PRISON COS. GET HOT By PAUL THARP October 4, 2001 -- America's new wall of homeland security is creating a big demand for cells to hold suspects and illegal aliens who might be rounded up. Stocks of private companies that build and operate prisons for governments have zoomed as high as 300 percent in anticipation of internment camps and new prisons. "Unfortunately, these are becoming good investments," said James MacDonald, a prisons-security analyst at First Analysts Securities. One company, Wackenhut Corp., may be able to put its expertise to work here. "Wackenhut has had some success running the immigrant camps in Austraila by converting military bases," said MacDonald. "It could be done here, too, but turning our old military bases into internment camps would be a highly charged issue for us," said MacDonald. "It would be too drastic." He said the half-dozen publicly traded prison companies are in a buzz about expanding prison projects being issued by the Federal Bureau of Prisons. The Bureau has just let out requests for bids for two prisons to hold criminal aliens in Georgia. "It's going to be the biggest award made this year by the Bureau, and it's generated a lot of excitement," said MacDonald. He said the Bureau is also seeking bids early next year for three more prisons in the Southwest deserts that can hold more than 1,500 detainees. Governments pay private prisons about $31,000 a year to handle each jailbird - about half what a government agency spends to run a prison on its own. Private prison investors are also jubilant about an expected U.S. Supreme Court ruling that would bar any inmate from suing a privately run prison for civil rights violations. "The Bureau is expanding rapidly to free up extra space in its system," said MacDonald. In line to get a big piece of that business is the nation's largest private prison company, Corrections Corp. of America. Its stock has soared 308 percent this year, and closed yesterday at $13.98, up 30 cents in active trading. The company was on the brink of bankruptcy just months ago, but a new management team and the sudden new business in the aftermath of the Sept. 11 terror attacks has changed its prospects. "There's clearly a better outlook for the company than it had a few months ago," said MacDonald. The company runs about 65 prisons around the U.S. and Puerto Rico and handles about 61,000 prisoners, including 500 in Leavenworth. Analysts say many security companies got a huge and immediate profits boost from supplying guards and new security in the aftermath of the terror attack. "They got immediate returns, but it's going to take a while for any new prisons to make their way into the market," said MacDonald. Also helping the profits outlook for private prisons is an expected rise in the crime rate due to the recession. "Crime always goes up in a bad economy," said MacDonald. "Where's there are good times and jobs are plentiful, people who get out of prison can usually find work and don't have to go back to their old ways. When the economy fails, so do the former inmates." Federal prisons are the fastest growing in the U.S., rising as much as 10 percent a year. State prison populations have been in a decline for a few years and barely will make a 1 percent rise this year, most of it expected in the fourth quarter, said MacDonald.