Cornell's Two California Prisons to Remain Open.

Business Editors

HOUSTON--(BUSINESS WIRE)--Sept. 30, 2002

Cornell Companies Inc. (NYSE:CRN) has begun to ramp up its two community corrections facilities in California, it was announced today by Thomas R. Jenkins, Jr., president. The state budget, recently signed by Governor Gray Davis, contains sufficient funding for both programs. The Leo Chesney facility is expected to be at capacity by the end of October with the Baker Correctional Center reaching capacity in early November.

The Baker facility can house 262 offenders and Leo Chesney serves 195 female offenders. Based on historical occupancy, the facilities produce annualized revenue in excess of $5.7 million. Both facilities, along with three additional community corrections programs operated by other private vendors, were slated for closure when an early version of the Governor's budget failed to contain funding to keep them open.

"Cornell Companies is deeply gratified by the degree of community and legislative support which manifested itself as the budget worked its way through the process", said Jenkins. "The Governor, faced with a difficult set of budget realities, began a process, which in the end, performed exactly as it should. We are grateful to Governor Davis for restoring funding for these two outstanding programs. These programs change lives and make significant contributions to the communities where they are located," he added

After the ramp-up period, the company expects to fully realize the financial contribution of these facilities in the first quarter of 2003.

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 contracts to operate 69 facilities with a total service capacity of 15,444. Cornell's facilities are located in 13 states and the District of Columbia.

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, (i) the impact of the restatement of our financial statements on current, anticipated or future Company awards, agreements, projects and financing arrangements, (ii) the outcomes of pending putative class action shareholder and derivative lawsuits, and related insurance coverage (iii) risks associated with acquisitions and the integration thereof (including the ability to achieve administrative and operating cost savings and anticipated synergies), (iv) the timing and costs of expansions of existing facilities,(v) changes in governmental policy and/or funding to eliminate or discourage the privatization of correctional, detention and pre-release services in the United States, (vi) the availability of debt and equity financing on terms that are favorable to the Company, (vii) fluctuations in operating results because of occupancy, competition (including competition from two competitors that are substantially larger than the Company), increases in cost of operations, fluctuations in interest rates and risks of operations and (viii) 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.