New Jersey Department
|For Immediate Release: November 29, 2004||
For Further Information:: Mary Cozzolino - (609) 292-5064
Commissioner Cites Capital Bonding Corporation
and Former CEO for State Law Violations
TRENTON – Continuing the Department’s focus on consumer protection, Banking and Insurance Commissioner Holly C. Bakke today ordered that Capital Bonding Corporation and its founder and former Chief Executive Officer Vincent Smith pay fines exceeding $1.2 million for violating state insurance laws. The order also revokes Smith’s and Capital Bonding Corporation’s authority to do business in New Jersey.
The commissioner’s order is the result of charges stemming from the Department’s extensive investigation of Capital Bonding’s business procedures. The Department cited Smith and Capital Bonding for failing to pay a significant number of forfeitured bail bonds. Within the same complaint, the Department also found that Capital Bonding and Smith issued payments to the New Jersey Bail Fund between 1999 and 2001 which were returned due to insufficient funds.
The Department found that Smith and Capital Bonding made agreements with surety companies that required Capital Bonding to make payments to New Jersey courts when defendants failed to appear for court appearances. Smith and Capital Bonding repeatedly failed to pay on bail bond forfeiture judgments. These actions contributed to the insolvency of several surety companies and a growing debt to the New Jersey Bail Fund.
Proceeds from the New Jersey Bail Fund are split between county and state government. When the integrity of the system is protected it strengthens the ability of the courts to administer justice and also contributes to the lessening of the tax burden for local taxpayers.
“The Department has taken this action against Smith and Capital Bonding for reasons not limited to fraudulent or dishonest business practices and to relieve the strain put on New Jersey residents,” Commissioner Bakke said. “Capital Bonding’s actions over the course of the past few years demonstrates its untrustworthiness and financial irresponsibility in the conduct of insurance business in this state.”
Recently, in a measure to strengthen consumer protections, New Jersey law was amended to require any bail bondsman wishing to conduct business in New Jersey to qualify and apply for an insurance producer license. As of December 31, 2003, all limited insurance representative registrations were terminated. Before this new regulation, companies need only register with the state. At the time, the Department also denied Capital Bonding’s application to be licensed in the state.
The Department found that Smith and Capital Bonding had improperly withheld, misappropriated and converted monies received in the course of doing insurance business. Smith and Capital Bonding committed fraudulent acts through failure to pay judgments and bail forfeitures under the terms of program administrator agreements with various surety companies.
A summary of the commissioner’s Final Decision and Order are as outlined:
“The revocation of Smith’s and Capital Bonding’s registrations was an appropriate measure to protect the public interest from such willful, repetitive, irresponsible, untrustworthy and fraudulent behavior and to serve as a deterrent to others,” Commissioner Bakke added. “The actions that I’ve ordered help promote a climate where consumers are protected from practices that violate their rights under state insurance laws.”
“These actions against Smith and Capital Bonding promote more responsibility in the bail bond system. It ensures that bail bondsmen and their surety companies properly underwrite risks and take appropriate measures to apprehend fugitives,” Bakke added.