While this idea has been suggested many, many times before (including by yours truly, here;
http://forums.introversion.co.uk/viewtopic.php?f=43&t=47975), it certainly isn't unique to the United States;
http://en.wikipedia.org/wiki/Supermax#Prisons_with_supermax_facilities; the article in general gives a decent overview of the concept as well, and is well worth a read for ideas in implementation.)
Furthermore, the America-centrism of the game doesn't really bother me for a number of reasons, one of them being that America is the only country with A: The Death Penalty (the chair in particular is actually not used all that often and was never used as often as people think it was, but that's another story), B: A reputation for nasty prisons that would not arouse (even more) obvious controversy from setting it in, say, Russia, China, or some second/third world helllhole.
Also, America has a
massive prison population, even relative to its size and even relative to those aforementioned controversial countries. And even outside the US, American prisons have (for all these reasons and more) a huge cultural landmark on pop culture relative to others, much like other aspects of America (and in many cases, California's) legal system. And there are some unique (and interesting) elements to the US in this respect, such as the issues with things "South of the Border" and numerous different ethnicities and ethnic crime groups, ranging from the Italian Mafia to the Yakuza to ethnic street gangs like the Crips and the Bloods (I know some of these are present in various forms in Europe, but not to the same extent nor the same diversity as in America)
EDIT: Also, there's the obvious rarity of non-American private prisons and the issue being more prominent there. A major part of the game formula, to say the least.
I'm not against mods or custom scenarios set elsewhere, but I can fully understand the developers sticking to a largely Southern US/Mountain States/Pacific Northwest/Midwest/East Coast type setting(s).