CRESCENT CITY, Calif. -- The Mexican Mafia is laundering street gang money through gang members incarcerated at Pelican Bay State Prison, prompting a crackdown on 16 inmates' prison bank accounts, prison officials said.

Prison spokesman Lt. Steve Perez said authorities have frozen the accounts because they believe they contain funds from drug sales, prostitution, extortion and other gang activities on the streets.

The gang is taking advantage of a system in which inmates can accept checks and money orders of any amount without saying where it originated, and can spend it with no investigation of where the money goes. The prison simply acts as a bank.

Inmates are supposed to use the money to pay expenses like attorney bills, mortgages, to buy items from the prison commissary or to support family members. One gang member told authorities he spent upward of $60,000 one year on his children's college education.

The problem 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 told The Los Angeles Times. "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."'

Court documents contend that was the case with Frank Madriaga, a gang member and former Pelican Bay inmate who allegedly intimidated drug dealers into paying street taxes to the gang in National City. Prosecutors collected copies of money orders from payments Madriaga persuaded friends to send to Pelican Bay inmates.

An associate said he asked Madriaga why he was dividing drug receipts into two piles; Madriaga allegedly replied that he was going to send one pile to his "brothers in the bay."

Madriaga was convicted of extortion and narcotics trafficking.

While the practice may occur at other prisons, most of the gang's leaders are incarcerated at Pelican Bay. The California Department of Corrections (CDC) has sent its information to the FBI.

"It's embarrassing if the CDC is an ATM for the drug trade," said state Sen. Gloria Romero, a Democrat from Los Angeles who chairs a corrections oversight committee. "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 Charles Carbone, a San Francisco attorney who has defended members of the Mexican Mafia and other inmates in lawsuits over prison conditions, said the department is exaggerating the problem to justify more restrictions on inmates.

"The department is notorious for inflating and overblowing what are innocuous or non-gang-related communications or associations," Carbone said.