Prison Phone Justice

Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, DC 20554

In the Matter of:
Rates for Interstate Inmate Calling
Services

WC Docket No. 12-375

COMMENTS OF
STEPHEN A. RAHER

Stephen A. Raher
1120 NW Couch St., 10th Floor
Portland, OR 97209
(503) 727-2163

Dated: March 25, 2013

TABLE OF CONTENTS
Page
I.

The Commission Should Impose Rate Caps ...................................................................... 2
A.

Rate Caps are Beneficial and Legally Proper ........................................................ 2

B.

The Commission is Authorized to Prescribe Generally Applicable
Regulations That Cover State and Private Facilities.............................................. 4

C.

The Commission Should Use the Regulatory Process to Obtain Reliable
Information on ICS Cost Structures ....................................................................... 4

D.

The Commission Should Model ICS Rate Regulation on the System Used
to Implement the Cable Television Consumer Protection and Competition
Act of 1992 ............................................................................................................ 5

E.
II.

III.

1.

Security Costs ............................................................................................ 7

2.

Site Commissions....................................................................................... 7

Intrastate-Interstate Parity ...................................................................................... 9

In Addition to Rate Regulation, the Commission is Statutorily Empowered to
Regulate General Ics Practices........................................................................................... 9
A.

Debit or Prepaid Calling ...................................................................................... 10

B.

The Commission Should Encourage Competition in the ICS Market, Such
as VoIP Services .................................................................................................. 10

Conclusion ....................................................................................................................... 11

-i-

SUMMARY
The Commission has gathered ample evidence demonstrating a persistent pattern of
supra-competitive ICS rates. The Commission can and should impose rate caps under 47 U.S.C.
§ 201(b). Rate caps should be based on benchmark rates calculated by surveying just and
reasonable costs in a representative sample of correctional facilities. The Commission should
also use a two-part regulatory system, modeled on the rules implementing the Cable Television
Consumer Protection and Competition Act of 1992, which would allow a provider to exceed rate
caps if it can show that the cap denies a reasonable return on rate base.
The Commission should ensure uniformly reasonable ICS rates by prescribing a rate
regulation system for states to implement as to intrastate calls. In addition, based on evidence
produced in other proceedings, the Commission should require a debit calling option in most
facilities, and should take broad steps to encourage competition in the ICS industry.

-ii-

Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, DC 20554

In the Matter of:
WC Docket No. 12-375

Rates for Interstate Inmate Calling
Services

COMMENTS OF
STEPHEN A. RAHER
Pursuant to the Notice of Proposed Rulemaking (“NPRM”)1 that initiated the abovecaptioned proceeding, the undersigned, Stephen A. Raher, submits the following comments for
the Commission’s consideration in connection with the Wireline Competition Bureau’s Docket
12-375.
I am an attorney in private practice in Oregon. I am familiar with the issues raised in the
NPRM due to my prior employment as a criminal justice policy analyst focused on prisons and
correctional facilities. I have recently published work about the treatment of inmate calling
services (“ICS”) under the Telecommunications Act of 1996 (the “1996 Act”) and the history of
the Wright Petition.2 A copy of my resume is attached hereto as Exhibit 1.
I regularly collaborate with many individuals and entities throughout the country on
projects addressing correctional policy issues (including inmate telephone service); however, I
submit these comments solely on my own behalf and not in any representative capacity or on
behalf of any employer.

1

78 Fed. Reg. 4369 (Jan. 22, 2013).
“Phoning Home: Prison Telecommunications in a Deregulatory Age,” chapter in Prison
Privatization: The Many Facets of a Controversial Industry (Byron Price & John Morris, eds.)
(Prager Press, 2012).
2

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I.

The Commission Should Impose Rate Caps
The NPRM begins with a lengthy discussion of the petitioners’ request for rate caps on

interstate long distance ICS. The imposition of rate caps under sections 201 and 276 of the
Communications Act of 1934 (the “1934 Act” or “Act”) would be legally proper, socially
beneficial, and would bring much-needed fairness to ICS pricing. Although some have
questioned the ability of the Commission to regulate ICS rates and practices, in reality there is no
impediment to the Commission’s jurisdiction in these matters. In particular, the Commission can
and should regulate ICS in state and private correctional facilities. To set price caps based on
appropriate benchmark rates, the FCC should gather cost data through an independent review
process. Using two tiers (based on facility size) the Commission should follow the model used
to implement the provisions of the Cable Act of 1992,3 by setting price caps that providers may
exceed only by charging cost-of-service rates established through a rate case proceeding.
A.

Rate Caps are Beneficial and Legally Proper

The Commission asks whether interstate interexchange ICS rates can be regulated under
both sections 201 and 276 of the Act.4 The answer to this question is emphatically “yes.”
Furthermore, because of the uniquely anti-competitive nature of the ICS market, some form of
price regulation is necessary to effectuate section 201(b)’s mandate of just and reasonable rates.
The ICS industry has predictably focused on section 276’s requirement that providers be
“fairly compensated” for payphone calls. Yet, as the Supreme Court has noted, the 1996 Act
(which enacted section 276) was structured as an amendment to the 1934 Act, not a displacement
of the pre-1996 statutory provisions.5 Thus, inmate services are subject to both section 276’s fair
compensation requirement, and section 201(b)’s reasonable rate requirement.

3

In the Matter of Implementation of Sections of the Cable Television Consumer Protection and
Competition Act of 1992 Rate Regulation, MM Docket No. 92-266, Report and Order and
Further Notice of Proposed Rulemaking [hereinafter “Cable Rate Order”], 8 FCC Rcd. 5631
(1993).
4
NPRM ¶ 49.
5
AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 378, n.5 (1999).
-2-

The 1996 Act unquestionably changed the landscape of American telecommunications
law, by emphasizing a preference for competition in lieu of regulation. Yet even the forceful
language of the 1996 Act does not abolish rate regulation—rather, it preserves the Commission’s
regulatory authority over markets that are not efficient and competitive.6
Given the amendments enacted in 1996 and subsequent changes in technology, it is fair
to say that the Act generally establishes a rebuttable presumption in favor of telecommunications
rate deregulation. But for reasons already acknowledged by the Commission, this presumption
has been soundly rebutted in the context of the ICS industry. The Commission moved to a
market-based price regime for free-world payphones because the market is subject to meaningful
competition.7 But when considering ICS pricing, the Commission correctly concluded that there
is no competition on the consumer level, and that competition which does exist (in the
institutional procurement process) is likely to drive consumer rates up.8
Given evidence already in the record, it is clear that ICS customers are subject to unjust
locational rents. 9 Thus, as explained in more detail below, the Commission should exercise its
powers under section 201(b) of the Act and impose rate caps to ensure that prison inmates and
their friends, families, and attorneys are not subject to the supra-competitive rates that are
prevalent today. If the Commission imposes a system of price regulation that allows ICS
providers to earn a reasonable rate of return on rate base, there is no danger of confiscatory caps
or any violation of section 276.10

6

See e.g., 1996 Act, Pub. L. No. 104-104 § 401, 47 U.S.C. § 160.
In the Matter of Implementation of the Pay Telephone Reclassification and Compensation
Provisions of the Telecommunications Act of 1996, CC Docket No. 96-128, Third Report and
Order, and Order on Reconsideration of the Second report and Order [hereinafter “Third
Payphone Order”], 14 FCC Rcd. 2545 ¶ 39 (1999)
8
In the Matter of Implementation of the Pay Telephone Reclassification and Compensation
Provisions of the Telecommunications Act of 1996, CC Docket No. 96-128, Order on Remand &
Notice of Proposed Rulemaking [hereinafter “Inmate Calling Order”], 17 FCC Rcd. 3248 ¶ 12
(2002).
9
See Third Payphone Order ¶ 37.
10
See Fed. Power Comm’n v. Hope Natural Gas Co., 320 U.S. 591 (1944).
7

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B.

The Commission is Authorized to Prescribe Generally Applicable
Regulations That Cover State and Private Facilities

The Commission asks for comments on its ability to regulate inmate services within state
and private correctional facilities.11 Given the plain text of the Act, as well as the District
Court’s application of the doctrine of primary jurisdiction,12 it is difficult to understand why the
Commission would not have jurisdiction to regulate ICS rates and practices. State and private
correctional facilities must comply with numerous generally applicable federal laws, including
existing telecommunications laws, and there is no reason that ICS rate regulation should not
apply equally to all facilities offering covered services.
Opponents of the Wright Petition have raised many vague concerns regarding ill-defined
security issues. The Commission should not be distracted by these self-serving arguments.
Appropriately designed rate regulation (such as the system proposed in these comments) would
in no way dictate or interfere with security measures, but instead would simply require ICS
providers to demonstrate to the Commission that rates attributable to security measures are
accurate and reasonable.
C.

The Commission Should Use the Regulatory Process to Obtain Reliable
Information on ICS Cost Structures

The Commission has noted the need for reliable data on ICS rates and costs.13 In
particular, the Commission notes two submissions it has received: (1) a nationwide analysis of
prison phone contracts published in 2011 by Prison Legal News (the “PLN Study”), and (2) a
2008 “Call Cost Study” submitted by a coalition of ICS providers (the “ICS Study”).
The PLN Study is based on thorough and transparent methodology, and provides the
most comprehensive and reliable evidence currently available concerning customer rates and site
commissions in the ICS industry. Due to the authors’ status as public interest researchers, the
PLN Study does not benefit from access to ICS providers’ cost data. The ICS Study purports to
11

NPRM ¶ 52.
Wright v. Corr. Corp. of Am., Case No. 00-293, mem. op. (D.D.C. Aug. 22, 2011).
13
NPRM ¶¶ 25, 43.
12

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provide such cost data, but this study suffers from faulty design, as other commenters have
already explained.14 The Commission should not rely on self-reported cost data disclosed by
ICS providers as part of a policy-making debate. The ICS Study consists of an opaque summary
of costs, apparently based on unaudited self-reported data, with no assurance that figures are
based on standardized accounting rules and proper allocation of costs for centralized equipment.
Instead, the Commission should obtain cost information from an independent study and/or
through individualized rate-case proceedings.
Although the PLN Study does not show ICS providers’ costs or profit margins, it does
reveal one important feature of inmate services rates—the wide variety in pricing proves that
some jurisdictions have successfully designed contracts that allow for appropriate security
measures without exorbitant phone rates. When establishing rate caps, the Commission should
carefully study the procedures and practices in states that have managed to implement rate
structures that are closer in line with free-world rates and base benchmark rates on those same
states.
D.

The Commission Should Model ICS Rate Regulation on the System Used to
Implement the Cable Television Consumer Protection and Competition Act
of 1992

The Alternative Wright Petition establishes a legally and factually sound argument in
favor of rate caps. For the reasons already expressed by various supporters of the Petitioners, the
Commission should impose rate caps. The only colorable argument advanced in opposition to
rate caps is that some providers may have costs in excess of the cap, and thus would not be able
to fully recover their expenses. Such hypothetical possibilities should not deter the Commission
from providing protection that ratepayers need.
The Commission should impose rate caps based on an independent survey of ICS
provider costs, covering a representative sample of correctional facilities. These rate caps should
be set conservatively, with greater weight given to jurisdictions that have negotiated ICS prices
14

See NPRM ¶ 25, n.86.
-5-

more in line with free-world rates. Protections for high cost-of-service locations can be provided
through two mechanisms, which are discussed in turn.
First, many ICS providers have noted the impact of facility size on costs. Because ICS
operations at smaller correctional facilities may not be able to achieve economies of scale
available in larger prisons, the Commission should establish a two-tier system of rate caps that
uses a separate category for small facilities. A facility should be assigned to one of the two tiers
based on its average daily population during a twelve-month lookback period. Facilities with
average daily populations of less than fifty inmates should be assigned to a “small facility” tier.
By using fifty inmates as the cutoff, the small facility tier would include nearly 40% of local
jails, which together house less than 5% of the country’s jail population.15 The Commission
could then set rate caps for each tier based on an independent study of ICS costs in facilities of
the appropriate size.
Second, the Commission can provide a safeguard for any provider who contends that it is
unable to cover its reasonable costs under the applicable rate cap. Such a safeguard was utilized
in the Cable Rate Order, and the Commission should use a similar mechanism when regulating
ICS prices. In the Cable Rate Order, the Commission announced that it would impose caps
based on a benchmarking survey that focused on systems with effective competition.16 The
order also provided, as a secondary mechanism, that operators who wished to charge rates above
the benchmark could initiate a rate-making proceeding using standard cost-of-service
principles.17
The two-step approach used in the Cable Rate Order should be used to regulate ICS rates
because it would provide long-overdue consumer rate protection, while minimizing
administrative burdens for the majority of ICS providers and providing a safeguard for providers

15

U.S. Dept. of Justice, Bureau of Justice Statistics, Census of Jail Facilities, 2006, NCJ No.
230188 (Dec. 2011), tbls. 8, 10.
16
Cable Rate Order ¶¶ 206-207, 223, 228.
17
Id. ¶¶ 259, 262
-6-

in unusual circumstances. Such a procedure would ensure just and reasonable rates, while also
complying with section 276’s mandate of reasonable compensation.
1.

Security Costs

ICS providers’ primary justification for charging rates above those found in the free
world is the cost of necessary security measures. ICS providers should be able to include such
costs in their rate base if they can show that the cost is reasonable and is required by the terms of
their contract with a correctional agency, or by applicable law. Whenever security costs are
attributable to multiple facilities or contracts, cost allocations should be performed using
generally accepted regulatory accounting procedures.
2.

Site Commissions

Section 276 requires that payphone providers are fairly compensated for “calls.”18 Yet
for purposes of this provision, the Commission has already concluded that location rents are not
unavoidable costs of a payphone call, and therefore should not be included in a payphone
provider’s rate base.19 In the ICS industry, location rents take the form of “site commissions”
that may fund prison-related programs or simply provide revenue to the contracting
government’s general fund. The Commission has previously announced that such site
commissions are not part of the provider’s cost, but rather should be treated as profit.20
In connection with the current proceeding, the Commission asks whether it should
address site commissions when examining ICS rates.21 If the Commission is to have any impact
on ICS rates, it must address the critical issue of site commissions. The Commission’s pervious
holdings regarding site commissions are correct, and for the economic and regulatory reasons
previously stated, when the Commission sets rates in the future, site commissions should be
excluded from a provider’s rate base. The most frequent response from opponents of ICS rate
18

47 U.S.C. § 276(b)(1)(A).
Third Payphone Order ¶¶ 154-156.
20
Inmate Calling Order ¶ 15.
21
NPRM ¶¶ 37-38.
19

-7-

regulation is that site commissions fund important prison-related programs.22 Such arguments
are unpersuasive for two reasons.
First, there is no universal requirement that site commission revenue be directed to
inmate welfare or other beneficial prison programs. Some jurisdictions treat commissions as
general fund revenue, thus providing no benefit to inmates or prison systems.23 In other
instances, site commissions are simply used as general purpose unrestricted fund that prison
operators can use without any significant oversight. For example, internal correspondence from
the federal Bureau of Prisons (“BOP”) indicates that contracting staff believed that one private
prison operator was using site commission revenue to subsidize an unprofitable inmate
commissary operated by a sub-contractor.24
Second, even to the extent that site commissions are used to fund “worthy” programs, this
is still not an acceptable use of ratepayer funds under standard principles of telecommunications
finance. One of the cardinal rules of regulatory accounting is to avoid cross-subsidization
between classes of customers and categories of service.25 Thus, if revenue from one type of
calling service is generally not supposed to subsidize another class of service, it is especially true
that call revenue should not be used to subsidize activities entirely unrelated to
telecommunications, as is currently the case with site commissions in many jurisdictions.
If ICS providers in certain states cannot operate profitably due to high mandatory site
commissions, then this is a problem that should be addressed by the state.26 If certain states
persist in levying some type of commission on ICS customers, that is their prerogative, however

22

See e.g., NPRM ¶ 37, n.116.
Steven J. Jackson, “Ex-Communication: Competition and collusion in the U.S. Prison
Telephone Industry,” 22 Critical Studies in Media Comm’cn, 263, 277-278, n.5 (2005).
24
See BOP emails attached hereto as Exhibit 2. These emails were produced to the commenter
by BOP in connection with the Freedom of Information Act litigation Raher v. Fed. Bureau of
Prisons, Case No. 09-526 (D. Or.).
25
1 Leonard Saul Goodman, The Process of Ratemaking (1998) at 374.
26
See Inmate Calling Order ¶¶ 39-40.
23

-8-

these states should not be able to use the telecommunications network to collect this revenue
(i.e., by utilizing the network’s billing infrastructure).
E.

Intrastate-Interstate Parity

Although the NPRM addresses interstate ICS, the Commission also asks whether it
should impose an intrastate-interstate parity rule.27 While intrastate rates vary largely by
jurisdiction, some states have successfully mandated rates below the Commission’s tentatively
suggested benchmark rates, and the Commission should not interfere with rates in these low-cost
jurisdictions.
The Commission should, however, ensure that intrastate rates are just and reasonable, and
are consistent with a comprehensive rate system that complies with all applicable provisions of
the Act. This can most easily be accomplished by the Commission prescribing a rate-setting
methodology for state regulators to implement consistent with the overall regime requiring just
and reasonable interstate ICS rates. Such a “cooperative federalism” approach28 would preserve
local control while establishing a uniform regulatory structure and clearly articulated policy
objectives. It would also be consistent with the Commission’s preemptive power to implement
the Act.29
II.

In Addition to Rate Regulation, the Commission is Statutorily Empowered to
Regulate General ICS Practices
The remaining topics addressed in these comments relate to issues other than price. The

Commission asks if it has authority to address non-rate matters such as debit calling and nongeographic numbers. NPRM ¶ 41; 53.

27

NPRM ¶ 34.
See generally Philip J. Weiser, “Federal Common Law, Cooperative Federalism, and the
Enforcement of the Telecom Act” 76 N.Y. Univ. L. Rev. 1692 (2001).
29
See generally AT&T Corp. v. Iowa Utils Bd., 525 U.S. 366 (1999) (upholding the ability of the
Commission to prescribe rules for states to use in implementing provisions of the Act); 47 U.S.C.
§ 276(c).
28

-9-

The Commission is empowered to address these issues under section 201(b), which
requires not only reasonable rates, but also just and reasonable practices and regulations.30
Section 205(a) empowers the commission to prescribe just and reasonable rates and practices.31
The Supreme Court has upheld the Commission’s power to regulate practices related to
the provision of payphone service.32 In upholding the Commission’s regulatory authority, the
Court noted that the Commission’s definition of an “unreasonable practice” for purposes of
section 201(b) is entitled to deference under Chevron U.S.A. v. Natural Resources Defense
Council.33
Given the plain text of section 201(b) and the holding of Global Crossing, it is clear that
the Commission can address non-price matters by regulating practices and encouraging
competition in the ICS market.
A.

Debit or Prepaid Calling

The Wright Petition does an excellent job of explaining the benefits of debit or prepaid
calling. Although there may be some justification for allowing small facilities (i.e., jails with
less than fifty inmates) to opt out of debit calling for purposes of administrative efficiency, larger
correctional facilities typically have inmate trust fund accounting systems in place that can be
adapted to accommodate debit or prepaid calling systems. The Commission should mandate
access to debit or prepaid calling in such facilities, and should promulgate regulations prohibiting
excessive fees in connection with such systems.
B.

The Commission Should Encourage Competition in the ICS Market, Such as
VoIP Services

The Commission asks how it should address the use of non-geographic phone numbers
and VoIP services in the context of ICS.34 Despite the lack of competition in inmate services,
30

47 U.S.C. § 201(b).
47 U.S.C. § 205(a).
32
Global Crossing Telecomm’cns v. Metrophones Telecomm’cns, 550 U.S. 45, 55 (2007).
33
Id. (citing Chevron, 467 U.S. 837, 843-844 (1984).
34
NPRM ¶ 41.
31

- 10 -

recipients of ICS calls do have some market-based options that can apparently result in lower
call rates through the use of non-geographic numbers. Some of these alternative services are the
subject of the currently pending Securus Petition.35
Given the pro-competition mandate of the 1996 Act, the Commission should encourage
competitive alternatives such as those that are subject to attack in the Securus Petition. Although
Securus makes generalized allegations of security concerns, these allegations do not withstand
closer scrutiny, for the reasons stated by various commenters in response to the Securus Petition.
By fostering the growth of wireless service and mandating number portability, the
Commission has established a general regulatory regime that has led to increased decoupling of
telephone numbers from geographic location. Because of these widespread changes, ICS
providers must adapt security measures to accommodate this new fact of life, rather than using
security as a façade to attack services that introduce price competition into the industry.
III.

Conclusion
The systematic imposition of supra-competitive rates on ICS customers is well

documented. ICS providers have had many years (during the Commission’s lengthy delay in
acting on the Wright Petition) to voluntarily reform their practices; while rates have declined in
some jurisdictions, reliable data still shows exorbitant rates due to the lack of effective
competition. Because of these continued high rates, Commission should regulate ICS prices and
practices as proposed herein.
Respectfully submitted,
/s/ Stephen A. Raher
Stephen A. Raher
1120 NW Couch St., 10th Floor
Portland, OR 97209
(503) 727-2163

35

In the Matter of Petition for Declaratory Ruling of Securus Technologies, Inc., WCB Docket
No. 09-144, Petition for Declaratory Ruling [hereinafter “Securus Petition”] (Jul. 24, 2009).
- 11 -

EXHIBIT 1
Resume

STEPHEN A. RAHER
1120 NW Couch Street, 10th Floor, Portland, OR 97209
(503) 727-2163 • stephen.raher@gmail.com

EDUCATION
Lewis & Clark Law School, Portland, OR – Juris Doctor, summa cum laude, 2009
•
•
•

Member, Cornelius Honor Society
American Bankruptcy Institute Outstanding Student Award
Paul H. Casey Business Law Scholarship, 2007-2009; Business Law Roundtable Scholar, 2009

University of Colorado - Graduate School of Public Affairs, Colorado Springs, CO – Master of Public Administration, 2002
Colorado College, Colorado Springs, CO – Bachelor of Arts in Music, 1998

EXPERIENCE
Perkins Coie LLP, Portland, OR

November 2011 - present
Associate Attorney: Advise clients regarding legal issues arising in bankruptcy, insolvency, and commercial litigation.

Judge Elizabeth L. Perris, U.S. Bankruptcy Court for the District of Oregon, Portland, OR

August 2009 - present
Law Clerk: Performed legal research and recommend disposition of pending motions; drafted opinions and court orders.

Sixteenth Amendment Tax Services, Portland, OR

July 2005 - August 2009
Proprietor: Provided tax return preparation, bookkeeping, and forensic accounting services to small businesses, tax exempt
organizations, and individuals. Advised clients on business and investment planning strategies.

Greene & Markley, PC, Portland, OR

January 2008 - May 2009
Law Clerk: Performed legal research with a focus on tax controversies, bankruptcy, and commercial litigation.

Professor Ed Brunet (Lewis & Clark Law School), Portland, OR

October 2007 - February 2008
Research Assistant: Performed legal research for article Summary Judgment is Constitutional, 93 Iowa L. Rev. 1625 (2008).

KRCC-FM, Colorado Springs, CO

December 2004 - February 2006
Associate News Producer: Wrote and produced news stories with strict deadlines and edited submissions from freelance
reporters. Produced twice-weekly public radio news program focused on public affairs and regional news. Produced several
stories for national outlets including National Public Radio and WBUR’s Here and Now.

Colorado Criminal Justice Reform Coalition, Colorado Springs, CO

November 1999 - June 2004
Co-Director/Senior Policy Analyst: Published research on criminal justice policy and state budgeting. Developed and
executed legislative campaigns, including writing model legislation, lobbying for passage of legislation, testifying before state
legislative committees, and monitoring implementation of enacted bills. Planned and coordinated strategic litigation.

PUBLICATIONS & WORKS IN PROGRESS
•
•
•
•

“Phoning Home: Prison Telecommunications in a Deregulatory Age,” chapter in Prison Privatization: The Many Facets of a
Controversial Industry (Praeger Press, 2012).
The Business of Punishing: Impediments to Accountability in the Private Corrections Industry, 13 Richmond J. of Law & the Public
Interest 209 (2010).
“Interpreting Initiatives and Referenda,” chapter in Interpreting Oregon Law (Oregon State Bar, 2009) (co-authored with Steven
J. Johansen).
“Judicial Review of Legislative Procedure: Determining Who Determines the Rules of Proceedings,” presented at the
Midwest Political Science Association Spring Conference (Chicago, 2009).

PUBLIC AND COMMUNITY SERVICE
Treasurer and Board Member, Private Corrections Institute
Board Member, Community Shares of Colorado
Treasurer and Board Member, Community Council for Adolescent Development
Member, Secretary of State’s Advisory Committee on Lobbyist Reporting Requirements
Exhibit 1
Page 1 of 1

January 2004 - present
January 2003 - December 2003
June 2000 - October 2002
Summer 2001

EXHIBIT 2
BOP Emails

From:
Sent:
To:
Cc:
Subject:

Daniel M. Simpson
Tuesday, April 19, 2005 9:15 AM
Mary E Carney
Randy R. Taylor
Re: Fwd: RCDC Commissary Services Intent

I don't have the actual agreement yet, but they way it was explained to us was MidState would "run" the commissary. That
may be a bag and drop system. As for the performance pay for Reeves it is allocated from PMB budget and not part of the
per diem. If MidState was to receive the customary mark up for wholesale goods this may not be a concern, but the
possibility of a private vendor draining the commissary profit for their own profit seems wrong. Of course we will need to
see the actual contract.
I am getting you a copy of Big Springs commissary contract since I also have concerns with it. If the company is supplying
the items decides the unit price and then marks it up another 20% there seems to be a concern there. Under this scenario
the inmates are being paid from the trust fund and not in the per diem rate. They have been supplementing the trust fund
with telephone commission profits and comments made by the contractor indicate that without those funds the commissary
operation would be in the hole. Of course the telephone commission is supposed to come off the board bill. This
commissary was profitable until a sub-sub-contractor was hired to run it. I think under this operation the sub-subcontractor actually staffs the commissary.
Dan Simpson
Privatization Field Administrator
Federal Bureau of Prisons
Correctional Programs Division (PMB)
El Paso, Texas
(915) 534-6311
>>> Mary E Carney 4/19/2005 6:42 AM >>>

(b)(5)

>>> Randy R. Taylor 4/19/2005 7:10 AM >>>
I have a few questions.
The 20% mark up will still go to the trust fund, correct?
I read in the attached .pdf that Midstate will be the sole supplier and pack the goods for delivery off of the inmates order at an
offsite location. Reeves staff will be delivering them. Where does inmate labor come in?
If inmates are used, then they are paid out of trust fund profits, aren't they?
I would have to review the contract to see if Midstate was receiving profit other what they would normally make on the "wholesale"
of their goods.
As I understand the current process the inmates pull/fill the order out of bulk stores and package it for the purchasing inmate.
I am not sure the regulations regarding convict labor apply to trust fund inmates. The sales and work they perform benefits the
population through the trust fund.
Therefor without the agreement between Geo and Midstate it would be hard to tell if any impropriety has taken place.
My thoughts, let me know what you think Mary.

>>> Daniel M. Simpson 4/18/2005 2:55 PM >>>
Mary,

Exhibit 2
Page 1 of 3

SuppBOP06899

Reeves County is proposing to use a sub-contractor to operate the inmate commissary. They also intend to continue to use inmate
labor in order to reduce their subcontractor's operating costs and allow the subcontractor to deduct their profit as a operating
expense.
Is there any legal considerations we need to know about if a subcontractor proposes to derive a profits based upon inmate labor
and inmate funds?

Dan Simpson
Privatization Field Administrator
Federal Bureau of Prisons
Correctional Programs Division (PMB)
El Paso, Texas
(915) 534-6311
>>> Valerie Lavender 4/18/2005 10:50 AM >>>
Randy,
As oulined in the SOW, the contractor is to provide written notice of their intent to tneter into any third party contracts and/or
agreements. Attached is a copy of the contractor s written notice of intent. The contractor has also been advised to provide the
CO with a copy of the contract prior to executing.
In the event I receive a copy of the contract, I will forward to you and Dan.
Let me know if you have any questions. Thanks!!
Valerie
>>> Elena White 4/18/2005 9:08:03 AM >>>
See attached letter.
Elena White
Secure Oversight Monitor
Correctional Programs Division
Privatization Management Branch
432-268-6978 - Big Spring Office
432-268-6885 - Fax
432-213-1269 - BOP Cell
432-447-2926 ext 1021 RCDC Office
eawhite@bop.gov

Exhibit 2
Page 2 of 3

SuppBOP06900

From:
To:
Date:
Subject:

Matthew D. Nace
Taylor, Randy R.
7/25120077:43
7/25/2007 7:43AM
AM
Fwd: ITS Rebates for CAR VI Contracts

Please call me about this (when
{when you have time) so we can discuss.
Thanks Randy!
>»Carey
>>> Carey Cleland 7/19/2007 2:33PM>>>
2:33 PM »>
Randy,
I have discovered an issue that needs to be addressed for our new CAR VI contracts. After reviewing
the Big Spring Invoice it was discovered that the BOP has not been receiving any of the telephone
commissions that Cornel has been receiving as a result of the Inmate telephone system (ITS). This
amount is only $3,000 per month as a result of a $10,000 expense deduction for over 22,000 inmates
exceeding 300 minutes per month on their personal telephone calls. The BOP does not allow inmates to
exceed 300 minutes per month on their phone calls.
On our current contracts we modified them June 2002 (Mod. 13 for Cal. City) restricting inmates to 300
minutes, then in November we modified our contracts again (Mod. 18) taking out the 300 minutes and
replacing it with language that says they shall not exceed the limits established by BOP policy.
The CAR VI SOW, page 49, states ~The contractor shall implement telephone limitations as directed by
the CO". 1
I feel that we need to direct the contractor to follow BOP policy P.S. 5264.07, Telephone
Regulations for Inmates, limiting their phone calls to 15 minutes per call and not to exceed 300 minutes
per calendar month. This will save us $13,000 per month at Big Spring alone. This can be done by
technical direction from the CO.

Exhibit 2
Page 3 of 3

SuppBOP010343