LASD-run Inmate Welfare Fund: Another Taxpayer Money Black Hole

Inmates at the Central Men’s Jail (Source: Facebook via LASD)

Nika Soon-Shiong is West Hollywood’s Public Safety Commissioner.

Last year, the LA County Sheriff’s Department (LASD) pocketed $44.9 million in police fees, phone tolls, professional services and barbershop visits billed to people in jails of LA County. Those profits come from low-income residents, including the one in three people detained before sentencing simply because they can’t post bail.

Revenue from these fees goes to something called the Inmate Welfare Fund (IWF). California law requires that the IWF be used to benefit the welfare of those incarcerated – not to line the pockets of the world’s largest sheriff’s department. As in so many other areas of ministry, what the law requires bears little resemblance to what is done in practice.

Since 2006, a series of Auditor General reports have revealed questions about whether the LASD has pervasively violated the intended purpose of this fund. Let’s break down how LASD has overtaxed hundreds of thousands of people for years in the name of “inmate welfare” and assess what we know about these programs.

LASD’s inmate welfare fund earned $29.7 million last year from commissary sales

It’s easy to see how this is the most profitable income category. Below is an example of the sale price breakdown prepared during a presentation by the Inspector General to the LA County Board of Supervisors. An 8 oz. bag of Flamin’ Hot Cheetos is sold to inmates for $5.33. An 8 oz. bag of Folgers coffee is sold for $14.27.

graph showing the cost of a bag of cheetos: $5.33 sale price minus $2.51 The cost of LASD equals $2.82 for the inmate welfare fund.  51% of this money goes to programs and 49% goes to facilities
(Source: OIG Report on Inmate Welfare Fund)

Since 2013, the supplier that LASD has contracted with for Cheetos and other food products is a for-profit company called Keefe Group. Keefe Group also makes money by providing hygiene items such as soap, tampons and toothpaste, which LASD sells at a 50% markup.

table of items showing cost for LASD, sale price, total number ordered and total cost.  Irish spring soap: LASD is $0.68, sale price $1.45.  roll-on deodorant: LASD cost $1.88, sale price $4.00.  fresh mint toothpaste: LASD cost $1.02, sale price $2.16.  cocoa butter lotion: LASD cost $0.66, sale price $1.41.  pads (pack of 10): LASD cost $1.27, sale price $2.70
(Source: OIG Report on Inmate Welfare Fund)

Among the Keefe Group’s many legal battles is a lawsuit it filed against the Mississippi Department of Corrections, which wanted to change suppliers to what Mississippi officials called “a better-known corporate prostitute.” . These court records reveal that, in the company’s words, “government officials know that the company charges detainees far above market rates”, but they allow the practice “because [they get] part of the commissioner’s profits.

LASD inmate welfare fund earns $15m a year from phone bills

A phone call to LA County jails costs 25 cents per minute. A 15 minute conversation costs $3.75. In addition to the per-minute rate, there are fees to open an account or submit a refund. It costs $5.95 for each time a caller requests to speak to a live agent.

Since 2011, LASD has contracted Public Communication Services for telephone services. Despite its misleading name, Public Communications is a subsidiary of Global Tel Link, a private, for-profit company that controls about 50% of the lucrative prison telecommunications market.

Global Tel Link is actively encouraging prisons to refuse free in-person visits where people can hug loved ones, instead marketing its video call services that charge up to 70 cents per minute. A few years ago, it was discovered that the company had bribed officials in exchange for government contracts.

According to the company’s service agreement with the sheriff, “The IWF will earn a minimum annual guarantee in telephone commissions of $15 million.” LASD earned at least $15 million a year from phone charges. As COVID-19 protocols restricted in-person visits to jail, an increase in the usual number of phone calls netted so-called “public” communications services and the sheriff an additional $5 million.

man in orange overalls with headphones looking at a tablet.  text: "expand our support - new partnerships and services"
(Source: Global Tel Link)

Former FCC Commissioner Mignon Clyburn described the correctional phone market industry as “the clearest and most glaring type of market failure.” [they have] never seen as a regulator. In 2021, the FCC adopted a 21-cent-per-minute charge cap for out-of-state calls. Unfortunately for those incarcerated in county jails, most phone calls did not go through to out-of-state numbers.

The California State Legislature has declared the need to protect incarcerated persons and their loved ones “from the predatory practices of private companies providing goods and services to those confined in county jails.” To that end, the legislature passed SB555, which would have ensured that the rates charged for telephone communications did not exceed $0.05 per minute. The bill would also ensure that the prices of Commissary items do not exceed a 10% markup above the costs paid to the vendor. This would reduce the price of calls and commissary costs by five times.

Governor Newsom vetoed SB555, fearing it would require “service contracts to be negotiated and awarded to the lowest cost provider.” The governor’s statement reads: “I cannot support this bill in its current form. I fear this will have the unintended consequence of cutting back on important rehabilitation and education programs for people in custody.

While we’re concerned that these “inmate welfare” programs will disappear if inmates are charged below or market price for everyday consumer goods, remember that the IWF represents a tiny fraction of the department’s revenue. The sheriff charges about $400,000 per deputy in his annual contracts with 42 cities, and has been found to understate the revenue generated from the contracts and overstate the crime reduction benefits.

When it comes to rehabilitation programs in prisons, there is little understanding of what IWF programs are to begin with – let alone how effective they are. The LASD appoints a seven-person committee on the Inmate Welfare Fund to identify and approve areas of program spending. In 2019, the inspector general reported that even this LASD-appointed commission was not receiving enough information from the sheriff to make informed decisions.

How does the Inmate Welfare Fund support “significant rehabilitation and education programs” for those in custody?

Educational programming was suspended in 2020 during the pandemic, just at the time of Governor Newsom’s veto. The following April, the Auditor-Comptroller reported that the LASD-operated IWF lacked key performance indicators to track and evaluate program expenditures.

The following month, the LA County Board of Supervisors (BOS) passed a motion to reduce or eliminate fees paid by inmates, citing New York and San Francisco’s adoption of free telephone communications. The BOS motion called for the development of recommendations to provide free or paid goods and services and a detailed statement of IWF expenditures.

At the time of the May 2021 BOS request, there were already a dozen such analyzes available online indicating that since 2006, LASD has failed to comply with recommendations to improve record keeping or to cease improperly transferring inmate welfare funds to its regular operating budget.

A month before the motion, the Auditor General’s review of processes pointed out that the sheriff “could replace jail maintenance expenses with IWF revenue that should be funded through the normal sheriff’s budget process.” .

In the year since the motion was passed, two disturbing reports on IWF programmatic spending have been released. An October 2021 Auditor General’s report concluded that there is still no key performance indicators or evaluations of IWF programs, making it difficult to determine whether these programs are “wanted, needed, or effective.”

An April 2022 Auditor General’s report noted that the largest category of program spending went to what is known as “special departmental spending”. Programs categorized as “membership” went from approximately $500 to $338,076. This membership expense is described as funding an “inmate diary program”. No information is available on the initiative of the newspaper.

All of these discoveries are breathtaking. Neither the public nor the accountants repeatedly appointed to investigate what the sheriff is doing with tens of millions of dollars a year have any idea where the money really went.

Let’s summarize what we know. The LASD pays a for-profit company $2.51 for an 8 oz. bag of Flamin’ Hot Cheetos, which is already a markup. He then charges the poorest people in LA County $5.33 for an 8 oz. bag of Cheetos under the guise that it is for their own benefit. Then, he remains opaque about whether he is actually using the money to help anyone, as required by state law.

The sheriff cited “staff shortages and other priorities” as reasons for his lackluster commitment to creating performance appraisal processes or providing detailed reports on IWF expenses.

It is a common pattern. LASD recently decried staffing shortages despite hiring or promoting 1,900 new employees as part of the county’s “hiring freeze.” The county sheriff’s 2022-23 allocation exceeds that of public health and fire departments by more than $1 billion each. LASD said an increase in appropriations from $3.4 billion to $3.6 billion is evidence of “defunding.”

As budget season approaches and such claims grow louder, it’s important to remember Sheriff’s record-breaking profit margins from 8 oz. bags of Flamin’ Hot Cheetos. We’ve all had a few dollars eaten by an ATM, but the county loses $44.9 million every year. And LASD eats the profit.


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