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Commitments, Contingencies and Other Matters | 12 Months Ended
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Dec. 31, 2023
Commitments and Contingencies Disclosure [Abstract] |
Commitments, Contingencies and Other Matters | 16. Commitments, Contingencies and Other Matters Transition of Jose Gordo from Chief Executive Officer to Advisor The Company announced on November 30, 2023 that following discussions between GEO and its Chief Executive Officer, Jose Gordo, the parties agreed that Mr. Gordo would depart as Chief Executive Officer and as a Board member on mutually agreeable terms and transition to the role of an advisor, effective December 31, 2023 (the “Separation Date”). Mr. Gordo and the Company entered into a Separation Agreement, on November 29, 2023. Pursuant to the terms of the Separation Agreement, Mr. Gordo will: (i) receive all accrued wages through December 31, 2023, less applicable withholdings; (ii) be eligible to receive a target annual performance award for the year ended December 31, 2023 pursuant to the terms of GEO’s Performance Award Plan, if and to the extent earned, at the same time as other senior management employees participating in the Performance Award Plan; and (iii) be entitled to the payment of health insurance premiums under COBRA for a period ending on the earlier of eighteen (18) months following the Separation Date or the date he is no longer entitled to receive COBRA continuation coverage. Under the terms of the Separation Agreement, Mr. Gordo’s equity award agreements will survive the separation of his employment except that performance shares shall only vest during the 18-month period of the Advisory Agreement. The Separation Agreement also contains a mutual release, cooperation and non-disparagement provisions. Mr. Gordo and the Company also entered into an Advisory Agreement on November 29, 2023, effective as of January 1, 2024, for a period of eighteen (18) months concluding on June 30, 2025. Pursuant to the terms of the Advisory Agreement, Mr. Gordo will be available to give advice and support regarding litigation, client relations, operational issues, growth opportunities, and company financial management and debt restructuring matters and provide any and all other related assistance requested by the Company for an advisory fee of $40,000 per month for the Advisory Period. The Company is seeking to continue Mr. Gordo’s services in these specific areas to benefit from his many years of experience in the industry, the deep relationships he has forged inside the Company and with its industry partners, his global operating perspectives, and his specific expertise in a specialized industry. Additionally, Mr. Gordo’s previously-awarded unvested performance shares shall continue to vest as scheduled through June 30, 2025, when and to the extent the Compensation Committee of the Board certifies that the performance goals are actually met. The Advisory Agreement also contains provisions related to confidentiality and conflicts of interest. Appointment of Brian Evans as Chief Executive Officer Brian Evans, who has been with the Company for 23 years and served as the Company’s Chief Financial Officer for 14 years, was appointed Chief Executive Officer on November 29, 2023, effective January 1, 2024. In connection with his appointment, Mr. Evans and the Company entered into the Evans Employment Agreement on December 4, 2023 to provide that Mr. Evans will be employed by the Company for a three-year term beginning January 1, 2024 (the “Effective Date”). Unless the Evans Employment Agreement is sooner terminated, or not renewed, it will automatically extend upon the end of its initial term for a rolling three-year term. Pursuant to the terms of the Evans Employment Agreement, Mr. Evans will serve as Chief Executive Officer and report directly to the Executive Chairman. Either Mr. Evans or the Company may terminate Mr. Evan’s employment under the Evans Employment Agreement for any reason upon not less than thirty (30) days written notice. Under the terms of the Evans Employment Agreement, Mr. Evans will be paid an annual base salary of $1,000,000, subject to the review and potential increase in the sole discretion of the Compensation Committee. Mr. Evans will also be entitled to receive a target annual performance award of 100% of Mr. Evans’ base salary and be entitled to participate in the Stock Incentive Plan. The Evans Employment Agreement provides that upon the separation of employment by Mr. Evans for good reason, by the Company without cause or upon the death or disability of Mr. Evans, he will be entitled to receive a separation payment equal to two (2) times the sum of his annual base salary. The Company will also continue to provide Mr. Evans and any covered dependents with the Executive Benefits as defined in the Evans Employment Agreement for a period of five (5) years after the date of separation. In the event of Mr. Evans’ death within such five (5) year period, the Company will continue to provide the Executive Benefits to Mr. Evans’ covered dependents, and, if applicable to Mr. Evans’ estate. In addition, the Evans Employment Agreement provides that upon such separation, GEO will transfer all of its interest in any automobile used by Mr. Evans pursuant to its Executive Automobile Policy and pay the balance of any outstanding loans or leases on such automobile so that Mr. Evans owns the automobile outright. In the event such automobile is leased, GEO will pay the residual cost of the lease. Lastly, all of the outstanding and unvested stock options and restricted stock granted to Mr. Evans prior to separation will fully vest immediately upon separation; provided, however that any restricted stock that is subject to performance-based vesting shall only vest when and to the extent the Compensation Committee certifies that the performance goals are actually met, and provided further that Mr. Evans remains in full compliance with the restrictive covenants set forth in the Evans Employment Agreement. Upon a separation of employment by the Company for cause or by Mr. Evans without good reason, Mr. Evans will be entitled to only the amount of compensation that is due through the effective date of the separation. The Evans Employment Agreement includes a non-competition covenant that runs through the three-year period following the separation of the executive’s employment, and confidentiality and work product provisions. Appointment of Shayn March as Acting Chief Financial Officer Shayn March, Executive Vice President, Finance and Treasurer, was appointed Acting Chief Financial Officer on November 29, 2023, effective January 1, 2024. Mr. March, 58, joined the Company as Vice President of Finance and Treasurer in March 2009. In connection with his appointment as Acting Chief Financial Officer, the Compensation Committee approved an increase in Mr. March’s annual base salary to $450,000, effective January 1, 2024. Otherwise, the terms of Mr. March’s employment continue to be governed by the March Employment Agreement. The March Employment Agreement provides that Mr. March will be employed by the Company for a two-year term beginning June 22, 2021. Unless the March Employment Agreement is sooner terminated, or not renewed, it automatically extends for an additional two years after the end of each term. Either Mr. March or the Company may terminate Mr. March’s employment under the March Employment Agreement for any reason upon not less than thirty (30) days written notice. Under the terms of the March Employment Agreement, Mr. March is entitled to receive an annual bonus in accordance with the terms of any plan governing employee bonuses then in effect as established by the Board of Directors. The March Employment Agreement provides that upon the separation of employment by the Company without cause or upon the death or disability of Mr. March, he will be entitled to receive a separation payment equal to the current annual base salary for the greater of: (i) the remainder of the term or (ii) twelve (12) months. The Company will also continue to provide Mr. March and any covered dependents with the Employee Benefits as defined in the March Employment Agreement for a period of twelve (12) months after the date of separation. In the event of Mr. March’s death within such twelve (12) month period, the Company will continue to provide the Employee Benefits to Mr. March’s covered dependents, and, if applicable to Mr. March’s estate. Lastly, all of the outstanding and unvested stock options and restricted stock granted to Mr. March prior to separation will continue to vest for the greater of: (i) the remainder of the term or (ii) twelve (12) months. Upon a separation of employment by the Company for cause or a resignation by Mr. March, Mr. March will be entitled to only the amount of compensation that is due through the effective date of the separation. The March Employment Agreement includes a non-competition covenant that runs through the two-year period following the separation of the executive’s employment, and confidentiality and work product provisions. Appointment of Wayne Calabrese as President and Chief Operating Officer Wayne Calabrese, Senior Vice President and Chief Operating Officer, was appointed President and Chief Operating Officer on November 29, 2023, effective January 1, 2024. In connection with Mr. Calabrese’s appointment as President and Chief Operating Officer, Mr. Calabrese and the Company entered into the Calabrese Employment Agreement, to provide that Mr. Calabrese will be employed by the Company for a two-year term beginning the Effective Date and ending on December 31, 2025. Under the terms of the Calabrese Employment Agreement, Mr. Calabrese will be paid an annual base salary of $700,000, subject to the review and recommendation of a potential increase in the sole discretion of the Compensation Committee. Mr. Calabrese will be entitled to receive a target annual performance award of eighty percent (80%) of his base salary and will also be entitled to participate in the Stock Incentive Plan. The Calabrese Employment Agreement provides that upon a separation of employment by Mr. Calabrese for good reason or by the Company without cause or upon the death or disability of Mr. Calabrese, he will be entitled to a lump sum separation payment equal to Mr. Calabrese’s annual base salary for six (6) months. In addition, the Calabrese Employment Agreement provides that upon such separation, the Company will transfer all of its interest in any automobile used by Mr. Calabrese pursuant to its Executive Automobile Policy and pay the balance of any outstanding loans or leases on such automobile so that Mr. Calabrese owns the automobile outright. Additionally, all of the outstanding unvested stock options and restricted stock granted to Mr. Calabrese prior to separation will fully vest immediately upon separation; provided however, that any restricted stock that is subject to performance-based vesting shall only vest when and to the extent the Compensation Committee certifies that the performance goals are actually met. Upon a separation of employment by Mr. Calabrese without good reason or by the Company for cause, Mr. Calabrese will be entitled to only the amount of compensation that is due through the effective date of the separation. Except that if Mr. Calabrese’s separation from employment occurs upon the conclusion of his two-year term (or any extension thereof) (the “Full Term Separation Date”), all of the outstanding unvested stock options and restricted stock granted to Mr. Calabrese prior to the Full Term Separation Date will fully vest immediately upon separation; provided however, that any restricted stock that is still subject to performance-based vesting as of the Full Term Separation Date shall only vest when and to the extent the Compensation Committee certifies that the performance goals are actually met, and provided further that Mr. Calabrese remains in full compliance with the restrictive covenants set forth in the Calabrese Employment Agreement. The Calabrese Employment Agreement also provides that Mr. Calabrese is not eligible for retirement benefits under the Company’s policy based on his prior employment and retirement, which resulted in Mr. Calabrese taking his retirement benefits at that time. The Calabrese Employment Agreement includes a non-competition covenant that runs through the three-year period following the executive’s separation from employment, and confidentiality and work product provisions. Non-Renewal of Term under Executive Chairman Employment Agreement and Transition of Dr. George Zoley from Executive Chairman to Advisor and non-Executive Chairman In addition, on November 29, 2023, the Company confirmed that Dr. George Zoley, the Company’s Founder and Executive Chairman, will step down as Executive Chairman on June 30, 2026, at the end of his current employment term under his Executive Chairman Employment Agreement. The Company and Dr. Zoley plan on entering into an Advisory Services Agreement prior to June 30, 2026 to reflect Dr. Zoley’s continuing role with the Company as an Advisor beginning on July 1, 2026 while continuing to serve as the Company’s non-Executive Chairman of the Board of Directors, subject to shareholder approval. Collective Bargaining Agreements The Company had approximately 49% of its workforce covered by collective bargaining agreements at December 31, 2023. Collective bargaining agreements with 27% of employees are set to expire in less than one year. Contract Developments On December 18, 2023, GEO received a new task order from ICE establishing February 19, 2024 as the end of the contract performance period, ten months short of the end of the Company's 1940-bed company owned Adelanto ICE Processing Center's base contract term. The next day, on December 19 th, ICE issued a public statement, saying, in part, that “While no final decision has been made regarding the disposition of the facility, ICE must consider the effect of ongoing litigation that prevents full use of the facility, likelihood of relief from that litigation, the cost associated with maintaining the facility and the operational requirements for effective national detention operations.” GEO believes the task order and public statement issued by ICE demonstrate that the government is considering whether to discontinue its use of the facility before the end of the contract’s base term due to the ongoing impact of the outdated COVID-19 related limitations imposed by the federal court over three years ago. As a result, GEO and the three unions representing the Facility’s employees have filed motions to protect GEO’s interests which include annualized revenues and the potential loss of jobs by 350-plus Facility employees. Subsequent to the filing of these motions, ICE extended the task order funding for the Adelanto contract through June 19, 2024. During the fourth quarter of 2023, in Colorado, GEO renewed its contract with ICE for the provision of the company-owned 1,532-bed Aurora ICE Processing Center and associated secure support services for a one-year term. During the fourth quarter of 2023, in California, GEO renewed its contract with the U.S. Marshals for the provision of secure support services at the government-owned, 512-bed El Centro Detention Facility for a two-year term. Also during the fourth quarter of 2023, at the state level, GEO received a two-year renewal of its lease agreement with the State of New Mexico for its company-owned, 600-bed Guadalupe County Correctional Facility, which is managed by the New Mexico Corrections Department. Additionally, the Company's GEO Reentry Services division renewed five residential reentry center contracts at the state and federal levels during the fourth quarter of 2023 During the third quarter of 2023, the Company renewed two direct contracts with the U.S. Marshals Service. One was at its company-owned 1,900-bed Rio Grande Processing Center in Texas for a five-year term, and the second at its company-leased 770-bed Western Region Detention Facility in San Diego for a two-year term. ﻿ The Company also renewed three contracts with ICE during the third quarter of 2023 for respective one-year terms that include its company-owned 700-bed Broward Transitional Center in Florida, its company-owned 1,904-bed South Texas ICE Processing Center, and its company-owned 1,314-bed Montgomery Processing Center in Texas and entered into a new emergency nine month contract to provide air operations support for ICE. On April 28, 2023, the Company signed a 66-month lease, with subsequent unlimited one-year options, with the Oklahoma Department of Corrections for its previously idled company-owned Great Plains Correctional Facility which commenced May 1, 2023. During the first quarter of 2023, the USMS exercised the five-year option period under the Company's direct contract for the 768-bed Robert Deyton Facility in Georgia, which is now effective through February 2028. On January 9, 2023, the Company announced that its Australian subsidiary, GEO Australia, had entered into a contract with the Department of Justice and Community Safety in the State of Victoria for delivery of primary health services across thirteen public prisons. The contract commenced on July 1, 2023. Commitments As of December 31, 2023, the Company had contractually required commitments for a number of projects using existing Company financing facilities. The Company’s management estimates that these existing contractually required capital projects will cost approximately $61.3 million, of which $49.0 million was spent through 2023. The Company estimates the remaining capital requirements related to these contractually required capital projects to be approximately $12.3 million. These projects are expected to be completed through 2024. In addition to these current estimated capital requirements, the Company is currently in the process of bidding on, or evaluating potential bids for the design, construction and management of a number of new projects. In the event that the Company wins bids for these projects and decides to self-finance their construction, its capital requirements could materially increase. Litigation, Claims and Assessments Shareholder and Derivative Litigation On July 7, 2020, a putative shareholder class action lawsuit was filed against the Company and its officers George C. Zoley and Brian R. Evans in the U.S. District Court for the Southern District of Florida. On November 18, 2020, the lead plaintiffs, James Michael DeLoach and Edward Oketola, filed a consolidated class action amended complaint against Messrs. Zoley and Evans––as well as then current and former Company officers J. David Donahue and Ann M. Schlarb. On September 23, 2021, the court dismissed all claims against Messrs. Evans and Donahue, and Ms. Schlarb, and dismissed all claims against GEO and Mr. Zoley other than claims related to GEO's disclosures about pending litigation. On October 4, 2021, plaintiffs filed a consolidated class action second amended complaint. The second amended complaint alleged that GEO and Mr. Zoley violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, and alleged that Mr. Zoley violated Section 20(a) of the Exchange Act, by making materially false and misleading statements and/or omissions related to pending litigation, and sought relief individually and on behalf of a putative class consisting of all persons and entities––other than the defendants, the officers and directors of the Company, members of their immediate families and their legal representatives, heirs, successors or assigns and any entity in which the defendants have or had a controlling interest––who purchased or otherwise acquired the Company’s securities during the alleged class period from November 9, 2018 to August 5, 2020, inclusive. The second amended complaint sought damages, interest, attorneys’ fees, expert fees, other costs, and such other relief as the court deemed proper. On June 21, 2022, the court dismissed all claims in the second amended complaint other than those related to the Company’s statements about pending lawsuits made prior to July 17, 2019. The parties resolved this matter following mediation for a payment to a settlement class of $3 million paid by the Company's insurance carrier. On November 17, 2023, the court entered a Final Judgment and Order of Dismissal with Prejudice approving the settlement. After the putative shareholder class action lawsuit was filed, three related putative shareholder derivative actions were also filed. These cases generally allege breaches of fiduciary duties related to the same underlying matters alleged in the class action above. First, on July 1, 2021, a putative shareholder derivative complaint was filed in Palm Beach County, Florida Circuit Court against the Company, as well as current and former Company directors and officers George C. Zoley, Jose Gordo, Brian R. Evans, Ann M. Schlarb, Richard H. Glanton, Anne N. Foreman, Christopher C. Wheeler, Julie M. Wood, Guido van Hauwermeiren, Scott M. Kernan, and Duane Helkowski (collectively, the “State Court Defendants”). Second, on November 12, 2021, a putative shareholder derivative complaint was filed in the U.S. District Court for the Southern District of Florida against the Company, the State Court Defendants, as well as then current and former Company officers David Venturella and J. David Donahue (collectively, the “Derivative Defendants”). Third, on August 24, 2022, a putative stockholder derivative complaint was filed in the U.S. District Court for the Southern District of Florida against the Company and the Derivative Defendants. The state-court complaint alleges breach of fiduciary duty and unjust enrichment claims against the State Court Defendants relating to purported healthcare and quality of care deficiencies, an allegedly inadequate response to the COVID-19 pandemic, alleged forced labor by detainees, and alleged exposure to pending litigation, which purportedly led to damage to GEO. The federal-court complaints make similar allegations of breach of fiduciary duty as to the Derivative Defendants, and also allege that the Derivative Defendants violated Section 10(b) of the Exchange Act, and Rule 10b-5 promulgated thereunder and that Mr. Zoley contributed to alleged violations of Sections 10(b) and 21D of the Exchange Act. These cases are currently stayed. Immigration Detainee Litigation Civil immigration detainees at the Aurora ICE Processing Center filed a class action lawsuit on October 22, 2014, against the Company in the U.S. District Court for the District of Colorado. The complaint alleges that the Company was in violation of the Colorado Minimum Wage Act ("CMWA") and the Federal Trafficking Victims Protection Act (“TVPA”). The complaint also claims that the Company was unjustly enriched based on the level of payment the detainees received for work performed in a Voluntary Work Program ("VWP") the Company is required to implement at the facility under the terms of its contract with the federal government. On July 6, 2015, the court found that detainees were not employees under the CMWA and dismissed this claim. On February 27, 2017, the court granted the plaintiffs' motion for class certification on the TVPA and unjust enrichment claims. The plaintiffs' class seeks actual damages, compensatory damages, exemplary damages, punitive damages, restitution, attorneys’ fees and costs, and such other relief as the court may deem proper. On October 18, 2022, the court issued an order granting plaintiffs’ motion for summary judgment on the Company’s affirmative defenses, denying the Company’s motion for summary judgment, motion to dismiss, and motion for decertification of the class, narrowing the class period for plaintiffs’ TVPA claims, and otherwise ruling against the Company’s motions for relief. All trial dates are currently stayed by court order pending appeal of certain of GEO's defenses to the 10th Circuit Court of Appeal. Oral argument before the 10th Circuit was held on September 18, 2023. Since the Colorado suit was initially filed, four similar lawsuits have been filed - two in Washington State and two in California. The first of the two Washington State lawsuits was filed on September 26, 2017, by immigration detainees against the Company in the U.S. District Court for the Western District of Washington. The second lawsuit was filed on September 20, 2017, by the State Attorney General against the Company in the Superior Court of the State of Washington for Pierce County, which the Company removed to the U.S. District Court for the Western District of Washington on October 9, 2017. The plaintiffs claimed that Washington minimum wage laws should be enforced with respect to detainees who volunteer to participate in a VWP administered by GEO at the Northwest ICE Processing Center (the "Center") as required by the U.S. Department of Homeland Security under the terms of GEO’s contract. The Center houses persons in the custody of federal immigration authorities while the federal government is determining their immigration status. In October 2021, an unfavorable jury verdict and court judgment resulting in a combined $23.2 million judgment entered against the Company in the retrial of the two cases, which judgment amounts were subsequently increased by a further award against the Company of attorney’s fees, costs, and pre-judgment interest in the amount of $14.4 million. Post judgment interest is accruing on these judgments in accordance with Washington law. The trial court has waived the necessity to post a supersedeas bond for the combined judgments and has stayed enforcement of the verdict and judgments while GEO’s appeal to the U.S. Court of Appeals for the Ninth Circuit is pending. Oral argument before the Ninth Circuit was held on October 6, 2022. On March 7, 2023, the Ninth Circuit certified certain state law questions to the Washington Supreme Court. Oral argument before the Washington Supreme Court was held on October 17, 2023. On December 21, 2023, the Washington Supreme Court issued an opinion answering the questions certified by the Ninth Circuit. Under the Ninth Circuit’s March 7, 2023 order certifying the above questions to the Washington Supreme Court, the Ninth Circuit has resumed control and jurisdiction over the Washington State lawsuits. On February 21, 2024, the United States Department of Justice filed its Amicus Curiae in Support of GEO, arguing that the Washington judgments should be reversed because the Supremacy Clause precludes application of the Washington Minimum Wage Statute to work programs for federal detainees. In its Brief, the Department of Justice asserts that application of the Washington law independently contravenes intergovernmental immunity because it would make federal detainees subject to provisions that do not apply, and never have applied, to persons in state custody, singling out a contractor with the federal government for obligations Washington does not itself bear. The Department of Justice also contends that the immigration statutory structure approved by Congress does not contemplate a role for states or state law in governing the Voluntary Work Program for federal detainees. In California, a class-action lawsuit was filed on December 19, 2017, by immigration detainees against the Company in the U.S. District Court Eastern Division of the Central District of California. The California lawsuit alleges violations of the state’s minimum wage laws, violations of the TVPA and California's equivalent state statute, unjust enrichment, unfair competition and retaliation. The California court has certified a class of individuals who have been civilly detained at the Company's Adelanto Facility from December 19, 2014, until the date of final judgment. On March 31, 2022, the court entered a stay until the Ninth Circuit rules on the Washington State lawsuits. Current and former detainees of the Mesa Verde ICE Processing Center and the Golden State Annex ICE Processing Center filed a class action lawsuit on July 13, 2022, against the Company in the U.S. District Court for the Eastern District of California, Fresno Division. This lawsuit is similar to the cases in Colorado, Washington and California discussed above. The complaint alleges that federal detainees who volunteer to participate in the VWP at GEO’s Mesa Verde and Golden State Annex ICE facilities are employees of GEO and entitled to the state’s minimum wage. Plaintiffs also make claims for unfair competition, unjust enrichment, human trafficking, forced labor, California's Private Attorneys General Act and retaliation. GEO filed both a motion to stay the action pending the Ninth Circuit's decision in the Washington State lawsuits and a motion to dismiss the action in its entirety. On July 10, 2023, the court entered a stay until the Ninth Circuit rules on the Washington State lawsuits. GEO believes it operates the VWP in full compliance with its contract with ICE and all applicable laws, regulations, and standards. GEO strongly disputes the claims made in these lawsuits, and intends to take all necessary steps to vigorously defend itself from these lawsuits. GEO has not recorded any accruals relating to these lawsuits at this time as losses are not considered probable. Challenges to State Legislation that Conflict with Federal Contracts On April 29, 2021, the Company filed a lawsuit in the U.S. District Court for the Western District of Washington against the State of Washington for declaratory and injunctive relief challenging the State of Washington’s newly enacted law – House Bill 1090 – that purports to prohibit the operation of "private detention facilities" in the state, which would prevent the United States from using privately contracted detention facilities to house detainees in the custody of ICE. The court entered a stay of this action pending the final resolution of the AB-32 appeal. On June 22, 2023, the State of Washington filed a stipulation indicating, among other things, that it will not enforce House Bill 1090 against GEO for its operation of the Northwest ICE Processing Center. On November 16, 2023, the court entered a Judgment and dismissed the case. On July 13, 2023, the Company filed a lawsuit in the U.S. District Court for the Western District of Washington against the State of Washington for declaratory and injunctive relief challenging the State of Washington’s newly enacted law – House Bill 1470. House Bill 1470 purports to empower state agencies with new rule making, inspection, investigation, and testing powers over the Northwest ICE Processing Center. House Bill 1470 also creates a statutory regime of civil penalties applicable to private detention facilities for violations of House Bill 1470 detention standards, and purports to create a private right of action for detainees aggrieved by violations of the statute. The Company is awaiting a ruling on its complaint from the U.S. District Court for the Western District of Washington. Other Litigation The nature of the Company's business also exposes it to various other legal claims or litigation, including, but not limited to, civil rights claims relating to conditions of confinement and/or mistreatment, sexual misconduct claims brought by individuals in its care, medical malpractice claims, claims related to deaths in custody, product liability claims, intellectual property infringement claims, claims relating to employment matters (including, but not limited to, employment discrimination claims, union grievances and wage and hour claims), property loss claims, environmental claims, automobile liability claims, indemnification claims by its customers and other third-parties, contractual claims and claims for personal injury or other damages resulting from contact with the Company's facilities, programs, electronic monitoring products, personnel or detainees, including damages arising from the escape of an individual in its care or from a disturbance or riot at a facility. Legal proceedings with respect to our facilities are unpredictable and, where material, can cause adverse effects, such as prompting modification or even termination of the underlying facility management contracts. Accruals for Legal Proceedings The Company establishes accruals for specific legal proceedings when it is considered probable that a loss has been incurred and the amount of the loss can be reasonably estimated. However, the results of these claims or proceedings cannot be predicted with certainty, and an unfavorable resolution of one or more of these claims or proceedings could have a material adverse effect on the Company's financial condition, results of operations or cash flows, including the modification or loss of one or more facility management contracts, or could result in a material impairment of the Company’s assets. The Company's accruals for loss contingencies are reviewed quarterly and adjusted as additional information becomes available. The Company generally does not accrue for anticipated legal fees and costs but expenses those items as incurred. Other Assessment A state non-income tax audit completed in 2016 included tax periods for which the state tax authority had previously processed a substantial tax refund. At the completion of the audit fieldwork, the Company received a notice of audit findings disallowing deductions that were previously claimed by the Company, approved by the state tax authority and served as the basis for the approved refund claim. In early January 2017, the Company received a formal Notice of Assessment of Taxes and Demand for Payment from the taxing authority disallowing the deductions. The total tax, penalty and interest related to the assessment is approximately $21.1 million. The Company appealed the administrative ruling. In February 2024, the Company received notice that the New Mexico Court of Appeals had ruled against its appeal. The Company plans to appeal this ruling to the State Supreme Court by timely filing a Petition for Writ of Certiorari. The Company disagrees with the assessment and intends to take all necessary steps to vigorously defend its position. The Company has established an estimated liability based on its estimate of the most probable loss based on the facts and circumstances known to date and the advice of outside counsel in connection with this matter. Asset Divestitures Effective September 20, 2022, the Company executed a Share and Unit Sale and Purchase Agreement ("SPA") for the sale of its equity investment interest in the government-owned Ravenhall Correctional Centre ("Centre") project in Australia for approximately $84 million in gross proceeds, pre-tax to an unrelated third party. In accordance with the SPA, the Company sold its shares/units in GEO Australasia Holdings Pty Ltd, GEO Australasia Finance Holdings Pty Ltd and GEO Australasia Finance Holding Trust, the Company's former wholly owned subsidiaries. These subsidiaries held the contract receivable and related non-recourse debt which were transferred to the buyer and are no longer an asset or outstanding obligation of the Company. These subsidiaries also held restricted cash that was also transferred to the buyer. The Company continues to manage the operations of the Centre on behalf of the State of Victoria. As a result of the sale, the Company recorded a gain of approximately $29.3 million, pre-tax. The proceeds, along with available cash on hand, were used to repay all of the remaining outstanding principal of its Term Loan B and its newly issued Tranche 3 Loans. Refer to Note 11 - Debt for additional information. On July 1, 2021, the Company completed a divestiture of its youth division (“Abraxas”). The divestiture included the sale of certain non-real estate assets in the Company's youth division for total consideration of $10 million which was in the form of an unsecured term note receivable (“Term Note”). The Term Note was to mature July 1, 2026 and bore annual interest at 5%. Principal payments of $250,000 were to be due annually each year starting July 1, 2022. After June 30, 2023, an additional payment would have been due equal to 50% of the excess cash flow (as defined in the Term Note) in excess of $1,000,000. The remaining balance was due on the maturity date. Additionally, the Company had provided a $4 million working capital line of credit (“Grid Note”) which was to mature on December 31, 2022 and bore daily interest at prime minus 1%. Each loan under the Grid Note was payable upon the earlier of (i) on demand, (ii) thirty days from the funding date, or (iii) the maturity date. There were no amounts drawn on the Grid Note during 2021. The sale resulted in the assignment of the Company's youth services management contracts to Abraxas. The Company retained the ownership of the youth services real estate assets and have entered into lease agreements with Abraxas for the six company-owned youth facilities. As a result of the transaction, the Company recorded a loss on asset divestiture of approximately $4.5 million during the year ended December 31, 2021 inclusive of a working capital adjustment. On October 15, 2021, the Company signed a letter agreement with Abraxas and another unrelated not-for-profit entity for the settlement of the Term Note and termination of the Grid Note. In accordance with the letter agreement, Abraxas became affiliated with the other unrelated not-for-profit entity and paid the Company $8 million in full settlement of the Term Note on December 31, 2021.

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