Brad Heath, USA TODAY

ATLANTA – The prisoners in Atlanta's hulking downtown jail had a problem. They wanted to snitch for federal agents, but they didn't know anything worth telling.

Fellow prisoner Marcus Watkins, an armed robber, had the answer.

For a fee, Watkins and his associates on the outside sold them information about other criminals that they could turn around and offer up to federal agents in hopes of shaving years off their prison sentences. They were paying for information, but what they were really trying to buy was freedom.

"I didn't feel as though any laws were being broken," Watkins wrote in a 2008 letter to prosecutors. "I really thought I was helping out law enforcement."

That pay-to-snitch enterprise – documented in thousands of pages of court records, interviews and a stack of Watkins' own letters – remains almost entirely unknown outside Atlanta's towering federal courthouse, where investigators are still trying to determine whether any criminal cases were compromised. It offers a rare glimpse inside a vast and almost always secret part of the federal criminal justice system in which prosecutors routinely use the promise of reduced prison time to reward prisoners who help federal agents build cases against other criminals.

Snitching has become so commonplace that in the past five years at least 48,895 federal convicts — one of every eight — had their prison sentences reduced in exchange for helping government investigators, a USA TODAY examination of hundreds of thousands of court cases found. The deals can chop a decade or more off of their sentences.

How often informants pay to acquire information from brokers such as Watkins is impossible to know, in part because judges routinely seal court records that could identify them. It almost certainly represents an extreme result of a system that puts strong pressure on defendants to cooperate. Still, Watkins' case is at least the fourth such scheme to be uncovered in Atlanta alone over the past 20 years.

Those schemes are generally illegal because the people who buy information usually lie to federal agents about where they got it. They also show how staggeringly valuable good information has become – prices ran into tens of thousands of dollars, or up to $250,000 in one case, court records show.

John Horn, the second in command of Atlanta's U.S. attorney's office, said the "investigation on some of these matters is continuing" but would not elaborate.

Prosecutors have said they were troubled that informants were paying for some of the secrets they passed on to federal agents. Judges are outraged. But the inmates who operated the schemes have repeatedly alleged that agents knew all along what they were up to, and sometimes even gave them the information they sold. Prosecutors told a judge in October that an investigation found those accusations were false. Still, court records show, agents kept interviewing at least one of Watkins' customers even after the FBI learned of the scheme.

The risks are obvious. If the government rewards paid-for information, wealthy defendants could potentially buy early freedom. Because such a system further muddies the question of how informants — already widely viewed as untrustworthy — know what they claim to know, "individual cases can be undermined and the system itself is compromised," U.S. Justice Department lawyers said in a 2010 court filing.

Before Watkins became an informant, he was a prolific armed robber.

In 1995, he held up a string of shops and restaurants, sometimes robbing the same place more than once, and sometimes pulling more than one robbery a day, according to court records. The last time he was arrested, in 2006, Atlanta police said he asked a supermarket clerk for a pack of cigarettes, stepped back, pulled a handgun and yelled "robbery." He fled before he got any money, employees caught him, and federal prosecutors hit him with a gun charge that could have put him in prison for the rest of his life.

By then, Watkins had been a federal informant for a decade, he said in a letter to USA TODAY. He claimed he once wore a wire inside a prison to help catch another man who was selling information to would-be witnesses. That man, Gregory Harris, later confessed, but, in an unusual move, the government agreed to halve the 20-year prison sentence Harris was already serving in exchange for his cooperation in other cases. (Harris was found dead this year inside the trunk of a burning car.)

And so began a career of trying to cash in on what he knew.

Pressure, and plenty of cooperation

People charged with federal crimes don't have many ways to avoid a tough sentence.

Nearly everyone charged is convicted. They usually face the prospect of a lengthy prison term, driven by long minimum sentences for drug crimes and sentencing rules that leave judges little leeway to make exceptions – unless they cooperate. Often, becoming an informant is the only chance defendants have.

An experienced lawyer who knows what his client has been charged with "can ask a client three or four questions, and you can get 95% accuracy on the sentencing range within 10 minutes … unless he has something to trade," said Tim Saviello, a John Marshall Law School professor and former federal public defender in Atlanta. "People are willing to pay $20,000 or $30,000 to get a piece of information. That tells you how valuable it is."

Every year for the past decade, 11% or more of the people convicted of a federal crime got a shorter sentence because they provided "substantial assistance" to investigators, a USA TODAY examination of federal sentencing data shows. That figure almost certainly understates the extent to which defendants cooperate because some get breaks that aren't reflected in court records and others only pass on information that the government doesn't find useful.

In return, prisoners offer up names and addresses of drug dealers. They wear recording devices or let police listen to their phone calls. They introduce undercover agents to their contacts inside crime organizations.

That kind of help has become indispensable for law enforcement. The Drug Enforcement Administration told the Justice Department's inspector general in 2005 that it "could not effectively enforce the controlled-substances laws of the United States" without its confidential sources.

Cooperation is especially common when drugs are involved. Nationwide, at least a quarter of the people sent to federal prison in drug-trafficking cases over the past five years successfully traded information for a shorter sentence. In some parts of the country – including Idaho, Colorado and western New York – more than half did, while in Nebraska, fewer than 5% of convicted drug traffickers got deals. One reason is that some prosecutors' offices demand far more cooperation to get a deal.

The benefits can be huge. Last year, half of the defendants who cooperated with the government got their sentences chopped by 50% or more, according to a U.S. Sentencing Commission report. People convicted of some white-collar crimes such as bribery and tax evasion usually avoid prison entirely.

It's up to Justice Department lawyers to decide who gets a break.

A jailhouse enterprise

Watkins' business plan was simple.

His associates on the outside collected information about drug dealers and other criminals, and he offered to sell it to other prisoners at the Atlanta City Detention Center who had money but lacked the facts or criminal contacts to cooperate with the government on their own. Sometimes the money ended up in a jail account that inmates use to buy commissary items, according to court records.

In exchange, he would deliver "packages" of information that his customers could share with federal agents looking to open new cases or buttress old ones.

The trouble was most of what Watkins had to sell was "classic street-level information" that was of little interest to federal agents looking to take down major drug traffickers, said Robert McBurney, who worked a related case when he was a federal prosecutor in Atlanta. He said Justice Department lawyers were uncomfortable shortening one prisoner's sentence as a reward for someone else's information, and doubly so when the would-be informants concealed the fact that their information was secondhand.

And then there was the money. "There were discussions that, if the information he relayed is valid, maybe he's an entrepreneur. If he chooses to get money instead of a reduction in sentence, Adam Smith would applaud that," McBurney said, invoking the 18th-century economist. But prosecutors didn't take the same view.

Watkins said he didn't see the problem. "The biggest buyer of information is the government," he said during a brief phone call from a detention center in Georgia. "But they pay in years."

He claimed during a phone call that the agents who debriefed him "knew money's been changing hands," and his lawyer said in court filings that it should have been obvious to investigators that Watkins was getting outside information. "They basically authorized all of this," Watkins said. He said he is still providing information to federal agents, an allegation that prosecutors have disputed.

Watkins' enterprise didn't come to light until the summer of 2008, when another inmate contacted prosecutors looking for a deal – with information about Watkins. (He got one.) Watkins later told the FBI that he had brokered deals for four inmates. James Rochester, the informant who turned him in – and had been intercepting his mail – told federal prosecutors through his lawyer that he thought there were at least a dozen customers. Watkins himself wrote to agents and prosecutors admitting that he had acted as a broker for other prisoners seeking information.

McBurney said prosecutors tried to review all cases that could have been tainted by Watkins' scheme. "It's a pernicious situation that, sadly, undid some good works," McBurney said. But FBI agent Mile Brosas testified in December 2010 that agents went "just based on the names that Mr. Watkins gave us."

Neither Watkins nor his customers were ever prosecuted for the scheme. At least one actually won a reduced sentence.

Watkins is still angling to get his own sentence reduced.

He pleaded guilty to a federal gun charge in 2007; in exchange, the government promised in a written plea agreement to recommend a 30-year sentence. But five and a half years later, he still hasn't been sentenced. Part of the reason is that he's still trying to get a judge to force the Justice Department to give him a "substantial assistance" reduction as a reward for the help he said he has given to state and federal agents.

The Justice Department "feigns dismay that Marcus Watkins was allegedly buying and selling information when the Government had been legally buying information from him over a lengthy period of time," his lawyer, Martin Cowen III, alleged in one court filing. He said it should have been obvious to agents by 2008 that Watkins – who had been in prison for two years by then – couldn't have been giving them current information about criminals unless he was getting it from someone outside the jail.

The government, Cowen said, was "'shocked, shocked' to find that information was being sold in the jail."

But if prosecutors weren't actually surprised, Atlanta's chief federal judge was. At a hearing in 2010, U.S. District Court Judge Julie Carnes excoriated the "abominable situation" of prisoners trading for outside information, and said she was "appalled that it's going on to the level it appears to be going on." The scheme, she said, could let the wealthy buy their way to reduced sentences, conjuring images of Hessian mercenaries of the Revolutionary War.

Carnes still hasn't decided what to do with Watkins.

Information has a price

Watkins' enterprise wasn't the only time someone here figured out how much information was worth.

In 2010, federal prosecutors indicted another man, Sandeo Dyson — an Army medic locked up on charges that he had tried to burn down a strip club for money — for running a similar scheme out of the same jail at the same time as Watkins. His customers paid $5,000 and $10,000 for information they hoped would win them lighter sentences. Prosecutors said he made $50,000 selling information to four other inmates.

Dyson pleaded guilty to a charge of encouraging his customers to lie to agents about the source of their information and was sentenced to 18 more months in prison.

U.S. District Judge Richard Story had planned to lock Dyson up longer. But by the time Dyson's attorney, Barry Lombardo, finished sketching the history of the pay-to-snitch business in Atlanta, Story instead sentenced him to the bottom end of what the federal sentencing guidelines said was appropriate, Lombardo said. (The transcript of that hearing remains sealed.)

In 2000, prosecutors here convicted Harris.

Four years before that, agents charged a prominent local defense lawyer, Robert Fierer, and his former drug-dealer client, Kevin Pappas, with running an even bigger information-for-sale enterprise. Their customers were quoted prices up to $250,000 for information that they hoped might help them go home sooner, according to court records.

To get a deal, Pappas said, people needed the right kind of information about the right kind of criminal – solid information about someone significant enough to be worth a federal agent's time, but not so ironclad that they'd ever be asked to testify. "The key is you got to know what the point of interest is in a given office today," he said.

The prosecutor who put the pair in prison, Buddy Parker, says he understands the pressures that made the information so valuable. "The only way to avoid a long sentence was to cut a cooperation deal. People without information, they're screwed," he said. "The guy who was the greatest criminal had the greatest likelihood of getting a low sentence."

Fierer got a two-and-a-half-year sentence. But he went home early after he gave agents information about another case.

Following the information, and the money

Watkins' information is still reverberating through one drug case.

In early 2008, an Atlanta jail inmate facing mortgage fraud charges approached FBI agents with information about a drug trafficker who was dealing in tractor-trailer loads of marijuana and cocaine. Leon Lumsden was by then practiced at trying to use information to win a deal. At his sentencing hearing that July, so many federal agents showed up on his behalf that the judge gave him an even bigger sentence reduction than prosecutors had sought.

The prosecutor on Lumsden's case, Gale McKenzie, had warned state and federal officers that his "credibility was nil." Still, she wrote in a September, 2008 e-mail, "many from state and federal law enforcement debriefed him and reported receiving verified information of value as well as making arrests based on his cooperation."

But the information about the drug dealer panned out. Marlon Burton — "Bird" on the street — lived in a country club south of Atlanta and traveled in a Mercedes; he had a direct connection to a Mexican cartel, according to court records.

What was less clear was how Lumsden — a white-collar crook — knew about him. During a phone interview this month, Watkins said he provided the information about Burton to Lumsden, and that he was compensated for it. Court records show he had previously offered the same facts to federal investigators.

Lumsden insisted that the information he got from Watkins was worthless. "I didn't benefit from all the garbage he gave me," he said during a brief phone call from a Georgia prison. "Everything he gave me was straight BS."

A reliable source, and more arrests

Still, in November of 2008, the FBI used Lumsden's information to ask a federal judge to let agents wiretap the trafficker's cellphone. He was an important part of the case because the agents' other informant hadn't done business with Burton in years, meaning a judge might think it was too stale to justify a wiretap. The agent who signed the wiretap application, Nikki Badolato, told the judge that Lumsden was "reliable."

Badolato later testified that she didn't know that Lumsden had been buying information because his name was misspelled in an FBI database.

The FBI got its wiretap. Agents arrested Burton the next year.

Burton in turn informed on the other members of his organization. In return, prosecutors chopped a decade off his prison sentence, a bargain the judge called "more than generous." One of the people Burton implicated was the owner of a Lithonia, Ga., machine shop where he said he would park, and sometimes unload, truckloads of marijuana and cocaine.

Agents arrested the owner, Ivey Grant, in the drive-through line of a Sonic Drive-In. It was the first time Grant, 61, had been charged with a crime, and when FBI agents booked him they found his hands were so scoured by years of labor that his fingerprints had worn away.

Grant is serving nine years in federal prison.

He insists he didn't know what was in Burton's trucks; to him, they were just like any of the other big rigs and dump trucks that rent space in the shop's dusty parking lot. Now he's asking a federal appeals court in Atlanta to overturn his conviction, saying that the judge who approved the wiretap that ensnared him should have been told about the shaky informants behind it.

Sitting in a cinder-block prison office in Atlanta's federal prison last month, Grant sounded more confused than angry about how he ended up facing almost a decade in custody. "I don't think it's right for a convicted felon to get up on the stand in front of honest citizens and convict other people," he said.

But with seven years to go, he sees the appeal.

"If someone says you can go home today if you say that box is blue," he said, stabbing a thick finger at a big, white cardboard box in the corner of the office and grinning, "then that box is blue."