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law enforcement for profit

July 10 roundup

by Walter Olson on July 10, 2014

  • Supreme Court agrees to hear case in which feds claim right to ignore deadlines for suit-filing because of Wartime Suspension of Limitations Act (WSLA), passed in 1942 [my new Cato post, earlier]
  • As we’ve advised before, don’t run 10K races while your claim of low-speed-crash injury is pending [Philly.com]
  • Incentivizing complaint-filing: State Bar of California pushes “urgency legislation” empowering it to collect $2500 per enforcement action from targets of its efforts against unauthorized practice of law; association of non-lawyer preparers of legal documents calls it “a cleverly designed effort by the Bar to seek additional revenue from non-members of the Bar.” [Dan Walters, Sacramento Bee via KafkaEsq]
  • Feds get earful on Hawaiian tribalization plan [KHON, Indian Country Today, more, earlier]
  • BP: “Legal feeding frenzy continues four years after the spill” [Melissa Landry, The Hayride]
  • Danke schön! “Overlawyered ist übrigens ein vorzügliches Blog, das sehr oft sehr gute Postings hat zu den Irrungen und Wirrungen des US-amerikanischen Rechtssystems” [Lawblog.de comment]
  • There’ll always be a Berkeley: California city requires medical marijuana dispensaries to set aside some product for free use by indigent and homeless [Reason, KCBS]

A twelve-minute Cato podcast in which I talk to Caleb Brown about how government can roll minor fines over routine offenses into crushing financial burdens and years of entanglement in the criminal justice system. A particular problem: systems that assign fines and payments to the account of actors in the justice system and for-profit private contractors which can operate under a perverse incentive to trip up petty wrongdoers and keep them in the system. The National Public Radio special “Guilty and Charged,” based on a yearlong investigation, is here. Many of my examples are taken from it, including the persons drawn into the system after fishing out of season and making an illegal left turn, and the woman saddled with a $10,000 debt on emerging from prison. Radley Balko discusses. I’ve written earlier on the problems with private probation, on a Shelby County, Alabama judge’s 2012 finding that the town of Harpersville was engaged in a “judicially sanctioned extortion racket,” and more broadly on law enforcement for profit and its forfeiture branch.

Related: Tyler Cowen on a new book about persons living at the margins of the law, Alice Goffman’s On the Run: Fugitive Life in an American City.

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Law enforcement for profit to take another big leap forward? [Washington Post]:

The Internal Revenue Service would be required to turn over millions of unpaid tax bills to private debt collectors under a measure before the Senate, reviving a program that has previously led to complaints of harassment and has not saved taxpayers money.

The provision was tucked into a larger bill, aimed at renewing an array of expired tax breaks, at the request of Sen. Charles E. Schumer (D-N.Y.), whose state is home to two of the four private collection agencies that stand to benefit from the proposal.

It requires all “inactive tax receivables” to be assigned to private debt collectors if the IRS cannot locate the person who owes the money or if IRS agents are unable to make contact within a year.

The idea has been tried twice before, but was discontinued both times after poor results including net losses on the program. Nina Olson, who holds the position of Taxpayer Advocate in the U.S. government (and is no relation), strongly opposes the program, noting that some of the money would be recouped by the Treasury anyway through means such as future withheld refunds without the need for paying 25 percent contingency fees to the middlemen. Bounty-hunting freelancers are more likely to resort to tactics such as day-and-night harassing calls, and have less flexibility to work out payment plans for those getting back on their feet after reverses or, in the case of estate taxes, heirs who may have not yet received the inheritances from which they need to pay the tax due.

Compare many state governments’ practice of putting out plaintiff’s-side litigation opportunities to private lawyers at contingency fee, which has created a durable lobby for hardball extractive lawsuits of dubious social benefit as well as showering large sums on law firms that already are or soon become influential political players in their states.

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On “The perils of privatized probation,” Radley Balko seems convincing to me [Washington Post], quoting The Economist’s “Democracy in America“:

I’ve written about these fees before, but here’s a quick refresher: if you get hit with a $200 ticket you can’t pay, then a private-probation company will let you pay it off in instalments, for a monthly fee. Then there may be additional fees for electronic monitoring, drug testing and classes—many of which are assigned not by a judge, but by the private company itself. When probationers cannot pay, courts issue warrants for their arrest and their probation terms are extended—a reprehensible practice known as “tolling”, which a judge declared illegal last year. These are folks who had trouble paying the initial fine; you have to imagine they’ll have trouble paying additional fines. It’s plausible to posit that these firms’ business models are based on assigning unpayable fees to people who lack the sophistication, time, will or whatever to contest them. One might even say these predatory firms treat the long arm of the law as sort of lever on a juicer into which poor people are fed and squeezed to produce an endless stream of fees.

The incentives of the private companies do not, to put it mildly, appear well aligned with the interests of the public. More in our law enforcement for profit tag.

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Speed traps paved the way to corruption in tiny Hampton, Fla., critics say [CNN] More: Lowering the Bar.

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And goodbye to an Atlanta-based lab services business [Ed Hudgins, Atlas Business Rights Center] Law-enforcement-for-profit sidelight: according to owner Michael Daugherty, allegations of data insecurity at LabMD emanated from a private firm that held a Homeland Security contract to roam the web sniffing out data privacy gaps at businesses, even as it simultaneously offered those same businesses high-priced services to plug the complained-of gaps.

“An Oklahoma state senator has filed a bill to allow law enforcement officers to issue electronic citations for traffic, misdemeanor and municipal ordinance violations.” Sen. Al McAffrey, himself a former police officer, says approaching motorists’ cars is one of the more dangerous parts of patrol officers’ job. So why not let them just skip it, even if that also means skipping the opportunity for motorists to be notified of their legal jeopardy at once, see their accusers, have a chance to explain themselves, and so forth? “If they don’t have to approach vehicles during traffic stops to give people tickets but can simply email traffic violation citations directly to the district court clerk then they’re less likely to get into a dangerous altercation, the lawmaker said.” McAffrey’s S.B. 1872 would also attach a new $5 processing fee to the tickets, of which a portion would be shared with the ticketing officer’s department. [Insurance Journal, KOCO](& welcome Above the Law, Scott Greenfield readers)

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  • Under new Illinois law, third offense of tossing cigarette to ground will be a felony [Andrew Stuttaford]
  • “The New York Times calls for prosecutors to establish an ‘open file’ policy to combat prosecutorial misconduct.” [Nicole Hyland, LEF; New York Times; Radley Balko, whose column at the Washington Post has now launched]
  • “Three Arrests Illustrate the Impact of New York’s Silly Seven-Round Ammunition Limit” [Jacob Sullum]
  • Forfeiture reform on the agenda in Michigan? [John Ross/Reason, Institute for Justice, earlier]
  • Speaking of law enforcement for profit, more on the proliferation of fees and third-party collectors that can land minor miscreants in “debtors’ prison” [Fox News; related, Balko]
  • “Want to stop repeats of Columbine and Newtown? Deprive mass killers of the spotlight. Can the media do that?” [Ari Schulman, WSJ via @garyrosenwsj]
  • “She’s regretted the lie that sent him to prison ever since.” [NY Mag]

Long Island: “The head of Suffolk’s new Traffic & Parking Violations Agency on Thursday defended the controversial policy of charging an administrative fee even on tickets that are dismissed.” [Newsday]

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The Economist has a short piece on the unseemly business of probation and collections companies operating under government contract that leverage misdemeanors and petty fines levied on hapless citizens into larger ongoing obligations. Local police and sheriffs’ departments share in the booty as well as sometimes lending enforcement muscle. More: OC Weekly on collections in Orange County, Calif.

And Michael Greve is seen biting the steering wheel in response [Liberty and Law]

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The letters to persons who have written bad checks, which threaten jail, “bear the seal and signature of the local district attorney’s office. But there is a catch: the letters are from debt-collection companies, which the prosecutors allow to use their letterhead. In return, the companies try to collect not only the unpaid check, but also high fees from debtors for a class on budgeting and financial responsibility, some of which goes back to the district attorneys’ offices.” Moreover, “the ultimatum comes with the imprimatur of law enforcement itself — though it is made before any prosecutor has determined a crime has been committed.” [New York Times; commentary, Scott Greenfield, BoingBoing]

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His speech is titled “Economic Lessons from American History,” (printable PDF version) and one of the lessons has to do with loser-pays:

…if Jefferson’s decimal coinage concept was a good idea that quickly spread around the world, another idea that developed here at that time was lousy: the so-called American Rule, whereby each side in a civil legal case pays its own court costs regardless of outcome. This was different from the English system where the loser has to pay the court costs of both sides.

The American Rule came about as what might be called a deadbeat’s relief act. The Treaty of Paris (which ended the American Revolution) stipulated that British creditors could sue in American courts in order to collect debts owed them by people who were now American citizens. To make it less likely that they would do so, state legislatures passed the American Rule. With the British merchant stuck paying his own court costs, he had little incentive to go to court unless the debt was considerable.

The American Rule was a relatively minor anomaly in our legal system until the mid-20th century. But since then, as lawyers’ ethics changed and they became much more active in seeking cases, the American Rule has proved an engine of litigation. For every malpractice case filed in 1960, for instance, 300 are filed today. In practice, the American Rule has become an open invitation, frequently accepted, to legal extortion: “Pay us $25,000 to go away or spend $250,000 to defend yourself successfully in court. Your choice.” …

…policing the marketplace has long been considered a quintessential function of government. The reason for this is that when policing has been in private hands, self-interest and the public interest inevitably conflicted. The private armies of the Middle Ages all too often turned into bands of brigands or rebels. The naval privateers who flourished in the 16th to 18th centuries were also private citizens pursuing private gain while performing a public service by raiding an enemy’s commerce during wartime. In the War of 1812, for instance, American privateers pushed British insurance rates up to 30 percent of the value of ship and cargo. But when a war ended, privateers had a bad habit of turning into pirates or, after the War of 1812, into slavers.

Predictably, the American Rule has spread exactly nowhere since its inception at the same time as the decimal coinage system. There is not another country in the common-law world that uses it. … Few things would help the American economy more than ending the American Rule.

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Shelby County, Ala. judge Hub Harrington had some scathing words for the town of Harpersville and a private probation company over “debtors’ prison” treatment of local defendants milked for large fines and fees. [Birmingham News via ABA Journal] More on abusive fine extraction and privatization of law enforcement here, here, etc.

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One way to rein in some of the abuses — see this CNN story — would be to curb arbitrary impositions of “interest” at far higher than actual market interest rates. Very similarly, requiring the use of realistic rather than inflated interest rates would be one way to restrain tax-farming “probation” firms and other abusive privatization of law enforcement, much in the news lately, and also excessive damage awards in civil litigation (where “prejudgment” and “postjudgment” interest is often set at notional and absurdly generous levels.)

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A St. Louis lawyer has won big in contingency-fee tax collection by teaming up with class action firm Korein Tillery to challenge cellphone companies’ claims not to be subject to municipal taxes on landline telephone providers. At the same time he’s been town attorney for the suburban community of University City, which now finds itself in the position (with many other Missouri municipalities) of paying its share of $65 million in proposed fees. [Paul Hampel and Margaret Gillerman, "U.City lawyer wins big in class-action case", St. Louis Post-Dispatch, Jul. 23]

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Once again, the combination of contingency fees and law enforcement spells trouble: an article by Tresa Baldas in the National Law Journal reports that controversy is mounting over the activities of private firms that go after noncustodial parents’ child support obligations in exchange for a percentage share of the bounty (“Suits collecting around child support collectors”, Sept. 17, no free link). “Critics of the industry — many of them lawyers — claim that private collectors of child support are engaging in predatory practices, such as charging excessive contingency fees as high as 50%, and using aggressive collection tactics that run afoul of federal laws.” The private agencies escape the scrutiny of federal debt collection laws and have been operating effectively without regulation, but state lawmakers are now moving to fill the gap, with 13 states having passed laws intended to protect the services’ clients (if not always their adversaries) by capping fees, prohibiting the agencies from collaring state-directed payments, and giving clients more leeway to withdraw from contracts.

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Mississippi state auditor Phil Bryant “has issued a demand letter for recovery of the $14 million in legal fees paid by MCI to two law firms in the wake of the state’s $110 million settlement with MCI in a 2005 tax fraud case.” The Langston and Lundy & Davis law firms “were hired as outside counsel to represent the state by current Attorney General [Jim] Hood. Langston has been identified as one of Hood’s largest campaign contributors, a reality that Langston doesn’t deny.” The two firms were then cut into the $14 million as part of the negotiated settlement, but Bryant says the money belonged to the public and should have gone through the appropriations process. The twist: to enforce the state’s rights in the matter, Bryant will apparently have to call on legal support from the office of AG Hood himself, and you have to wonder how cooperative he’ll be. (Sid Salter, “Langston: State asks recovery of legal fees”, Jackson Clarion-Ledger, Sept. 23; “State parties bring smack down”, Biloxi Sun-Herald, Sept. 23). More on the furor: Point of Law, May 13 and May 23, 2005.