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October 1991
TAKING THE BOUNCE OUT OF BAD CHECKS
By
Vinse J. Gilliam
Senior District Attorney Investigator
Ventura County, California, District Attorney's Office
Today, banking officials estimate that about 1 percent of
the 50 billion checks written in the United States each year are
returned due to nonsufficient funds (NSF). This figure
translates into approximately 500 million NSF checks annually,
1,369,860 daily, 57,075 per hour, or roughly 15 every second.
In many jurisdictions, NSF checks are so numerous that the
problem overwhelms local law enforcement agencies. The sheer
volume also restricts the type of NSF checks that can be
investigated and prosecuted effectively.
Traditionally, only those individuals who are prolific or
pass NSF checks for large dollar amounts are pursued. And,
restitution is available only for those victimized individuals
or businesses that are included in the criminal prosecution or
are able to pursue a civil remedy successfully. As a result,
many victims simply stop submitting NSF checks to local law
enforcement agencies.
In Ventura County, California, conservative estimates have
placed the business community's losses due to NSF checks at more
than $3 million per year. In a non-cash-carrying society,
accepting checks for goods and services has become a requirement
for conducting business. However, when an accepted check marked
"NSF" is returned by the bank, the business incurs a double
loss--one for the purchased item and another for the cost of
trying to obtain restitution. As a result, businesses are
forced to raise prices in an attempt to cover their losses,
thereby passing the cost of NSF checks on to the customer. This
article will address how Ventura County, California, attacked
the pervasive problem of NSF check writers successfully.
THE RESTITUTION/DIVERSION PROGRAM
In order to combat effectively the NSF check problem in
Ventura County, the district attorney's office established an
NSF Check Restitution and Prosecution Unit, which became
operational in February 1986. This unit, staffed with one
district attorney investigator, two investigative assistants,
and four collections officers, formulated and operated a unique
restitution/diversion program.
Ventura County's NSF Check Program begins with processing
all NSF and account-closed checks directly into the district
attorney's office, using an official complaint form. Then, in
each case, a decision is made as to whether the offense is a
felony or misdemeanor.
Cases involving felony conduct are referred directly to the
appropriate law enforcement agency for investigation, and if
possible, returned to the district attorney's office for
prosecution. If the NSF check constitutes a misdemeanor
offense, it is earmarked for deferred prosecution and
restitution efforts.
At this point, the unit prepares and sends letters to NSF
check writers, giving them the opportunity to make full
restitution and pay a $25 administrative fee for each NSF check.
If these individuals fail to respond to the first letter, a
second letter is sent. This letter, in addition to requesting
full restitution and a $25 administrative fee for each NSF
check, states that the addressee must attend a 4-hour diversion
class for which there is a $40 fee.
CHECK DIVERSION CLASS
The NSF check diversion class, similar to existing classes
for traffic and alcohol offenders, emphasizes prioritizing
resources, value orientation, and how to balance a checkbook
accurately. Its curriculum, reviewed and approved by the
county's personnel department, is taught by certified private
instructors.
Since the inception of the NSF Check Program, a total of
1,422 individuals have attended the diversion class. The
success of this educational segment can be demonstrated best by
the fact that fewer than five of the class participants
continued to write NSF checks and were criminally prosecuted.
RESTITUTION FUNDS
All restitution funds received directly from NSF check
writers as a result of the letters are deposited through the
county auditor's office. The victim merchants then receive
restitution via a county warrant issued by this office.
Handling restitution in this manner serves as a deterrent and
prevents the NSF Check Unit from issuing a warrant for the bad
check writer's arrest unnecessarily.
If the NSF Check Unit is unable to obtain restitution, the
district attorney investigator evaluates the case and makes a
decision regarding criminal prosecution. Where criminal
prosecution is supported, the investigator completes the
necessary followup and prepares the case for filing. This
eliminates the need to refer the case back to the local law
enforcement agency. If criminal prosecution is not possible,
the NSF check is returned to the victim merchant, and the
district attorney's small claims advisor assists the merchant
with obtaining a civil judgment.
GOALS AND OBJECTIVES
Ventura County's NSF Check Program targeted four primary
goals and objectives. The program:
* Provides a central clearinghouse for all NSF/account
closed checks
* Establishes a deferred restitution/prosecution program
that allows NSF check writers the opportunity to pay
restitution in lieu of prosecution
* Ensures timely prosecution of NSF check writers who
failed to make full restitution, and
* Is self-sufficient based on administrative and diversion
fees collected from the NSF check writers.
At first, enabling legislation authorized the Ventura
County District Attorney's Office, along with six other district
attorneys' offices, to institute this program as a 1-year pilot
project. (1) However, at the conclusion of the pilot project,
the programs results were so noteworthy that the California
Legislature amended the legislation to allow the district
attorney in each of California's 58 counties to establish similar
deferred prosecution programs. The continued success of the
Ventura County NSF Check Program throughout the first 5 years of
operation has proved that it provides a viable and
cost-effective way to attack the spiraling NSF check problem.
PROGRAM SUCCESSES
During the program's first 5 years of operation, 3,811
individuals and merchants submitted 53,748 NSF and account-closed
checks to the NSF Check Unit. These NSF and account-closed
checks were written by 14,515 different people. During the same
period, the NSF Check Unit collected and returned over $2,195,500
in restitution on over 25,400 checks to local victim merchants.
Each year, the amount of restitution to victim merchants has
steadily increased. During 1990, restitution averaged $47,000
monthly.
Of the 53,748 NSF and account-closed checks submitted to
the NSF Check Unit, followup investigation has been completed on
a total of 48,412 checks. Fifty-two percent (25,174) of the
investigated checks were cleared by the check writer making full
restitution through the diversion component of the NSF Check
Program. However, 32 percent (15,492) of the investigated
checks were not cleared, and the check writers failed to
participate in the diversion phase of the program. As a result,
felony and misdemeanor arrest warrants were issued against these
1,700 individuals. To date, 738 of these offenders have been
apprehended and successfully prosecuted. The sentences imposed
in these cases have ranged from probation and restitution on all
checks to a 5-year-8-month term in State prison. Court-imposed
restitution in these cases represents an additional $713,300.
The remaining 15 percent (7,262) of the checks submitted to
the NSF Check Unit were referred to the appropriate law
enforcement agency for investigation or returned to the victim
merchants because either: 1) The check did not meet the
criteria for the NSF Check Program, 2) the NSF Check Unit was
unable to obtain voluntary restitution from the NSF check
writer, or 3) criminal charges could not be initiated because
the criminal intent to defraud could not be proven beyond a
reasonable doubt.
COSTS VS. REVENUE
Due to the lack of resources, the Ventura County Board of
Supervisors approved the creation of the NSF Check Program on
the condition that the program would be self-supporting through
fees obtained from those NSF check writers who elected to
participate in the diversion program. On the average, the NSF
Check Unit collects $14,300 in fees each month, while its
monthly operating expenses have averaged $12,600.
Like any new business, the operating expenses during the
program's first year exceeded the revenue collected. However,
the 5-year average indicates that the revenue received from the
restitution/diversion fees surpassed the programs operating
expenses by 13.2 percent. This surplus allows the district
attorney's office to donate over $100,000 to the Ventura County
general fund to help supplement other county programs.
BENEFITS TO LAW ENFORCEMENT
The NSF Check Program has largely eliminated the NSF check
problem for law enforcement in Ventura County. Because the
district attorney has county-wide jurisdiction, all NSF and
account-closed checks can be collected, combined, investigated,
and prosecuted by one agency. Police and sheriff's personnel no
longer have the burden of spending valuable hours deciding which
checks are worthy of criminal investigation, determining if
other agencies have similar NSF checks from the same person, and
deciding which agency should conduct the investigation. Now,
local law enforcement can devote additional resources to other
white-collar crimes, such as check and credit card forgeries and
computer frauds. Only felony NSF check cases are referred to
local law enforcement agencies for followup investigation.
The NSF Check Program has also saved deputy district
attorneys countless hours of court and case review/preparation
time. If restitution had not been obtained, thousands of
additional court cases, both criminal and civil, would have been
processed through the criminal justice system. The additional
expenses associated with the filings of these cases would have
amounted to hundreds of thousands of dollars.
PUBLIC INFORMATION
A continuous public information campaign was initiated for
the NSF Check Program with a twofold purpose: 1) To inform the
business community of the existence of the NSF Check Program,
and 2) to capitalize on the deterrent effect of the NSF Check
Program by making potential NSF check writers aware of the
consequences of writing a bad check. To help meet these goals,
the NSF Check Unit developed a handbook for businesses, which
includes information on the following topics:
* NSF Check Program guidelines
* Safeguards against taking a bad check
* Steps to follow when accepting checks
* How to identify forged/counterfeit checks
* What to do with a bad check
* NSF check report, and
* Suggested Ventura County check policy.
The NSF Check Unit also designed NSF check warning signs
and distributed them to local merchants. These warning signs
alert customers to the fact that passing a bad check with the
intent to defraud is a crime. The customer is also put on
notice that the business reports NSF check writers to the
district attorney's office. Merchants who have posted these
warning signs in their front windows or next to their cash
registers have reported a marked decrease in the number of NSF
checks received from their clientele.
In addition, district attorney staff members routinely
address business and community groups in an effort to inform
them about the benefits of participating in the NSF Check
Program. Regular press releases and annual reports are also
distributed to increase citizen awareness and to deter potential
NSF check writers. Copies of the NSF handbook, NSF check
warning signs, and NSF check reports are also available at all
Chamber of Commerce offices and local law enforcement stations.
NSF CHECK ROUNDUP
In a continuing effort to deter potential NSF check
writers, the Ventura County District Attorney's Bureau of
Investigation conducted a NSF check round-up in March 1990.
Over a 2-day period, 15 teams of district attorney investigators
made a concerted effort to execute a substantial portion of the
outstanding felony and misdemeanor NSF check warrants. At the
conclusion of the roundup, 29 suspects had been arrested or had
surrendered to the court. The publicity surrounding the NSF
check roundup also had a positive impact on the number of checks
cleared in subsequent months by NSF check writers submitting
voluntary restitution to the NSF Check Unit.
CONCLUSION
The success achieved by the Ventura County District
Attorney's NSF Check Restitution and Prosecution Unit has far
exceeded its original goals. The business community has shown
overwhelming support, and the proactive stance has allowed a
timely financial recovery for many victims, as well as educating
the public on these crimes. Because local law enforcement has
been relieved of the task of investigating NSF checks,
detectives have been able to reallocate more of their
investigative resources to check and credit card forgeries and
other types of white-collar crimes.
However, the most innovative and impressive part of the NSF
Check Program is the fact that it is completely self-supporting
and operates at no cost to local taxpayers or participating
victim merchants. This factor makes the Ventura County NSF
Check Program one of the few criminal justice programs that is
cost-effective and revenue offset. The large dollar amount of
restitution returned to victim merchants, coupled with the fact
that the entire program is financed by the NSF check writers,
makes this a truly innovative government program that should be
encouraged and supported, especially in this time of shrinking
resources.
FOOTNOTE
(1) The creation of this program was made possible by the
passage in 1985 of Senate Bill 1108, which created California
Penal Code Sections 1001.60 - 1001.67.