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Bail Bond Businesses Getting Black Eye in Texas, California

It's common knowledge that outside the federal Bureau of Prisons, California and Texas have the largest prison systems in the U.S. So it should come as no surprise that bail bonds are big business in both states. But the bonding industry has recently come under fire for unethical practices in California and elsewhere, and is being scrutinized for influence peddling in Texas.

California Corruption

In Los Angeles County alone, local officials incurred $9.1 million in lost revenue from bail bond forfeitures between 2001 and 2003. Almost $6 million of that debt resulted from one company, Capital Bonding Corp. (CBC). Uncollected bond forfeitures were estimated at $100-$150 million statewide.

CBC, which did business in 38 states, referred to itself as the "Wal-Mart of bail bonds." However, the company conducted its business more like Enron. For example, CBC arranged bail for Carlos Alberto Hernandez, who was convicted of murder in December 2002. Hernandez's bond was $1.5 million and he was about to receive a life sentence. The bail was posted without collateral; Hernandez, who reportedly paid "little or nothing" to get out of jail, fled to Mexico nine days before his sentencing date.

CBC also posted a $500,000 bond for drug dealer Javier Mendoza in November 2001. Mendoza, who faced 20 years, never even showed for his arraignment.

In March 2004, Maria De La Luz Menjivar skipped out on a $100,000 bond posted by CBC after she pleaded guilty to running a sex-slave operation.

It could not be determined whether Mendoza or Menjivar posted collateral for their bonds, because under California law bail bonds can be offered based on credit ratings and collateral is not required. According to a 2004 report by the Los Angeles Times, some bonding companies relax or waive collateral requirements in order to attract customers and thus boost their profit margins. Some firms are also suspected of charging less than the standard 10 percent bond commission in order to drive up business.

"The system is set up for the corporate agents to pocket the highest [payments] possible, while not looking at or caring about the likelihood of the defendant returning to court," complained Karen Gorham, a Riverside County prosecutor.

The situation has gotten so out of hand that smaller bail bond agencies are cooperating with law enforcement agencies investigating possible criminal charges.

"The legitimate bail bonds companies are documenting information about illegal activity, like soliciting inside the jail, and forwarding it to us. We turn it over to the FBI and the state," said Glenda Stroobant, former vice president of the Orange County Bail Agents Association. Such tips have led to indictments and convictions.

Robert Spencer Douglass pleaded guilty in June 2004 to illegally paying jail prisoners to solicit business for his company, Aladdin Bail Bonds. Aladdin was the largest bonding firm in the state. Douglass forfeited his bail bond license, sold his business, was ordered to pay $425,000 in penalties, and was sentenced to three months house arrest and three years probation.

Other charges being investigated against certain bonding companies doing business in California include perjury, conspiracy, obstruction of justice and unlawful business practices.

"It goes to the integrity of the justice system," observed L.A. County district attorney Steve Cooley. "It's beyond the millions of dollars. It's public safety."

Jeff Stanley of San Jose-based Bad Boys Bail Bonds said that the smaller bonding companies are just upset because they're losing money. "They've lost market share. So they're doing anything and everything they can to attack the larger companies," he said.

But on July 9, 2004, charges of perjury and forgery were filed against Bad Boys employee Cindy Marie Abreu. The charges allege that Abreu lied and filed false documents to delay the collection of bond forfeitures; under California law, if a bond forfeiture is not collected within two years the debt is cancelled. Abrue pleaded no contest and was sentenced in February 2005 to a 32-month prison term, which was suspended.

Also, on April 11, 2005, an unlicensed bondsman who worked with Paco's Bail Bonds, Carlos MacPherson, was sentenced to 40 months in prison after pleading no contest to charges of perjury and conspiracy to obstruct justice. MacPherson had helped secure the $1.5 million bond for convicted murderer Carlos Hernandez, who then absconded.

And two former bail bond agents, Jorge Andres Castro and Alejandro de Jesus Cruz, co-owners of Xtreme Bail Bonds, pleaded guilty in February 2007 to felony charges that they referred Orange County jail prisoners to attorney Joseph G. Cavallo. Such referrals are illegal under state law.
Insurance companies affiliated with bonding companies have come under fire, too. Highlands Insurance Co. and Legion Insurance Co. filed for bankruptcy after accumulating $3.1 million in debt from CBC bond forfeitures between 2001 and 2002.

In 2003, Aegis Security Insurance Co., one of CBC's underwriters, was barred from securing any more bail bonds in the state due to rapidly mounting forfeitures. At the time Aegis had paid only $1.5 million of a $5.6 million debt. In August 2004, Aegis and another CBC insurer, Harco National Insurance Co., paid $5.2 million to Los Angeles County to cover unpaid bond forfeitures.

Several months earlier Harco had taken control of CBC, entering the company's Pennsylvania headquarters with private security guards and ousting CBC president Vincent J. Smith.

What's more, it was discovered that CBC had been operating in California since 2001 without a license. Company attorney Brian Sun argued that CBC was merely the "program administrator" for several independent operators and, therefore, did not require a license.

Besides California, CBC has also been investigated in Connecticut, New Jersey, North Carolina and its home state of Pennsylvania. When Harco National Insurance assumed control over CBC's operations in May 2004, the company owed Berks County, Pennsylvania almost $2 million in bond forfeitures. In August 2005 it was reported that a grand jury investigation into CBC had been launched by the Pennsylvania Attorney General's office.

In 2004, Aegis and Harco were forced to pay Connecticut $5 million in forfeited bonds written by CBC, and the state revoked the company's license for three years.

CBC was also barred from writing bonds in New Jersey due to fraud and dishonest business practices; state officials cited the company's "irresponsible, untrustworthy and fraudulent behavior." In November 2004, the company was fined $1.2 million by the state's Banking and Insurance Department. CBC had sent more than 50 checks to the New Jersey Bail Fund that bounced.

CBC isn't the only bail bond company that has experienced financial problems, but its troubled history is reflective of significant shortcomings in the industry. According to an October 13, 2004 article in USA Today, seven insurance companies nationwide have declared bankruptcy over debts related to forfeited bail bonds.

Our nation's criminal justice system, with its fixation on arrests and imprisonment, "has allowed commercial bonding to become a very lucrative business with very little accountability," observed Alan Henry, director emeritus of the Washington, D.C.-based Pretrial Justice Institute. Legislation to reform California's bail bond industry was introduced in 2004 and passed by state lawmakers, but was vetoed by Governor Schwarzenegger.

Texas Politicking

In Texas, Tarrant County Commissioner J.D. Johnson and the county's District Clerk, Tom Wilder, have both received healthy campaign donations from bail bond lobbyists. Johnson, who received $15,700 from 2003 to 2006, serves as chairman of the Tarrant County Bail Bond Board. Wilder, who works with the county's criminal courts, received $10,000 over the same time period.

While the amounts may not be substantial, they are significantly more than the bail bondsmen's contributions to any other local elected official.

"Everything is political in this town, and you have to have some people on your side to make that work," said bonding agent David Gallagher.

What is not immediately clear is why bail bond businesses would need any political influence. As always, the answer boils down to money.

In 1979 a public program called PreTrial Services was created in Texas.
The idea was to provide nonviolent, low-risk prisoners with an opportunity to get out of jail quickly and cheaply until their trial date. PreTrial Services has worked relatively well in every major Texas county except Tarrant County. Harris, Dallas and Travis Counties all have signs posted in jail holding tanks to inform prisoners that they may qualify for quicker, cheaper bonds through the PreTrial Services program.

Tarrant County officials, including Commissioner J.D. Johnson, opposed posting such signs, which resulted in the district attorney seeking an opinion from the state Attorney General's office. In December 2005 the Attorney General held the county could post signs about PreTrial Services in jail areas (Opinion No. GA-0381), and the signs were finally put up.

Still, Tarrant County bondsmen, who see the low-cost PreTrial Services program as a threat to their livelihood, have fought it tooth and nail.

"Our bond business is very high risk, and the pre-trial program is not geared toward those who cannot afford private bonds, but to criminals who have money and the right contacts," said Ronnie Long, who runs one of Tarrant County's largest bail bond firms. "What they are doing is taking away a part of our business that balances off the other high risk bonds we do."

Not surprisingly, District Clerk Wilder agrees. "We should be able to look at the financial picture of the accused. We have a lot of crime, and the marketplace is what keeps [bond agents] going," he stated.

County Criminal Court Judge Daryl Coffey is not necessarily convinced by the bonding industry's arguments. He points to the fact that among the same category of defendants, those who used PreTrial Services paid an average of $20 per bond while those who used bail bondsmen paid between $150 and $200. The additional time that defendants stay in jail when they are unable to afford bond equates to about $50 per day per prisoner to the taxpayer. He also noted that the delay in posting signs about PreTrial Services was "a stall tactic to protect the business of the private bail bond agents."

As of June 2006, just over 2,200 unsentenced misdemeanor and felony defendants were held in the Tarrant County Jail. In comparison to Austin's Travis County Jail, which has more than double the funding for PreTrial Services ($2.6 million as opposed to $1 million), Tarrant County could save about $30,000 per day, or about $11 million per year, if the same percentage of prisoners was released through PreTrial Services as in Austin. The program would save Tarrant County $3.8 million annually if it was applied only to defendants charged with misdemeanors.

Wilder counters that "a pre-trial release costs the taxpayer over $300 on average, where surety bond costs the taxpayer nothing."

Well, not exactly. Figures indicate that in May 2006, $563,580 in bail bonds were forfeited due to defendant no-shows, but bail bondsmen paid only $60,198 of the debt. The rest had to be written off by the county.
From January to May 2006, $3.4 million in forfeitures resulted in only $545,000 being recovered by the county from bonding companies.

"Taxpayers are getting ripped off with this, and much of it is because the bond agents have so much political power in Tarrant County," noted District Judge Sharen Wilson. "The bonding agents are very powerful in terms of political influence."

Another judge, who didn't want his name used, agreed. "When you are running for office here, and you are perceived as someone who either wants bond reduction or more personal recognizance releases, the bond companies come up with money and force against you."

In reality, the no-show rate for prisoners who use PreTrial Services and those who use bail bondsmen is identical. But that's the only similarity. All other factors are skewed in favor of the bondsmen, and they are working feverishly to maintain control.

"There must be a balance," said Arlington defense attorney Don Hase. "Clearly the bail bondsmen are politically powerful here, and politically there is influence to keep pre-trial release [numbers] as low as possible."

Both sides claim to know what the taxpayers want. "No free lawyers and no free bonds. Law-abiding citizens don't want that," opines bail bondsman Ronnie Tong.

Bonding agents have even gone so far as to hire heavyweight lobbyist Gib Lewis, a former Texas Speaker of the House. Efforts to learn what Lewis is being paid to represent the bail bond industry have been unsuccessful.
"Political clout makes all the difference," said Joe J. Johnson, a lawyer and former bondsman who was named to the county's Bail Bond Board. "As Tarrant County gets bigger and more criminal cases [are] filed, the system is changing. And it's not in favor of bond agents."

Currently Tarrant County is second only to Harris County in the number of bail bond companies that have set up shop, even though Harris County is twice as large and at least three other Texas cities are considerably larger.

One bonding agent, who wanted to remain anonymous, related the story of how he negotiated with a mother to get her daughter out of jail for a $160 to $200 fee. The daughter had been arrested on a first time offense for possession of a small amount of marijuana. But before he could get the girl released the mother learned about PreTrial Services, which charged only $30. The mother returned to the bondsman who, after some haggling, dropped his price to $30.

A short time later the same bonding agent had a young relative who also was arrested for a small amount of pot. "I got the kid out on the pre-trial release program," he said. "If they are giving this away to everyone else, I figured we might as well take advantage of it as well." 

Sources: Fort Worth Weekly, Los Angeles Times, Reading Eagle, USA Today, Daily News, LA County District Attorney's office press releases, San Diego Union-Tribune

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