Senator questions Bank of America’s no-bid prison deal

Introduction

A senior U.S. Senator is questioning the Treasury Department’s decision to award Bank of America Corp. an exclusive contract to provide technology and financial services in all federal prisons.

In a letter sent Friday, Sen. Charles Grassley, R-Iowa, asked Treasury how the deal can protect taxpayers from fraud and conflicts of interest, given that it was awarded without the competitive bidding and transparency required for most federal contracts.

Competitive bidding is “meant to give taxpayers the most bang for the buck,” Grassley said in a statement to the Center for Public Integrity. “Any time the government avoids competitive bidding, the practice needs exploration.”

The Center first reported Thursday that Bank of America has been paid at least $76.3 million dollars to manage inmates’ accounts and oversee e-messaging and phone services inside the 121 facilities managed by the Bureau of Prisons, which house more than 214,000 prisoners.

The deal has been amended 22 times since it was awarded in 2000. Treasury granted it under a 150-year-old authority that allows the agency to sidestep the oversight, transparency and competition typically required for federal contracting. The contracts are known as financial agency agreements.

“It is concerning that these [oversight] requirements do not apply to financial agency agreements such as the one with Bank of America,” Grassley wrote. “The Treasury Department’s decision to repeatedly amend rather than competitively bid this arrangement raises significant questions.”

Grassley is the senior Republican on the Senate Judiciary Committee, which oversees the Justice Department. He could become chairman of the committee if Republicans gain a majority in the Senate after this fall’s election.

Prisons account for more than one-fourth of the Department of Justice’s discretionary budget through fiscal 2018, Grassley said, so “we must be sure that the BOP [Bureau of Prisons] is operating as efficiently as possible.”

A Treasury spokesman said the department had received Sen. Grassley’s letter and will respond. The Department of Justice did not respond to a request for comment.

In the letter, which was addressed to Treasury Secretary Jacob Lew, Grassley asks Treasury to detail all payments by Treasury and DOJ to Bank of America or its subcontractors. He also asks Treasury to disclose the 22 amendments, only 17 of which were provided to The Center under a Freedom of Information Act request.

The Center’s report also noted that JP Morgan Chase & Co. issues high-fee payment cards to federal inmates when they are released. The cards contain inmates’ earnings from prison jobs and any leftover money sent by their families. JP Morgan holds a similar financial agency agreement with Treasury to provide the cards.

JP Morgan and Bank of America are the two biggest U.S. banks by asset size. Both have declined to comment on their deals with the Treasury Department.

The Center’s report was the second in a two-part series about prison bankers, companies that profit from inmates’ families through exclusive deals with prisons. The first part of the series detailed how JPay Inc., a Miami-based technology company, has gained access to 70 percent of U.S. offenders, and holds a monopoly on transferring money into prisons that house about 450,000 inmates.