Investing in companies inthe prison business carries financial, headline and regulatoryrisks, the AFT said in its second report on the topic.

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(Bloomberg) –The American Federation of Teachers is encouragingpensions to consider avoiding private equityinvestments in companies that profit from massincarceration.

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Investing in companies in the prison business carries financial, headline andregulatory risks, the group said in its second report on the topic,released Tuesday morning. The AFT, the country's second-largestteachers' union, represents 1.7 million members participating inpension funds with an estimated $3 trillion under management.

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“This is, first and foremost, a humanitarian and civil rightsissue — but it is also a financial issue that brings the misalignedincentives of our justice system into stark relief,” said AFTPresident Randi Weingarten. “Private prisons and private equityfirms that invest in corrections companies are profiting fromjailing people — disproportionately people of color — and are amajor contributor to the United States' world-leading incarcerationrate.”

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As debate about U.S. criminal justice reform intensifies, somelarge public pensions have begun divesting direct stock holdings inthe industry. The AFT's latest report is designed to draw publicpension trustees' attention to private equity with a watch list offirms invested in areas such as privatized prison health care,commissary services and bail bonds.

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“Although private equity firms acquire corrections companies inan attempt to make money for their principals and investors, thecost-cutting involved has led to allegations that some of thesecompanies neglect, mistreat or abuse prisoners and take advantageof the families of the incarcerated,” the report says.

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The group's first report, issued in August, focused on risksincluding those associated with immigrant detention.

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READ MORE:

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California pension trustees call for disclosures of#MeToo costs 

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NJ pension sells stake in gun manufacturer VistaOutdoor

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Most employees with public pensions thatare under-funded don't know it

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