Ready for Reform | Bail Bond Business Getting Regulatory Scrutiny
HBJ PHOTO/STEVE LASCHEVER
Andrew Marocchini, president of Manchester-based BailCo Bail Bonds, is pushing reform legislation of the bail bond industry.
For years, bail bondsmen like Andrew Marocchini and Mary Anne Casey have been asking for help in cleaning up their industry, which they say has been plagued by unethical and illegal business practices.
They blame lax regulatory oversight and intense competition for widespread unlawful behavior in the industry such as undercutting, which is when bondsmen discount legally prescribed premium rates that allow defendants to get out of jail at a reduced price.
Their pleas for help have fallen on deaf ears, the bondsmen said. Lawmakers have failed to pass legislation that would tighten regulation and oversight over the industry, while the state insurance department, which regulates surety bail bondsmen, largely ignored the problems.
But all that may be changing, with a recent pledge from state Insurance Commissioner Thomas Sullivan to crack down on the industry by forcing bondsmen to play by the rules.
Sullivan’s strong words have already gone beyond empty promises. His office recently announced enforcement actions against surety bail bond agents that resulted in two license revocations, two license suspensions, a one-year probation, and fines totaling $7,500.
During the recent legislative session, Sullivan also supported a bill to strengthen statutes that govern surety bail bond agents. Despite passing several committees, however, the bill failed to make it to the floor of the House or Senate.
“I’ve been disturbed by this since the day I walked into office. I’m very much concerned with the public safety risk,” said Sullivan, who added that discounting bond premiums can allow defendants arrested for serious crimes to get out of jail for a reduced price. “There is no reason why this industry can’t operate within the letter of the law.”
Sullivan, who has been commissioner since 2007, said his office has begun aggressive “overt and covert operations” against agents trying to alter the rules in their favor. Those efforts include doing random audits on bondsmen throughout the state. He’s also issued a bulletin outlining the department’s expectations of agents and what constitutes improper business practices. Although considered a simple step, it is one that past commissioners did not take, industry observers said.
“I’ve never heard of licenses being revoked before,” said Patrick Moynihan, a bondsman who works at Casey Bail Bonds in Hartford. “It shows that there is actually a division out there that is looking into the bail industry. That creates a foundation for everything.”
In Connecticut, there are 516 licensed surety bail bond agents, 136 bail bond agencies, and 19 surety companies.
Surety bail bond agents differ from professional bondsmen because they are retained agents under contract with insurance companies and are authorized to underwrite and execute bonds for a specified amount of money.
Conversely, professional bondsmen are personally liable for the bonds they underwrite and must put up their own personal property or assets as security for the bonds.
Industry observers say there are multiple ills plaguing the industry, but undercutting bond premiums is the most prevalent.
Bond premiums are the amount a customer pays to have someone released from jail. The person signing the bail bond agrees to pay the bail in full if the defendant fails to appear in court.
The law requires that all surety bondsmen charge the same rates, a nonrefundable fee of $50 for bond amounts up to $500; 10 percent of the bond’s face value for bond amounts from $500 to $5,000; and 7 percent of the bond’s face value for bond amounts in excess of $5,000.
Charging a premium lower than those rates is illegal, but Moynihan estimates that as many as 85 percent of bonds written in the state are discounted.
Marocchini, who is president of Manchester-based BailCo Bail Bonds, said an overcrowding within the industry has created a very competitive environment, prompting long-standing bail bond agents to break state laws in order to gain business.
The surety bail bond industry has more than doubled in size over the past decade, growing from 223 licensed agents in 1999 to 516 today.
“The problems were started by a few bondsmen who were trying to gain a competitive advantage but then spread like wildfire because the bad apples made it difficult for legitimate businesses to compete,” explained Marocchini. “So companies either went out of business or started the illegal practices themselves.”
Sullivan said his office has seen other problems too, including bondsmen failing to return collateral to clients or cosigners promptly upon the disposition of cases, and failing to keep proper records relating to their business activities.
He said his department has also received complaints about physical altercations among bail bond agents fighting over prospective clients.
“I wouldn’t label the whole industry as bad or aberrant in their behavior, but I would say there is enough malfeasance for this department to be concerned,” Sullivan said.
Casey, who is the owner of Casey Bail Bonds in Hartford, and Marocchini note that the bail bond industry is a business that provides a great service to the state for a relatively small amount of taxpayers’ dollars, and also assists the state’s law enforcement agents by returning fugitives.
But the illegal behavior by some creates a negative outlook on the industry as a whole, some say.
Judges, for example, are aware of the undercutting and are setting more restricted bonds or cash bonds, which eliminates surety agents from the process.
“They are undermining the viability of us as an industry,” Marocchini said. “Bondsmen have a fiduciary responsibility to make sure defendants go to court. If you don’t charge full fees or don’t secure collateral, you can’t do your job.”
Problems have escalated in recent years largely because former insurance commissioners ignored the problems or kept them low on their priority list, “allowing the industry to go essentially unregulated,” Casey said.
A 2003 investigation by the Legislative Program Review and Investigations Committee concluded that the insurance department was ineffective in its oversight.
“There was an eight-year period where someone could just fill out an application and they were granted a license,” Casey said. “In some cases, there are people who are illiterate writing bails.”
But Sullivan brings a sense of hope that things will change. “Sullivan is a doer,” Moynihan said. “The staff that he brought in is willing to go out into the field. He’s chosen not to take the easy way out, which would be to ignore the issue.”
In the recent legislative session, Sullivan and his department worked with legislators on a proposal to strengthen the statutes that govern surety bail bond agents. But the proposed legislation never made it to a vote.
The bill included strengthening license provisions on suspensions and revocations, clarifying the prescribed premium rates that bail bond agents must charge, requiring surety insurers to conduct biannual audits of their agents, and requiring bondsmen to maintain all their records for at least three years.
Sullivan has pledged to push the legislation again in the 2010 legislative session.
Marocchini said the state also needs to attach criminal penalties to the statues and restrict soliciting at courthouses, which creates feeding grounds for bidding wars. But simply enforcing what’s already on the books “can go a long way in cleaning up the industry,” Marocchini said.
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