Lexington National Insurance Corporation has sued the District Court of Maryland-and its chief clerk, Roberta Warnken-claiming Warnken did not follow the law and cost Maryland citizens "in excess of $1 million."
The dispute is about an obscure deadline in the bail bonds world and a two-year-old law passed (partly at Lexington National's behest) to stop "unscrupulous actors"-that is, competitors to Lexington National- who "engage in frivolous appeals and delay tactics" to avoid paying bails that should be forfeited when the defendant skips court.
A spokesperson for the District Court, Terri Bolling, says that as a matter or policy, "neither [chief] Judge Clyburn nor Warnken can comment because of the pending litigation." David Paulson, a spokesperson for the attorney general's office, which can be expected to defend the suit, says about the same thing, adding that, "In this case, it would be even more problematic since as of this moment, the office has not been officially served with the suit."
At issue is a law passed in 2011 tightening the deadline for paying bond forfeitures.
When a criminal defendant pays a bail bondsman his 10 percent fee (or whatever it is-see "Men of the Pen," Feature, March 27), the bondsman pledges to the court that he will pay the full bail if the defendant skips town.
Standing behind the bondsman is an insurance company like Lexington National, which was founded in 1989 by Brian Frank to serve his uncle Fred's burgeoning bail business. There are other insurance companies that specialize in the bail business. Fred Frank rival 4 Aces, for example, has used Houston-based Financial Casualty and Surety and Ohio-based Continental Heritage.
When a defendant does not show up for court, the bond company has 90 days-which can be extended to 180 for "good cause"-to either bring the defendant in or pay the forfeited bond.
But some companies found a loophole, Frank says: On the 180th day, instead of bringing money, they'd bring an excuse. The defendant has been located, they would say, though we don't have him in custody. But we know where he is, so the bail should not be forfeited. Frank cites a case in which an unnamed rival did just that, claiming the defendant was in Puerto Rico.
"This guy isn't even locked up," Frank says. "So there is no legal basis" to cancel the bond forfeiture. But that's kind of the point. The judge rejects the bond company's claim and then the company appeals, Frank says. "So of course they don't pay while it's under appeal. And if they locate the guy and bring him back in the meantime, it's moot. It's no harm no foul.
"They found a gap" in the law, he concludes, "and they exploited the gap."
The 2011 amendments to the bail forfeiture law were meant to stop such legal abuses, Frank says.
In the long-term, bail forfeiture should not much matter to a company, because if the defendant is captured or arrested any time within 10 years of the original court date, the bail company can get a "remission" of the forfeited bail. They get the money back.
But under the new law, if the company misses that 90- or 180-day initial deadline, they cannot get the remission.
Frank's beef? For a year after the new law was passed, the court clerk was canceling the forfeitures. Frank says he noticed this by May of 2012, 90 days after the law went into effect. "It's then that we saw they were entering a code in their system, essentially striking forfeiture, with no legal basis," he says.
Frank says he has no idea why this was happening. "I have no view on the motive," he says. "It's just the law is the law. I have to play by the rules. The clerk doesn't have the right to decide which laws they're going to comply with and which laws they're not going to comply with."
He contacted the court about it, got no answers and eventually had his lobbyist, Barry Udoff, president of the Maryland Bail Bond Association, get in touch with the law's sponsor, Maryland House Judiciary Chairman Joseph F. Vallario Jr.
The legislator forwarded Udoff's concerns to Chief Judge Ben Clyburn, who on Feb. 28, 2013 sent a letter back to Vallario saying "an administrative review" had taken place and that, as a result, steps were being taken to comply with the law.
"The Court will also undertake an analysis to determine what, if any, remedial steps should be taken to enter and collect on any forfeiture matters where judgments should have been entered and payments should have been made," the judge wrote. "Of course, such analysis will include a consideration of equitable treatment and any resulting impact on the competitive bond market."
Shortly after, according to Frank, the court said it would enforce the law starting now, but it isn't going to go back and correct the mistakes the clerk allegedly made.
That's not good enough for Frank. He wants the court to charge its competitors for all the bails it says they should have forfeited since May of 2012. In the legal complaint, Lexington "asks this Court to direct the District Court and Clerk to comply with their unambiguous legal obligations, and thereby to remedy the specific economic injury to Lexington's statutory and constitutional rights."
The new rules already caught rival 4 Aces flat-footed. In June, that company sued to stop enforcement of an interpretation of the law that would require both that bail be forfeited and the fugitive be returned ("Aces Up," Mobtown Beat, June 26).
Frank says 4 Aces is not a target though.
"This isn't just directed at any one competitor," Frank says. "We saw it in a couple of instances. We saw a pattern. It was exploiting a loophole and not complying with the letter or the spirit of the law."