WASHINGTON -- Federal prison inmates are keeping large sums -- 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 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 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 by 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, Fla., 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 staff member 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 in 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 three-judge 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, 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 also can 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 yearslong 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 next 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 payments, 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.