Introduction

The Center for Public Integrity traveled around the U.S. to investigate the growing web of prison bankers, private vendors and corrections agencies … and how they profit off the innocent by shifting costs onto inmates’ families. Video by Eleanor Bell. Share this video on Facebook and Twitter. CNBC was a partner in this reporting and shot some of the general footage. Read the video transcript.

Adryann Glenn, former inmate: I sold cocaine. I started selling cocaine when I was eleven years old. Powder cocaine, never crack.

Vincent Townsend, Pay-Tel Communications president: The reason we’re in this mess now, on my side, my industry has abused the public.

Danielle, inmate’s partner: I was pretty mad, I mean, you made a mistake but now I gotta pay for it.

Jack Donson, former federal prisons officer: You can make a lot of money from prisoners and prisoners’ families, especially in these peripheral services.

Pat Taylor, inmate’s mother: They are dependent on their families’ money – completely dependent on their families’ money. And they’re punishing the families not the inmates.

Mignon Clyburn, FCC Commissioner: There are 2.7 million children with at least one parent in prison. There are 700,000 inmates who are released to society every year. This is an American problem, this is a main street problem.

Jack Donson: There is plenty of money to be made out of that unfortunately.

Ryan Shapiro, JPay CEO: I know who’s making money down to the penny and I can tell you that nobody’s making a killing on those margins.

Jewel Miller, inmate’s mother: You know it is kinda sad that they would pick on his mother who is 80 years old and trying to make do on 12 hundred and something dollars a month.

Dan Wagner, Reporter: It’s just not one company, and it’s not just one prison. This is an entire system that is shifting the burden on poor families.

Keith Miller, inmate: The fact that she has to pay the fees to send the money and then the fact that they make a certain cut off it seems to be that they’re double dipping.

Jewel Miller: I’m Jewel Miller and I live at Swords Creek and I am very active.

Friday’s Jewel day so I have my hair done that day and just get out and mostly enjoy whatever comes my way.

But I always do it on a weekend so when I go up, that it will look good.

I go see my son every Saturday.

I have six kids. I have one daughter that has passed away. My youngest one is in prison at Bland.

Keith Miller: I worked in coal mines and I got out running around I guess with the wrong crowd and long story short I came into getting strung out on Oxycontin. Things just kept going downhill from there. I ended up getting two robbery charges with other charges included.

I got 21 years and six months.

Pat Taylor: My name is Pat Taylor and I live in Johnson City, TN.

Eddie’s been incarcerated 14 years.

I was a single mother. He’s had a — he had a rough life.

Pat Taylor’s son Eddie and Jewel Miller’s son Keith are serving time at Bland Correctional Center, where they train service dogs for disabled veterans and kids.

Keith Miller: Cato, load. Verrry gooood.

It’s a real good sense of accomplishment to know that you’re doing something good for the community, to give back.

Good boy.

Jewel Miller: People love him. I’ve heard people say they’ve never seen a poor boy with as many friends as Keith has.

Keith Miller: I’ve often tried not to ask for anything just for the simple fact that I don’t want to be a burden to her.

Dan Wagner: Prisoners with jobs are paid a minimal amount, so that they can pay for victims’ restitution, fines, goods and services that they want to buy.

But those wages haven’t gone up in decades, and the prices of things that they buy continue to rise. So increasingly families are stepping into that gap, paying through prison bankers. And one company has come to dominate 70 percent of that market.

Ryan Shapiro: When I was 23 years old the internet was starting to take its hold on a lot of different industries and it was clear that it was not even thought of for the prison industry. Why wouldn’t you be able to send money with a credit card online?

We quickly built a website and we started taking payments.

Dan Wagner: JPay is the undisputed leader in the market for getting money into prisons.

Last year this company moved about a billion dollars, generating tens of millions in fee revenue.

Ryan Shapiro, the company’s founder, literally invented this business back in 2002 and he hasn’t slowed down since.

Ryan Shapiro: What does my morning my routine look like? I wake up, I help my kids with breakfast, I run over to CrossFit. It gets me in that competitive mind frame – and helps me focus for the rest of the day, I feel fantastic the rest of the day.

We’re fighting against, we’re trying to convince a family member who for years has been sending money orders in the mail and we’re trying to convince them to use their credit card over the web or over the phone.

Dan Wagner: In lots of states, families have to go through JPay to send money into a prison at all because JPay now controls both the electronic transactions and the money orders.

So for 14 years Pat Taylor sent the money order directly to the prison, until last year she was instructed to send it to JPay.

For almost 45,000 families, JPay is the only way to send an inmate money and the company charges them fees as high as 45 percent.

Ryan Shapiro: My first customers were mostly mothers and grandparents. Now I think the majority are African-American women from the age of like 25 to 36 years old, I believe, and then different categories of women, basically.

It’s not just a convenience, it’s also – it’s just a comfort factor for mom to know “my son has his money.”

Keith Miller: I’ll show you a few items we get from commissary.

This is mostly food here.

Dan Wagner: Prisons contract with private vendors to sell goods and services to inmates. Things like food, toiletries, and clothing – as well as phone calls, emails and stationery.

Some prisons even charge for toilet paper.

Keith Miller: And I’ll show you my hygiene items. They’re over here.

Dan Wagner: Employed prisoners like Keith can earn between 27 and 45 cents an hour in Virginia.

That doesn’t go far at the prison store.

Keith Miller: This is around 4 dollars a bottle, for, it’s not very big a bottle of Suave lotion.

Dan Wagner: JPay helps streamline the flow of cash into prisons, making it easier for corrections agencies to take a share of the funds.

For example: when a relative in Virginia sends 120 dollars to an inmate the deductions start when JPay takes its first cut: the money transfer fee.

Then the state automatically takes money for a savings fund, fines and restitution. Once inmates receive the money they’re charged for doctors and prescriptions.

Email and music downloads are another revenue stream for JPay.

That can leave about one third for commissary. And vendors mark that up, too.

Pat Taylor: To give him $50, I have to send 70 off my card.

Dan Wagner: It’s hardest on people like Pat Taylor who are barely scraping by.

She pays JPay as much as 35 percent on each transaction before the government takes out its share.

Pat Taylor: Well, I just let a bill go. I let a bill go and pick it up later.

Dan Wagner: It’s not just one company, and it’s not just one prison. Corrections agencies and private vendors work together to shift the costs onto families, and make money in the process.

Phone and commissary vendors charge marked up prices, and return a share of the profits to the prisons.

We made several requests to discuss the profit sharing issue with the Virginia Department of Corrections, but they refused to be interviewed for this story.

Pat Taylor: It’s not that much money the first, second, third time, but when you keep doing it, that money goes to someone whereas before we could just send it straight to them, send $50, they got $50.

Dan Wagner: While profit sharing isn’t new, JPay’s innovation was apply it, for the first time, to financial services.

Ryan Shapiro: Government agencies can and will accept a portion of the revenue as an incentive to put the program in because if there’s any agency or any department that’s strapped for cash or for money, it’s Corrections… so this was an opportunity to supplement that budget shortfall basically.

Dan Wagner: Is it fair to call the commission share a kickback?

Ryan Shapiro: Although the structure may seem … the word kickback has a negative connotation, right, and it seems like some person is making that money and pocketing it and buying a new Chevrolet or something. When in fact it’s going to use for the inmates’ benefit.

So the question really becomes, who should be paying for that? Should the taxpayer pay, or should mom and dad pay?

Jack Donson: Bureaucracy is bloated. I don’t think anybody can look anyone in the eye in the government and say we’re not a bloated agency.

So when we talk about maybe potentially cutting out fee for service things, you’re just going to have to get lean and trim like any other business organization in the private sector.

My name is Jack Donson. I spent twenty-three years in the trenches of the federal bureau prison system. I have a prison consulting business on Wall Street, New York.

You can make a lot of money from prisoners and prisoners’ families, especially in these peripheral services.

Every additional prisoner is more emails, more phone calls, you know, more commissary items purchased.

Everyone knows in the private prison world in circles, that prisons are extremely profitable.

There’s a lot of revenue being generated by these things and they’re being paid by the more marginalized population.

Adryann Glenn: My mother, who doesn’t have anything to begin with, who never did anything to anybody at all, has to pay this exorbitant fee to send me money, and then when she sends me that money they take a cut of that money about three different ways – you got the Department of Corrections taking a piece and all these little private vendors making money off my mother who has nothing, who’s done nothing wrong. She’s not even the customer! If anybody’s the customer it’s me! So how come she’s getting charged for me? All you’re doing is sitting back getting fat off of my mother.

My name is Adryann Glenn.

Right now, I wake up every day about 6 am. Go off to cosmetology school. From there I leave and work at a barber shop.

I spent 49 months, 10 days, and 17 hours in the Virginia Department of Corrections.

I got a friend whose mom she actually added up the fees. And she was like I could be paying a car payment. With what they’re charging me to call him; to send him money, when he needs medical care, I could pay a car note off of that. That’s not right.

The majority of the people that you find incarcerated and locked up are going to come from the poorer neighborhoods, projects, like myself – I come from the projects.

The majority of us have either been to jail or prison. I can’t really think of a friend who hasn’t.

Jewel Miller: I would say the cost of what we do for Keith a month is at least four or five hundred dollars a month. And you take that out of 12 hundred dollars and you don’t have much left.

Keith Miller: The fact that she has to pay the fees to send the money and then the fact that they make a certain cut off it seems to be that they’re double dipping into the money that she’s sending.

Adryann Glenn: A couple of months, before I was released was when JPay took over and then all of the sudden, there was a fee for this, there was a fee for that.

They might send the money in but you might not get it.

If it goes to a facility that has somebody with a similar name to yours and it gets credited to their account they’re not changing it. You’re just out of that money.

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JPay’s CEO Ryan Shapiro responded to these claims in a phone interview.

Ryan Shapiro: We don’t scam people, we don’t overcharge people. If it was due to an electronic mishap then the customers would all be refunded. You know, the proper money would be in the right accounts.

But if it was due to a customer mistake and the money was already spent, I don’t think the customer expects us to refund them that money.

Jewel Miller: Everything so far that they have done has just made it harder, more complicated and costs more money.

Ryan Shapiro: You know, there’s costs associated with each transaction and if you are, if you don’t have the means there is the free, the availability of doing it the other way. Except in those few states where there is no option.

Pat Taylor: I used to be able to just send the money order straight to the facility and it would go there and go on his account right there, and he was able to order his commissary.

Jewel Miller: If you send it by money order they take their time getting it back to him – it takes about 14 days.

Pat Taylor: And it may not even get to them in 14 days if I send the money order. So I have it put on my card.

Jewel Miller: The only reason they drag around is so everybody will go with the credit card and give them more money.

Pat Taylor: [Crying] If your child had the same situation, what would you do? If your child, your husband, your wife, your mother, your father — do you love your family?

Dan Wagner: Ryan Shapiro denies that this is an issue. He says people’s money orders are credited within two or three days after they’re received.

What we found, talking to families all over the country, is that their money orders are arriving a lot more slowly since JPay came in. For families without any extra money to spend a few weeks in advance, this just doesn’t work.

JPay has identified that as an opportunity in the market.

So we’re starting to see cards like this pop up in prison visiting rooms.

Jewel Miller: I mean, when you put out little cards with pictures on it like people are crying because their money order takes so long to get there and trying to make you put it on credit cards, now that tells you right there there’s something dead wrong.

Ryan Shapiro: Of course we’re going to catch a bad wrap here and there. Verizon catches a bad rap, Google, whomever the customer. Customers get upset. So I can’t satisfy everybody but we really try, we really try hard. If you listen to phone calls, if I take you through that call center, and you listen to how our customer service reps treat our customers you’d be blown away.

JPay customer service rep: “OK I do apologize for the inconvenience you’re experiencing through the website. I’m more than happy to assist you further today with completing the payment transaction ….”

Ryan Shapiro: This company’s focus is on customer service meaning you satisfy the customer when they call.

Jewel Miller: This is Jewel Miller and …

Ryan Shapiro: Before JPay came around that kind of customer service did not exist in corrections. Period.

Jewel Miller: … Why when we send the money orders that we have to pay send all this information on it – once it goes on your record are y’all not able to keep it?

Ryan Shapiro: We go out of our way to make sure that they feel comfortable, that they feel like you’re spending money with a company that cares about you.

Jewel Miller: This is one of the most aggravating things that I’ve ever had to deal with and for anybody to tell a person that everybody’s happy with this JPay – Honey, I can tell you – there ain’t nobody happy with this JPay….

[Pause]

She hung up.

Boy: Daddy, daddy, daddy

[Danielle laughs.]

Danielle: Say hi! He’s up there!

I need a second job just because I don’t have enough money now.

Dan Wagner: Corrections agencies are adding all kinds of new charges for things like electricity, medications, even room and board.

County jails have been the most aggressive, charging people for intake fees and ID bracelets.

Danielle on phone: I can’t afford that…

It’s basically like paying two rents. I gotta pay his phone calls my rent and my electric and then I gotta pay his phone calls, I mean it’s all of that and then his court costs, his lawyer costs.

Just for him to eat, they take his rent money out of his food money so I put in 50 dollars for food and they take out probably like 25.

Dan Wagner: Inmates who don’t have any money coming in can end up in debt to the jail. Then no one wants to send them money, because they know it’ll just be taken by the state.

Danielle on phone: [aside] It’s about to say “You got about one minute left.”

There’s other people sitting there starving who have negative accounts so if somebody does put money in their account, they’re not going get no food.

Boy: Bye daddy

Danielle on phone: Love you, Daddy.

Boy: Love you, Daddy.

Danielle on phone: Ok, I’ll talk to you later, Love you bye.

[hangs up phone]

Sigh – it’s horrible.

They call and it’s just like 15 minutes fly (clicks) like that.

15 minutes you gotta basically pay three dollars every time.

I didn’t mess up. I didn’t do a crime. I didn’t get myself in trouble. Why I gotta pay for all that?

Jewel Miller: They’re out to get the extra money. And they don’t care who they get it off of.

Ryan Shapiro: The revenues for the money transfer business are tiny compared to commissary or phone revenue. Right. We’re just a drop in the bucket.

Vincent Townsend: The reason we’re in this mess now, on my side, my industry has abused the public and I’m willing to admit that, y’know we have abused the public.

[FCC Commissioner introduces Mignon Clyburn, applause]

Mignon Clyburn: What we are seeing is people making unspeakable sacrifices. Elders are not taking their medicine so they can be able to afford to speak to their young ones. We’re seeing children go without food, without clothing, without the support they need.

Dan Wagner: Well the one area where we’re starting to see some relief for families is with the phones. These companies have been allowed to charge just exorbitant prices, sometimes 17 dollars for a 15-minute call. They were paying commissions as big as 80 percent back to the prisons.

Mignon Clyburn: These are often the most vulnerable, these are often those with the more muted voices, these are often the individuals that we choose not to hear from. I have chosen to listen.

Dan Wagner: The Federal Communications Commission stepped in last year and said “no way, you can’t just charge people as much as you want in order to get more money back to the prisons.”

Mignon Clyburn: Those rates went into effect in February of this year. And I cannot tell you how many letters and calls we are getting and even the providers are getting saying “this is making a difference already.”

Pat Taylor: That makes a big difference for me. It was a joy to my heart.

Adryann Glenn: All a lotta guys have when they’re incarcerated are those phone calls, those letters, those visits, that’s it. That’s what they live for, that’s how they get through their time. I’ve seen guys, their family didn’t come see them in a week or two and the next thing you know they ended up in a hole for 90 days because they just felt alone. ‘cause you feel alone. You can’t build a family in prison.

Mignon Clyburn: It is up to us, if we care about the recidivism rates which are incredibly high, among the highest in the world, we need to make sure that there are not communications disconnect just because someone is behind bars. When those critical disconnects remain and are perpetuated by an unjust and unreasonable rate structure, you are going to have people going home as strangers.

Adryann Glenn: When you come out, the hardest thing is not having any money, and then all the money that they’ve been spending on you while you’ve been away, they don’t really have any money to help you out with. So you’re kind of forced to get back into that revolving door. “Well, I’m just going to do it for a week or two”. Well that week or two can turn into another 10 years in prison.

Jewel Miller: I think Keith and I have both got through this so well because we have stayed close and spent our time together, and that is a priority to me.

He’s just in really good spirits, and he ate good, and we just had a wonderful time. Just means so much to the inmates and to the parents that I don’t think some people realize how great it is. I had a great time.

Mignon Clyburn: I am hopeful that this will be an incredible example of how federal government, private industry … how we can truly make these markets more efficient and a better service to those who need them the most.

Vincent Townsend: My counsel to other industries that serve a imprisoned population is “you better pay attention to what’s the ethical, right, moral, you know, whatever good word you want to use, to treat people fairly, because if you don’t treat people fairly ultimately it’s not a long-term business plan. Because if you don’t then some regulators’ going to step in and then you’ll have to deal with it.”