Securities and Exchange Commission Investigation of Cornell Companies Terminated; No Enforcement Action Recommended

Business Wire, Oct 7, 2004

HOUSTON -- Cornell Companies Inc. (NYSE:CRN) today announced that it has received correspondence from the staff of the United States Securities and Exchange Commission indicating that the staff's investigation of the Company has been terminated and no enforcement action has been recommended.

The SEC investigation began in 2002 and concerned the circumstances leading to the restatement of the Company's 2001 and 2002 financial statements.

In making the announcement, Harry J. Phillips Jr., chairman and chief executive officer, said, "Cornell is gratified that the SEC staff has completed its investigation of our Company and we are pleased that no enforcement action has been recommended."

Cornell Companies Inc. is a leading private provider of corrections, treatment and educational services outsourced by federal, state and local governmental agencies. Cornell provides a diversified portfolio of services for adults and juveniles, including incarceration and detention, transition from incarceration, drug and alcohol treatment programs, behavioral rehabilitation and treatment, and grades 3-12 alternative education in an environment of dignity and respect, emphasizing community safety and rehabilitation in support of public policy. Cornell (http://www.cornellcompanies.com) has 66 facilities in 16 states and the District of Columbia and 5 facilities under development or construction, including a facility in one additional state. Cornell has a total service capacity of 18,205, including capacity for 2,726 individuals that will be available upon completion of facilities under development or construction.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current plans and actual future activities and results of operations may be materially different from those set forth in the forward-looking statements. Important factors that could cause actual results to differ include, among others, (1) the outcomes of pending putative class action shareholder and derivative lawsuits, and related insurance coverage, (2) Cornell's ability to win new contracts and to execute its growth strategy, (3) risks associated with acquisitions and the integration thereof (including the ability to achieve administrative and operating cost savings and anticipated synergies), (4) the timing and costs of the opening of new programs and facilities or the expansions of existing facilities, (5) Cornell's ability to negotiate contracts at those facilities for which it currently does not have an operating contract, (6) significant charges to expense of deferred costs associated with financing and other projects in development if management determines that one or more of such projects is unlikely to be successfully concluded, (7) results from alternative deployment or sale of facilities such as the New Morgan Academy or the inability to do so, (8) Cornell's ability to complete the construction of the Moshannon Valley Correctional Facility as anticipated; (9) changes in governmental policy and/or funding to discontinue or not renew existing arrangements, to eliminate or discourage the privatization of correctional, detention and pre-release services in the United States, or to eliminate rate increase, (10) the availability of financing on terms that are favorable to Cornell, and (11) fluctuations in operating results because of occupancy levels and/or mix, competition (including competition from two competitors that are substantially larger than Cornell), increases in cost of operations, fluctuations in interest rates and risks of operations.