In February 1966, Steelman was transferred to the Stockton State Hospital. Classified as mentally ill, he was later transferred to the Atascadero State Hospital, where his "remarkable progress" saw him returned to Stockton State Hospital after several months. He was later sentenced to 14 months' imprisonment for his second forgery conviction, to be served at the California Men's Colony (CMC), where he proved to be a model inmate.Where Sadness Breathes: The True Story of Willie Steelman and Douglas Gretzler and the 17 People they Murdered in the Autumn of 1973 p. 9
