A corrections company that won a $60 million federal contract to open a 300-bed halfway house in Northeast Washington lost its lease Thursday after neighborhood residents sued to stop it.

The abrupt reversal after fierce community opposition appears to again secure a second company’s monopoly on the lucrative business of housing former prisoners.

On Nov. 1, Core DC, a subsidiary of a Florida-based corrections firm, won a five-year, $60 million Federal Bureau of Prisons contract to build a new halfway house at 3400 New York Ave. NE, an industrial area near the Maryland line.

The deal to open the halfway house in the vacant property owned by powerhouse Douglas Development immediately drew the ire of Ward 5 residents concerned about hundreds of former prisoners coming to their community.

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The project also threatened to take business from Hope Village in Southeast Washington, D.C.’s only halfway house for men, which has won more than $125 million in federal contracts since 2006, despite claims that it offered substandard care. It is unclear whether Hope Village will regain the federal contract.

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On Thursday, D.C. Council member Kenyan R. McDuffie (D-Ward 5) was the first to announce the Core deal was off.

“Just learned that Douglas Development will not execute a lease with Core DC,” he tweeted. “In the future, I hope that the federal BOP will ensure adequate community engagement prior to awarding a contract.”

In an email, Paul Millstein, vice president and head of development at Douglas, also said the company was no longer working with Core.

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“I can confirm we are not moving forward,” he wrote. “No further comment. Thank you.”

Carlyle I. Holder, chief executive of Core’s parent company, declined to comment on the company’s trouble, citing pending litigation.

“As soon as it’s resolved, you’ll get everything you want to know,” he said. “I’ll be the first person to call you.”

Douglas and Core parted ways days after 12 Northeast residents sued the city, alleging Core had not appropriately consulted the community while planning to bring hundreds of former prisoners, including sex offenders, to Ward 5.

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The lawsuit, filed Tuesday in D.C. Superior Court, also alleged zoning regulations for halfway houses were insufficient and “vague,” according to the suit.

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“The BOP and CORE DC, by failing to consult with the affected local citizens and residents of neighboring communities, demonstrated the absolute highest level of disregard for the DC Government, its elected officials and DC citizens,” the lawsuit said.

The Bureau of Prisons did not immediately respond to a request for comment, and the D.C. Office of Zoning declined to comment.

Pierre Hines, a plaintiff in the suit, praised Douglas Development’s decision to end its relationship with Core. He said the company sent a spokesman to an Advisory Neighborhood Commission meeting on Wednesday, but he did not provide answers to basic questions about the planned halfway house.

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“This is just a great day,” he said. “I commend Douglas for making the principled decision to not be business partners with a company that does not want to engage with the community.”

In a statement, Kevin Donahue, deputy mayor for public safety and justice, encouraged the Bureau of Prisons to “work transparently and collaboratively with District residents and returning citizens advocates in identifying suitable locations for a new halfway house.”

In Ward 8, news of Core’s lost lease was seen as a win.

Hope Village, which opened off the Suitland Parkway in 1978, lost its contract to Core as advocates for prisoners’ rights alleged it lacks meaningful job programming, transportation subsidies and grievance procedures. Weeks after it lost the contract, prosecutors announced two arrests as part of a crackdown on escapes from the facility.

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After Core won the contract, Hope Village filed a formal protest with the federal government, saying the company had an unrealistic plan that might result in housing violent sex offenders near children.

At the 7th District Police Station blocks from the halfway house Thursday evening, officials were conducting a rare public meeting — ill-attended amid a last-minute scheduling change and pouring rain — when they learned of McDuffie’s announcement. Phinis Jones, Hope Village’s spokesman, was enthusiastic.

“We’ve got the beds available,” Jones said. “We are ready to continue.”

At the meeting, Avon Hart-Johnson, founder of the nonprofit DC Project Connect, which works with families affected by incarceration, wondered whether the contract imbroglio pitting Core against Hope Village was a distraction from a more important question.

“I understand the location is key,” she said. “The real question is how is the programming? Citizens have to be prepared to walk back out on the street.”

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