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LASD-Run Inmate Welfare Fund: Another Black Hole of Taxpayer Dollars

The most expensive Cheetos in the world are sold in LA County jails. The sheriff’s office eats the profit.

inmates walking down jail hallway
Inmates at Men’s Central Jail (Source: Facebook via LASD)

Nika Soon-Shiong is the Public Safety Commissioner for West Hollywood.

Last year, the LA County Sheriff’s Department (LASD) pocketed $44.9 million off commissary fees, telephone tolls, vocational services, and barbershop visits charged to people in LA County jails. These profits come from low-income residents, including the one in three people held in custody before conviction simply because they cannot afford bail.

The revenue from these charges goes to something called the Inmate Welfare Fund (IWF). California law requires that the IWF is used to benefit the welfare of incarcerated people — not to line the pockets of the largest sheriff’s department in the world. As with so many other areas of the department, what the law requires has scarce resemblance to what is done in practice. 

Since 2006, a series of auditor-general reports reveal questions about whether LASD has been pervasively violating the intended purpose of this fund. Let’s break down how LASD has been overcharging hundreds of thousands of people for years in the name of “inmate welfare” and evaluate 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 highest-grossing category of revenue. Below is an example of the sale price distribution prepared in an inspector-general presentation to the LA County Board of Supervisors. An 8 oz. bag of Flamin’ Hot Cheetos is sold to incarcerated people for $5.33. An 8 oz. bag of Folgers coffee is sold for $14.27.

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

Since 2013, the vendor LASD contracts with for Cheetos and other food items has been a for-profit corporation called the Keefe Group. Keefe Group also makes money by providing hygienic items such as soap, tampons, and toothpaste, which LASD sells at a 50% markup.

chart of items showing the cost to LASD, sale price, total number ordered, and total cost. irish spring soap: LASD cost $0.68, sale price $1.45. roll-on deodorant: $1.88 LASD cost, $4.00 sale price. freshmint toothpaste: $1.02 LASD cost, $2.16 sale price. cocoa butter lotion: $0.66 LASD cost, $1.41 sale price. tampons (10 pack): $1.27 LASD cost, $2.70 sale price
(Source: OIG report on Inmate Welfare Fund)

Among the Keefe Group’s many legal battles is a lawsuit that it filed against the Mississippi Department of Corrections, which wanted to change vendors from what Mississippi officials called “a better-known corporate prostitute.” These court files reveal that, in the company’s words, government “officials know the company charges inmates prices far higher than market rates,” but they allow the practice “because [they get] a portion of commissary profits.”

LASD’s Inmate Welfare Fund Earns $15 Million a Year from Telephone Fees

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

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

Global Tel Link is actively encouraging jails to deny free in-person visits where people can hug their loved ones, marketing instead its video call services that charge up to 70 cents per minute. A few years ago, the company was found to have 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 $15M.” LASD has made at least $15 million a year from telephone charges. As COVID-19 protocols restricted in-person visits to jail, a rise in the usual number of phone calls earned the so-called “Public” Communications Services and the sheriff an extra $5 million dollars.

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

Former FCC commissioner Mignon Clyburn described the correctional phone market industry as “the clearest, most glaring type of market failure [they have] ever seen as a regulator.” In 2021, the FCC passed a fee cap of 21 cents per minute for out-of-state calls. Unfortunately for those incarcerated in county jails, most phone calls are not made to out-of-state numbers. 

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

Governor Newsom vetoed SB555, voicing concern that it would require “service contracts to be negotiated and awarded to the lowest cost provider.” The governor’s statement read: “I cannot support this bill in its current form. I am concerned it will have the unintended consequence of reducing important rehabilitative and educational programming for individuals in custody.”

If we fear that these “inmate welfare” programs will disappear if incarcerated people are charged below- or at-market rates for everyday goods, let’s remember that the IWF represents a tiny fraction of the department’s revenue. The sheriff is charging about $400,000 per deputy in its yearly contracts with 42 cities, and has been found to understate how much revenue the contracts earn as well as overstate the benefits in terms of crime reduction.

When it comes to rehabilitative programs within jails, there is little understanding of what the IWF programs are to begin with — let alone their efficacy. The LASD designates a seven-person Inmate Welfare Fund Commission to identify and approve areas of programmatic expenditure. In 2019, the inspector general reported that even this LASD-appointed commission does not receive enough information from the sheriff to make informed decisions.

How Does the Inmate Welfare Fund Support ‘Important Rehabilitative and Educational Programming’ for Individuals in Custody?

Educational programming was suspended in 2020 during the pandemic, right around the time of Governor Newsom’s veto. The following April, the auditor-controller reported that the LASD-operated IWF lacked key performance indicators to track and evaluate program expenditure.

The next month, the LA County Board of Supervisors (BOS) passed a motion to reduce or eliminate fees paid by incarcerated people, citing New York and San Francisco’s adoption of fee-free telephone communications. The BOS motion called for the development of recommendations to provide no-cost or at-cost goods and services and an itemized statement of IWF expenditures.

At the time of the May 2021 BOS motion, there were already around a dozen such analyses available online indicating that since 2006 LASD has failed to comply with recommendations to improve record keeping or stop inappropriately transferring Inmate Welfare funds to its regular operating budget.

A month prior to the motion, the auditor-general’s process review highlighted that the sheriff “may be supplanting jail maintenance expenditures with IWF revenues that should be funded through the sheriff’s normal budgeting process.” 

In the year since the motion passed, two worrisome reports of the IWF’s programmatic spending have been published. An October 2021 auditor-general report concluded that there are still no key performance indicators or evaluations of IWF programs, making it hard to determine whether those programs are “wanted, needed or effective.”

An April 2022 auditor-general report noted that the largest category of program spending went to something called “special department expenses.” Programs categorized as “membership” jumped from around $500 to $338,076. This membership expenditure is described as funding an “inmates newspaper program.” There is no information available on the newspaper initiative.

The totality of these findings is breathtaking. Neither the public nor the accounting experts repeatedly appointed to investigate what the sheriff is doing with tens of millions of dollars per year have any idea where the money is actually going. 

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

The sheriff cited “staff shortages and other priorities” as reasons for its lackluster commitment to creating performance evaluation processes or delivering detailed IWF expenditure reports.

This is a common pattern. LASD recently decried staff shortages in spite of the fact that it hired or promoted 1,900 new employees under the county’s “hiring freeze.” The sheriff’s 2022-23 allocation from the county exceeds that of Public Health and the Fire Department by over a billion dollars each. LASD expressed that an increase in appropriations from $3.4 to $3.6 billion is evidence of “defunding.” 

As budget season comes around and such claims grow louder, it’s important to remember the sheriff’s world-record-breaking profit margins from 8 oz. bags of Flamin’ Hot Cheetos. We’ve all had a few dollars eaten by a vending machine, but the county is losing $44.9 million each year. And LASD eats the profit.