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Friday, March 30, 2007

Columbia Missourian: Felons Writing Bail

The Columbia Missourian published an article today about felons in the bail bond business. Profiled in the article is Thomas McGee, who was granted a bail bond license while reportedly still on parole for attempted first-degree arson in 2001. According to the Missourian, McGee soaked a hallway with gasoline in a house where three women lay bedridden. Casenet indicates that McGee was sentenced to seven years in prison, but served 120 days shock time and was released from parole three years later. He was granted a bail bond license in 2004. According to research conducted by the Missourian, there are seven other bondsmen with Missouri felony convictions.

Evidently, the DIFP had been investigating McGee’s convictions. I presume that this occurred after former director Dale Finke ordered a review of licenses after the arrest of Lee Jackson in late 2005. The Missourian reports that after a one year investigation, DIFP investigator Robert Volkmer closed McGee’s file earlier this month. “There have not been any consumer complaints against Mr. McGee since his original license was issued,” Volkmer’s report states. “I believe this file should be closed with no further action.” According to DIFP spokesman Emily Kampeter, both Volkmer and the handling of McGee’s file are under investigation by the department. Volkmer was not authorized to close McGee’s file, and the department director, Doug Ommen, strongly disagrees with his findings, she said. “It is not our directive of this administration to allow those individuals to be licensed with this department,” she said. “There were some lapses there.”

Another department lapse was profiled here just a few months ago. After the 15-year Lee Clause took effect in 2005, Donald Christian was licensed under the authority of Jack Allison. Christian had pleaded guilty to possession of a controlled substance and was granted suspended execution of sentence and given five years probation. In 2005, Christian was granted a license. In November, Christian was arrested again on new drug charges. The DIFP said that they did not know how Christian was granted a license in 2005. They filed a complaint with the Administrative Hearing Commission in order to discipline his license.

The article goes on to say that the department has taken action by asking Senator Kevin Engler to sponsor Senate Bill 153 which, in the Department’s opinion, will correct some of the problems. Here are the claims about SB153 from the article, my comments in blue:

▪Eliminate inconsistencies by treating people who have either pleaded guilty or been found guilty the same. Under current law, a person who has pleaded guilty to a felony and received a suspended sentence can still receive a bail bond license. I disagree and have spoken to the Department about this issue. The current statute regarding the licensing of felons says: “Final adjudication or a plea of guilty or nolo contendere within the past fifteen years in a criminal prosecution under any state or federal law for a felony or a crime involving moral turpitude whether or not a sentence is imposed…” (Emphasis added) I asked the department if the current statute gave them the authority to discipline a license holder if the licensee received a suspended sentence. Here is the DIFP’s reply: “The new language did fix the SIS problem, so the department does have the authority to seek discipline; however, the discipline sought is discretionary.” This means that the Department has the discretion to seek discipline or not. And as shown in the article, the department has not consistently applied its authority when seeking discipline on license holders. SB153 will continue to give the department discretion concerning when or if it will discipline felons.

▪Require bail bond agents to report felony convictions to the department. SB153 does NOT require agents to report convictions to the department, it requires they report arrests to the department and does not instruct the department on how to proceed with this information.
▪Make ineligible for a license a person who has been convicted of a felony within the past 15 years. This law is already in place.
▪Allow the Department of Insurance to look at people with convictions older than 15 years on a case-by-case basis. Under current law, a person can be licensed if the felony is more than 15 years old — no questions asked. In the bail bond community this is ironically known as the “Lee Clause,” named for Virgil Lee Jackson, a man who received a license despite multiple felony convictions in the 1980s. Lee is awaiting trial on charges that accuse him of attempting to have a competing bail bond agent murdered in 2005. In my opinion, this has been the problem all along. The bail association and Lee Jackson passed the Lee Clause in 2004, hoping that he would be granted a general bail bond license. Unfortunately for Lee, he had another run-in with the law before he could accomplish his dream. I have consistently testified before the Missouri General Assembly asking them to remove the Lee Clause and be clear and concise that we did not need felons in the business….period. The bail association wants to keep felons, so it continues to draft language that will continue to allow felons in the business and refuses to repeal the Lee Clause.

The article goes on to quote Jack Allison, who according to the article employs two convicted felons and three men awaiting trial for felonies. Allison is the legislative chair of the bail bond association and has testified before the Missouri General Assembly for several years to allow felons to write bail. Allison said he employs felons because the Department of Insurance does not provide employers details about the criminal background checks conducted by state police. Ultimately, though, Allison said he would still hire a person who had committed what he considers a “minor” felony more than 15 years ago. That’s because, he said, people change. The article does not discuss felons who work for Allison with more recent convictions. Donald Christian, who works for Allison, pleaded guilty in 1998 to possession of a controlled substance. He was also charged with a new drug charge last November. Gregory Tetro pleaded guilty in US District Court last Wednesday to a federal drug charge. Both continue to work under Allison’s authority. Allison is quoted in the article regarding felons, “It will take a little to get rid of them, but we’ll continue to try.” My suggestion to Allison and other general agents who contract with felons, just quit hiring them. Allison said he would like to see the term “dangerous” better defined by law. The term “dangerous felon” as used in SB153 is defined by law. Here is the definition: "Dangerous felony means the felonies of arson in the first degree, assault in the first degree, attempted forcible rape if physical injury results, attempted forcible sodomy if physical injury results, forcible rape, forcible sodomy, kidnaping, murder in the second degree, assault of a law enforcement officer in the first degree, domestic assault in the first degree, elder abuse in the first degree, robbery in the first degree, statutory rape in the first degree when the victim is a child less than twelve years of age at the time of the commission of the act giving rise to the offense, statutory sodomy in the first degree when the victim is a child less than twelve years of age at the time of the commission of the act giving rise to the offense, and, abuse of a child pursuant to subdivision (2) of subsection 3 of section 568.060, RSMo, and child kidnapping;” -RSMO 556.061. As I have said before to members of the Missouri General Assembly, examples of crimes not included as dangerous felonies would be manufacturing meth, child pornography, possession or sales of drugs, embezzlement, burlgary, felon in possession of a firearm, and sodomizing a 13 year-old. The bail association passed the Lee Clause and the industry has been paying for it ever since. Even now that there is consistent press coverage about the issue, they continue to want to license felons.

SB153 does not fix the problem. The language was written by and supported by the some of the very people that passed the 2004 legislation and continue to support felons in the bail bond industry. As long as the regulators and legislators listen to the very people who are creating these problems, we will continue to have this kind of press coverage about our industry.

Thursday, March 22, 2007

Idaho Bondsman Killed By Client

Joshua M. Schmidt, a 30 year old bondsman in Idaho, was killed, presumably by a client he had just bonded out of jail. According to this report on KTVB, Anthony Bosworth II was arrested on March 14 on a charge of domestic violence, and held on a total of $30,000 bond. Schmidt bonded him out of jail and Schmidt escorted Bosworth to two banks in an attempt to cash a personal check. Schmidt's body was found the next day and police believe he was killed in his truck by Bosworth and his body was later dumped. Bosworth's ex-wife flagged down a police officer saying Bosworth was at her apartment, covered in blood and waving a gun. She said he disposed of some clothing and left in a vehicle matching the description of Schmidt's truck. Bosworth was later located driving the truck. Bosworth fled on foot and opened fire on police officers. The police returned fire and Bosworth died on the scene.

Our condolences to the family of Joshua Schmidt.

Tuesday, March 20, 2007

Bondsman Found Not Guilty In Shooting

According to this report on KQTV in St. Joseph, MO, bondsman Richard Schenecker was found not guilty by a jury of unlawful use of a weapon. A St. Joseph woman had accused Schenecker of almost shooting her while he chased down a fugitive in 2005. Schenecker's defense was that the fugitive fired the shot, not him.

MO Bondsman Interviewed About Service in Iraq

Missouri licensed bondsman Joshua Geno of Tri-State Bonding in Carthage was recently interviewed by the Joplin Globe regarding his service in Iraq, Guantanamo Bay, and Afghanistan. Geno is a member of the 414th Military Police Company, based in Joplin.

Two Bondsmen Shot in Louisiana

Louisiana media report the shootings of two local bondsmen who were attempting to apprehend a fugitive. According to reports, bondsmen Veronica King and Eddie MacKenzie were attempting to pull a bond on client, Arthur Basaldua. The bondsmen were talking to Basaldua when he pulled a gun on MacKenzie and King and fired at them several times. King was shot once in the thigh, once in the shoulder and a third bullet grazed her forehead. She was taken to a local hospital. Her condition is unknown. MacKenzie was shot once in the lower backside but refused medical treatment. A manhunt is underway conducted by local law enforcement and the FBI. A warrant has been issued for Basaldua’s arrest for two counts of attempted first-degree murder.

Monday, March 19, 2007

4th Postponement in Jackson/Dotson Trials

The Jackson and Dotson trials were scheduled to begin today and next Monday. Last Friday, joint motions were filed in both cases by US Prosecutor Dean Hoag. The motions state that all parties are not ready for trial, new indictments are expected, and the motions ask for another setting 30 days from now.

Previous Coverage below.
Lee Jackson held on federal charges 4/1/2006
Dotson Arrested/New Charges for Jackson 6/2/2006
Dotson/Jackson trial postponed 6/8/2006
Arraignment 6/13/2006
Trial postponed again 10/28/2006
Dotson Freed on Bond 11/15/2006
Jackson Accused of Another Murder Plot 11/22/2006
January Trial Date Postponed 1/22/2007

Tuesday, March 13, 2007

DIFP Issues Statements of Charges Against Bail Corporations

The Department of Insurance (DIFP) has issued statement of charges and show cause orders on why cease and desist orders should not be granted on the following bail bond companies:

1) 1A Bail Agency, LLC, Organizers Shawn Wilhite of Warrensburg, MO and Patricia Wilhite of Clinton, MO, organized July 2003
2) A&G Worldwide Investments, Inc., President-Wayne O. Anderson II of Kansas City, MO, organized May 2000
3) A Stan Moreland Bonding Services, Inc., President-Stan Moreland of Warrensburg, MO, organized October 1997
4) Absolute Surety, Inc., President-David Brackett of Lebanon, MO, organized March 1997
5) MCB Investment Corporation, President-Harold McBee of Chillicothe, MO, organized December 2004

In the statement of charges, the DIFP alleges that the above companies are operating as insurance companies without certificates of authority (RSMO 374.786), that they are operating as insurance companies without complying with the laws governing insurance (RSMO 375.158), and they have failed to obtain certificates saying the insurance laws of this state have been complied with (RSMO 375.161).

Additionally, the DIFP issued show cause orders to each company stating they each have fifteen days to respond to the cease and desist order asking for a public hearing with the Director of Insurance or the cease and desist order will be issued.

The cease and desist orders stated they must cease the three alleged violations described in the statement of charges and pay reasonable costs associated with the investigation of the matter.

Last fall, the DIFP announced it would no longer license bail bond corporations. In the meeting held with affected companies, the DIFP announced that prior administrations had allowed the licensing of corporations, but the current administration had decided it was not permissible under the current bail bond statutes and Missouri Supreme Court Rule.

Monday, March 12, 2007

SB153 Passed Out of Committee

Last Tuesday, the Senate Small Business, Insurance & Industrial Relations Committee passed a committee substitute on SB153. So far, the substitute bill is not available on the Missouri General Assembly's web site. According to the summary, the committee substitute looks to be similar to the substitute language offered by Senator Engler at the committee hearing. You can read the summary of the substitute here. Next, the bill will go to the full Senate for a vote.

Losses Continue For Bail Bond Insurer

Most insurance companies, insuring bail bond agreements, take no liability on the bond. Any losses are presumed to be absorbed by fully collateralized bonds, co-signor agreements, and/or the company writing the bond. Here’s what happens when indemnitors fail to cover the losses. Bancinsurance wrote reinsurance policies for a bail bond agency, which means a bail bond company purchased insurance against loss, and that insurance policy was reinsured by Bancinsurance. According to Bancisurance, the reinsurers were not required to pay losses unless there was a failure of the bail bond agency. As the bonds were to be 100% collateralized, any losses paid by the reinsurers were to be recoverable through liquidation of the collateral and collections from third party indemnitors. In 2004, auditors for the company withdrew their audits for the years 2001 through 2003 and was unable to complete the 2004 audit citing that the auditors could not rely on the representations of management regarding the bail bond program. NASDAQ responded by temporarily de-listing the company. Bancinsurance hired new auditors, amended its filings, and hired a team of lawyers to investigate how it could recoup on its losses.

Last week, Bancinsurance reported 4th quarter losses, reporting that it continues to pay losses on its discontinued bail bond judgment policies. Bancinsurance reported the following information to the Securities and Exchange Commission (SEC) on its 2006 annual report: Beginning in 2001 and continuing into the second quarter of 2004, Bancinsurance participated as a reinsurer in a program covering bail and immigration bonds issued by four insurance carriers and produced by a bail bond agency. The liability of the insurance carriers was reinsured to a group of reinsurers, including Bancinsurance. They assumed 15% of the business from 2001 through 2003 and 5% of the business during the first half of 2004. This program was discontinued in the second quarter of 2004. Based on the design of the program, the bail bond agency was to obtain and maintain collateral and other security and to provide funding for bond losses. The bail bond agency and its principals were responsible for all losses as part of their program administration. The insurance carriers and, in turn, the reinsurers were not required to pay losses unless there was a failure of the bail bond agency. As the bonds were to be 100% collateralized, any losses paid by the reinsurers were to be recoverable through liquidation of the collateral and collections from third party indemnitors. In the second quarter of 2004, the Company came to believe that the discontinued bond program was not being operated as it had been represented to the Company by agents of the insurance carriers who had solicited the Company’s participation in the program, and the Company began disputing certain issues with respect to the program, including but not limited to: 1) inaccurate/incomplete disclosures relating to the program; 2) improper supervision by the insurance carriers of the bail bond agency in administering the program; 3) improper disclosures by the insurance carriers through the bail bond agency and the reinsurance intermediaries during life of the program; and 4) improper premium and claims administration.

The reports furnished by Bancinsurance do not identify the bail bond company, if it is still in business, or why the company was unable to cover its losses. My guess is that the bail bond company was writing irresponsible bail, suffered losses, and the cosignors and collateral were either insufficient or nonexistent.

Wednesday, March 7, 2007

Unsatisfied Judgments-Pending Disciplinary Actions

The bail bond unsatisfied judgment list is compiled by the DIFP and the Missouri Office of State Courts Administrator. The following companies/general agents appear on the current list. The list is distributed to local courts via electronic means.

1) Billy Corn Sr., general agent, Cassville, MO-1 judgment
2) L&C Investment Group, president-Douglas Cheatham of Blue Springs, MO- judgment appealed, case in litigation
3) Sherry Goodin, inactive general agent of Marshall, MO-8 unsatisfied judgments
4) C&M Bonding, president-Cody Ice of Houston, MO-1 judgment

The following agents/companies appear in the section listing pending disciplinary action: A Way Out Investments, Ozell Scott, Kenneth Strange, 1A Bail Agency LLC, A Aarons Bonding, A Stan Moreland Bonding Services Inc, A&G Worldwide Investments Inc, A&J Bail Bonding LLC, Absolute Surety Inc, MCB Investment Corp, and David McKinney

Note: The judgment list does not provide the address of the company or corporate officers. I added the address, corporate presidents, and corporate status using the Missouri Secretary of State business database as well as the DIFP licensing information.

Thursday, March 1, 2007

SB153 Heard in Committee

The Senate Small Business, Insurance and Industrial Relations Committee met last Tuesday and heard testimony on SB153. There were bondsmen in attendance speaking for and against the bill. Speaking in favor of the bill were the bail association leadership and its lobbyist. Speaking against the bill were several individual bail bond agents and general agents. A substitute bill was offered to the committee by Senator Engler. The substitute has not been adopted by the committee. The committee could choose to adopt the sub, the original bill, adopt its own substitute, or simply do nothing. Below is a synopsis of the substitute offered by Senator Engler.

1) The bill raises the CD required to become a general agent from $10,000 to $20,000 and then the DIFP can require the CD be increased to $40,000 based upon
regulation. Whether a company has 1 agent or 51, it will be required to assign $20,000 to the State of Missouri.
2) The DIFP must notify the general agent of a notice of forfeiture within 48 hours of receiving notice from the courts. In my opinion, the language is vague and does not specify if this notice is a bond forfeiture hearing or an unsatisified judgment.
3) The Department shall include a photograph on the bail bond license. The bill does not say how this picture will be obtained or what the additional licensing cost might be.
4) An agent cannot write bonds without noticing the department of the name, address and telephone number for each employer he/she works or operates as an independent contractor. I don’t know why the department would need to know an agent's employment information unless it is related to his/her bail bond license. The licensing application/renewal form requires that a bail bond agent disclose the general agent’s name, address and license number in addition to the general agent's original signature. The law already requires a signed affidavit stating the agent does not work for a political subdivision of the State of Missouri. Why would the DIFP need to know if a bail bond agent sells Avon, works at a grocery store, or has contracted to roof the neighbor’s house?
5) If a bail bond agent goes to work for a new company he/she must file an affidavit with the DIFP and the new general agent, swearing “that to the best of their knowledge, there are no outstanding premiums owed at the time of the appointment.” First of all, notice the words "must" and "their." In order to go to work for a new company, you MUST file an affidavit saying there are no outstanding premiums owed. I think there is very little possibilty an agent could swear under oath that no one owes money to the agent and/or the company. And who are they? The writers of this bill use the possessive plural pronoun "their" to indicate that more than one person owes this money. Secondly, the section does not tell to whom the money might be owed. Premium owed the agent? The former company? The new company? All of the above? Additionally, the section does not differentiate between uncollected or uncollectible premium in the form of credit extended to clients and collected premium not turned into the company. The next sentence of this section states that IF premiums are owed (it doesn’t specify to whom the money is owed) and the agent does not satisfy this obligation, the former general agent may file notice, under oath, with supporting documentation, stating that the bail bond agent has failed to satisfy his/her obligation. Then upon receipt of this notification, the new general agent MAY cancel the authority of his/her new agent. IF the new general agent cancels the authority of the new agent, the cancellation SHALL remain in effect until all of the alleged premiums due the former general agent are paid in full. That is a lot of confusing language.
Misappropriation of premium is already against the law. There are already remedies for a company who alleges an agent misappropriated funds. A company can file a complaint with the DIFP, file a complaint with the local prosecutor, or sue the agent for the amount due.
6) Gives the Director of the DIFP the power to suspend, revoke, refuse to issue, refuse to new, censure, or limit a license. The DIFP will have the power to investigate wrong-doing, will be the hearing body for complaints arising from its own investigations, and then will have the power to revoke licenses based upon its own discretion. Presently, the Director must file a complaint with the Administrative Hearing Commission to discipline a license holder. If, after a hearing, the Commission finds cause, the Director may discipline the licensee.
7) Keeps the 15 year felony clause, but adds that a license MAY be refused, revoked, etc. if an applicant has been convicted of: any dangerous felony defined by section 556.061, RSMo, any felony crime of assault, any felony crime that results in the serious physical injury or death of another person, any felony crime against the administration of justice, or any felony of which deceit or fraud is an element of the offense. Examples of felonies not included in this language would be manufacturing of meth, possession of child pornography, and distribution of drugs.

The committee meets on Tuesdays. They may (or may not) vote this substitute or another form of the bill out of committee and to the floor of the Senate.
Check here to track the progress of this bill.

I know there are some who think I am being nit-picky about the language in this bill. Please remember the frustration and confusion caused by some poorly constructed language in the past. Here is a sample of some of the bail legislation passed in 2004. Try to explain these passages to a new agent in the field.
374.702(4) A person licensed as an active bail bond agent shall hold the license for at least two years prior to owning or being an officer of a licensed general bail bond agent. (Please, someone tell me how you can own a general agent!)
The DIFP can cause a complaint against any license holder believed to be "acting in the capacity of an attorney at a trial or hearing of a person for whom the attorney is acting as surety." [RSMO 375.755(11)] Go ahead, try to figure out why a bail agent can't practice law without a license at a trial or hearing for a person whose bond was written by an attorney.