“We are not slowing it down, there is no conspiracy,” he said.

He said JPay does “want people to convert from a money order customer to a digital customer, absolutely,” but only because electronic payments are more efficient. “We’re not trying to make an extra dollar everywhere we can,” Shapiro said.

Before JPay, Virginia prisons credited money orders to inmates’ accounts in roughly three days, families say. Today, money orders can take more than a month to reach an inmate’s account, Marvin Rodriguez-Barrera, an inmate at Virginia’s high-security Red Onion State Prison, wrote in a letter to prisoners’ rights advocates in February.

Faster to Guatemala

“I am from Central America, and it is cheaper for my family, and easier, to send money to Guatemala than for my family to send me money from this very state!” Rodriguez-Barrera wrote. “The old way of using money orders was cheaper, easier and in many instances faster.”

Those seeking to avoid the fees by sending a money order must print and fill out a JPay-provided form whose instructions are dwarfed by large print barking at them to “Put down your pen! Put away your car keys!” because “There’s a faster way to send money, go to JPay.com and sign up now!”

The aggressive marketing has worked. One former marketing director for the company lists as a key accomplishment on his LinkedIn profile that he “Converted 78 percent” of money order users to online users, boosting the company’s annual revenue by $985,000.

Shapiro said the information in the profile, including the former employee’s title, was inaccurate. He said he didn’t have data on how many money order users convert to electronic payments or how much revenue the company gains when they make the switch.

Inside JPay’s secure, fishbowl-like money order processing room, reams of envelopes sit in postal bins on the shelves. Signs around the room remind the handful of workers employed there which states allow them to deduct a fee and which offer the service for free.

In Pennsylvania, the first state where JPay accepted money orders by mail, executives were surprised to see the number of money orders plunge by two-thirds in the first two months, Chief Financial Officer Mark Silverman explained in a brief interview.

Shapiro said that Missouri used to process 30,000 money orders a month before JPay came in.

“With JPay, we drove that down to only 1,000 people sending money,” he says. “And that’s by choice.”

JPay’s marketing materials urge customers to choose the higher-cost option. During her twice-monthly visits to Bland, an isolated work camp nestled between rolling, green hills, Pat Taylor now sees JPay-branded fliers warning of the misery awaiting anyone who tries to use the “free option.”

On one side, a multi-ethnic lineup of models bury their faces in their hands and complain of what a “nightmare” it was to complete the money order, how it got lost or delayed.

“There’s a better way,” the flier promises on the reverse side, which depicts an attractive young woman seated with her laptop computer. For “Faster, Easier, Next-Day Delivery,” families can choose from a menu of high-fee options.

Tequila, cigars and lobbying

To impress state corrections officials and gain their business, JPay spends heavily on industry conventions attended by agency heads with contracting authority. During a 2012 convention of the American Correctional Association, the company threw what it called an “END OF THE WORLD PARTY” at a Denver wine bar that bills itself as “about you, and your inalienable right to the unbridled enjoyment of food and wine.”

The invitation, printed on a disposable beer coaster, promised “a bash, JPay-style: *fuerte* tequila, hand-rolled cigars, a live mariachi band.” Conventioneers could catch a JPay shuttle leaving from the hotel “ALL NIGHT LONG,” it said.

For years, JPay has sponsored an award for former state corrections directors presented by the Association of State Correctional Administrators, paying for the recipient’s trip and a Wexford crystal bowl inscribed with the honoree’s name.

JPay’s outreach extends to state legislatures as well, even though many of the company’s contracts forbid it from using fee revenue to lobby.  The company has hired registered lobbyists in at least seven states. Shapiro says JPay’s lawyers approved the use of company funds for that purpose.

In Ohio, it tapped Thomas Needles, a former aide to President George H. W. Bush. Needles gives generously to Republican candidates and also lobbies for for-profit universities. In Maryland, JPay hired Bruce Bereano, one of the state's best-paid lobbyists, who was disbarred after a 1994 conviction for overbilling his clients and using the money for campaign donations.

The company also sought to lobby Washington for access to the federal Bureau of Prisons’ 216,000 inmates — what Shapiro has called “the mother ship of all contracts,” which is now held by Bank of America.

It spent $20,000 in 2012 to hire Park Strategies, run by former U.S. Sen. Alfonse D’Amato of New York, in an effort to obtain the contract. That effort was not successful.

More inmates, smaller budgets

JPay was founded in 2002, just as the U.S. prison population neared the apex of a three-decade climb that more than quadrupled the number of inmates in state prisons. Shortly thereafter, as the economy went into recession, state budgets were squeezed and officials looked more aggressively for ways to cut spending on prisons.

Already, private vendors had stepped in with a solution: They would charge prisoners sky-high prices for phone services, snack foods, hygiene products and clothing, then return a large cut back to the prisons — often 40 percent or more.

Shapiro was the first entrepreneur to see how financial services might provide another stream of revenue. For a fee, he offered to deliver cash in ways that saved time and effort for corrections agencies, and often to give them a portion of the proceeds, just as the phone and commissary companies were doing.

“When we started, the states were very much saying to us, ‘There’s no need for procurement here because there’s no one else doing what you do,’ ” Shapiro said in a 2012 interview. Ten years later, he said, all of them were asking companies to submit bids for the work.

That doesn’t mean the door is open to competitors. Most states, including Virginia, now contract with JPay or its main competitor under a master agreement negotiated by Nevada in 2011 on behalf of a multi-state consortium. Participating states can simply sign on to the deal with one or both of the companies without the hassle of separately determining the best company for the job.

JPay is protected from other market forces, as well. When states offer its music players and tablet computers for sale to inmates, they often confiscate radios that people already own, according to inmates in Ohio. This leaves inmates dependent on JPay’s music downloads, which can cost 30 to 50 percent more than the same songs on iTunes, inmates say.

The profit-sharing arrangements are at the core of JPay’s origin story, Shapiro said in 2012. A couple of years out of college, he spent months driving around upstate New York, pitching JPay to “every sheriff, whether they had five inmates or 100 inmates” — without success.

Then someone in Passaic County, New Jersey, suggested that they offer the county 10 percent of their revenue, “so the jail would be less of a tax burden on the community.” The warden signed up on the spot.

Critics including Alex Friedmann, associate director of the Human Rights Defense Center, an inmates’ advocacy group, says the profit-sharing amounts to a legal kickback. “They charge exhorbitant fees then kick back a percentage of their revenue. … The company doesn’t need that for profit,” Friedmann said.

Shapiro says he prefers the term “commission” because “the word kickback has a negative connotation, and it seems like some person is making that money and pocketing it and buying a Chevrolet or something, when in fact it’s going to use for the benefit of inmates — basketball hoops, volleyball, whatever.”

Most states put their share of the cash in an “Inmate Welfare Fund” that is supposed to be used for inmate benefits beyond what is guaranteed to them by law. As incarceration rates climbed, however, the definition of “inmate benefit” drifted, says Justin Jones, who was director of the Oklahoma Department of Corrections until last year.

“The Legislature allowed us to broaden the definition of inmate welfare and it got to the point, almost anything they would fund through appropriations could now be paid for as inmate welfare,” he says. “It ended up where we started using that money if an inmate went out to medical on an emergency and medical was end-of-year short,” he says. “We bought air conditioners, ice machines, X-ray machines.”

Jones was not a fan of the system. If legislatures want to impose longer prison sentences or “if they create new crimes, then the legislature should appropriate dollars for that,” he says. “I should not have to go in and redefine and stretch the definition of inmate welfare accounts.”

Double dipping

Taken together, JPay and other prison vendors create a system in which families are paying to send the money, and inmates are paying again to spend it, says Keith Miller, who is serving 21 ½ years at Bland for a series of drug-related, violent crimes committed in his early 20s. The earliest he may be released is 2021, when his mother will be 87 years old.

“The fact that [my mother] has to pay the fees to send the money and then the fact that [prison agencies] make a certain cut off it seems to me that [the prisons are] double-dipping into the money they’re sending,” he said in an interview at the prison. “It really doesn’t make sense to me that this should be allowed.”

Shapiro is skeptical that JPay’s fees make much of a difference for inmates’ families. He says companies that provide other services to inmates, such as phones and commissary, are the real problem.

“Compared to the commissary or phone revenue, we’re just a drop in the bucket,” he says.

That may be changing.

Last year, the Federal Communications Commission dusted off a 12-year-old petition filed by inmates’ families who argued that prison phone rates were unfairly high, preventing them from maintaining contact with loved ones. The commission capped rates for many calls under its authority to ensure that pay-phone rates are just, fair and reasonable.

Mignon Clyburn, who was acting chairwoman of the FCC when it passed the rate cap and now serves as one of three commissioners, says the action was necessary because people are “making unspeakable sacrifices to stay in touch with their loved ones.”

Vincent Townsend, president of Pay-Tel Communications, a major provider of phones for inmates, said his industry “abused the public.”

‘Ethical, right, moral’

Other prison vendors “better pay attention to what’s ethical, right, moral,” he said. “Because if you don’t then some regulator’s going to step in, and you’re going to have to deal with it.”

There is a crucial difference: The telephone industry is closely regulated by the FCC, which has explicit authority to set rates for pay-phone calls. Financial and consumer protection regulators have less power over pricing.

The Consumer Financial Protection Bureau can sue companies for offering unfair, deceptive or abusive financial services. The bureau declined more than a dozen requests to discuss specific issues related to prison financial services.

The Federal Trade Commission, which has consumer-protection authority and the power to ensure that markets are competitive, declined to comment “on specific companies or conduct.”

Regulators in seven states have levied fines totaling $408,500 against JPay for operating without a license. The actions were not designed to disrupt its business, according to the Conference of State Bank Supervisors, a trade group that represents these regulators in Washington.

“State banking regulators are concerned with ensuring that businesses operating in their states are properly licensed and with enforcing applicable laws (including consumer protection laws),” the group’s spokeswoman said in an emailed statement.

‘Invent a better way’

Shapiro says he understands the challenges faced by poor families of inmates since JPay’s startup days, when he would spend “hours on the phone with a grandmother, talking about her day at Wal-Mart.”

He says he feels trapped by the structure of the industry he has come to dominate. He wishes the fees were lower, that states didn’t force him to charge more and give them a share and that he could “invent a better way” than asking people’s families to help pay for their imprisonment.

Yet Shapiro says he is satisfied to compete within what he admits is a broken system, even if the system may be punishing some innocent family members.

For many families, JPay has become that system. When Jewel Miller, 80, phoned JPay’s call center last month to ask why her payments are delayed, and why she must submit the same form every time she sends a money order to Keith, the operator hung up on her.

In a series of interviews it became clear that Shapiro was unaware of some of the fees related to his business. He said he did not know, for example, that Florida now charges its own fee for money order deposits after JPay processes the payments.

These fees are spelled out in JPay’s contracts with states, which Shapiro signed. Florida’s says it will charge a 50 cent “Money Order by Mail” fee.

As of July, Shapiro was unaware of JPay’s own $1.95 fee to deposit money orders in Indiana, declaring, “If someone sends $100 with a money order to an Indiana inmate, that inmate gets $100. … I am positive.”

Two days later, he called back to say, “We’re working with the states right now to get some of those fees taken off.”

So far, the fees remain in place.

Eleanor Bell contributed to this story.