The Economics of Everyday Things - 47. Bail Bonds

Episode Date: May 6, 2024

How does bail work — and who's really paying? Zachary Crockett follows the money. SOURCES:Joshua Page, professor of sociology and law at the University of Minnesota.Steven Zalewski, criminal defense attorney and co-owner of Affordable Bails New York. RESOURCES:"Does Bail Reform Increase Crime in New York State: Evidence from Interrupted Time-Series Analyses and Synthetic Control Methods," by Sishi Wu and David McDowall (Justice Quarterly, 2023)."Profit Over People: The Commercial Bail Industry Fueling America’s Cash Bail Systems," by Allie Preston and Rachael Eisenberg (Center for American Progress, 2022)."All Profit, No Risk: How the Bail Industry Exploits the Legal System," by Wendy Sawyer (Prison Policy Initiative, 2022)."A Debt of Care: Commercial Bail and the Gendered Logic of Criminal Justice Predation," by Joshua Page, Victoria Piehowski, and Joe Soss (RSF: The Russell Sage Foundation Journal of the Social Sciences, 2019)."The Economics of Bail and Pretrial Detention," by Patrick Liu, Ryan Nunn, and Jay Shambaugh (The Hamilton Project, 2018)."Selling Off Our Freedom: How Insurance Corporations Have Taken Over Our Bail System," by Color Of Change and ACLU’s Campaign for Smart Justice (2017)."Inside the Wild, Shadowy, and Highly Lucrative Bail Industry," by Shane Bauer (Mother Jones, 2014). EXTRAS:"To Catch a Fugitive," by Freakonomics Radio (2011).

So people come into my office and let's say it's 8 o'clock in the morning and last night their son got arrested for possession of a weapon. They're frantic. The police department isn't giving them information, the court system's not giving them information. So they want to know what's going on. They always want to know what the charge is. They want to know where they were arrested and then they want to know what's going on. They always want to know what the charge is. They want to know where they were arrested, and then they want to know how they get them out.

When I get the person released, my fee is then made. That is Stephen Zalewski. He's a criminal defense attorney in New York, but he also has another job. I am one of the owners of Affordable Bails New York. Affordable Bails is one of around 25,000 bail bond companies in the United States. These businesses are usually across the street from a courthouse illuminated by neon signs. And for those accused of crimes, they offer a way to get out of jail while awaiting trial. More than 2 million Americans use their services each year to post around $15 billion worth of bail.

Bail bonds are a controversial business. They're often portrayed as seedy establishments with briefcases full of cash and bounty hunters who kick down doors. And some of that is true. But the economics of the industry are often misunderstood. It's a common misconception that I walk in with $100,000 in my hand. Basically, I'm giving them a promissory note. When your kid got arrested for doing something stupid, you may not have $5,000 you can come to court with. For the Freakonomics Radio Network, this is the economics of everyday things.

I'm Zachary Crockett. Today, bail bonds. When you're charged with a crime in America, you're usually taken to a local jail. Within a few days, a judge will review your case and decide if you should be given bail. That's the option to get out of jail while you're waiting for your court date. If you're granted bail, in most cases, the court wants some kind of assurance that you're going to show up when you're supposed to. So they'll order you to put up a sum of money to secure your release. The concept is that if there's a financial stake in your return, people will

likely return. Again, that's Stephen Zalewski. If they set bail, they can set it in multiple forms. Some states actually have a schedule, so if you commit crime A, the bail is X. Other states have complete discretion of the court. The amount of your bail varies, depending on where you live and what you're charged with. You might be ordered to pay something like $5,000 if you're accused of misdemeanor assault.

It could be $25,000 for grand theft auto. And for something like murder, kidnapping, or rape, bail might be well into the six or even seven figures. When you're granted bail, you generally have a few options. You can pay the full amount, let's say $5,000, to the court. Assuming you show up to your court dates, you'll eventually get it back after your case is resolved, less fees and surcharges. If you pay into the court system, the court, for instance, New York, take a 3 or 4 percent

surcharge. If you don't have $5,000, another option is to stay in jail. I would say the majority of Americans right now don't have $5,000 laying around in their house they can pay. When you don't pay your bail, you might sit in jail for months or even years waiting for your court date. But there's another alternative. You can call up a bail bond company.

The bail bond industry traces its origins to the Wild West. As the story goes, in the late 1800s, two brothers, Peter and Thomas McDonough, picked up on an opportunity while working at their father's saloon in San Francisco. They realized that most of the local criminals didn't have any family members around to post bail to the courts when they got in trouble. So they began charging a fee to front them the money. The business was so profitable that the brothers eventually replaced the saloon with a bail bond establishment.

The concept spread around the country. And by the mid 20th century, bail bond companies were a fixture in the American justice system. The purpose of the bail bond industry is to provide someone with the ability to get out relatively quickly, as well as make sure that the person returns to court. Zalewski started his firm, Affordable Bails New York, around 15 years ago. He was well aware of the industry's unsavory reputation. I was a criminal defense attorney for many years. And before I even knew anything about the bond business, all I would hear, to be quite

honest with you, were horror stories. People being charged exorbitant fees, never being able to get collateral money back, people revoking bonds because the guy was 50 minutes late for his check-in. Since starting his firm, Zalewski says he's posted around 75,000 bail bonds for clients in the state of New York. The business model for all those bonds is pretty simple.

So you have to look at us as an insurance agency, a little different than the guy that sells you car insurance, but nonetheless, we are an insurance company. I'm handing them a bond, which is a promissory note that says, hey, if he doesn't come back to court, I pay. In return for taking on this risk, bail agents charge a fee. In most states, it's around 10% of the bail amount. So for a $5,000 bail, you pay 500 bucks and you don't get it back.

Sometimes for bigger bail amounts, Zalewski will also take collateral to cover his risk. They may give me the deed to their house and I'll put a lien on their home. I've gotten things as exotic as Bugatti's. I mean, amazing cars. Engagement rings are, believe it or not, very common. So we collateralize the bail with what we think is appropriate based on the crime. The people who pay these fees and put up this collateral are usually the defendants' family members on the outside. And they're almost always women. You know, typically they are mothers, grandmothers, spouses, partners, former partners, sisters, and so forth.

Joshua Page is a professor of sociology and law at the University of Minnesota. He researches criminal punishment. He spent 18 months working as a bail bond agent to better understand how the industry works. Page says there are sociological reasons why bail bond companies target women. They're perceived to be more sympathetic, more loyal, and ultimately more willing to put up money for loved ones in need.

To find clients, bail agents will often attend the initial court hearings where judges assign bail. They'll seek out a defendant's family members in court and offer emotional support. The legal process is often really confusing. People, lawyers, judges, in many ways speak a different language. So what bail agents do is they strategically present themselves as somebody that can help. Many bail agents will also form quid pro quo relationships with criminal defense attorneys. They have this mutual referral system.

The bail agents, when they talk to defendants, will try to refer them to the lawyers and the lawyers will try to refer clients to the bail bond agents. If all else fails, they'll make cold calls. They'll pay attention to the jail rosters that are increasingly online. And when people's bail comes up, they'll put their name and number and birthdate into a software program that provides information about family members and start cold calling, saying that they're happy to help them out and get the defendant out of jail.

When a family member signs a contract with a bail bond company, they become a co-signer, essentially a guarantor on a loan. And if a defendant is bailed out and decides to go on the run, that can become a problem for everyone involved. That's coming up. Once the defendant is out on bail, Stephen Zalewski of Affordable Bails New York has to play enforcer. My responsibility then is to monitor the person, make sure they go back to court. My responsibility then is to monitor the person, make sure they go back to court. If a defendant goes on the lam, the bail bond company could be on the hook for the full

bail amount. It's in Zalewski's interest to find the fugitive and bring him back in. And for that, he usually employs a bounty hunter. We're going to hunt this scum down. Get down! Now! The only way this guy will get away from us is if he kills himself right now and jumps into a pool of sharks.

You may recognize this line of work from reality TV shows like Dog the Bounty Hunter, but Salewski says those depictions are exaggerated. They had three or four Belbon shows and they made everybody look like they were crazy. What it did is it took an industry that had some legitimacy and made it look ridiculous. I don't need a guy with hair extensions and a paintball gun running around to catch people. It doesn't make any sense. If there's a kernel of truth in these shows, it's that bounty hunting can sometimes be violent. There have been many documented cases of bounty hunters killing bail bond fugitives. In one case, a New Orleans man was allegedly

shackled, beaten and stuffed in a trunk, he had failed to show up to court for stealing a bottle of aspirin. But Zalewski says the typical search is resolved without incident. So the first calls we make are to the family. What we do is we check to see if the person's been re-arrested or if they're in the hospital. Within two hours of finding that out, we are at their house to see if they're home. And I'd like to tell you it's a big secret, but it's not. 90% of the people who skip bail are with a family member.

The average search, to be honest with you, probably takes three to four days if someone's really running. Every now and then, Zluski's bounty hunters cut it pretty close. So someone was on a $500,000 bail. They left. We searched for two months and could not find the person. We get a call from a retired police officer who lives in Tennessee. And he says, hey, listen, are you looking for somebody? And describes the woman. And it turns out she

met this fellow, they were dating, and she spouts off that she ran on a $500,000 bail in New York. And we went down to Tennessee and got her. Sometimes, Zalewski says, returned defendants will attempt to use his office as a storage unit for contraband. People would literally come to surrender and they bring their backpack and I take the backpack and search it and there were guns, drugs. And I'm like, are you kidding me? So I can get this when I get out.

I said, no, you can't get the gun back and the drugs. Once a fugitive is apprehended, the bounty hunter is typically paid 10 to 20% of the bond amount. Joshua Page, the sociologist, says family members who co-sign the bail bond contract often have to foot the bill. If a bail company sends a bounty hunter after a defendant, the co-signer will be charged for the expense of the bounty hunter. Co-signers also agree to give bail companies access to all kinds of personal records.

And when a person goes missing, it's the co-signer that the bail company really contacts a lot. In theory, if a fugitive isn't returned to court, the bail bond company has to pay the full amount of the bond. In the business, that's called a forfeiture. But courts rarely make these companies pay up. We were doing an average of $60 to $100 million a year. We were doing forfeitures in pay less than one tenth of one percent.

By contrast, automobile and property insurers pay out up to 60% of their revenue in losses. Part of the reason for these small forfeiture rates is that bail bond firms are backed by a handful of major insurance companies that often fight tooth and nail to avoid forfeitures. And courts tend to go easy on the bail bond industry by giving them long grace periods. With a bail bond company, when someone doesn't show up in court, the court usually gives us 60 to 90 days to return the person, thereby avoiding forfeiture. The courts have their own economic incentive for giving bail bond companies leniency. And Page says it has to do with

a serious point of contention in the American justice system. For the courts, it's more of a matter of trying to save money and to offload responsibilities. If people can't afford the bail, then they'll remain locked up. And so in some ways, the bail bond industry functions as a release valve to try to deal with jail overcrowding. The court's stated purpose of bail is to give defendants a way to get out of jail before their trial, while giving the court assurance that they won't jump town. But some scholars and criminal justice activists say that charging people cash has actually served the opposite

purpose. In the 1980s, with crime at record levels and politicians calling for tougher punishments, judges started setting higher cash bail. Between 1990 and 2009, the average bail amount doubled. Since then, jails have become increasingly crowded. It's estimated that on any given day, there are 413,000 people in city and county jails who haven't yet been convicted of a crime. This pretrial incarceration comes at the expense of taxpayers. On average, it costs around $77 a day to house a single person.

Across the entire pretrial prison population, that's nearly $12 billion in public funds each year. The problem isn't just that cash bail is set too high. Some jurisdictions set bail that is so low, it disincentivizes bail bond agents from taking on the cases. Setting bail in those low amounts, $1,500, there's no purpose at all. We don't wanna bail people out because on a thousand dollar bail, my fee is $100.

These issues have led to broader cash bail reform efforts. Some states like New York, California, Kentucky and New Mexico have cut down on cash bail by limiting the types of cases in which it can be used. Illinois recently became the first state to get rid of the practice altogether. Police there have been instructed to give out citations rather than arrest warrants where possible. And if prosecutors want to detain someone in jail before a trial, they have to present evidence at a hearing.

But these alternative systems to cash bail are also very costly for taxpayers. The theory is that you're trying to reduce the jail population because it costs money, but it also costs a lot to monitor people when they're out because you still have to have the infrastructure to do that. New York, where Zalewski's firm is based, changed its bail system in 2020. Cash bail was eliminated for most nonviolent crimes, including burglary, drug offenses, and stalking. Those accused of certain crimes are free until their case is concluded, either without restriction or with some kind of monitoring system. Whether or not efforts like this have led to a reduction in crime and recidivism is

a point of political contention. But it's clear that bail reform, alongside a global pandemic, has had a sizable impact on the bail bond business. The assignment of cash bail in New York has plummeted in the past few years. Lots of bond agencies have closed down and Zalewski has felt the squeeze too. Before 2020, affordable bails had 10 offices.

Today, it's down to just four. Originally we were the largest bail firm in New York. With the change of the bail laws in New York, everybody became small. They wanted to make our industry the industry of the devil because we're exploiting people by taking money from them so that someone could stay out of jail. We didn't exploit people.

What we did is we provided them with something that needed to be provided. But we're still alive, still in business. We survived. For the economics of everyday things, I'm Zachary Crockett. This episode was produced by me and Sarah Lilly, and mixed by Jeremy Johnston. We had help from Daniel Moritz-Rapson. When you walk out of the courthouse and spit, you should be spitting on my door.

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