Theorizing financial extraction: The curious case of telephone profits in the Los Angeles county jails

Punishment and predation in legal financial obligations

Punishment scholars have documented the rise of financial takings in the criminal justice field. Sometimes called monetary sanctions or “legal financial obligations,” these takings include “fees, fines, restitution orders, and other financial obligations that courts and other criminal justice agencies may impose on persons accused of crimes” (Harris et al., 2011: 235–236). Courthouses now charge defendants extra fees to use public defenders or exercise their right to a jury trial. Between 1991 and 2004, the proportion of inmates who self-reported such legal financial obligations grew from 25 to 66 percent. Harris (2016) has shown both the impact and breadth of these court-imposed fines and fees, and how they happen.

While many defendants assume debt from simply being accused of crimes, additional financial penalties are imposed on those who actually do go to prison. While rates vary, all states charge prisoners some form of a daily fee for being in prison (Brennan Center for Justice, 2019). Some states also charge inmates additional fees for the use of medical care (Shapiro, 2016). Once individuals leave prison they may also become subject to fees for parole and probation services. From the early 1990s until 2014, the number of states that charged persons on probation and parole for their supervision grew from 26 to 44 (CEA, 2015). In total, approximately 10 million Americans owe nearly $50 billion in debt stemming from criminal justice fines and fees, contributing approximately $40 billion in payments each year (Bach, 2015; Lind, 2015). Civil asset forfeiture is a particularly devastating practice. It is estimated that between 2001 and 2014, $2.1 billion in assets was seized from individuals who were not charged with a crime (Ingraham, 2014).

Telephone contracts in jails have been linked to the financial burden imposed on inmates (Page et al., 2019). Because inmates are a captive market and are likely to seek out connections with kin while incarcerated, contracts to provide telephone services are highly profitable. Over the past decade, in-person visitations with friends and family have been increasingly replaced by telephone and video interfaces. Usually single companies are given control over correctional buildings and are known to charge exorbitant per-minute prices for inmates’ telephone calls. The annual value of this industry is estimated at $1.2 billion, generating commissions of more than $460 million for public and private carceral institutions per year (Bunn, 2015; FCC, 2015).

Evidence and methods

In this article I focus on the use of telephone contracts in the Los Angeles County jails in the mid-1990s, but this evidence is a part of a larger project on institutional overcrowding in the Los Angeles County jails and public hospitals. Evidence is provided by archival documents representing Los Angeles County governance. Documents were focused primarily on debates between County-level decision makers, including the five-member Board of Supervisors (BOS) and its staff offices, top-level accountants, and officials from the Sheriff’s Department (which runs the County jails).

I examined every document available in five sources concerning the administration of the Los Angeles County jails. The bulk of the material for the period prior to 2008 consists of the donated papers of three retired members of the County Board of Supervisors. The Huntington Library holds the papers of Edmund D. Edelman (1953 to 1994, bulk 1974 to 1994) and the papers of Kenneth Hahn (1953 to 1993). The University of Southern California Regional History Collection holds the Yvonne Brathwaite Burke papers (1979 to 1981 and 1994 to 2008). The County’s own online collection was used for the period after 2001. Finally, materials were collected from the California State Archives concerning relevant state legislation.

All of the sources include memos between the supervisors and their advisory staff or department heads, communiques between County officials and State of California officials, research reports used to inform policy, meeting minutes and transcripts, newspaper clippings, press releases, and video recordings of interviews of County officials. The most important set of documents consisted of the memos between supervisors and their advisory staff—each supervisor has aides charged with coordinating policy with each department—which expressed a degree of candidness not found in some of the other types of documents in the holdings. Meeting minutes, transcripts, and video records of the BOS meetings were equally important. In these meetings, supervisors and relevant County officials debated and voted on policy.

There are trade-offs with using these sources. There is the possibility that actors misrepresent themselves in documents meant for public dissemination. Also, three of the four sources are from Democratic BOS members, suggesting that their views may be overrepresented. These concerns are mitigated by the fact that the documents were released years after the retirement of these public officials, thus limiting their potential for political blowback. The donated papers also contain communications from all officials, not just the donors. Most importantly, the communiques reflect what Ermakoff (2015) calls “moments of collective indetermination … . Actors’ search for behavioral cues from peers, their wait-and-see attitude, and their desire to align with a collective stance directly document the emergence of mutual uncertainty.” It is these expressions of ambivalence and absence of a group stance that provide the opportunity for post factum analysis. Third, oral histories suffer from the same issues, as actors may misremember or misrepresent their individual beliefs (Jerolmack and Khan, 2014). As Vaughan (2004) points out, it’s the historical ethnographer that reconstructs a timeline of group thinking in the past, that no single actor has access too.

The puzzle: Expanding jail healthcare with telephone profits

Los Angeles County opened its flagship jail in 1997. The facility – known as “Twin Towers” because of its two side-by-side towers – was a start-of-the-art jail designed with 3,992 maximum-security jail beds. Its intended purpose was to house thousands of serious, violent offenders (including those awaiting trial and those sentenced to the county jail). ¹

The opening of the jail included the installation of 830 Pacific Bell telephones for inmate use. While the 830 phones were a small portion of the jail system’s 4,000 phones the new contract with Pacific Bell provided a $16.75 million bonus and raised the County’s commission rates from 19% to 42%. This proved to be a windfall. As expressed in Figure 1, Telephone revenues in the jail system grew tremendously during the opening; growing from $4 million in fiscal year 1990–1991 to almost $31 million in fiscal year 1998–1999. Rates for telephone included a surcharge of $2.65 every time an inmate made a call, plus first-minute and additional-minute charges that varied based on time of day and distance. For example, a 10-minute phone call made at 2 p.m. to a person located 25 miles away would cost an inmate $4.11. ²

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Figure 1.

Inmate welfare fund telephone revenue, 1991–1999.

Somewhat surprisingly the Sherriff’s Department used the windfall to fund an expansion of mental healthcare and healthcare services in the jail. The money was used to hire 142 additional security personnel, dozens of medical professionals, and a new medical information computer system. Those 142 security personnel were used to provide additional supervision for “suicidal” mentally ill offenders that had been moved into the high-security cells of the Twin Towers jail. In addition, the staffing allowed the Sheriff to open a third jail tower: a 200-bed jail medical facility that had been left empty and unfunded when the jail opened. The medical information system was to be used to keep track of inmates’ health needs and end the miscommunication that had plagued the jail’s health services. Concerning the expansion of healthcare services, the Sheriff at the time said, “It is an issue that must be resolved … . There are no other options, except get it done. We are going to do all we can to expedite a resolution to this problem.” ³

The 1997 healthcare expansion was a major shift for the jail system. Before this point the Sheriff’s Department had all but ignored health care regulators, the Justice Department, and local American Civil Liberties Union (ACLU) attempts to force the Sheriff into expanding health care services. During the 1980s, the Sheriff’s Department was cited by various health authorities and courts no fewer than six times for inhumane treatment of the mentally ill. In each instance, jail authorities found ways to skirt these citations without expanding care. In the archival record, we can easily trace the shifting of stances, from denial of a medical problem in the County jails in the 1980s, to acknowledgement of the problem by 1990, to action on the problem in 1997. In part the availability of new telephone revenue helped produce this change. ⁴

This is a theoretically unexpected policy development. If we are to understand the predation impulse as a characteristic of financial extraction it suggests that such telephone profits would primarily be used to help with ongoing fiscal crisis, while the punishment impulse would suggest that such funds would primarily be used to expand a culture of punishment and neglect. Instead, the County used this precious revenue to, ostensibly, improve conditions of confinement. How are we to account this development?

Austerity and legal demand in the LA county jails

Before the County opened the Twin Towers jail in 1997, the County’s jail system became forever entrapped in an ongoing cycle of austerity and challenges from legal actors concerned about inmate’s conditions of confinement.

On the one hand, in 1992, Los Angeles County faced a fiscal crisis that nearly dismantled what was the largest jail system in North America. Between 1992 and 1997 three jails were closed, thousands of inmates were released early, and—to its greatest embarrassment—the County could not afford to open the very jail we are discussing, the newly constructed Twin Towers jail. The jail – the last the County planned during the 1980s jail boom – had sat empty when construction was completed in 1994 due to a lack of operational funding. ⁵

While many date the rise of austerity conditions in California’s public sector to 1978 (the year that the infamous tax-limiting Proposition 13 was passed), it was not until 1992 that the criminal justice system in Los Angeles County would be subject to budget cuts. In 1992, the Republican-led State of California appropriated $1.5 billion from all of its counties’ yearly property tax revenue. No department was immune to cuts. Supervisor Edward Edelman of the Los Angeles County Board of Supervisors told a newscaster: “We have to make choices … . Hospital, sheriff deputy layoffs, clinic closures … . You’re talking about cutting services … people will have to wait … in the long run, jails cells will close, sheriff stations … . We are releasing people early. This is sending the wrong message to criminals who are convicted.” ⁶

This period ushered in a new milieu of routine austerity for the Sheriff’s Department and would forever take jail expansion off the table. While from 1978 to 1988 the system had exploded from 7,500 inmates to 24,000 inmates (catching correctional building fever along with the rest of the nation), the jail population then flattened out and hovered, depending on the year’s budget, between 14,000 and 24,000 inmates. ⁷

On the other hand, legal advocates have continuously forced the Sheriff’s Department to spend revenue in new ways. While there were other successful legal demands starting in 1988, the most germane to our analysis occurred only months after the opening of Twin Towers. In the Spring of 1997, the Civil Rights Division within the Department of Justice (DOJ) retained a panel of medical experts to tour the jails and interview inmates and medical personnel. The result was a scathing report on medical and mental health care in the jail system. This report was not made available to the public and was meant to start a dialogue between the County and the DOJ. To be clear, the DOJ was only threatening to file a lawsuit and was giving the County another chance to fix its longstanding health care deficits. But in March of 1997 the Los Angeles Times obtained a copy of the report and escalated the situation to a crisis level.

Internal discussion of the newspaper article among County officials was significant. A memo conveyed that Sheriff’s Department officials wanted to hold a private meeting with the BOS to discuss the report. Even Michael Antonovich, the BOS member furthest politically to the right (and generally most hesitant to expand inmate services), acknowledged the urgent need to act on the issue. He passed a motion that stated, “While recent news reports have sensationalized the findings of the U.S. Department of Justice, the Sheriff, the CAO and the Director of Mental Health have been working on a memorandum of understanding between all relevant agencies to address the problem … . Instruct the CAO to identify funding to implement a plant to mitigate the mental health service deficiencies for jail inmates … .” ⁸

Historical formation: Exploiting legal ambiguity in the inmate welfare fund

We can see how these two contexts – austerity and legal demand – coalesced in the historical formation of the decision to use expanded telephone profits for jail healthcare. An incredible administrative problem had to be overcome before telephone contracts could be used to fund the healthcare expansion. The expanded profits had come somewhat as a surprise to County officials all over the state. Originally, in 1987, when telephone profits in jails were quite low, they had been tied by state legislature to what were called inmate welfare funds (IWF). That is, any funds from telephone use in jails were to be deposited into IWF accounts. This was a major problem for officials in 1997 because IWF’s could only be used “solely for the benefit, education, and welfare of the inmates confined within the jail.” This meant that it barred Counties from using the funds for jail operations. In particular, the penal code read: “funds shall not be used to pay for required expenses of confining inmates in a local detention system, such as inmate meals, clothing, housing or medical services (emphasis added).” ⁹

With so much new money in the account, cash strapped jail authorities wanted to figure out a way to use the revenue beyond the narrow scope of traditional IWF expenditures. The tricky part was doing so in such a way that was still technically in the service of inmate welfare. We can see this partly in the minutes of a Board of Supervisors meeting in which the supervisors direct a committee to generate revenue for the jails through the alteration of the rules surrounding the Inmate Welfare Fund. In attempting to innovate on this issue, the committee consulted their legal office and delved into old records dealing with the uses of the IWF. ¹⁰

At first, officials discovered what they thought were the clear 1987 limits on the use of the IWF, but County officials soon discovered ambiguity in the law. In 1993, Senate Bill 904, amended the Penal Code’s IMF wording from “solely” to “primarily” to be used for benefit of inmate welfare. With the backing of the California Peace Officers Association, the bill had been pressed by County sheriff’s concerned about not being able to use excess funds in IWF for jail operations, “To not fully spend these funds in these times of fiscal constrain would be a waste of the very limited resources of counties.” ¹¹ A clarification in new penal code was added:allow funds NOT needed for the welfare of the inmates to be used for the maintenance of county jail facilities. This may include, but is not limited to, the salary and benefits of personnel used in inmate programs such as education, alcohol and drug treatment, welfare, library, accounting, and other programs deemed appropriate by the Sheriff.

It was the wording of this latter point and “other programs deemed appropriate by the Sheriff” that gave the County some possibility that it could use the funds for uses beyond the narrow scope of traditional IMF expenditures. However, County officials also discovered that the pertinent guidelines in the Custody Division Manual (§3–75/020.00) had not been updated since the passage of the 1993 bill. The manuel still prohibited the use of the funds for medical services. As another report stated this constituted clear ambiguity in the law:

There is no written document that provides clear funding guidance regarding what categories of expenditures—“funding mix”—are appropriate for IWF … . The Section 4025 provisions are general in nature … but do little to clarify exactly how a given county might apply it to its particular situation. ¹²

In order to provide itself with a plausible rationale and exploit the ambiguity, the Sheriff's Department changed the contextual meaning of “required expenses of confinement.” Documents illustrate that officials reasoned that they had always fulfilled “required” medical care; that is, that they were always providing what was required by the State of California, and the DOJ response plan in 1997 was actually a voluntary addition to healthcare. This was an administrative innovation, because the meaning of “required services” appears as malleable in our analysis: the new medical plan was in response to a regulator that was threatening to sue the Sherriff’s Department for not providing required health care; later calling those expenditures “voluntary” therefore constitutes an administrative maneuver.

The maneuver was so concerning that the annually convened LA County Grand Jury decided to take up the issue in its 1998 report. The body traditionally served as fact finding commission for the BOS as it had the power to simply make recommendations to which the Sherriff’s department would only have to respond to on paper. Concerning the funded medical information system (JHIS), the report noted:

“[S]ome could argue that JHIS is potentially ‘a stretch’ to include the design, development, testing, and implementation of the JHIS, including labor costs, as an example of ‘jail maintenance.’ It meets a general test of being for the ‘benefit and welfare’ of the inmate population, but could fail the test of offsetting ‘necessary and required expenses of confinement,’ such as medical services.”

Characteristics: Healthcare as punishment or predation?

While the historical origins of the policy find themselves in austerity and legal demand, it is possible that elements of predation exist in the healthcare programs themselves. The administrative response to the DOJ plan was to turn Tower One of the Twin Towers almost entirely into a mental health facility and open the 200-bed third medical tower (which had been left closed in the original Twin Towers plan due to lack of budgeting). ¹⁴

Characterizing this shift as predation or betterment for the conditions of confinement is difficult because medicalized space in jails requires jails to have security. After inmates suffering from mental illness were transferred into Twin Towers, a major issue for DOJ was that there was not enough deputy staffing to supervise sick inmates when they left their cells. In contrast to general population inmates who could be supervised in groups, inmates suffering from mental illnesses were required to each be accompanied by staff whenever they left their cells.

While the DOJ response plan included other healthcare expansions, the part funded by the telephone revenue was used mainly for security personnel to do these tasks, not medical personnel. It funded 44 Sheriff’s deputies, 51 custody assistants, and 30 staff to implement a new computer system for inmate information. This compares with medical staff increases that included 2 physician specialists, 10 staff nurses, 1 phlebotomy tech staff, and 4 custodians. Because custodians were counted as medical service personnel in the budget, medical services staff increased by 17, as compared with 95 security personnel and 30 data systems personnel. Both kinds of personnel were used to help open the 200-bed medical tower that had been left out of the austerity-driven Twin Towers opening (See Figure 2). ¹⁵

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Figure 2.

Sheriff's DOJ Response and Custody Automation Plan: 1997–98 Additional Positions Request and Total Salaries and Employee Benefits (S&EB).

The nature of the computer automation system is also pertinent to our discussion. The funded program was actually a combination of two systems: a security system to keep track of inmate classifications, movements, and time to release and a medical information system to keep track of inmate’s health needs and appointments. Importantly, the security plan was a holdover solution to an earlier policy crisis. Previously, the jail had been sued for keeping inmates beyond their release dates and the new computer information system was cast as a way to correct such errors. The funding for the security information system was folded into the health information system after the DOJ crisis. We can see this as a separate initiative by tracking it through different meetings and planning committees until being treated as if it was never separate from the DOJ mental health effort. The conflation can be found in the following minutes of a Board of Supervisors meeting:

Over the past several months the sheriff, in conjunction with chief information office, CCJCC and the CAO, has developed a three-year custody automation plan. This plan is designed to address custody issues involving health and mental health care delivery, overcrowding, erroneous releases, and a host of the other problems that have plagued custody operations. The proposed plan would incorporate information from local police departments, criminal justice agencies, and trial courts for tracking purposes. ¹⁶

The medical information system itself also had dual meanings. While a part of the system was to improve the “screening of inmates to promptly identify those with health and/or mental health problems,” another part of the new system was a way to track and charge inmates for medical care. If we trace the plan back to its origins, the system gained popularity among the Board of Supervisors because it was framed as a way to charge inmates a $3.00 co-pay. Previously, jail administrators had difficulty tracking who had received health care due to outdated record keeping. ¹⁷

We can see the complexity of the telephone profit funded healthcare expansions; that is, even though telephone profits were ostensibly used to buttress conditions of confinement those expansions themselves reflected ambivalent elements of “predation” and “punishment.” The punishment impulse correctly suggests that these expansions increased carceral power through additions to security staff, jail space, and folding older information control systems into the response plan. The predation impulse is also indicated in that the medical information system also doubled as a way to charge inmates for medical care.

Discussion and conclusion

A theme in recent annual review pieces on monetary sanctions is the immense variation in policies among counties and states (Fernandes et al., 2019; Martin et al., 2018). As the author’s summarize in another report, “The statutes and rules governing legal financial obligations are remarkably complex, are included in a wide variety of state legal codes, and commonly involve a broad and diverse set of stakeholders who benefit from or support their imposition” (Harris et al., 2017: 4).

One strategy has been to try and account for this variation by testing for population level characteristics of counties and states. The strategy has produced mixed results. For instance, Martin et al. (2018) note that in Washington State counties, the percent of population that vote Republican increases the level of assessed fines and fees, but in Pennsylvania, no county-level factors are associated with sanction levels.

Disaggregating the constitutive claim (Pacewicz, 2020) of the financial extraction framework – the link between historical formation and the elements that characterize these practices – can be useful for understanding the sources of local variation. In this case, the use of expanded telephone profits for inmate healthcare occurred in the context of severe austerity and legal demand. The County Sheriff’s Department had entered a new and permanent period of resource limitation in 1992 that was coupled with the DOJ threatening to sue the county for substandard jail healthcare. By unpacking the process of how officials exploiting legal ambiguity in the penal code we saw how these two contexts were transformed into predatory and punishment functions. Traditionally, telephone funds could not be used for any purposes other than narrowly defined inmate welfare, which was not of much use to jail officials in the middle of an austerity crisis. The only way that the jail system could substantially benefit from the increased telephone funds was to change the contextual meaning of its DOJ mental health care response plan.

In the end, we saw how these jail healthcare policies became reflective of punishment and predation impulses. This constitutes the characteristics of financial extraction as distinct from their historical formation. First, the expansion of staffing was primarily for security personnel and allowed the County to open a wing of a jail – 200 beds – that it had previously left empty due to lack of funds. Second, we also saw that resources funded a computer information system that allowed the County to charge inmates fees for medical care and folded in a previously existing security information system – systems that can be characterized respectively as predation and punishment.

If we continue to attempt to explain variation by correlating local systems with population level characteristics that might indicate punitiveness – such as percent of county that votes republican – could risk conflating historical formation with constitutive elements of these practices. Rather, the sources of variation could also be found in local political and bureaucratic fields at the moment of their inception. As Fernandes et al. (2019: 400) note, the origins of policies are “buried deep in state and city statutes” and “the stakeholders that benefited from the assessment and collection of these sanctions ballooned, including those far outside the court system, from the public-school system to health care. These external and internal pressures facilitated the expansion of the monetary sanctions system…” We can see this as a part of punishment studies effort to pay more attention to “localized on-the-ground process” (Hannah-Moffat and Lynch, 2012; Schoenfeld, 2016) to explain variation in the penal landscape.

We can also use this disaggregation to track “where the money goes.” There is much variation in how these funds are divided up and where they are used. For instance, Martin (2018) shows that Nevada splits court fees between courts and the state’s general fund while Mississippi funds a wider variety of funds, including many worthwhile endeavors. These are akin to the constitutive elements we unpacked in this study; that is, the healthcare uses of telephone revenue that also served punishment and predative elements. By disentangling these present-day purposes from their historical roots we can better understand the practices that sustain financial extraction and the constituencies that have come to rely on them.

There is reason to believe that the particular force of legal demand identified in this case may be important in other cases, especially in carceral settings. As evidence of this dynamic in jails, Schlanger (2015) has documented the continued presence of court orders on conditions of confinement – even despite their overall decline after the Prison Rights Litigation Reform act of 1995. This also resonates with findings on the role of progressive litigation on early penal development (Campbell, 2011; Feeley and Rubin, 1998; Lynch, 2011; Reiter, 2016; Schoenfeld, 2010). In order to win over fiscal conservatives who had opposed prison building in the 1970s, penal advocates reframed federal court Eighth Amendment rulings as infringements upon states’ rights and penal expansion as a conservative cause (Campbell and Schoenfeld, 2013). Reiter (2016) demonstrates that the rise of solitary confinement in California prisons was, in part, an unintended consequence of progressive lawsuits against indeterminate sentencing.

Alongside the force of austerity and cultures of punishment, studies of financial extraction should be attentive to legal demands placed on local governments. While Ordower, Sandoval and Warren (2016: 24) argue that with the rise of financial extraction, “the underlying question becomes whether an offender is an offender at all or merely a target wearing a dollar sign,” this study points to administrators’ view that inmates also exist as legal problems and that financial extraction may be an important way of resolving them.

Writing in this journal Garland (2014) described the utility of this kind of “history of the present.” The idea is that in elucidating “a series of troublesome associations and lineages” of the past can “suggest the openness of the future” (Garland, 2014: 372). Problematizing the present in such a way that revels the contingent process that brought it into being, disturbs what we previously thought of as immobile, unified, and consistent.

This suggests something about how we should dismantle systems of financial extraction in criminal justice. In addition to pursuing legal rules against particular instances of financial extraction, we ought to be equally attentive to the forces that brought them into being and those that rely on them. Seeking to tie new progressive taxation that should specifically replace financial extraction revenue could be a route forward. If not, and we simply deprive jurisdictions of particular means of supporting agencies, we risk pushing them into other tricky avenues of profiteering. The rise of profiteering is a major social problem in criminal justice, and we can be attentive to its complex interplay of punishment, predation, and judicialization.