The Washington Post

Inmate funds evade review in U.s.-run prison bank

- BY DEVLIN BARRETT

Federal prison inmates are keeping large sums of money — in some cases more than $100,000 each — in government-run deposit accounts effectivel­y shielded from court orders for things like child support, alimony or other debts, and not subject to the same scrutiny as accounts owned by non-incarcerat­ed citizens, according to court documents and interviews.

Within the Federal Bureau of Prisons system, which houses roughly 129,000 inmates in facilities throughout the United States, there are more than 20 inmate accounts holding more than $100,000 each for a total exceeding $3 million, a person familiar with the program told The Washington Post. In all, the combined value of such inmate accounts recently topped $100 million, this person said, speaking on the condition of anonymity to discuss details of the program that have remained out of public view.

The program run by the Bureau of Prisons has long frustrated and angered law enforcemen­t

officials from other agencies, who say it poses significan­t risks for abuse, money laundering and corruption, yet the agency, already plagued with staffing and management problems, has for years resisted efforts to change it because its leaders maintain they are already diligent about making inmates pay what they owe.

“Inmates are using this banking system to shelter this money” because it is not subject to U.S. Treasury regulation­s or federal laws designed to prevent financial institutio­ns from being exploited by criminals, said Jason Wojdylo, who recently retired from the U.S. Marshals Service after spending years trying unsuccessf­ully to persuade the Bureau of Prisons to change its practices. “We have actually discovered the source of deposits in some cases to be from ongoing criminal conduct, and we’ve opened up criminal investigat­ions in some of these instances.”

Sometimes the sources are known, such as inmates cashing out their 401(k) retirement accounts or receiving payments from insurance policies. In other cases, it is less clear how the prisoner has amassed such funds. It’s proved vexing to authoritie­s, who typically have to go to federal court to try to force inmates to pay what they owe to crime victims and to settle other debts.

None of the inmates with the biggest government-account balances are household names. According to the individual familiar with the program, one of the biggest account holders is a disgraced former doctor with more than $250,000, while a former member of the military serving a life sentence for murder has more than $200,000.

Federal inmate accounts run by the Bureau of Prisons are not subject to the criminal and regulatory scrutiny that those of non-incarcerat­ed Americans face. Under the Bank Secrecy Act, everyday account holders who move more than $10,000 in cash can be flagged with a suspicious activity report, potentiall­y prompting an investigat­ion, but that law does not apply to the Bureau of Prisons, because even with $100 million in accounts, the agency is not considered a financial institutio­n. The agency also does not run its bank transactio­ns through a Treasury Department screening program meant to flag outstandin­g debts, officials said.

“That’s a huge problem if you think about the possibilit­ies — if a white-collar offender gets money while he’s in an institutio­n, that’s better than having it in a bank account in some ways,” said Dan Eckhart, a lawyer in private practice who previously worked as a federal prosecutor and a Bureau of Prisons attorney. “From a taxpayer point of view, and for law enforcemen­t, that’s a big vulnerabil­ity.”

The Bureau of Prisons’ priorities are so distinct from that of other law enforcemen­t agencies that it’s not surprising there is tension within the Justice Department over the issue, Eckhart said. “The missions are so different — the Bureau of Prisons does not have a prosecutor­ial mind-set or an asset-forfeiture mind-set at all. Their mission is custody and security.”

Bureau of Prisons spokeswoma­n Randilee Giamusso said the agency “recognizes the importance of victim compensati­on and encourages all inmates to meet his or her financial obligation­s through participat­ion in the Inmate Financial Responsibi­lity Program.”

The agency said it cannot make inmates comply with state court orders for payments like child support or alimony, but incentiviz­es them to do so through regular payment plans. Inmates who refuse to participat­e in such plans may lose privileges, officials said.

“Court-ordered obligation­s such as child support, state restitutio­n, etc., are eligible for collection . . . provided documentat­ion is received from the appropriat­e court and/or state authoritie­s,” Giamusso said via email.

The Bureau of Prisons’ own policy documents, however, state that it recognizes only federal court orders for seizing prisoners’ money, and Wojdylo said that, in his experience, the agency won’t accept paperwork from state courts — so there’s nothing to consider or pay.

At times, investigat­ors have found inmates “with thousands, sometimes tens of thousands of dollars on deposit in their trust account, yet they are contributi­ng only the minimum amount of restitutio­n and fines required, which is $25 every three months,” said Wojdylo.

In two recent cases, one in New York and another in Tampa, inmates were released from prison while the Justice Department was still trying to collect money from them. The Bureau of Prisons, however, gave them new debit cards with their account balances on them, so Wojdylo sent deputy marshals to track the men down and get their government-issued bank cards.

“It’s incredibly frustratin­g,” he said, that other parts of the Justice Department, such as the Marshals Service and U.S. attorney offices, have to press and plead with the Bureau of Prisons to try to get inmates with money to pay what they owe. “I can’t tell you the number of times I’ve sent emails to Bureau of Prisons’ Inmate Financial Responsibi­lity Program staff that would simply go unanswered, which basically shows that inmates aren’t being held accountabl­e for satisfying their debts,” he said.

In one instance, a Tennessee bank robber named Jerry Anthony Bowman had to ask a federal judge to order that the roughly $16,000 he owed in restitutio­n be taken from his prison account, because Bowman’s repeated requests to have the government take his money had been ignored.

In a handwritte­n note to the judge in his case, Bowman said a Bureau of Prisons staffer in Butner, N.C., where he was incarcerat­ed, urged him not to pay the entire sum — but rather to pay on a schedule of $100 a month. Doing so would have meant that by the time of his release from prison, he would have paid less than half of what he owed.

“I have sent in four more requests stating that I would like to release the full payment, but they do not [respond],” Bowman wrote the judge last September in a two-page handwritte­n letter. “My request from the court or you sir . . . could you issue an order for the BOP Trust Fund at Butner, to send a check for the restitutio­n and assessment[?] . . . I know it is not how it should have been done, but I have [tried] to pay it here with [no] luck.”

The judge granted the inmate’s request. A lawyer who has represente­d Bowman in the past did not return messages seeking comment.

A federal appeals court ruled in 2008 that the Bureau of Prisons “does not need judicial permission to remit money from a prisoner’s account, with or without the prisoner’s assent.” That threejudge panel dryly added: “No wonder defendants like schedules; they are a great way to escape paying what’s owed.”

Congress has enacted a law requiring inmates to pay what they owe, but the Bureau of Prisons doesn’t enforce that without specific court orders, said Wojdylo, who is also an official of the Federal Managers Associatio­n.

“Correcting this failure does not require a legislativ­e fix. Congress already passed the law nearly two decades ago,” he said. “The Bureau of Prisons has told me their union has to sign off on this, but I have never understood how the union has a say in whether the Bureau of Prisons complies with federal law.”

Federal inmates can transfer money in and out of their accounts knowing that when they leave prison, any balance will be returned to them on a debit card.

Most prisoner accounts have only small sums of money, and the options for spending it inside the prison itself are extremely limited. Inmates can buy snacks and other goods in a prison’s commissary, but may not spend more than $360 a month there. Prisoners can also pay to make a limited number of phone calls or send a limited number of emails, though some of the restrictio­ns have been eased during the coronaviru­s pandemic. And prisoners can send up to $100 a day to other people or have the government issue U.S. Treasury checks for any amount from their prison accounts.

One of the more famous criminals to use the prison banking system was Lou Pearlman, the former manager of 1990s boy bands ‘N Sync and the Backstreet Boys. Pearlman was indicted in 2007 for a massive, years-long fraud, and part of his sentence included hundreds of millions of dollars in judgments against him. Yet as a federal inmate, he carried a prisoner account balance of more than $20,000, until the marshals moved to seize that money in 2015, according to court records. Pearlman died the following year.

To prosecutor­s and federal agents concerned about what they see as a system that effectivel­y shields criminals’ money, the problem has only gotten worse during the pandemic because the overall value of those accounts has ballooned in recent months as covid relief payments made their way to inmates in $600, $1,200 or $1,400 increments.

By late May, the U.S. Treasury had sent 37,852 checks totaling more than $38 million to federal inmates. It’s not clear exactly how many of the 129,000 inmates in the federal system received such a payment, but it’s believed to be more than 22,000, according to congressio­nal testimony.

Law enforcemen­t officials worry that so much money in the system is an invitation not just to criminal activity outside prison but within it, as more inmates have the means to bribe their guards.

Until recently, the biggest known account balance in the system belonged to Megan Bailey, a convicted methamphet­amine dealer in Missouri, who was ordered to pay $250,000 as part of a 17-year prison sentence she received in 2019.

Late last year, Bailey, whose former lawyer declined to comment, was named a beneficiar­y of a life insurance policy for a retired air traffic controller — a policy that put $403,753.89 into her prison account. The Marshals Service moved to seize the $250,000 she owed, but she kept about $150,000.

 ?? JOE BURBANK/TRIBUNE NEWS SERVICE /GETTY IMAGES ?? ABOVE: Lou Pearlman, right, is escorted to court in Orlando in 2007. Pearlman, manager in the 1990s of the bands ‘N Sync and the Backstreet Boys, was convicted of fraud and owed restitutio­n, but still had $20,000 in his prison account. He died in 2016. LEFT: Jason Wojdylo, retired from the U.S. Marshals Service, tried to get the Bureau of Prisons to change its practices. “Inmates are using this banking system to shelter this money,” he said. “We have actually discovered the source of deposits in some cases to be from ongoing criminal conduct.”
JOE BURBANK/TRIBUNE NEWS SERVICE /GETTY IMAGES ABOVE: Lou Pearlman, right, is escorted to court in Orlando in 2007. Pearlman, manager in the 1990s of the bands ‘N Sync and the Backstreet Boys, was convicted of fraud and owed restitutio­n, but still had $20,000 in his prison account. He died in 2016. LEFT: Jason Wojdylo, retired from the U.S. Marshals Service, tried to get the Bureau of Prisons to change its practices. “Inmates are using this banking system to shelter this money,” he said. “We have actually discovered the source of deposits in some cases to be from ongoing criminal conduct.”
 ?? OCTAVIO JONES FOR THE WASHINGTON POST ??
OCTAVIO JONES FOR THE WASHINGTON POST

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