GEO Making 33% Profit at Tacoma Facility, Possible Violation of Federal Acquisition Regulation - UPDATE: 36.79%!

 

Day 6 of Jury Trial on GEO's Exploitation of Detainee Labor in Tacoma:

Details of Super Profits Released

 

 

 

The first big financial reveal was when GEO's Associate Warden for Finance and administration  testified under oath that the annual profits for GEO at the Tacoma Northwest Detention Facility range between $18 to 20 million. 

The monthly invoice he was testifying about was $4.5 million for housing those waiting for their immigration case outcomes, and additional funds for transportion, for a total of about $5.1 million per month, or  annual profits of 29% to 33%. 

In the afternoon, Chuck Hill, the guy who handles GEO's budgets for the entire Western district explained a Powerpoint he'd produced in 2014.  It  showed GEO's revenues of $53,329,447 and profits of $19,621,970.  

The table Hill created, and plaintiff attorney Andrea Brenneke shared with the jury, showed profits of 36.79% in 2013.  

Hill took issue with the characterization of this number as "profits" but referred to it instead as the "gross operating margin," and pointed out that it did not take into account GEO's expenditures on financing, i.e., the payment to its bond holders. 

Once we deduct this, then GEO's net profits in 2013 were reduced to 19.92%.

The attorney showed that in most recent years GEO, AFTER it paid its lenders, was still making 16% to 19% profits from its contracts for the Tacoma facility.

 

 

 Q and A:

(1)  Can GEO budget in its contract taxpayer money to be spent on interest payments and financing?  

A. No. FAR 31.205-20

"Interest on borrowings (however represented), bond discounts, costs of financing and refinancing capital (net worth plus long-term liabilities), legal and professional fees paid in connection with preparing prospectuses, and costs of preparing and issuing stock rights are unallowable."

(2) Okay, so is it legal GEO able to earn massive profits, and spend from these profits, what Mr. Hill called the "gross margin," on GEO's financing?

A.   No. FAR 15.404-4

"C) For other cost-plus-fixed-fee contracts, the fee shall not exceed 10 percent of the contract’s estimated cost, excluding fee."

GEO's legal strategy defending against the wage claims is to lie.   

UPDATE 7/8/2024: Subsequent testimony indicates that GEO was relying on a portion of the rule that does not limit profits.  The rule itself (15.404-4 "Profit") contradicts Congress's mandate for agencies to adopt protocols to “acquire property and services of the requisite quality and within the time needed at the lowest reasonable cost, utilizing competitive procurement methods to the maximum extent practicable.”  I am writing an article about history of this rule and its contribution to predatory governance and the federal deficit.

 

 

Lie #1  GEO is meeting all their contractual obligations without depending on the detainees to do any work.  GEO's marching in their officials and officers to say that GEO guards are cleaning and doing laundry and the detainees may once in a while pitch in because they feel like it and want to help out with cleaning where they live.  (And working in the kitchen gives them an opportunity to leave their pods.)

Their testimony is contradicted by the plaintiffs themselves, who are telling the jury that they are not working to avoid boredom but earn money.  A former GEO kitchen supervisor from 2009 - 2012 now performing similar duties at a nursing home confirmed their accounts.  So did the pay sheets plaintiffs introduced into evidence.  They showed dozens of workers in the dinner shift, not just a few.    

Lie #2   GEO's attorney in his opening statement said the rate was set in 1979.  Today GEO's Ryan Kimble said he saw the one dollar/day rate in a 1979 Congressional continuing resolution.   This makes it sound as though GEO is just following the payment schedule for the work program that Congress wants ICE to follow and that ICE in turn is obligating GEO to use.

At some point the plaintiff attorneys will point out that the first time the dollar/day rate was set was 1950.  1979 was actually the last time Congress set a rate, and the bill Kimble claimed to have seen clearly states that Congress's appropriation at that rate ended on October 30, 1979. 

To be continued... 

C17-5769-RJB, Nwauzor et al. v. GEO Group, Inc. & C17-5806-RJB, State of WA v. GEO Group, Inc. The Complaint is here.