A $38 billion plan to turn commercial warehouses into immigrant detention centers is under investigation by the Department of Homeland Security’s internal watchdog, putting nearly 50 federal contractors and former Secretary Kristi Noem under scrutiny.
The Department of Homeland Security’s inspector general has launched a probe into a $38 billion warehouse-to-detention program championed by former Secretary Kristi Noem, following a Wall Street Journal report that ICE paid 11 percent to 13 percent above market rates for facilities.
A person familiar with the matter confirmed the probe, stating the inspector general is expected to announce an “audit of ICE’s acquisition of detention space” on Wednesday, which will review all of the department’s warehouse purchases. The policy was a signature initiative of Noem and her top adviser, Corey Lewandowski.
Under Noem, DHS spent at least $1 billion on 11 vacant warehouses, part of a plan funded by the "One Big Beautiful Bill" passed last summer to fund a mass-deportation effort. Since January 2025, nearly 50 contractors have received $1.7 billion for services related to the warehouses, with some firms new to federal work securing contracts worth over $100 million.
The investigation freezes a cornerstone of the Trump administration's mass-deportation strategy and casts uncertainty over the future of federal detention contracts. Noem's successor, Markwayne Mullin, has already paused the warehouse conversion plan, creating a potential pivot back toward leasing from private prison operators like GEO Group and CoreCivic, whose profits surged in 2025.
The probe places a spotlight on an aggressive and costly strategy to expand the government's direct ownership of detention space. Noem and Lewandowski had argued that buying and converting warehouses—properties more commonly used by retailers like Amazon—was a necessary step to move away from leasing facilities from private companies and local governments. The goal was to house as many as 8,000 people at a time in some of these locations.
However, critics in both parties questioned the logic, pointing out that purchasing and retrofitting empty warehouses was far slower and more expensive than acquiring existing, properly configured jail facilities. The purchased properties lacked appropriate zoning and essential plumbing to support large detainee populations, creating a significant logistical and financial hurdle.
A core focus of the inspector general's audit will be the nearly $1.7 billion in contracts awarded for acquisition, renovation, and logistical services. The Wall Street Journal's analysis of government data revealed that many recipients were new to the immigration detention sector.
For example, KVG LLC, a defense contractor specializing in support for U.S. Coast Guard ports, was awarded a three-year contract worth more than $113 million in March, despite having no prior experience in immigrant detention. Another company, SK2, was formed in Puerto Rico in June 2024 and received a $6 million DHS contract in January 2025, its first federal award. The Journal identified four other firms that had never received federal contracts before securing deals related to the warehouse plan, with their combined contracts valued at up to $500 million.
The pause implemented by Secretary Mullin signals a significant policy reversal. The warehouse strategy was a departure from the government's long-standing reliance on private contractors such as The GEO Group and CoreCivic. These firms have profited immensely from federal detention contracts, with GEO Group’s profits jumping to over $254 million in 2025 from $32 million in 2024, according to a Public Citizen report. CoreCivic’s profits grew to $116.5 million in 2025.
This reliance on private operators is itself controversial, facing legal challenges over issues like the use of detainee labor for as little as $1 per day. A recent federal appeals court ruling in Michigan sided with immigrants who fought the government's mandatory detention policy, a policy that helped drive detention numbers to a record high of about 73,000 people.
The inspector general's probe into Noem's warehouse program adds another layer of complexity to the contentious landscape of U.S. immigration detention. The outcome could reshape federal contracting practices and determine whether the government doubles down on its own facilities or returns to its controversial partnerships with private industry.
This article is for informational purposes only and does not constitute investment advice.
