BOB ABERNETHY, anchor: Now a story about a former state legislator who believed the answer to crime was more and more prisons -- until he got locked up himself. Now he's leading a faith-based program for prisoner rehabilitation, and he says it works. Compared to a national recidivism rate of 67 percent, for his ex-cons, he says, it is just eight percent. Lucky Severson reports.

LUCKY SEVERSON: It's been a long haul for Pat Nolan, raised in a family of nine children in a crime-ridden Los Angeles neighborhood.

PAT NOLAN (President, Justice Fellowship, Prison Fellowship Ministries): Crime was an absolute part of our life there to the point that every time you went out, whether to church or school or the store, you were in danger of being robbed or knocked down and beaten.

SEVERSON: Then, after Catholic school and law school, Nolan won a seat in the California Assembly and became the Republican minority leader hell-bent on putting the bad guys in prison.

Mr. NOLAN: We built more new prisons than any state in history. We built more -- I think it was 11 or 12 prisons, not one new university, and I think that's a sad commentary. But at the time I thought that would make us safer.

JACK COWLEY (Former Warden, Oklahoma Department of Corrections): He was a madman. He was Attila the Hun when it comes to lock them up and throw away the key.

SEVERSON: But then the "lock-em-up" assemblyman got locked up himself, caught accepting illegal campaign contributions in an FBI sting. Nolan spent over two years in prison and was shocked at what he experienced there.

Mr. NOLAN: I saw virtually nothing was being done to change the mind or hearts of the inmates. Nothing was being done to prepare them to live healthy productive lives when they got out.

SEVERSON: Suddenly the hard-nosed prison builder had a change of mind and heart himself. He found a new calling -- reforming the system he helped build, a system he now calls human warehousing. He's still in favor of locking up the bad guys but says there are too many people who could be productive citizens languishing behind bars. And he is not alone. Mike Schnobrich is with the Council of Prison Locals and a guard at the U.S. prison in Florence, Colorado.

MIKE SCHNOBRICH (Council of Prison Locals and Guard, United States Penitentiary Administrative Maximum Facility, Florence, Colorado): When I hired on back in '92, we were told that we no longer engaged in any sort of rehabilitation. If an inmate has a drug problem, they can do a little bit of drug treatment, they can get a GED, but not a whole lot more after that. And so it really is, for the most part, almost a warehousing operation. And I think there's not too many people in the system who would disagree.

SEVERSON: Nolan now heads a faith-based program that operates in several states called Justice Fellowship, an arm of Prison Fellowship Ministries. It offers mentoring programs for inmates while they're still in prison and when they get out, so they'll stay out. This year 650,000 Americans will be coming home from prison, most of them unprepared to re-enter society. That worries former wardens like Jack Cowley.

Mr. COWLEY: Because [we] can no longer tolerate a 67 percent recidivism rate in this country. It's not tolerable, and we're not going to put up with it anymore. Quite frankly, it's got to stop.

SEVERSON: He says the broken system is costing American tax payers billions of wasted dollars each year.

Mr. COWLEY: You can't afford, as a taxpayer, a $60 billion ticket for crime in this country any longer. Bridges are falling down, people, and we cannot afford to take this money and put it in something that is no longer working.

SEVERSON: There are two sets of statistics that help explain the impact on our society of U.S. prison policy. Number one: 95 percent of Americans sentenced to prison are going to be coming out, maybe to your neighborhood. Number two: as many as seven out of 10 of those will end up back in prison within three years. There are so few rehabilitation programs very few offenders are prepared to make it on the outside. And it's no wonder that most employers won't hire them.

One exception is Korns Galvanizing in Johnstown, Pennsylvania. At any given time, at least half the workers here are ex-cons like Jack Shipley who spent over 43 years of his life behind bars for burglary and robbery. He's was shocked when he applied at Korns over three years ago.

JACK SHIPLEY (Employee, Korns Galvanizing Company): And then I explained to Mr. Heider who I was and what I was in this town, and he said, "We don't care. We don't care at all." He said, "What we care about is what you can do, you know, if you can work."

BARRY HEIDER (Vice President, Operations, Korns Galvanzing Company): A lot of these fellows just pump me up. They've got smiles on their faces and an attitude to succeed.