How many jobs are created by Black criminality? From [HERE] and [HERE] On Wall Street, Bank of America plays a perpetual second fiddle to JPMorgan Chase & Co., the only U.S. bank that holds more assets.
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.
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.
The agency awarded the contracts using a 150-year-old authority that allows it to sidestep the oversight, transparency and competition typically required for federal contracting. That means that for 14 years, Bank of America has never been required to compete with other vendors who might do the work better or for less money, according to Treasury documents obtained under the Freedom of Information Act.
JPMorgan’s no-bid deal to issue debit cards for various federal agencies began in 1998, was extended in 2008 and eventually expanded to include cards for federal prisons. Fees from former inmates make up most of the bank’s compensation for these cards, documents show. A separate Treasury document from 2013 said that about 50,000 released prisoners had been issued cards and listed fees of $2 for withdrawing money from an ATM and $1.50 for leaving an account inactive for three months.
JPMorgan, Treasury and the Bureau of Prisons declined to provide a current fee schedule for the cards. Bank of America, JPMorgan and the Bureau of Prisons all declined numerous requests to discuss the banks’ deals inside U.S. prisons.
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.
Across the country, jails and prisons are hungry for ways to shift their operational costs onto inmates and their families. Inmates need money to pay for essentials like toiletries and court fines as well as extras like higher-quality food than what is served in prison cafeterias. Their families often pay high fees to send them the money. Inmates, in turn, pay marked-up prices for items sold at prison stores.
The oil that lubricates this entire system is supplied by the prison bankers, vendors that collect all the inmates’ money in a pipeline of cash from which payments and fees can be pulled. Bank of America’s lock on federal prisons makes it a major player among prison bankers, many of which provide a range of high-cost financial services to inmates and their families and share their profits with the prison systems they work for.
Providing services inside prisons is a growing business, but it’s not new. The first accounts for federal inmates were set up in 1930. Inmates’ families could no longer bring them food and clothing, the government decided, but instead would be allowed to send money into individual accounts. Until the early 2000s, most deposits were made by mail using postal money orders, a process that was nearly cost-free. Before Bank of America’s contract, the Treasury Department held inmates’ funds.
Bank of America’s prison contract is an example of how the Treasury Department leans on a power granted during the Civil War to pick and choose its own bankers and allow other agencies to avoid procurement rules that might force a competitive bidding process.
By hiding these deals from the public, Treasury “invites opportunities for waste and fraud,” said Neil Barofsky, who provided independent oversight of Treasury’s $700 billion bailout program after the 2008 financial crisis. He said Treasury’s expansive use of the authority reminds him of what he saw while working with the agency.
“The reaction from Treasury when dealing with banks was to find a way to say no to being transparent,” said Barofsky, now a partner with the law firm Jenner & Block LLP.
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.
In a 1975 report, however, government auditors said Treasury was reimbursing banks operating on overseas military bases for office parties and club dues, leaving them with “little or no incentive to operate the facilities profitably or efficiently.”
Twenty years later, the U.S. Court of Appeals for the District of Columbia overturned Treasury’s selection of Citibank as a financial agent to deliver electronic benefits like Social Security, calling it “arbitrary.”
And in 2008, the Government Accountability Office said a deal with JPMorgan to provide stored value cards on Navy ships was “at risk of delivering a system solution that falls short of cost, schedule and performance expectations.”
Most recently, Treasury’s inspector general last spring criticized oversight of a program to deliver federal benefits on debit cards issued by Dallas-based Comerica Bank. The inspector general found that officials had failed to keep tabs on fees charged to consumers and did not justify the decision to pay Comerica an extra $32.5 million for work it had promised to do for free. Treasury agreed to rebid the deal, then quietly extended its partnership with Comerica for five years.
Twenty-two amendments, no bidding
Treasury has spent more than $5 billion in the past decade on financial agency agreements with a handful of banks, often without considering whether another company could do the work cheaper or more effectively, documents show.
Consider how Bank of America’s prison deal has swelled in the 14 years since it was awarded.
The original contract to hold and manage inmates’ accounts and track their purchases from prison stores, worth up to $14.4 million, was amended six months later, adding up to another $1.47 million to Bank of America’s compensation. In 2003, officials added telephone service to the deal, boosting the bank’s potential compensation to $25.8 million. Later, the work grew to include e-messaging for inmates.
Bank of America’s contract has been amended 22 times since 2000 and the cost has swollen more than fivefold to $76.3 million, Treasury officials say. They say the Department of Justice, the parent agency of the Bureau of Prisons, has reimbursed Treasury for those costs.
The contracts say these services might help the Bureau of Prisons reduce staff time spent opening letters or entering account deposits manually. Yet they never articulate why the work could not be procured directly by the Department of Justice using typical contracting procedures.
Bank of America and Treasury designated two subcontractors to perform the work: DynCorp International, a major military contractor based just outside of Washington; and Advanced Technologies Group, a Kansas-based technology company that today shares a parent company with Keefe, the biggest operator of prison commissaries.
Neither company would have been eligible to deal directly with Treasury because financial agents must be banks or credit unions that are insured by the federal government.
