Private Prison Firm GEO Group Faces Investor Lawsuit Over 'Blundering' Coronavirus Response

Private prison giant The GEO Group is facing a class action lawsuit from investors over its "blundering" response to the coronavirus pandemic.

The federal securities class action lawsuit was filed in the U.S. District Court for the Southern District of Florida last week by Wolf Haldenstein Adler Freeman & Herz LLP, a legal firm based in New York.

Filed "on behalf of all investors who purchased or otherwise acquired common stock of The GEO Group" between February 27, 2020 and June 16, 2020, the lawsuit claims that investors incurred losses in the shares of the company due its poor handling of the coronavirus outbreak.

On June 17, the law firm noted in a press release, The Intercept published an article titled "GEO Group's Blundering Response to the Pandemic Helped Spread Coronavirus in Halfway Houses."

That article described how the Grossman Center, a halfway house in Leavenworth, Kansas, operated by the GEO Group, failed to take preventative measures to prevent the spread of coronavirus, allowing the disease to thrive.

According to the article, residents had been forced to live in overcrowded conditions without the use of personal protective measures even as coronavirus diagnoses at the center increased.

Not long after the article was published, the GEO Group's share price fell $1.03 per share, or 7 percent, to close at $12.17 per share on June 17, the legal firm said.

The drop in share price, however, also came as CoreCivic, another major for-profit prison company in the U.S., announced that it was suspending its dividend and reevaluating its corporate structure. It is possible that some part of the drop could have been connected to a response to that industry news.

In a statement sent to Newsweek, a GEO Group spokesperson denied the allegations made in the class action lawsuit.

"We strongly deny the allegations in the Complaint and will vigorously defend our company in this matter," the spokesperson said.

In the wake of George Floyd's death, however, there have been growing calls for investors to dump shares of companies that profit from mass incarceration, prison labor and immigration detention.

In an opinion piece published on June 30 by MarketWatch, Tanay Tatum-Edwards, the founder and CEO of FreeCap Financial, a financial data provider aimed at helping investors divest from the prison industry, wrote that "investors are scrambling to figure out how to create portfolios that support racial equity."

"The mass incarceration crisis disproportionately impacts Black Americans—there's a reason it's called the 'new Jim Crow'," Tatum-Edwards wrote.

"Many companies have a direct financial incentive to keep this unjust system in place. From exploiting unpaid or cheap prison labor to price gouging basic necessities—companies continue to profit as incarceration rates increase. This is not a small problem; more than 4,000 companies have benefitted from this injustice," Tatum-Edwards wrote.

"It is time to completely divest from private prisons," the advocate said, noting that both The GEO Group and CoreCivic "explicitly identify a reduction in incarceration rates as a material risk in their annual reports."

"Any company whose financial model is built on the exploitation of Black and Brown communities is not worth saving," Tatum-Edwards said. "Shareholders of these two stocks, including the two largest—mutual-fund and exchange-traded fund providers Vanguard Group and BlackRock...should divest from these companies."

Change is already underway amid national outrage over systemic racism in the U.S. and and the government's immigration detention system.

Wall Street banks have agreed to end their financing arrangements with private prison industry leaders after being pushed to do so by immigration advocacy groups such as Dream Defenders and Families Belong Together.

Meanwhile, other banks have pre-existing lending agreements that they have committed to not renewing.

Newsweek has contacted Wolf Haldenstein Adler Freeman & Herz LLP for comment.

This article has been updated with a statement from The GEO Group.

GEO Group protest
Alessandra Mondolfi (left) and Reverend Willie Allen-Faiella join with other activists and protesters including the group Never Again Action as they protest outside the headquarters of the private prison company the GEO Group on August 12, 2019 in Boca Raton, Florida. Joe Raedle/Getty