Understanding the Underground Economy in Federal Prison | Chapter 21

How the Underground Economy Operates

People entering federal prison often want to avoid problems and finish their sentence as quickly as possible. The underground economy in federal prison affects daily decisions, even for those who never participate directly. In this chapter, I describe how informal exchanges develop, how currency functions inside prison, and where disciplinary risks exist.

What Should I Know About the Underground Economy in Federal Prison?

Many people enter prison intending to avoid trouble and finish their sentence without incident. Each day, they control how they respond to their surroundings. They do not control how others respond. Understanding how prison operates gives people more information about the environment they live in.

When judges impose a prison sentence, people become wards of the system. Inside the Bureau of Prisons, the government assumes control over daily life. People cannot earn a living wage. The institution provides basic needs such as clothing, bedding, showers, medical care, and three daily meals.

Rules sharply limit personal possessions. Items not issued by the institution, such as extra clothing, sneakers, watches, radios, or sunglasses, may be confiscated as contraband. Staff may also issue disciplinary infractions for unauthorized property.

Many people resist the level of control imposed by institutional rules. They do not want to eat only at scheduled times or rely solely on issued food and clothing. Some attempt to bend rules. If caught, they may face sanctions that include harsher living conditions or additional time.

How the Underground Economy Develops

Some people respond to rigid rules by creating informal systems of exchange. These arrangements involve goods and services traded between prisoners. This underground economy operates alongside official prison systems.

Daily life inside prison follows strict repetition. Bells ring at the same times. Schedules dictate movement, work assignments, and clothing. Regulations determine what people do throughout the day.

People serving long sentences often know exactly what their schedule will look like years later. The repetition does not change. Because institutions offer limited variation, prisoners create alternatives through informal exchanges.

Participation is optional. Understanding how the underground economy functions is not.

Rules Governing Exchanges Between Prisoners

Disciplinary rules prohibit prisoners from giving anything of value to one another. If someone runs out of stamps, another prisoner is not permitted to lend one. A new arrival without hygiene items must wait for staff or commissary access.

In practice, prison does not operate this way. People rely on one another for basic needs. These exchanges may violate disciplinary code 328, which prohibits:

“Giving money or anything of value to, or accepting money or anything of value from another inmate, or any other person without staff authorization.”

The rule applies broadly. Even gifts to family members require staff approval. People should know the rule exists regardless of how often it is enforced.

Administrators seek control for security reasons. Limiting exchanges reduces disputes between prisoners. Despite the rule, informal exchanges remain common and widely understood by staff.

Currency Inside the Underground Economy in Federal Prison

Bartering occurs, but most exchanges rely on currency substitutes. U.S. cash is contraband. Commissary items such as tuna, candy bars, or snacks function as payment.

When transactions exceed roughly $50, some settle balances through outside payments. Family members may send money to third parties. Few people have access to this option, and those who do may charge a premium.

A typical federal prison houses about 1,000 men. Average prison wages are approximately $30 per month. That places about $30,000 into prisoner accounts each pay period.

Many people also receive funds from home. On average, about $100 per month per person enters the institution from outside sources. In a 1,000-person prison, roughly $130,000 flows through prisoner accounts monthly.

In larger institutions, monthly account activity can exceed $500,000. These funds support a steady underground economy.

Indigent Prisoners and Prison Hustles

Indigent prisoners play a central role in the underground economy. Their earnings rarely cover basic needs. Some are capped at earnings of roughly $20 per month.

Despite limited income, they must purchase toiletries, stamps, batteries, medical items, and phone access. Radios, headphones, and batteries are required to hear television audio. Without outside funds, survival becomes difficult.

Many establish hustles to earn commissary items or currency. Common services include laundry, cleaning, ironing, and running errands. Prisoners with money pay others to perform these tasks.

Some hustles support daily needs. Others accumulate capital.

Juan’s Story

Juan comes from a rural village in Central Mexico. He received a five-year sentence for illegal reentry. He does not speak English and lacks a GED, limiting formal prison work opportunities.

Juan performs laundry three days per week at two tuna packs per load. He cleans six rooms at five packs per week each. He irons clothes for one pack per item.

Each week, Juan earns approximately 100 packs of tuna. Commissary sells tuna for $1.05. Juan trades his tuna for other food items at $0.85 value.

He operates an informal store, exchanging three items for every two taken. He later sells commissary items at $0.80 on the dollar through outside payments.

Over 38 months, Juan has saved more than $400 per month. With 15 months remaining, he expects to leave with about $20,000. He plans to purchase a dump truck in Mexico.

Avoiding Commissary and Institutional Friction

Large institutions require waiting in long commissary lines. Crowds gather. Requests for favors are common.

Some pay others to shop for them. A family member may send $125 to another prisoner. That person keeps $25 and purchases $100 in goods.

This arrangement reduces time spent in lines and limits unwanted interactions.

Corky’s Story

Corky avoids commissary entirely. His monthly expenses exceed $800 due to food, water, toiletries, stamps, services, and currency reserves.

Each month, his wife sends money to several indigent prisoners. Each receives $300, purchases $250 in goods for Corky, and keeps the balance.

Corky pays others to cook, clean, do laundry, and perform his assigned job. He uses these arrangements to reduce daily complications.

Buying Influence Inside Prison

Administrators state that prisoners receive equal treatment. In practice, relationships develop between staff and certain prisoners.

Those in key positions may help others secure jobs or housing assignments. Some offer help freely. Others expect compensation.

John’s Story

John knew Leon from county jail. Leon helped explain job assignments and schedules. Maintenance work required full-day labor and limited phone access.

Leon connected John with Trevor, the unit head orderly. John’s mother sent Trevor $50. John moved ahead on the job list.

Instead of working in facilities, John completed unit tasks and controlled the remainder of his day.

Risks and Disciplinary Exposure

Underground economies exist in every prison. Beyond service exchanges, contraband markets also operate. Drugs, alcohol, and theft expose participants to serious sanctions.

These violations can result in criminal charges beyond internal discipline.

Mail, phone calls, and electronic communication are monitored. Discussing transactions creates risk.

Corky described using intermediaries to move funds. Even indirect arrangements may lead to disciplinary action if discovered.

Thank You,

Justin Paperny is an ethics and compliance speaker and founder of White Collar Advice, a national crisis management firm that prepares individuals and companies for government investigations, sentencing, and prison. He is the author of Lessons From Prison, Ethics in Motion, and the upcoming After the Fall. His work has been featured on Dr. Phil, Netflix, CNN, CNBC, Fox News, The Washington Post, and The New York Times.

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