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MCI WorldCom and the state are raking in windfall profits from the captive customers in Missouri's prisons


Unlike the claims of savings aired on those 1-800-COLLECT television commercials, Janet Logan hasn't saved a buck or two. Instead, she's stuck. Every time she accepts a collect call from her husband, Marvin, she has no choice as to which phone company she uses or the rate charged. It costs her more than $3 — even if she talks for less than a minute.

On Christmas Day, for instance, Logan conversed with Marvin for nearly two hours. The collect call from Jefferson City cost $49.80. Her total MCI charges for the same month added up to $724.24.

Logan is one of thousands of Missourians who since 1995 have been forced to pay exorbitant rates to speak to family members incarcerated in state prisons. As a result of the five-year contract signed in 1995 between Missouri and MCI WorldCom, the two parties are projected to split nearly $82 million in revenues by next year, at the expense of some of the poorest families in the state. Under the provisions of its exclusive contract, MCI, the long-distance carrier, forks over more than half of its jailhouse tolls to the state of Missouri.

Late on a Saturday afternoon, sitting on the front steps of Immanuel Lutheran Church on the North Side, Logan contemplates the price she pays for staying in contact with her husband. She has to raise her voice to be heard over the drone of the diesel engine as her fellow riders file off a bus. They've just returned from a visit to the Algoa Correctional Center. All of the passengers are women. The 250-mile round trip takes 11 hours and costs her $25. The church offers regular transportation to Missouri prisons, including a charter to Algoa twice a month. The only other way in which Logan can communicate with her husband is by telephone — and only when he calls collect from one of the 69 pay phones at Algoa.

"How does it affect our family?" asks Logan. "For the last two weeks of the month, we don't call."

Logan is concerned that if she challenges the telephone companies or the Missouri Department of Corrections (DOC), there may be repercussions for her husband. "We have no control. We have no power," she says. "If you fight the system, stand up and say something, then the prisoners are the ones who get hurt.

"The Missouri Department of Corrections and MCI make a good team," says Logan, who works at Kmart. "Both of them are getting their backs scratched for providing the service. Nobody sees what goes on behind the door of people in prison."

In this case, however, the real cost extends beyond the prison walls to the families of inmates. Each time a prisoner dials up from one of Missouri's 19 correctional facilities, the party on the other end of the line must pay a $3 surcharge, if he or she chooses to accept the charges. The receiver of the collect call then pays a rate of up to 30 cents a minute.

For allowing MCI to lock up this market, the state takes a 55 percent commission on gross revenues generated by inmates using the 1,100 pay phones in state prisons. Last year, that percentage dumped an estimated $10.4 million into the state's coffers, according to the Missouri Office of Administration. In addition, the five-year contract stipulates that MCI give the state a $2 million bonus for renewing the agreement in each of its first two years and $1 million annually thereafter. By the time the five-year contract expires next summer, the state will have hauled in $45 million in commissions (from the $82 million in gross revenues), plus $7 million in bonus payments.

The projected revenue from the contract, which ends in mid-June next year, is based on the steady growth of Missouri's prison population, proving at least that crime does pay for Missouri and MCI. Moreover, unlike many other states, Missouri doesn't use this bounty to pay for prison programs but funnels those dollars to its general-revenue fund.

Since the 1996 deregulation of the pay-phone industry, MCI is no longer required to submit rate changes to the Missouri Public Service Commission. This lack of oversight appears to have also benefited the state. From fiscal year 1995 to fiscal year 1996, Missouri's prison-pay-phone commissions jumped from less than $1 million to more than $7.5 million. MCI records filed with the Office of Administration show that the state received a 25 percent commission in 1994. The state now receives more than double that amount.

The Missouri Office of Administration, which negotiated the pact with MCI, followed the lead of other states when it cut the deal to increase the commissions. "It was kind of a nationwide movement," says Richard A. Hanson, commissioner of the state agency. "It was money that otherwise went to the phone company." MCI may not be so likely to sign a similar contract the next time, says Hanson. "Our indications from looking at other states is that those kinds of commissions aren't being bid anymore. The phone companies probably decided they weren't making the money that they thought they would on those contracts."

As rates and revenues have increased, so has criticism. In 1997, the state of Florida found that MCI had overcharged for collect calls placed from prisons. The discovery prompted the Sunshine State to order the company to refund more than $277,000 to customers. In April, a dozen prisoners filed a federal class-action suit in Chicago against MCI and other telephone companies that provide prison-pay-phone service in Illinois. A similar case filed in Kentucky last fall is pending. Included among the defendants in that suit are MCI and the Missouri DOC. The Illinois and Kentucky suits both allege that prisoners' families are being unfairly overcharged for telephone service.

Under mounting attacks from prison reformers and state legislators, Missouri officials earlier this year negotiated a revised deal with MCI, choosing to cap the state's commissions at $790,625 a month in return for the long-distance carrier's reducing its prison-pay-phone rates to 30 cents a minute.

Despite this ameliorating step, the families of Missouri prisoners are still paying many times more than average consumers are charged to make direct calls to comparable destinations. It is a predicament they share with others around the country. With the growth of prison populations nationwide, the prison-pay-phone business has become a billion-dollar enterprise, spurring telephone companies to strike deals not only with state penitentiaries but with municipal and county jails, too.

MCI says its inflated rates are justified because of the added expense of providing telephone service to prisons, including security systems that monitor and record calls to ensure that inmates are not conspiring to commit telephone fraud or other crimes. "Rates are based on the cost of providing the service to the state," says Greg Blankenship, a spokesman for MCI in McLean, Va. "I might also point out that the rates charged for inmate calls are competitive with operator-assisted collect calls paid by consumers at the corner pay phone."

But Missouri Sen. Wayne Goode (D-St. Louis County) remains unconvinced by this explanation. In a March 24 letter to DOC director Dora Schriro, Goode expressed appreciation for the department's decision to reduce its prison-pay-phone rates but added a note of concern. "For the most part," Goode wrote, "inmate families are generally not very well off financially. In all cases, they are a "captive audience,' as there is no other choice available for verbal communication. It has long been my view that we should provide telephone service at the lowest possible cost and the state should not be trying to make a profit.... I pay less than 10 cents a minute for both intra and interstate service 24 hours a day, seven days a week and this price is available to any consumer. The state has very competitive contracts for inter and intrastate long distance ... used ... in the normal course of business. I fail to understand why the state cannot through the same competitive bid/negotiation process obtain similar rates for inmate telephone services."

Thanks to the state's Hancock Amendment, which caps the total revenue the state gets, affluent taxpayers may receive refunds from the same general-revenue fund to which impoverished inmates' families are contributing millions of dollars, Goode says.

With the DOC budget topping $500 million in the current fiscal year, the case can be made that Missouri should be making every effort to recoup the high cost of incarcerating its more than 25,000 criminal offenders. Goode, however, rejects that idea: "I don't buy that argument at all," he says. On the rare occasion when an inmate enters the penal system with assets, the state already possesses the authority to charge that individual room and board, says Goode. The prisoner-pay-phone situation is different in that it penalizes the inmate's family. Often, says Goode, the person saddled with the prison-pay-phone bill is the poor mother of an inmate.

Goode, who chairs the Senate Appropriations Committee, says he intends to work on changing the way the state handles its prison-pay-phone contract in the next year. His view on the issue is shared by conservative Missouri Sen. Larry Rohrbach (R-California), who in the last legislative session sponsored a failed bill that would have prohibited the state from profiting from its prison-pay-phone contract. Another ill-fated bill, sponsored by Rep. Charles Quincy Troupe (D-St. Louis), would have allocated the state's share of the profits to prison education programs.

With the Legislature in recess, Jefferson City drowses in the summer. At midmorning, outside the Truman Office Building, state employees linger in the shade, smoking cigarettes. It is a routine work day in Room 580 of the Office of Administration's Division of Purchasing — where details of the state's business relationship with MCI are buried in more than 700 pages of contract materials. Beth Jackson's complaints are part of this massive file.

Jackson lives in Jefferson City, on East Miller Street, in a modest ranch-style home. She recently married Ray Young, an inmate at the Jefferson City Correctional Center (JCCC). Because of her proximity to the prison, she now pays a flat rate of $1.30 each time she accepts a call from her husband. Before his transfer, however, she shared the same financial burden that Logan still endures. In April, Jackson (who filed her complaints as "Beth Jackson" but now goes by her married name of Young) was forced to confront MCI and the state of Missouri's bureaucracies after she was wrongly charged for more than $1,000 in collect calls from JCCC. The phone company rectified its error, but that hasn't lessened Young's sense of mistrust.

"The premise of the DOC is that they want lots of family involvement," says Young. "But the majority of inmates' families can't afford these kinds of phone calls. I've talked to the Office of Administration. I've talked to the DOC. I've talked to MCI. They all say that it's the other one who determines what the rates are. What I've been told was that MCI has to make money off of this. There's no doubt about that. That's what they're in the business to do."

Young finds the state's acceptance of what she calls a "kickback" more questionable, however.

Aside from the financial difficulties it creates, she says the high cost of prison telephone service works against rehabilitation and contributes to the high rate of recidivism. At the same time, ignorance and public apathy inhibit the possibility of change, she says. The penal system is "its own little world," says Young. "It's very difficult to penetrate into that. Even if you do, who are you going to tell? Who gives a damn? It's just like if you have cancer. The reality is, unless you have somebody in prison, you don't want to know about it."

By contrast, MCI and the state of Missouri know a great deal about their captive market and have shared this knowledge with each other since the telephone company began providing service for the DOC in 1989. It has been a mutually rewarding arrangement.

When the current contract came up for renewal in 1995, a MCI manager in St. Louis sent a letter to the Division of Purchasing in Jefferson City, emphasizing the financial incentive for the state's approval of MCI's offer. "To ensure our continued business relationship," wrote Steve Viefhaus, "MCI is ready to pay the Missouri Department of Corrections the highest commissions it has ever offered to any other state corrections department."

To further support its pitch, MCI submitted summaries from each Missouri correctional facility. The data included the number of collect calls placed, the total minutes logged and the revenue accrued. At Algoa, for example, prisoners made 15,807 collect calls to parties in other parts of Missouri in May 1994. The log indicates that during the one-month period, Algoa inmates collectively spent 265,688 minutes talking on the phone, translating into $88,536.26 in revenue.

The subsequent deregulation of the industry by the Telecommunications Act of 1995, along with the increasing prison population, made the prison-pay-phone business all the more lucrative. The DOC predicts the prison population will soon grow to more than 27,000, with two new correctional facilities scheduled to open in the near future. Meanwhile, MCI estimates that every inmate in the state's prisons already places more than $60 worth of collect calls each month.

This means that even with its self-imposed cap, the state is still eligible for more than $10 million in commissions over the course of the next year, because its touted rate reduction is offset by the $1 million bonus it receives for renewing the contract with MCI.

For the last two years, the Missouri Legislature has passed bills that would have aided the church-sponsored transportation service. Last year, state lawmakers allocated $150,000, this year $100,000. In each instance, Gov. Mel Carnahan has used his line-item-veto power to delete the funding from the DOC's budget. Attempts to reach the governor's office were unsuccessful.

State Sen. Walt Mueller (R-St. Louis County), who sponsored the bills and serves on the Senate corrections committee, doesn't understand how the state can continue to rake in millions of dollars through its prison-pay-phone contract and not earmark any of the money for prison programs. "I believe that if there was some use of this money that was going back into the prison system, some kind of benefit that was coming out of it, then I could see where it might have some reason for being," he says. "But by itself, I don't think the state is in any kind of position to make any money on anything. It's there to provide services, not make a profit."

The objective, says Mueller, should be to reduce the number of prisoners, not make money off them. "Our biggest problem is the number of beds we have to have. It costs $17,000-$22,000 a year for every prisoner. In my opinion, the best life they can have is with the encouragement of their family. If that connection is lost (while) in prison, when they come out they have no place to go. So if we can develop this communication with prisoners and their families, I feel there will be an automatic reduction in recidivism."

The Rev. Ted Schroeder, pastor of Immanuel Lutheran Church, has worked for years with prisoners' families and provides transportation so they can visit the inmates. "I believe that the state's receipt of any significant amount of money from telephone revenue is just plain immoral," he says. "I'm ashamed that my state has been doing this. The money we do get should only go to rehabilitate the inmate."

At her Norfolk Avenue residence, Janet Logan interrupts a discussion of her telephone woes to answer a call from her husband. The living room of the shotgun flat is crowded with a bumper-pool table. Logan's mother squeezes through in a wheelchair, followed by an old dog. One of Logan's four adolescent sons from a previous marriage wanders into the nearby kitchen. Outside, the morning sun has risen over Adams School and is slanting onto the porch, where Marvin's two rubber trees grow next to a front door augmented with bars.

Before hanging up, Logan asks her husband whether he wants to talk to a reporter. "He don't want to talk to you," she says later. "He knows we're being recorded. He's afraid if he says anything, he'll be punished."

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