Most of Trumbull County's judges permitted bail bond companies here to avoid millions of dollars in insurance fees by allowing them to post bonds backed by property, a practice that some in the industry say is illegal. The courts also allowed the companies to inflate the value of their property, another apparent violation of the Ohio Revised Code.
A spokesman for the Ohio Department of Insurance said the agency's Fraud and Enforcement Division is reviewing the matter. The Department of Insurance governs the bail bond industry in the state.
Ohio lawmakers passed and in January 2001 Ohio Gov. Bob Taft signed the Ohio Bail Bond Act that for the first time established regulations for the industry.
In November 2001, Robert Harned, former owner of Ace Bail Bond Co. in Warren, notified the Trumbull County clerk of courts, prosecutor and common pleas judges and municipal court judges throughout the county that he believed they were violating Ohio law by allowing bail bond agencies to write property bonds.
In his letter, Harned said the new Bail Bond Act provided an opportunity to end this practice that is ''violating certain statutes of the Ohio Revised Code.''
Except for Girard Municipal Court Judge Michael Bernard, who never allowed property bonds, everyone in the Trumbull County judicial system looked past Harned's letter. Nearly a year later, Common Pleas Court Administrative Judge Andrew Logan signed a journal entry putting in place rules allowing agencies to continue using property bonds.
Backing the bonds
After the Bail Bond Act became law in 2001, Trumbull County was one of the few in Ohio to continue to allow bail bondsmen to use property to back bonds - at up to three times the appraised value. Two examples:
- Bond agency:
All American Worldwide Bail Bonding
Combined private appraisal for properties at left:?$739,540
County appraisal: $113,500
Amount county allowed for bonds:?
- Bond agency:
All American Big Bob's Bail Bonding
Combined private appraisal for properties at left:?$1,435,000
County appraisal: $225,800
Amount court allowed for bonds:?
Lower courts countywide except Girard adopted the rules, but for nearly the next 10 years, none of the courts, including Logan's, enforced them.
After court officials realized what was happening, aided by complaints from a local bail bondsman who said he did not own enough property to compete, Logan signed a journal entry creating new rules two years ago and the practice has come to nearly a complete halt.
The judges and court officials still maintain the practice was legal even though it's virtually non-existent anywhere else in Ohio. They also maintain that the system worked because defendants were appearing in court and bond forfeitures were rare. Newton Falls Municipal Court Judge Philip Vigorito still allows property bonds on misdemeanor charges.
Harned and Thomas Cool, owner of Thomas Cool Bail Bonding, were opposed to using property bonds because they say they were at a competitive disadvantage with agents who owned more property. Harned admitted he wrote bonds backed by property he owned. ''I wouldn't have had a prayer if I didn't,'' he said. But he said he spent thousands of dollars lobbying for the Bail Bond Act.
How property bonds worked in Trumbull County
When a bondsman bails somebody out of jail, the agency for whom he works must purchase insurance to cover the amount of the bond. The insurance typically costs 1 to 2 percent of the bond amount.
Property bonds use real estate rather than insurance to back the bond. Some in the industry, like Charles Eddie Miller, president of the Ohio Bail Bond Association, say only family and friends can legally use property to bail out a defendant as long as they did not earn a profit doing so.
The minute a fee is charged on a property bond, ''to me,'' Miller said, the bail bond company has become an insurance company.
Logan's rules, which became effective in 2002, outlined the use of property bonds. The rules also allowed agencies to write bonds up to triple the value of their pledged property, rather than 50 percent of the property's equity as stated in the Ohio Revised Code.
Public records obtained by the Tribune Chronicle show that liens, mortgages and other encumbrances against the agencies' pledged property were never deducted. In at least two cases, the courts granted permission for agencies to post millions of dollars in bonds backed by property in which the agencies had negative equity, based on Trumbull County Auditor's Office appraisals.
Logan said it was a ''consensus'' agreement among judges and the Prosecutor's Office to allow triple the value because of the fortunate situation of not having many problematic bonds. Also, the provision gave bondsmen without much property the opportunity to do ''a little more business,'' the judge said.
Warren Municipal Court Judge Thomas Gysegem said he always opposed using property bonds. Unlike Bernard, Gysegem adopted Logan's rules anyway.
Common Pleas Court Magistrate Jason C. Earnhart, who helped craft the 2002 order while in the Prosecutor's Office, said part of the reasoning was that judges didn't expect a ''deluge'' of forfeitures, and even if bondsmen wrote more than the value of their property, a forfeiture would be collectible.
However, in one instance, records show that Trumbull County Common Pleas Court Judge Peter Kontos never collected a forfeiture on a $250,000 bond posted for theft ring suspect Robert Karpenko. All American Big Bob's Bail Bonding used property to back the bond.
Karpenko fled to Florida, where he was later arrested by authorities in that state on unrelated charges. His bond was revoked.
When Karpenko is released from jail in Florida, Trumbull taxpayers likely will incur the cost to transport him to face charges here. If the court collected a forfeiture, the money could be used to cover costs associated with the failure to appear.
Such costs could include overtime for police officers called to testify on the day the defendant failed to appear, prosecutors and public defenders participating in the case that day, or prisoner transportation if law enforcement later locates the defendant. The money could also go into the county's general fund.
Logan's rules also allowed agencies to use the same property to bail out an unlimited number of defendants. And the rules allowed agencies to use the same property in multiple courts.
Earlier this year, the Tribune Chronicle filed a records request with clerks in each court in Trumbull County for copies from 2011 of liens and releases of liens required by state law when property bonds are used. No clerks could locate any except Trumbull County Clerk of Court Karen Infante Allen.
That means there was no way for a court to know if the bonding company pledged property in excess of its allowable value, nor was there any means to prevent the company from selling the property used to back the bond.
Gysegem said the court's decision to not record, release or check liens was a matter of staffing.
''It takes a tremendous amount of time and skill to check what liens are on, check what liens are off,'' he said.
Similarly, in Central District Court in Cortland, Judge Thomas Campbell said the court did not follow the correct procedures, but noted in a letter to the Tribune Chronicle, ''the county and the taxpayers did not suffer any financial loss.''
Campbell said he has had ''reasonably good success'' with defendants appearing in court, which is his preference rather than forfeiting the bond, something he said he generally resists.
''I'm trying to accomplish the underlying purpose, which is make the defendant appear for the proceedings,'' Campbell said.
In Newton Falls Municipal Court, Vigorito said he no longer accepts property bonds on felony charges, which have the potential to be bound over to Common Pleas Court. He said it ''puts the bondsman and defendant in a situation of posting something that would not be approved in Common Pleas Court.''
''It would be like there is no bond posted at all,'' Vigorito said.
Appraisals, bond limits
On March 17, 2009, All American Worldwide Bail Bonding in Warren filed in Niles Municipal Court paperwork that would let the company write more than $2.2 million in bonds against four pieces of property valued at $739,540 by the company's appraiser.
The Trumbull County Auditor's Office valued these properties at $113,500. There were already $267,900 in mortgages against these properties .
On April 27, 2009, Worldwide filed in Common Pleas Court paperwork to use the same properties to write the same amount of bonds there.
Since the courts did not share information and the liens were not recorded, Worldwide was permitted to write more than $4.4 million in bonds against property that had a maximum of $471,640 worth of equity and, based on the auditor's appraisal, negative equity.
Worldwide owner Ron Metz, who was writing property bonds in 2009 backed by property owned by Robert Cregar, owner of All American Big Bob's, said he had some concern about the triple value provision, but didn't question it because ''it wasn't my call'' and he focused on writing good bonds.
''I did my business, I used his property, I worked as hard as I work now to make sure everyone goes to court,'' Metz said.
On Jan. 11, 2011, All American Big Bob's filed documents in Warren Municipal Court that would let the Warren company write more than $4.3 million in bonds against three pieces of property valued at $1.4 million by the company's appraiser.
The auditor's office valued these properties at $225,800. There were already $978,530 in mortgages against the properties.
Martin White, Cregar's attorney, said an outbreak of defendants not showing in court would have been needed to outrun the value of the property that was used as collateral for the bonds, and that did not happen.
''If everyone decides not to show up at court, I have a headache, but as a practical matter, that is not the case,'' White said.
White also noted the no-show rate for Cregar was about only 2 percent and that ''in all those years, there were no unpaid bond forfeitures.''
Financial records from 2006 show All-American Big Bob's used property to back approximately $3.6 million in bonds in four of Trumbull County's lower courts. If made to use surety bonds at a 2 percent insurance rate, this translates into approximately $72,620 in payments that would have been made to insurance companies.
In the nearly one decade after passage of the Ohio Bail Bond Act, the amount would total nearly $800,000. If all Trumbull County bail bond agencies posted similar numbers, this would total in the millions of dollars. That also translates into unpaid state income taxes from insurance companies.
Elsewhere in Ohio
Terri Mazur, Greene County Clerk of Courts, said that court maybe has taken three property bonds in her 16 years as clerk, including one by a family member of a defendant. In another case, a group of church members pooled their property in a case involving another parishioner. None, though, were posted by a bondsman. It's never been the practice, Mazur said.
''I guess to be frank, I've never been asked, and if I had an agent that said to me there is authority to do it in the revised code, I would say, 'OK, hold on,' and take a look at it,'' Mazur said.
In nearby Portage County, the use of property bonds are ''very rare,'' so much so, ''I can't even remember when we had one last,'' said Clerk of Courts Linda Fankhauser.
She said bail bondsmen never used their own property as surety in the decade she has been clerk.
The situation is the same in Mahoning County, where Kathi Welsh, chief deputy clerk of courts, said bondsmen never used property.
Gysegem said he wanted courts to use only insurance bonds and tried to nudge other judges to take that position when he took the bench in 1996, but his effort didn't have the support.
''I thought that if we went to insurance bonds, everything would be cut and dried and we knew each bond would be payable,'' said Gysegem.
But the ''bottom line is,'' the system ''worked,'' Gysegem said. ''We never had a problem.''
''They (the bondsmen) either paid it or they brought the defendant in,'' Gysegem said. ''We never had to go after their property to force a payment.''
How it ended
''It was brought to our attention, we were asked to look into it and it became clear the 2001 order was not being followed in its entirety,'' said Earnhart, who also wrote the 2011 order.
Cool, who at one point worked for Cregar and another bail bond company, began complaining that he could not compete selling insurance bonds against bondsmen using property.
He took his case to court officials. Unsatisfied with their response, he filed written complaints with local police departments and the Ohio Supreme Court. Earnhart said that court officials, after some digging, discovered that Logan's rules were not being followed.
So in July 2011, the rules changed, tightened to the point where bondsmen stopped using property bonds by bond agencies in favor of insurance bonds, but still preserving the ability of individuals to post a property bond.
The new rules created a series of hoops with each property bond, plus ''total discretion'' remains with the judge to approve or disapprove the bond, said Anthony Cornicelli, court administrator and chief magistrate.
The new rules also cracked down on filing liens on property used for a bond whether it was posted in or continued in Common Pleas Court. Also, gone from the order is the triple value provision.
''The situation is corrected now. That's the long and short of it,'' Cornicelli said.
For Metz, the change made no difference. He said he was already paying Cregar a commission on the property bonds, and when he switched to insurance bonds, he paid the insurance company instead.
''I've got to pay him. I've got to pay the insurance company. I have to pay somebody,'' Metz said.
The difference, according to the Ohio Bail Bond Association's Miller, is that paying Cregar improperly turns the bail bond agency owner into an insurance agent.
White said Cregar largely used his real estate as collateral for bonds, but had insurance bonds too. When the rules became more stringent, ''it just became much easier to do surety bonds, and he (Cregar), frankly, he likes it better,'' White said.
White said Cregar believed he was complying with the rules because there were no complaints of noncompliance until Cool raised the issue.