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Many federal prison services on a no-bid contract

Ryan Shapiro, CEO of JPay, a company that has a near monopoly on providing things like electronic money transfers to inmates in state prisons, wants to be able to get his business inside federal prisons as well. But he faces a big obstacle.

A guard's tower and concertina wire mark the perimeter of the Federal Prison in Terre Haute, Indiana, April 9, 2001.
Scott Olson | AFP | Getty Images
A guard's tower and concertina wire mark the perimeter of the Federal Prison in Terre Haute, Indiana, April 9, 2001.

An investigation by the Center for Public Integrity (CPI) and CNBC found that Bank of America has controlled all federal prison trust fund accounts in a no-bid contract dating back to 2000. The contract, which has been amended 22 times, was designated by the U.S. Treasury on behalf of the Federal Bureau of Prisons (BOP).

That means Bank of America ultimately controls everything from trust fund accounts to software to phones and emails in every federal prison in the United States.

Documents pertaining to the contract and subsequent amendments were obtained via a Freedom of Information Act request.

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Treasury spokesman Daniel Watson told CNBC the department has longstanding statutory authority to designate financial agents of the U.S. to perform such services.

"Long ago, Congress determined that it was more efficient for Treasury to manage the fiscal operations of the federal government through the private banking system than it was for the federal government to establish its own parallel system," Watson told CNBC.

Watson said the current contract expires on May 31, 2015. The contract has been amended 22 times, each time allocating more money to Bank of America and greater responsibility in terms of the services the bank provides.

Bank of America and the Federal Bureau of Prisons declined to comment for this story.

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In 2011 and 2012, Shapiro appealed to U.S. Rep. Debbie Wasserman Schultz, D-Fla., because he felt his company was being shut out of the process.

"They were frustrated in multiple attempts to get a meeting with the Bureau of Prisons, so we contacted BOP directly to see if they would take a meeting. I believe sometime in late 2012 or early 2013 a meeting did take place," spokesman Sean Bartlett told CNBC.

Bartlett said the congresswoman and her staff were performing some constituent services to try and cut through red tape to get a meeting, as Shapiro felt he was shut out of getting JPay into federal prisons.

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Bank of America also subcontracts to companies like prison software provider Advanced Technology Group (ATG), but ultimately decides how and where the money goes. No other financial institution was able to bid during those 12 years, and none will be able to until at least 2015.

Asked whether other financial institutions and companies will be able to bid for the federal prison contract once it expires, Watson told CNBC that "at that time, Treasury may decide to designate the same or a different financial agent to provide these services."