Prison Inmates’ Fiscal Dealings Probed

Mexican Mafia members at Pelican Bay State Prison have used their gang associates on the streets of Southern California and elsewhere to funnel money in and out of the prison, officials say, prompting a crackdown on prisoners’ personal financial dealings.

Corrections officials have identified more than a dozen Pelican Bay prisoners who have used their state-issued prison accounts to launder money collected from gang activities and drug sales, prison spokesman Lt. Steve Perez said.

The rules allow inmates to receive checks and money orders of any amount, which they can use to pay attorney bills or mortgages, buy items from the prison canteen, or give to family members or friends. The state essentially acts as a bank, withdrawing money when a prisoner seeks it.

Officials say the rules require them to make sure the checks don’t bounce, but not to investigate the money’s sources. Moreover, the prison does not attempt to determine how prisoners spend the money, instead relying on them to tell officials how they’re using it.

“The fallacy is a guy with $20,000 can tell us, ‘I want to send $10,000 to my mother or sister to buy a car or pay doctor bills or for child care.’ How can we deny that?” Perez said. “All they have to do is put down a reason. They certainly are not going to tell us, ‘ ‘Cause I want to pay my dopers.’ ”

The case of Frank Madriaga illustrates the problem, officials said. According to court documents, he walked out of the prison as a “made” member of the Mexican Mafia.

Back on the streets of National City in San Diego County, authorities allege, he bullied methamphetamine dealers into providing drugs at below street prices, and had those who failed to pay “taxes” threatened or beaten.

Madriaga, in turn, paid tribute to Mexican Mafia members still in the prison near Crescent City, prosecutors charged. He was accused of persuading friends to buy money orders and send them to Pelican Bay to be placed in the accounts of mafia members. Prosecutors showed copies of money orders sent by Madriaga associates to the prison.

“What are you doing?” an associate asked Madriaga after seeing him make separate piles out of collected drug money, according to court records. Madriaga allegedly told him he was going to send money to his “brothers in the bay.”

Madriaga was convicted of extortion and narcotics trafficking related to his activities after he left Pelican Bay. He has denied the accusations and is appealing the conviction.

Officials assume the practice occurs at prisons across the state, but they’re focusing on Pelican Bay because it houses most of the top Mexican Mafia leaders who are behind bars.

Officials have frozen the accounts of 16 inmates at Pelican Bay. Investigators there have turned over information -- including that gleaned from other state prisons such as Corcoran, Lancaster and Salinas Valley -- to the FBI, Perez said. Prison officials hope the FBI can build criminal cases against some of the suspects.

State Sen. Gloria Romero (D-Los Angeles), chairwoman of an oversight committee on corrections, said the California Department of Corrections needed to tighten its rules, though she acknowledged that the problem was a complex one.

“It’s embarrassing if the CDC is an ATM for the drug trade,” she said. “I think you have to question to what extent the CDC needs stronger controls -- maybe limits on the amount of money that comes in.”

But some are skeptical of the prison system’s claims.

A San Francisco attorney who has defended members of the Mexican Mafia and other inmates in lawsuits over conditions at the prison said authorities are exaggerating the problem to justify even more restrictive measures.

“The department is notorious for inflating and overblowing what are innocuous or non-gang-related communications or associations,” said lawyer Charles Carbone, who added that the Mexican Mafia is not as powerful as it used to be.

At issue are the “trust accounts” set up for all 164,000 prisoners in the state. They can be used for purchases from the prison canteens or for authorized items, including clothing, from catalogs. To send more than $50 outside the prison, inmates only have to submit a request and provide a reason.

The money could be paying for children’s college educations, as one Mexican Mafia member told authorities he did with some of the more than $60,000 he got in one year.

It could buy a refrigerator for an inmate’s mother or pay a relative’s medical bill. However, the money also could be buying weapons and drugs, or financing attacks on rivals, Perez said.

“They have a right to send money to anyone on the outside,” he said. “Where we run into a problem -- particularly with the Mexican Mafia -- is that they will distribute money to gang members to be used according to the directions of the head gang members. Our concern is the money has been processed through the state, and the question becomes, for what purpose?”

Perez said most prisoners probably get money for their accounts legally and use it for legitimate purposes. That makes across-the-board restrictions on accounts tricky, he said.

“Not every inmate is abusing this,” he said. “If we want to establish sanctions, how do we do that in a way that it’s only going to affect those who violate the trust system?”

Investigators said Mexican Mafia members have built up large accounts -- more than $20,000 in some cases -- with money from the taxing of drug sales, prostitution and extortion activities of street gangs from Southern California to Nevada and Arizona.

Pelican Bay gang investigator Devan Hawkes said the probe so far has found that some of the money from prisoner accounts has gone to illegal activities such as drug trafficking and extortion. But prison officials declined to cite specific cases, saying the investigation was continuing.

Perez said prison officials acted because of the potential for crimes and acts of violence to be committed in the community as a result of inmates’ influence.

Those whose accounts were frozen at Pelican Bay are among the state’s most hardened criminals. They are housed in the Security Housing Unit, where they are isolated in their cells for all but a few hours of the day and are escorted in chains by two guards at all times.

“These are sophisticated people who are serious about making money,” Perez said.