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PLN editor quoted in article about banking services for prisoners

Wall Street Journal, Jan. 1, 2014.
PLN editor quoted in article about banking services for prisoners - Wall Street Journal 2014

A Shot at Banking Behind Bars

Can Financial Services for Inmates Reduce Recidivism, or Is It a Recipe for Trouble?

Wall Street Journal

By Joe Palazzolo

Jan. 30, 2014 7:24 p.m. ET

Michael Benanti spent 16 years in prison for conspiring to rob a bank. Now he is a banker of sorts for a captive audience.

Five years ago, Mr. Benanti launched Prisoner Assistant Inc., a company that helps inmates set up bank accounts, start establishing credit and conduct a variety of services that are difficult to perform from behind bars.

Mr. Benanti, 41 years old, believes people who leave prison with a banking relationship are less likely to return. The idea has found some support in research in the U.K., where banks have worked with prisons to open up inmate accounts and there was some indication of a decline in the number of repeat offenders.

"They get out with something to lose," Mr. Benanti said.

Reducing recidivism through improving inmate finances could play a role in paring the U.S. prison population of more than 1.5 million, many of them repeat offenders. About 4 out of 10 adult offenders return to prison within three years of their release, according to a national study by the Pew Center on the States.

But many prison officials have concerns about Mr. Benanti's company and the services it provides. They worry it could become a conduit for funding crimes and smuggling contraband, among other issues.

Ron McAndrew, a former warden of three Florida prisons and now an industry consultant, said corrections authorities "want to have as much control over an inmate's money as possible," because it is their responsibility to make sure restitution, fines or other financial penalties ordered by the courts are paid in full.

It is unclear how many prisoners have bank accounts, either jointly with a spouse or maintained by someone else. Ex-inmates who have used Mr. Benanti's services—he has about 300 clients currently—estimated that more than half of U.S. prisoners are without one.

Many U.S. prisoners rely exclusively on limited-use commissary accounts, which bear no interest for them and have no financial footprint on the outside. Inmate purchases from commissaries in federal prisons totaled about $256 million in fiscal 2013, and money paid to inmates for work was about $59 million, according to the federal Bureau of Prisons.

"It's like having your money in a shoebox," said Karl Nadler, who was released in October after serving a 15-year sentence for grand theft auto, extended by two escapes from county jails.

In his 12th year behind bars, Mr. Nadler saw an advertisement for Prisoner Assistant in the magazine Prison Legal News and hired the firm to help him set up a bank account with money his mother had bequeathed him.

He left prison with three years of banking history and $7,500 in unsecured credit, which he said helped drive down his insurance rates. "Now the biggest thing I care about is keeping my credit score up," said Mr. Nadler, who loads furniture trucks in Fort Lauderdale, Fla.

Prisoner Assistant requires clients to grant power of attorney to the company and charges a monthly fee, starting at $5, to manage an inmate bank account. For $24 a month, Prisoner Assistant will pay bills, pick up mail, make wire transfers and help an inmate get credit cards and lines of credit. The most expensive package costs $50 a month.

Mr. Benanti's company also provides a crash course on financial management and runs an a la carte concierge service, helping inmates set up websites, buy books or send flowers to loved ones.

Research on whether banking relationships help lower recidivism is limited. The U.K. study found that in a sample of 107 inmates who opened bank accounts in 2007, about 34% had reoffended within 12 months of their release from prison—well below the national average of 47%.

Paul A. Jones, a professor at Liverpool John Moores University who conducted the study on behalf of the Co-operative Bank PLC, called the research encouraging but wrote that the "utmost care must be taken when making any claim for the impact of any one factor on reoffending rates."

One former prisoner convinced of the benefits of banking is Brian Witham, 43, of Winslow, Maine.

Mr. Benanti helped Mr. Witham, one of his first customers, set up a bank account at Wells Fargo, which Mr. Witham then used to pay off small credit-card purchases. He slowly worked up his score to a respectable 660 by the time he was released in November, after serving nearly 20 years behind bars for armed robbery.

"It gave me the start I needed," said Mr. Witham, who began taking classes at a community college in Maine in January.

A spokeswoman for Wells Fargo, where most of the prisoner accounts are opened, declined to comment.

Many in the corrections field view Mr. Benanti's services with suspicion. Some corrections departments have rejected bank statements or credit reports sent to prisoners, Mr. Benanti said. Others have refused to notarize forms needed to open the accounts.

Late last year, the federal Bureau of Prisons temporarily cut off communication between Prisoner Assistant employees and clients over security concerns, costing him multiple interested investors, Mr. Benanti said. The Chicago law firm Winston & Strawn LLP has taken on Prisoner Assistant as a pro bono client as it contends with corrections departments and others.

The company received a subpoena in 2011 from Pennsylvania securities regulators, who opened an investigation into Mr. Benanti's business practices at the request of the state probation agency, he said. His company was never accused of wrongdoing. A spokesman for the Pennsylvania Department of Banking and Securities declined to comment.

Mr. Benanti declined to comment on the specific concerns raised by the Bureau of Prisons but said the agency lifted the communication ban after they were addressed by his lawyers.

Chris Burke, a spokesman for the Bureau of Prisons, declined to comment on Prisoner Assistant.

Perhaps the biggest fear of prison officials is that if inmates can manipulate money, they can use it to commit crimes, for instance by paying corrections officers to smuggle drugs into prison, said Mr. McAndrew, the former Florida warden.

Mr. Benanti said he keeps a record of every transaction and every client request to guard against misuse. "You can't do what I do without some security concerns," he said.

Paul Wright, editor of Prison Legal News, which is backed by the prisoner advocacy group Human Rights Defense Center, was skeptical of Prisoner Assistant at first, thinking it might be a scam. But the magazine has come to trust Mr. Benanti's business.

"There's this hostility to the basic notion that prisoners can have any existence outside of the institution or the prison system," Mr. Wright said. "This is helping prisoners when they get out."