Bills could loosen rules on already troubled bail bonds industry

Bills could loosen rules on already troubled bail bonds industry

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In the roar of a legislative session that has seen fights over constitutional amendments, hog farms and the power of the legislature itself, two lesser-discussed bills may benefit North Carolina’s politically connected for-profit bail industry.

House Bills 131 and 382 both make it easier for bail bond agents and surety companies to avoid paying a bail bond forfeiture when criminal defendants do not appear in court. The money collected from bail bond forfeitures goes to the state’s public schools.

The bills come in the wake of a number of high profile cases of bail agents admitting to massive and complex fraud schemes to get out of paying bail bond forfeitures of more than $1 million. That’s on top of investigations, arrests, convictions, predatory behavior and multi-million dollar lawsuits that so plague the industry that veteran judges and bail agents themselves have called for reform.

Gov. Roy Cooper vetoed both bills this week with the same single-sentence veto message:

“Adding another excuse to set aside a bond forfeiture when a criminal defendant fails to appear in court hurts school funding and reduces incentives to ensure justice is served.”

The veto of House Bill 382 was overridden in the House Wednesday and in the Senate late Thursday.

The bail language was part of the larger omnibus bill that included changes to unrelated laws, making it more difficult to argue for veto of the whole bill. Democratic minority leader Rep. Darren Jackson (D-Wake) asked House members to sustain the veto and work on rolling the non-bail related changes into another bill, promising to work with the Republican majority on getting those things passed. His fellow House members declined.

The veto of House Bill 131 was scheduled for a veto override vote in the House on Wednesday, but was instead referred back to the Committee on Rules, Calendar and Operations of the House.

District Attorneys and lawyers across the state lobbied lawmakers to sustain the vetoes.

In the 2016-2017 fiscal year, funds from bond forfeitures contributed more than $11 million to public schools, according to Leanne Winner, director of Governmental Relations for the North Carolina School Boards Association. The best estimate is that the two new bills, should they become law, could cut that amount in half.

“Both of these bills will reduce revenues that go to the schools,” said Winner. “But we need to make sure that defendants are brought back to be prosecuted. The money really becomes a secondary issue.”

In America, people are presumed innocent until proven guilty in a court of law. And in North Carolina, the law technically leans toward allowing those not deemed a danger to the public or a flight risk to be released without having to post money to assure they will appear to face charges.

But in reality, it’s become common for courts and magistrates to set bail for even minor offenses.

Those with the money to pay their own bail can return to their lives, families and jobs as they await their day in court. Or they can turn to the for-profit bail bond industry, which will allow them to pay a fraction (no more than 15 percent) of the total bail, which is guaranteed by the bond agent or the surety company backing him or her. Facing a $1,000 bail, a defendant could go home by paying as little as $150 to a bondsman.

The system works against indigent defendants who can’t afford a bail bond, critics point out. When bail is set at as little as $500 for relatively minor offenses or those who are not a danger, it can be difficult to get most bail bond agents interested in even fifteen percent of such a small amount. Public defenders across North Carolina report clients trying to get their bail amounts raised so that they can at least get the agent to work with them to get out of jail.

When someone is bailed out of jail but does not appear in court, the bail agent or surety company is on the hook for the bail amount. That forfeiture goes into a fund to support public schools. But lobbyists for the bail industry have had a lot of success in making those forfeitures harder to collect in the last few years.

Influential former state lawmakers linked to the for-profit bond industry now lobby their friends and former colleagues in the legislature on its behalf. Lawmakers were the beneficiaries of more than $300,000 in political contributions from the industry between 2002 and 2016. During that period, the North Carolina Bail Agents Association took credit for helping to pass 60 laws “helping N.C. bondsmen make and save more money and protect their livelihood.”

Critics, some bail agents themselves, say the loosening of forfeiture laws and and regulation on the industry has led to a boom in the business — and more than a few bad apples.

According to the North Carolina Department of Insurance, there were 479 people in the state with at least one type of bail agent license in 1986. Last year, that number was 1,746. That’s an increase of 265 percent in a state whose total population increased only 63 percent over the same period.

Between 2009 and 2016, criminal investigators with the North Carolina Department of Insurance have made more than 1,500 arrests related to insurance and bail bonding fraud alone. There have been more than 750 criminal convictions with more than 250 cases currently pending in court.

While a department spokesperson could not say precisely what percentage of those cases involved bail bonding, he confirmed that many do. Moreover, fraud is often just one element of cases that involve violence, kidnapping, sexual abuse, gun and drug offenses.

Those calling for reform of the industry say now — when the industry’s problems have never been clearer or on wider display in the state — is not the time to reward it with new ways to elude payment when it is due.

Ken A. Soo is an attorney with Tharrington Smith, LLP, a law firm whose education attorneys have more than 170 cumulative years representing K-12 public school districts in the state.

In a memo to state lawmakers this week, Soo argued for sustaining the vetoes and outlined the impact the bills would have on how forfeitures are collected.

Soo wrote:

The purpose of the bond forfeiture system is to ensure the appearance of the bonded defendant in court and facilitate the administration of justice. State v. Coronel, 145 N.C. App. 237, 247, 550 S.E.2d 561, 568 (2001). The amendments to NCGS § 15A-544.5(b) and § 15A-544.8(b) in House Bills 382 and 131 are contrary to that purpose and will significantly increase the likelihood that defendants will not appear in court to face justice. State law creates seven specific grounds upon which sureties may seek relief from their financial obligations on a forfeited bond. These options are carefully balanced to ensure that sureties only receive relief when a defendant’s failure to appear has been remedied in a timely fashion or was impossible due to incarceration in another jurisdiction on the scheduled court date.

House Bills 382 and 131 upend this balance by providing gratuitous relief to sureties with no attendant benefit to the administration of justice. The added language in NCGS § 15A- 544.5(b)(6a) and (b)(7) relieves sureties of their financial obligations solely because a defendant is arrested in another jurisdiction at any time in the 150 days after the failure to appear. This relief does not provide any incentive to sureties that will make defendants’ return to court in the county more likely, nor does it represent an excuse for missing court in the first place. The amendments’ only purpose is to reduce the financial burdens on sureties when they fail to uphold their end of the bail bond contract. The changes fly in the face of well-settled court precedent, see State v. Chandler, 219 N.C. App. 648, 722 S.E.2d 797 (2012), and provide no benefit whatsoever to the State.

Even more significantly, House Bill 131 also amends NCGS § 15A-544.8(b) to provide sureties with broad grounds for a refund on its payment of a forfeited bond for up to three years after the order to pay. The statute had previously provided narrow grounds under which the surety could recover its payment if the surety could show “extraordinary circumstances.” Courts have, appropriately, held that such language sets a high bar. House Bill 131 removes the word “extraordinary” from the statute, erasing decades of case law and leaving relief entirely to the discretion of judges with no guiding standard. See Coronel, 145 N.C. App. at 248, 550 S.E.2d at 569. This will result in wildly disparate results across counties and, because the new standard is so low, drastically reduce the efforts sureties will put into finding missing defendants. These consequences will burden the courts and hinder the administration of justice. In addition, because of the time delays involved in relief under section 544.8 and the much lower standard created by these bills, school boards around the state will be faced with finding funds in their current budgets to refund substantial portions of the forfeitures received in the last three years—potentially hundreds of thousands of dollars—and having to individually sequester future forfeiture payments for the full three years because of the likelihood that the money will have to be returned. While the purpose of the bail bond system is not to enrich school districts, the financial instability and financial planning burdens created by this change are a significant concern.”

Winner, of the School Boards Association, said she has heard from lawmakers that they may prefer to press ahead with the bills as written, overturning the governor’s vetoes. Then, in the next session, they can go in and address the problems she and others are emphasizing as lawmakers hurry to adjourn this week.

“We’ve had a number of legislators tell us they’d like to rectify this next year,” Winner said. “But six months is a long time — a lot can happen. And getting something undone is harder than getting it done.”

About the author

Joe Killian, Investigative Reporter, joined N.C. Policy Watch in August of 2016. His work takes a closer look at government, politics and policy in North Carolina and their impact on the lives of everyday people. Before joining Policy Watch, Joe spent a decade at the News & Record in Greensboro, reporting on everything from cops and courts to higher education. He covered the city councils of High Point and Greensboro and the Guilford County Board of Commissioners before becoming the paper’s full-time government and politics reporter. His work has also appeared in the Winston-Salem Journal, Go Triad, the Bristol Press in Bristol, Conn., and the Cape Cod Times in Hyannis, Mass.
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