novel certification of a class comprising all people detained at the Facility over the past ten years poses a potentially catastrophic risk to GEO's ability to honor its contracts with the federal government. And the skeleton of this suit could potentially be refiled against privately operated facilities across the United States, causing GEO and other contractors to defend them even though GEO firmly believes that policies give the Plaintiffs no legal claim. (Appellee Petition, 03/13/2017 at 30, emphasis added). 

Which outcome represents GEO's true position on its future ICE contracts if it loses these lawsuits?  Is it merely that a loss "could increase costs of operating these facilities"? Or does the Aurora lawsuit pose a "catastrophic risk"  to GEO's capacity to honor its ICE contracts?  Looks like ICE detainees aren't the only ones who may have a claim of Unjust Enrichment against GEO's directors.