Plea deal offers glimpse into rampant bail industry fraud

Plea deal offers glimpse into rampant bail industry fraud

When Sarah Jessenia Lopez plead guilty in May to attempted notary fraud related to bail bonding, it was not earth shattering. After all, fraud and criminality in North Carolina’s for-profit bail industry has been rampant for years.

The North Carolina Department of Insurance regulates the bail industry. Between 2009 and 2016, its criminal investigators 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. But a close examination of Lopez’s plea deal reveals details that could reverberate throughout the already troubled industry and contribute to the final dismantling of one of the state’s largest and most powerful bail surety companies.

Lopez, a Guilford County resident, initially faced charges of notary fraud. Among other things, she was accused of “post-notarizing” and back-dating court documents related to bail bonds to make it appear as if the principal had been present when they were not.

Pleading to five counts of attempted notary fraud, Lopez received community service and 24 months of supervised probation.

The tenets of her plea agreement make it clear why prosecutors were willing to reduce the charges.

From the agreement:

1) Defendant shall plead guilty. Receive consecutive probationary sentences.

2) Defendant shall cooperate fully with all investigations with Sec. of State’s office and other law enforcement agencies, including but not limited to interviews and written statements.

3) Defendant shall testify against James & Angel Richards, any members of All-American Bail Bonding [sic]Cannon Bail Bonding [sic] and all related entities, employers, owners or associates or others identified by law enforcement.

Cannon Surety is a large, politically well-connected company based in Greensboro. It backed bail bonds issued by bondsmen across the state.

In September of last year, the state’s Department of Insurance seized control of Cannon amid a failed audit and investigations related into its financial reports and business practices. The department said Cannon did not have enough money to pay bail bonds it had guaranteed and pointed to instances of the company not paying its bail forfeiture obligations.

The Department of Insurance and the Secretary of State’s office have ongoing cases and investigations related to Cannon, its employees and management.

The seizure of Cannon was one chapter in a complicated and long-running feud between some of the biggest players in North Carolina’s politically connected for-profit bail industry.

Cannon’s owner, Dallas McClain, has had a very public legal battle with his former business partner, Robert Brawley. Brawley, a former Republican state legislator and gubernatorial candidate, was sentenced to 15 days in jail for contempt of court last year as the lawsuits played out.

Cannon’s attorney Mark Bibbs has been the subject of an investigation by the Secretary of State’s office into improper lobbying.

Neither Lopez nor representatives from Cannon could be reached for comment this week.

Howard Neumann, chief assistant district attorney in Guilford County, said he could not comment on the Lopez case specifically. But plea deals of the sort she received are a common practice, he said.

“That’s not an uncommon practice in any sort of investigation that involves more than one participant,” Neumann said in an interview this week. “Four guys go in to rob a bank and one guy agrees to testify against the other three. That’s not uncommon.”

Guilford County has prosecuted a number of bail-bond related fraud cases in the last few years. All fraud is serious, Neumann said – but fraud related to bail bonding, which is part of the state’s functioning justice system, is especially pernicious.

“One of the things that sets it apart from other types of fraud is it involves documents in the court,” Neumann said. “Documents that have been altered or completely made up, and using those documents to get relief on a bond. Anybody who files a fraudulent paper in the court obviously piques our attention. We want to be the last institution that’s not adulterated by this type of fraud, by technology and the things technology can let you do.”

“You have to have complete confidence in what the courts do,” Neumann said. “You need to have confidence that everything that is going before the court is authentic.”

Ideally, all bail agents would be honest and no bail companies would involve bail agents, clerks or anyone related to the court process in fraud, Neumann said.

“We want them to be 100 percent honest people and to weed out the ones who are not,” he said.

That’s a large job, as even current bail agents admit.

There were 479 people in the state with at least one type of bail agent license in 1986, according to the Department of Insurance. 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.

“Things really started to change when the laws about a bondsmen’s responsibilities (were) watered down several years ago,” Neumann said. “Now the bondsman gets credit if he bails you out, you don’t show up for court but you get arrested eight weeks later, three counties away. The bondsman gets credit for that.”

Guilford County has developed task forces designed to apprehend fugitives, Neumann said, and has a large electronic monitoring program.

“If you don’t show up for court, the bondsman sits back and waits because they know the sheriff is going to bring them back,” Neumann said. “We get bondsmen who come in here and say, ‘I know Jim Smith is in Tennessee. Would you put him in the national system and extradite him? We’re not going to take a guy on a [low level] drug possession charge and put him in the national system as extraditable because a bail bondsman wants us to.”

Guilford is doing what it can to fight fraud in bail bonding and a corrosive culture within the industry, Neumann said. But things won’t actually change state-wide until new and better regulations on the industry are passed into law, he said.

“I think it’s going to take a more stringent application process before you get a license and some better laws before you see a statewide change,” Neumann said.

All current indications are of things going in the opposite direction.

The bail industry made more than $300,000 in political contributions to state lawmakers 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.”

In the legislative session that ended earlier this month, the group had more to celebrate.

House Bills 131 and 382 both made 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 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 HB 382 was promptly overturned by the General Assembly. House Bill 131 was referred back to the House Rules Committee.