Big bucks behind bid to repeal bail law
Industry giant, backed by private equity, is bankrolling a petition for a ballot initiative.
Backed by a private-equity firm, a large bail-bond company in San Diego is financing a campaign to repeal California’s landmark criminal justice reform.
The new law would abolish the state’s bail-bond companies, and in response, a handful in the industry has raised more than $2.5 million to push for repealing the measure.
The largest share of that, almost $800,000, comes from Triton, a bail company owned by Endeavour Capital, an Oregon-based private-equity firm that has managed billions of dollars in investments.
The donations are paying for an army of campaign workers that has descended on California’s shopping centers to beseech passersby for petition signatures. The campaign, which needs 365,880 names to put the measure before voters in 2020, pays the sidewalk solicitors a few dollars for each signature — the going rate around San Diego was $3.25.
“You gonna help me out, sweetheart?” asks a woman with long fake eyelashes accosting shoppers at a Walmart in San Diego.
“Señora, es usted un votante? Would you mind signing?” says a man in a Spider-Man T-shirt a few miles away at another Walmart.
“Hello, shoppers,” says a man in a Los Angeles Chargers hat at still another Walmart. “Do you have a minute to keep dangerous criminals in jail?”
The impetus for the new law arose from critics who say the bail system leads to the incarceration of many
defendants who pose no threat to society and languish in jail merely because they are poor. Under the new law, courts would decide who should be released, basing their decisions on defendants’ records, the nature of the accusations and other factors.
The Legislature passed the bill by a wide margin, and Gov. Jerry Brown signed it Aug. 28, saying that “today, California reforms its bail system so that rich and poor alike are treated fairly.”
Shortly afterward, opponents began the petition drive, an effort that state Sen. Bob Hertzberg (D-Van Nuys), who sponsored the legislation, called “naked capitalism.”
“Voter referendums are supposed to be about direct democracy. Now wealthy people can simply write big checks,” Hertzberg said of the petitioners for hire. “California is the biggest bail market and has the highest bail rates in the country. If these companies can delay it for a year, they can make money for a year.”
By engaging in a statewide political campaign, the private-equity company may bring a level of publicity that investors often prefer to avoid. But if enacted, the new law is likely to be ruinous to Endeavour’s investment: Without bail requirements in court, customers for the bail-bond companies would vanish.
John E. von Schlegell, cofounder of Endeavour Capital, said in an email that “as board members we are aware of the referendum but we are not involved in any of the details here at Endeavour.”
“The companies we invest in determine their own advocacy on issues that range from LGBTQ causes to homelessness to unions to health care,” Von Schlegell wrote. “Endeavour has not taken a position on this referendum, or any ballot measure for that matter .... We do support the company’s goal to continue to operate (legally and ethically) in California.”
He recommended talking to executives of Triton, the bail firm that Endeavour owns.
Triton executive Herb Mutter said the company made the donation because the new law “would wipe out the bail industry in California.”
He added: “We also think it is not good law. The notion that people are languishing in jail merely because they are poor is not supported by the facts.”
Although the bail-bond industry has been characterized in the past by small storefront businesses operating near county courthouses, Endeavour’s bail company is of a larger scale, and its backing by a privateequity firm creates an even more unusual profile within the bail industry.
In their search for profits since the recession, privateequity firms have explored new markets and increasingly invested in companies serving the poor and vulnerable.
They have bought up payday lenders, detention centers, nursing homes, prison phone services and homes for low-income renters, according to the Private Equity Stakeholder Project, a nonprofit group that has tracked the industry.
Likewise, Endeavour Capital invested in Triton in 2012 and owns almost twothirds of the company, according to 2017 state filings. It owns a similar stake in an affiliated insurer, Seaview Surety, which underwrites the bail amounts.
The Triton bail companies operate under the name Aladdin, and last year the Aladdin companies put up about $700 million in bail in California, according to Washington Post estimates that are based on insurance filings.
Endeavour says in its advertising that the bail company “fulfills a constitutional right.”
“Aladdin fulfills a constitutional right for its customers by providing expeditious pretrial release while ensuring a high rate of court appearances,” according to Endeavour’s website. It says Triton is also the “largest retail pretrial release service provider in America.”
Although Endeavour touts the constitutional underpinnings of its services, some legal scholars have looked askance at the bail-bond system.
In most states, people charged with crimes post bail money to be released before trial. The bail amount is supposed to ensure that a defendant will return for the next court date.
If the defendant shows up for trial, the bail money is returned.
Criticism of the system arises because many defendants — about a third of the people in California’s jails, Hertzberg said — cannot afford bail.
Some low-income defendants simply sit in jail. Others turn to bail-bond companies, which put up the bail on their behalf. The companies typically charge the defendants or their families 10% of the bail amount for this service.
For example, if a judge sets bail at $10,000, the defendant pays the bail-bond company $1,000, and the bail-bond company puts up the $10,000. When the defendant shows up for trial, the bail-bond company gets its money back. It generally does not return the $1,000 to the defendant.
“If you or your loved one has been arrested, Aladdin Bail Bonds guides you through every step of the bail process, helping make getting released from jail simple and fast,” Aladdin says on its website. “We are the largest, most trusted and most cost-effective bail service provider in California.”
Four states — Illinois, Kentucky, Oregon and Wisconsin — have largely banned commercial bailbond companies. Many other states are weighing reforms too.
It is unclear what will happen in California. The repeal campaign appears to have enough money to gather the required signatures — enough that it recently raised the pay per signature around San Diego from $2.25 to $3.25. It has until Nov. 26 to present the signatures to state officials.
If the repeal question gets to voters, the politics may be intricate and confusing, highlighting intraparty divisions.
Although the bill received broad support in the Legislature, the coalition of progressive groups that supported bail reform has splintered. Most notably, the American Civil Liberties Union, which has long campaigned for changes to the bail process, withdrew its support for the bill because, the group said, the law could lead to more defendants being held.
“As much as we would welcome an end to the predatory lending practices of the for-profit bail industry, [this bill] cannot promise a system with a substantial reduction in pretrial detention,” the executive directors of California’s ACLU affiliates said in a statement. “We oppose the bill because it seeks to replace the current deeply flawed system with an overly broad presumption of preventive detention.”
Jeff Clayton, executive director of an industry group known as the American Bail Coalition, echoed the ACLU, saying the new system will mean more people — not fewer — will be locked up pending trial.
“They’re going to lock everyone up. They’re going to have an algorithm to decide who stays in jail. And no one’s going to be able to post bail,” Clayton said. “On all three counts, it’s a failure.”
At the shopping centers where signatures were being gathered last week, the issue aroused mainly confusion or apathy or workaday greed. Some signature collectors were unsure of what the petition would do. If they couldn’t answer a question, they shrugged and said, “We’re just trying to let the voters decide.”
They were clear, however, on the monetary value of each signature.
Steve Burke, a retired IT worker, was approached by a petition solicitor last week as he was leaving a store.
“No, I won’t sign your petition,” he said.
Turns out, he’s in the petition business himself. “I could make a few bucks on my own name,” he explained.
Whether the petition gatherers understand or care about the law or its repeal is also difficult to fathom. A solicitor outside the Walmart in National City was asked which side he supported.
“To-may-toes, to-mahtoes,” he said, shrugging. “It’s just money to me.”