Collection of Monetary Penalties Gets National Attention

While court orders establish a variety of sanctions in criminal and civil cases, monetary penalties are clearly understood and measurable. In an article that appeared in hundreds of newspapers and magazines last Sunday, Associate Press (AP) reporters Martha Mendoza and Christopher Sullivan, put the national spotlight on one of the ten court performance measures of the CourTools: collection of monetary penalties – payments collected expressed as a percentage of total monetary penalties imposed by a court.

Measure 7 of the CourTools assesses how well a court takes responsibility for the enforcement of its orders requiring payment of monetary penalties. A secondary yet important aim of this measure is evaluating the efficiency of the court's internal processes for collecting and distributing monetary penalties including civil damage awards, child support, traffic and criminal fines.

In its study, the AP examined federal financial penalty enforcement across the nation and found (altough the study reports on federal efforts, its results have relevance for state courts as well):

--The Federal Government currently is owed more than $35 billion in fines and other payments from criminals and in civil cases -- almost five times the amount 10 years ago.

-- In 2004, federal authorities ordered $7.8 billion in 98,985 fines, penalties and restitution, but collected less than half. White-collar crime cases account for the largest amount of uncollected debt. The Government Accountability Office found that just seven percent of restitution in such cases is paid.

-- Success rates vary region to region, and from agency to agency responsible for collection.

-- Some of the low enforcement rates are due to officials' failure to keep close track of who owes what under a decentralized federal collection system.

-- Another major factor in the high rate of uncollected fines and penalties was a change in federal law. A decade ago, Congress mandated that fines be imposed regardless of defendants' ability to pay, which has added tremendously to outstanding debt. The 1996 Victims Mandatory Restitution Act requires judges to order payments regardless of a defendant's ability to pay.

In my view, the AP coverage highlights two important points for those us who are measuring (and those considering doing so) compliance with monetary penalties imposed by courts: (1) the main purpose of the measure is not to determine revenue generation, but rather to assess a court’s (along with that of other parts of the justice system) success in enforcing its orders; and, (2) some fines and fees are easier to collect than others, a factor that should be identified in the measurement of compliance with monetary penalties.

Government Integrity and the Enforcement of Court Orders

When a judge orders someone to pay a fine, the public has a reasonable expectation that it will be done. The issue is about more than loss of revenue. Lack of compliance in paying court fines and fees denies the Government revenues and, more important, calls into question the authority and effectiveness of the court and justice system. While the impact in terms of dollars is significant, the greater damage is inflicted by the erosion of our system of government from the loss of respect for authority. "Fines and orders to pay restitution are an important part of how we punish convicted criminals. When so little effort is made to collect that money, we allow convicted criminals to avoid punishment for their crimes, weaken our criminal justice system and ultimately deny justice to the victims of crimes," said Senator Byron Dorgan, North Dakota, who has pressed for closer scrutiny for years.

Blood, Turnips and Default Risks

Natalie Collins, a spokeswoman for the U.S. Attorney's office in Las Vegas, Nevada, is not surprised that uncollected debts have increased steeply since the 1996 Victims Mandatory Restitution Act was passed. "These people come out of prison with a huge restitution debt and if they can't pay, they have that judgment just hanging over them," she said. "We can't squeeze blood out of a turnip."

Ability to pay clearly contributes to a court’s compliance rate. Even vigorous and otherwise effective collection programs and processes may yield poor results with those who simply can’t pay. Sometimes even as financial penalties are being ordered, it's obvious that the money is never going to be paid.
"I've had clients who have had millions of dollars of restitution imposed, and every one in the courtroom knows that this person will never be able to pay," said Mike Filipovich, a federal public defender in Seattle.

What does this mean for a court’s measurement of compliance with monetary penalties? Should the measurement of compliance with monetary penalties include indicators of ability to pay? In the private sector, such questions are self-evident. Commercial lenders and bond issuers routinely evaluate default risk – the risk that individuals and companies will be unable to pay -- as a part their standard underwriting practices. The potential losses can be large and measures of default risk are essential to mitigate them.

Similarly, as part of its measurement of compliance with monetary penalties, courts could evaluate default risk at the time of the imposition of the penalty. This could be done subjectively or by some standard criteria. At least in misdemeanor cases, courts routinely evaluate offenders’ abilities to pay when they convert monetary penalties into days of community service or jail time in lieu of monetary penalties.

Compliance rates could be calculated and reported, for example, in disaggregated form in four levels of default risk – very high, high, moderate and low. A court’s overall compliance rates across all four levels of risk might be 33.4 percent, and disaggregated, 1.2, 12.2, 32.8 and 87.2 for the four individual default risk levels, respectively. At the very least, these figures may help a court to deflect criticism that it is not doing enough and to leverage additional resources (e.g., funds to outsource collections of moderate and high default risk penalties to private collection agencies).

Accountability, Responsibility and Differentiated Compliance Management

Court executives and managers understandably are dismayed when they are held accountable for things they cannot do – for collecting fines and fees from individuals and companies that constitute a high default risk – especially when they see themselves with little responsibility and even less control over collections. Nonetheless, like it or not, state courts – along with their justice system partners – will be held responsible for the enforcement of their orders. Who else is there? The public, legislators and other stakeholders are unlikely to parse responsibilities in ways that are satisfactory to court executives.

The measurement of success in achieving compliance with monetary penalties in terms of different levels of default risk will provide state courts with the means to improve their internal management of collection and compliance programs. Review of baselines and trends at various levels of default risk can help courts establish differentiated goals, performance targets, programs and processes. Performance data disaggregated by default risk of criminal offenders and companies with civil damage obligations can also help the courts shape larger public policy issues about whether and how the courts should bear responsibility over compliance with orders that will not be obeyed.

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