Respectfully submitted by Lawrence E. Rafferty (rafflaw) Weekend Contributor
I have written in the past about our large financial institutions and their uncanny ability to break the law and escape any criminal penalties at the corporate or personal level. If the Department of Justice had actually indicted a Bank of America official and procured a criminal conviction, that Bank of America official could have assisted the corporate office in their no-bid contract to handle all of the federal prison systems inmate financial services and email services.
“A few blocks north, however, at the New York Metropolitan Correctional Center, there exists a market that Bank of America has locked down, literally. For the 790 federal prisoners incarcerated at MCC, Bank of America controls the provision of money transfers, e-messaging and some telephone services.
The bank’s monopoly extends across the federal Bureau of Prisons system—121 institutions housing 214,365 inmates. Since 2000, Bank of America has collected at least $76.3 million for its work on the program.” Readersupportednews That would be $76.3 Million dollars in the Bank of America coffers without any need or worry about having to compete for this latest sweetheart deal.
Bank of America is not alone in taking advantage of federal prisoners financial services. When a prisoner has paid his/her debt to society and leaves prison, the refund of the prisoner’s prison bank account is made via the use of high fee debit cards.
“When inmates are released, JPMorgan steps in, issuing high-fee payment cards to distribute money from their prison accounts, which include earnings from jobs and money their families send them. The banks’ exclusive deals came not from the Bureau of Prisons, but from the U.S. Treasury.” RSN It would appear that these financial behemoths have “locked” up the prisoner financial service business and they never have to worry about having to deal with any competitors.
The Treasury department has seen to it that Bank of America and JP Morgan Chase will continue to make millions without any meaningful oversight or competition. You may be wondering how the Treasury Department can issue these contracts without the normal bidding process. The Treasury Department uses a law passed in 1863 to grant these so-called financial agency agreements without the inconvenience of having to actually bid out the agreement.
“Treasury’s power to award the deals, known as financial agency agreements, was created in 1863 to support the nation’s first national banking system, around the time the greenback was introduced. Since then, the department’s broad use of this power has drawn criticism from lawmakers, auditors with the Government Accountability Office, federal appeals court judges and the department’s own inspector general. Treasury has said the selection process is competitive enough and the contracts are handled responsibly.” RSN
It never ceases to amaze me that large and very profitable banks like Bank of America and JP Morgan Chase need sweetheart deals like these in order to “win” the business from the Department of Treasury. Wouldn’t the interests of the American taxpayer be better served by requiring the normal bidding process for lucrative service contracts like these? Should we actually allow the Treasury to utilize a power granted in 1863 due to the ongoing Civil War, which in effect drips of abuse and cronyism?
Would it surprise you to know that the “contract” allowing Bank of America to provide these financial services has been amended multiple times over the years in order to provide a bigger payout to Bank of America?
“The documents show how Treasury has expanded the scope of Bank of America’s contract—originally focused on managing accounts for inmates and tracking inventory at prison stores—to include an array of services for the nation’s largest prison system, from providing e-messaging to supplying the prison system with handheld scanners. The deal allows Bank of America to subcontract with other prison vendors, positioning it as a hub of prison services that are procured outside any government bidding process.
The contract has been amended 22 times in the past 14 years.” RSN
This sweetheart contract is not only questionable, it provides Bank of America carte blanche power to control much of the prison services vendor business. How can the Treasury claim that the process is “competitive enough”? I think it is far past the time for the Justice Department to investigate these sweetheart deals. Why would the Treasury Department utilize these non-bidding processes, at least in light of the appearance of impropriety? Maybe it is time for an independent organization or prosecutor to “follow the money”. All the way to jail.
What do you think?
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The article seemed mainly concerned with contract management which I consider a worthy topic.
But it seems that even before we get to contract management we might consider why privatize at all. At the state level, until recent decades most of these functions were handled by the state with little expense for inmates and their families.
Now, many, if not most states, and apparently the FEDS have contracted these services out to private enterprise. That might be defensible if costs were really reduced or if services were improved.
But it seems to me that the main effect has been to transfer costs to inmates and their families with essentially no saving in money or increase in quality of services.
That situation poses any number of questions. But I would argue that a serious problem is that it makes it far more difficult for inmates to maintain family ties. Now some might counter that prison is for punishment and inmate comfort, emotional or otherwise, is of little concern.
I would argue that we ought to be getting the best from prisons we possibly can. If that is true then we ought to at least try to user every resource in prison to encourage inmates to remain connected to their communities and their families. if we have any hope of decreasing crime rates it would seem to lie in finding ways to connect inmates to their communities and their families. It sound sexist, but I would argue that one of the strongest ties to main stream society for many men is their relation with a girl friend or spouse and their children.
Transferring expenses to inmates works against keeping inmates connected. In that sense it is a penny wise pound foolish policy that we will all pay for in the long run.
Why do we contract out these services at all? And if we do privatize these services why not have government pay for them – wouldn’t that force government to exert greater effort to control cost?
bfm – my understanding on the phone contracts is that a part of the phone call goes to the institution for whatever it wants to do with it. Just like the soda machines in high schools. A lot of those funds went to pay for coffee in the teachers’ lounge. 😉
Well maybe so. But even when you consider that some of those contracts include the phone centers where the inmates actually make the calls ( that is my understanding anyway) the cost for calls seem high enough to be considered gouging.
Besides, if there is any benefit in terms of crime rates and recidivism, and I think there is, then why are inmates and their families paying those fees at all. We ought to do everything we can to keep inmates connected to the community, churches ( oh my did I say that???), family, girl friends or spouses, children to give these people purpose to stay out of trouble.
We are talking about a population where even a few extra dollars for a 15 minute phone call or money transfer is a hardship. As a result, those few extra dollars will often mean that the call isn’t made, that the call from prison is declined with the result that a family relation is stressed or broken.
raff, Then what comments were unfocused? We had someone hijack a thread on illegal aliens to Trayvon Martin. Incredibly there WAS A TRAYVON thread ongoing. You supported this person and her hijack. This is your thread and you accuse comments being unfocused. Well then, point them out. And, tell us all why you consider them unfocused. You can’t just throw out an accusation out there and then not back it up. Too much of that going on here of late. I thought this was a good post, as I said @ the outset. And, I think it was a good and focused thread. You don’t think so. Make your case.
The costs for phone calls by prisoners in local, state, and federal prisons are unconscionable. They must make all calls collect and at very high fees per minute. These costs are not born by prisoners themselves, but by the family members they call. For many family members, these very expensive calls are the only way to have contact with and receive news from their incarcerated relatives. These is a punishment to the mothers, fathers, wives, and children of the prisoners. Someone is making huge amounts of money at the expense of these family members.
SierraRose – I do think the cost of the phone calls should be at a reasonable cost for equipment, etc. I do know they are out of line. Had a former student call me from jail one time, could not believe what it cost me.
Nick,
I was not suggesting any comments were “unworthy”.
BFM,
I was not being sarcastic. I was thanking you and Mike for your comments and for speaking to the issues that I was trying to discuss with the article.
What comments were unworthy?
raff, I just skimmed the thread and don’t see where it lost it’s focus. So, what are you referencing?
Mike A. and BFM.
Thanks for refocusing the discussion.
“Thanks for refocusing the discussion.”
I am going to guess that is sarcastic, and I am sorry if you feel that my remark is off task and worthy of criticism.
I made my remark for two reasons. It seems to me that many times an article on a specific problem is only the tip of the ice berg that reasonably opens the discussion to a knot of problems that are all relevant and important.
Second, I don’t hesitate to mention tangents because I think the tangents sometimes lead to interesting and relevant discussions. In the past there are numerous times that found the tangents to be valuable extensions.
And if I ever bring up a subject that is off task it is easy enough to ignore my comment. That is one of the wonderful things about a comment thread on the internet. I certainly wont be the first time that I have been ignored and I won’t be offended.
Finally, if it needs to be said, I appreciate this little space on the internet and the fact that we can all add our point of view. This blog is one of the first places that I check in the morning.
“The issue is the process by which a bank is chosen to provide those services. Granting government contracts without a bidding process is an open invitation to abuse, whether the ultimate customers are penitentiary inmates or soldiers.”
There is also the issue of transferring costs to inmates or their families. In the past friends or family could send funds to an inmate for the cost of postal money order and a stamp. Now, whether it is banks with the FEDS or companies like Jpay for many states, the cost is closer to the wire transfer costs of Western Union. Cost for telephone calls and email are often provided by these companies and based on tariffs far higher than the collect call system used a few years ago. And recovering funds from the inmates account after release was a costless (for the inmate) transaction involving a check issued by the state. Not any more. As mentioned above, in many jurisdiction funds are released in the form of a high cost debit card.
These new and much higher cost are usually paid by those least able to pay them.
And this has taken place with essentially public zero discussion.
So the issue is not just fair and efficient contract management. There is also the question of what costs the incarcerated and their families should bear and how we set reasonable costs for these people.
The issue is not whether banking services should be provided to inmates. The issue is the process by which a bank is chosen to provide those services. Granting government contracts without a bidding process is an open invitation to abuse, whether the ultimate customers are penitentiary inmates or soldiers.
Some of those federal inmates could probably buy our houses
Thank you for the insight Paul Schulte. I thonk you. It’s a new word.
Rafflaw,
“Non-violent offenses” include identity theft, fraud, extortion, blackmail, etc don’t they? Frankly, I think I’d rather a murderer have access to my bank than a counterfeiter.
Also, the bidding process does little to ensure compliance with the contract. That’s the job of on-going contract governance. The contract is the contract. If the government can’t write a contract with sufficient performance measures, targets, incentives and penalties, then a bidding process that awards the work to the lowest bidder will not result in better performance or higher quality.
Further, many contracts in private business and government at all levels are awarded without a competitive process because in pre-bid diligence, the buyer discovers that no, or few, qualified companies will bid. Ya know, they call a pre-bid conference and one company shows up.
Perhaps some lawyer can make a “federal case” that because prisoners don’t have multiple banks to choose from for their banking services, that they are subject to cruel and unusual punishment. If he can win, he can secure low-cost, high quality ATM, car loan, checking, savings, and mortgage services for prisoners who have raped, tortured, killed and beaten their way into federal prison.
Steve H – having worked with prisoners I can tell you from experience that they spend 24/7 figuring ways to game the system, whether it is the one they are in or the one they will be in when they get out. Prison is college for the criminally minded. Most come out with new skill sets or enhanced skill sets. Plus, they pick up new job partners.
PAUL…I look forward to it. My condo is at the Tempe Lakes at c. Rural and Baseline
Tom Nash – I know exactly where that is. My mother used to live there. 🙂
Elaine,
Thanks for the link to the Navient article.
Steve H.,
For clarification, there are indeed thousands of prisoners in the system for non-violent offenses. The banking services are not secured for specific prisoners. The bank also collects monetary gifts from the inmates families and friends because the prison system is forcing the prisoners to pay more and more for their own incarceration. Without a bidding process, there is no hope for competition to hold down the costs and no incentive for the bank to do the job correctly and honestly.
Hold on, now, there’s a bit more to this than the crowd that doesn’t understands business, understands.
Years ago I worked for a firm that provided records exchange services between the various Bell Operating Companies for “collect calls”. (At this point, anyone under 40 should stop reading.) So, some inmate in OH (Ohio Bell) would place a collect call to a person in CA (Pacific Bell), who would accept. The inmate DID NOT have to place a quarter in the pay phone in the prison to make the call. In fact, under law, Ohio Bell was required to place a bank of pay phones in the prison.
My clients reported that the incidence of fraud on the collect calls was nearly 100%: virtually none of the “collect calls” were paid. In addition, the phones were routinely vandalized and abused. But since denying prisoners the ability to call their, uh, “families” was ruled cruel and unusual (because of lawsuits brought by lawyers who wanted to make history and, therefore, a place in lawyer lore) the Bell companies were required to serve prisoners and eat the losses.
At this point, I would remind the readers that the federal prison system is not for shoplifters, drunks, and burglars. It’s for murderers, kidnappers, bank robbers, scammers, etc.
So, if you were a bank robber serving years in the Federal Pen and some lawyer secured for you the “right” to banking services, wouldn’t you be tempted to find a way to rob the bank? Heck, each and every one of the inmates, given any opportunity to “interface” with the bank will look for a way to steal from. Bogus this, bogus that; they have all day, week and month to figure out a way to scam the bank or the bank’s customers.
So, if I’m BoA, I’m planning for losses; for fraud, abuse and scams. And to pay for my risk, I’ll charge 35% or more. And if my losses exceed my revenue, I’ll raise my rates or refuse to renew. If I’m a BoA shareholder, I’m thinking about investing in another bank.
None of you would allow any Federal inmate into your house. Don’t expect the bank to allow them into the banking system without a hefty reward.
Thanks, Paul. The “derefulate” financial institutions is a newly coined word I invented, due to typing blind on this #!*!! Android onscreen keyboard, and also being a farsighted geezer. The box for comments is often misaligned with my typed words, and I often can’t proofread my pistings until after they are submitted.
Rather than admitting that I made an error in typing “derefulate” instead if the intended word “deregulate”, I’m sticking by my guns and insistibg that””derefulate” is actually a word.
Look forward to meeting you sometime when I return to Tempe this winter..sounds like you’re in Phoenix. Derefulatively yours, Tom Nash
Tom – love the new word. Language changes all the time and you are as free to create a new word as anyone else. Use it in a sentence and then send it on to the OED for submission. They should get a chuckle.
I live in Gilbert. When you get in the area let me know and we will have coffee.
LC,
Because its big money.
The whole prison system is broken! When you release 36,000 illegal criminals into the population, why are we keeping our Americans in Prison and many of them are innocent (put there by a corrupt judicial system) ?
There was an excellent PBS FRONTLINE documentary a few years ago enttitled “THE WARNING”. It gave a giod history of the rush to derefulate financial institutions, and the futile efforts of some (especially Brookley Born) to reign in the casino-like games being played by banks, hedge funds, insurance companies, brokerage firms, etc.
A lot of people served long sentences after their conviction during the S&L crisis of the 1980s.
One lawyer said in an interview that the reason for virtually criminal prosecution from the 2008 crisis was that, given the wholesale deregulation, it was not clear that laws were violated.
Tom Nash – what is “derefulate financial institutions, ” this is something I have not heard of.