Ethically Compromised Bail Investments

Endeavour Capital invests in Aladdin Bail Bonds, the largest bail bonds company in the country. According to estimates, Aladdin is backing at least a billion dollars in bail products.

Bail bonding is an ethically troubled and racist practice – only used in the U.S. and Philippines. Black, Hispanic, and American Indian individuals are twice as likely to be incarcerated for lack of ability to make bail. More than one-third of people in local jails are unable to make bail, trapping them in the system.

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Even people found innocent not long after being arrested, like Carlos Valiente of San Francisco, still often end up owing money to Aladdin.

As a May 2017 report from the ACLU Campaign for Smart Justice and Color of Change explains, the “bail industry has corrupted our constitutional freedoms for profit.”  

Like payday lenders that prey on families in crisis, bail companies profit from an imbalance of knowledge, power, and a lack of options that can trap families into cycles of debt so that even though they are not jailed, they are not free…for-profit bail companies keep the premium they’ve collected—even when charges are dropped or an arrest is deemed wrongful—collecting millions from innocent people.  (ACLU x Color of Change)

Aladdin’s Glassdoor reviews from current and former employees allege issues ranging from mismanagement to racism to claims that the company “encourages you to lie to clients [and] to fleece those in need.”


Aladdin Plays a Central Role in Blocking Reform

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Because of bail bonding’s questionable ethics, community leaders are trying to eliminate or improve the commercial bail bonding industry. Aladdin has worked hand-in-glove with the American Bail Coalition to stop reform in Oregon, California, Nevada, and Washington.  

The former President of the American Bail Coalition served on the National Private Enterprise Board of Directors of the American Legislative Exchange Council. ALEC has, in turn, partnered to support the for-profit bail industry, and, according to the ABC’s newsletter, “During its two decade involvement with ALEC, ABC has written 12 model bills fortifying the commercial bail industry.”


Aladdin Agents Face Scrutiny

In 2015, Aladdin was the focus on an investigation, along with six other companies, by the California Department of Insurance and the Santa Clara County District Attorney’s office.  As a result of the “Operation Bail Out” investigation, 30 bail bonds agents were booked into jail.

California Insurance Commissioner Dave Jones said at the time, “Complaints against bail agents for unfair business practices and alleged illegal activity have been increasing steadily.”

Aladdin Bail Bonds was also the subject of a class action lawsuit alleging that the company illegally withdrew funds from people’s bank accounts. A settlement was reached in the case in 2016.

In March 2015, a bounty hunter hired by Aladdin killed a man who had skipped a court date on a drug charge in Idaho.


Recent Mainstream News Coverage Highlights Problems with “Commercial Bail”, as practiced by Endeavour Capital’s Aladdin Bail Bonds 

Will Increasing Scrutiny on Industry Raise Questions for Endeavour Investors?

The New York Times’ recent article on the controversial world of commercial bail bonds has a headline that many customers of Aladdin Bail Bonds would be likely to understand, “When Bail Feels Less Like Freedom, More Like Extortion.”  The NYT article explained that, in the now $2 billion bail industry, bail bondsman have become “the payday lenders of the criminal justice world, offering quick relief to desperate customers, at high prices.”

One of Aladdin’s largest investors is Endeavour Capital. Earlier this spring, when we launched High Cost Endeavour, Endeavour’s Stephen Babson responded in the Portland Business Journal and assured investors that “Aladdin is a respected bail bonds provider,” but didn’t attempt to defend the company’s practices in detail.  

That is understandable. Defending the industry is a tough job. Given the cash bail industry’s business model is to profit off of those accused of felonies regardless of their guilt, innocence, or ability to pay, it’s easy to agree with the New York Times that “pretty much everyone who spends any time examining the American system of secured cash bail comes away with the same conclusion: it’s unjust, expensive and ineffective, even counterproductive.”

Following the New York Times expose, questions are increasingly being asked about the commercial bail industry and whether companies like Aladdin should really be “respected.”   

With the help of capital from Pacific Northwest-based Endeavour Capital, Aladdin bail bonds has expanded significantly.  But, while the expansion may be good news for investors, the increasing public concern about the nation’s criminal justice system and the role of commercial bail may signal increasing investor risk.

The cash bail industry affects people accused of felonies and their communities, a burden that falls disproportionately on African-Americans who are singled out for arrest at a rate 10 times higher than whites. The extractive costs of cash bail explain why 60% of the Americans in jail have not been convicted of a crime.

The cash bail industry has drawn increasing scrutiny and attention over the past few years. For example, the Color of Change coalition wrote a withering report on the cash bail industry in 2017, the Movement for Black Lives made cash bail part of their curriculum on the American justice system, and Equal Justice Under the Law has directly challenged the cash bail industry’s constitutionality in court since 2016.

So why does cash bail still exist? It has a lot to do with Aladdin Bail Bonds, the largest firm in the country –along with Aladdin’s owner Endeavour Capital. Aladdin donated $49,900 against bail abolition efforts in California, hires lobbyists in statehouses across the country to preserve its industry, and occasionally lobbies alongside the American Bail Coalition against criminal justice reform.

As detailed elsewhere in the website, Aladdin has fallen short even by the standards of existing laws. Aladdin settled a class action lawsuit for stealing funds from peoples’ bank accounts in 2016. Aladdin bail agents were arrested in a sting in Santa Clara, CA, one that focused on cash bail companies bribing inmates, employing prison informants, and employing a bounty hunter that was a convicted felon.

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What Does This Mean for Endeavour Capital and Institutional Investors?

As more elected leaders, media organizations, and community leaders are shining a light on the problems in the commercial bail sector, investors in Endeavour/Aladdin may begin to reexamine their choices and consider whether the increasing spotlight on abuses will bring increasing reputational and operational risk to companies operating in this industry.