Alleged Bail Bond Fraud Gives Industry Black Eye

A number of agents and a colleague from Ray’s Bail Bonds in Riverside, Calif., found themselves on the other end of the bailing out process last month when more than 200 felony counts were levied against them for allegedly having paid inmates to start up business in prison.

As part of an eight-month investigation, owner Spencer Douglass, 55, and his vice president of operations, Michael Testi, 52, are alleged to have sought referrals from inmates, then turned around and compensated them for their services, according to authorities.

Investigators reportedly discovered a company ledger that highlighted more than 200 alleged cash deposits to inmates in Riverside and Orange counties amounting to more than $15,500 dating back to March 2000.

The Riverside Sheriff’s Department reported that inmates took the money and deposited it into their accounts for personal items.

Spencer Douglass Insurance Associates was acquired by Frontier Insurance Company in 1994, along with its $6 million book of license and permit bond business primarily located in California and other Western states. In 1995, Frontier formed Douglass/Frontier LLC, which places and services bail bond business.

Those charged in the scheme along with Douglass and Testi were Ben Seid Asgari, 42, Susan Filian, 38, Martin Kenneth Smith, 37, Terry David Tenwick, 35, Andrew Fernando Sarabia, 30, Christopher Charles Moraga, 29, Jeffrey Wayne Hunt, 29, Mark Rubio, 28, and Samantha Ireland, 23. None of the inmates involved in the case will be brought up on charges.

Douglass’ office would not comment on the allegations.

The investigation picked up in intensity back in April when detectives searched Douglass’ offices in Riverside and Temecula. A month later, Douglass was served warrants at his home in North County and at his office in Carlsbad.

According to Scott Edelen, Deputy Commissioner for the California Department of Insurance, the CDI would not comment on the ongoing investigation, but he did say that the case raised some eyebrows.

“Bail agent investigations and cases do not often raise to the level of 100 plus criminal counts,” Edelen said. “In 1999-2000, CDI issued against bail licensees or applicants four revocations of license, 18 denials of license application, 18 revocations of unrestricted license and issuance of restricted license, and one suspension.”

The defendants were in court May 29 for their arraignment and to answer the charges brought against them. The arraignment was continued to June 15 for all defendants. Douglass entered a “not guilty” plea on the PC 134 count (“falsifying documents”) which was set for further proceedings on the same calendar date.

According to Deputy District Attorney Karen Gorham, this type of case is highly unusual. “I’ve never seen a case like this,” Gorham commented.

When asked what it would take to convict the defendants, Gorham said that it would require a standard where “you have a reasonable likelihood of winning a jury trial.” Although she could not comment on the exact aspects of the case, Gorham said, “we feel we have a strong case.”

If convicted, the defendants could receive a variety of sentences ranging from a misdemeanor conviction to up to 150 years for the most serious charges.

How will this case play out for the bail bonds industry as a whole?

According to Barry Pearlstein, president of the California Bail Agents Association, this case is definitely a blow to the work done by the CBAA to promote professionalism in the bail industry.

“The majority of bail licensees in this state are hard-working, ethical and professional,” Pearlstein stated. “They want to see bail promoted as an integral, effective branch of the pretrial release system. I would hope that people recognize that this type of activity is not standard in the industry.”

Edelen noted that a case like this could give the bail bonds industry as a whole a black eye. “Unfortunate instances of negligent behavior or alleged criminal behavior by a few bail agents can often lead to the perpetuation of an erroneous stereotype that is cast over the entire bail industry,” he said. “The vast majority of California’s approximately 1,100 bail licensees are honest and hard-working. Bail agents provide a valuable service for people, often at a time in their lives when they need it most.”

Pearlstein’s biggest surprise over the entire incident was the time involved in bringing a case against the defendants. “My initial reaction was—what took so long if there was evidence that this activity was occurring in this state?” he questioned. “Anybody who violates the law and the trust of California consumers should be prosecuted to the full extent of the law and be prohibited from further transacting bail in this state.”

According to Pearlstein, prior to the arrests in Riverside County, there had been rumors and unsubstantiated claims by bail licensees around the state that this activity was occurring. “Most bail licensees were attempting to handle their concerns locally with their sheriff’s department,” Pearlstein noted. “Others complained to the CDI, and asked for an investigation to be conducted.”

The case against the agents from Ray’s Bail Bonds was the second blow for San Diego-area bail bonds professionals in the last month.

In late May, the CDI issued a revocation of the license and licensing rights of bail agent Raymond W. Hrdlicka. Before the time of the issuance, Hrdlicka ran H&H Bail Bonds Inc. in San Diego and San Jose. He also at the time of issuance operated H&H Bail Bonds in Los Angeles and North American Bail Bonds Services Inc. in Fremont.

Effective May 25, Hrdlicka was banned from conducting business as a bail licensee, an action based on a similar edict of revocation ordered by the Insurance Department of the State of Washington.

Topics California Fraud Agencies