CoreCivic says it will pay $56 million to settle a lawsuit by shareholders who accused the private prison operator of inflating its stock prices by misrepresenting the quality and value of its services.
The lawsuit was filed in 2016, when CoreCivic’s stock fell after the U.S. Department of Justice directed the Bureau of Prisons to phase out contracts with private operators. The DOJ memorandum said privately run prisons have more safety and security problems than federally run prisons without significant cost savings. The class action was led by Amalgamated Bank, which said it lost $1.2 million when stock prices fell.
CoreCivic pointed out in court filings that the DOJ directive was rescinded under the Trump administration, and the company’s stock price went on to fully recover. The Brentwood, Tennessee-based company also argued that statements boasting of the quality and value of its services were of a generic nature and not fraudulent.