Dog Inc. inside the business of bail bonds and bounty hunting.
By Choo, David K.
Publication: Hawaii Business
Date: Thursday, June 1 2006
CREDIT TO http://www.allbusiness.com
It’s a “down” day at Da Kine Bail Bonds. The camera crew from the reality television show “Dog The Bounty Hunter” is idle for the next two weeks, and star Duane “Dog” Chapman and his buxom hail-bondsman wife, Beth Smith, finally have a chance to catch their breath and get some work done. But the phone won’t stop ringing. On and on, one call after another, like a radio call-in contest, or some kind of 24 hour help line. It may be a little of both.
On a typical day, Da Kine Bail Bonds receives more than 1,000 calls, several dozen of which are from clients checking in or potential clients asking for help to track down a wayward son or daughter or an enemy. The balance of the calls is from fans hoping to chat with Dog, Beth or Leland, Chapman’s son and bounty-hunting sidekick.
In addition to the telephone traffic, more than 100 fans and gawkers stop by Da Kine’s Queen Emma Street office over the course of a day. Many buy a Dog T shirt or tank top, but most just press their faces against the storefront window, or sneak out back, looking for a quick photo op with the bounty-hunting family.
The activity has gotten so heavy that Da Kine’s office manager and staff of one, Wesley Yoon, has been lobbying for a title change to “opener of door” or “T-shirt seller.”
“We get about 50 or 60 fan calls for every one bail bond call. And the tourists traffic is just mind-boggling,” says Beth. “We’re running a business, so we can’t change the phone number or close our doors. Right now, we’re a tourist attraction during the day and a bounty-hunting business at night.”
SUCCESS CAN BE A BITCH
The past two years have been very good to the Chapmans. Their television show, “Dog The Bounty Hunter” (think “Gunsmoke” meets “The Osbournes”), which chronicles the trials and tribulations of the criminal-chasing Chapman and his close-knit family/posse, is in its third season. The show has been a sudden, if unlikely, hit. When it premiered two years ago, “Dog The Bounty Hunter” drew nearly 3 million viewers, the biggest series premiere ever for cable network A&E. According to Nielsen Media Research. during its first four weeks, the show attracted 10.4 million viewers, sending it on its way to becoming cable television’s highest rated reality show. Variety also reported that, by season two, “Dog” was credited with helping push the once staid A&E from the Geritol generation to Gen X and Y, increasing its audience of adults ages 25 to 54 years old by 20 percent, 18 to 49 by 32 percent and 18 to 34 by 61 percent.
Halfway through its third season, “Dog'”s bite is equal to its bark (and Chapman can bark a lot). It now draws more than 4.2 million viewers an episode, making it the No. 1 cable program in its time period among adults ages 18 to 34 years old, 18 to 49 and 25 to 54. Last April, A&E officials decided to renew “Dog” for a fourth season, a move that all but guarantees syndication for the show and ushers the Chapmans into a financial promised land.
It seems like a world away from the mom-and-pop operation that was teetering on the verge of bankruptcy until Dog tracked down and apprehended Max Factor heir and fugitive Andrew Luster in Mexico. The 2003 tabloid case landed Chapman in a Mexican jail, but, when he was released four days later, he emerged as America’s favorite bounty hunter.
“You are a flash in the pan if you get one or two seasons under your belt. You’re OK if you have three,” says Chapman. “But you’re in, bruddah, if you get to four. Five or six seasons and you’re making real money. With the TV show, we are finally beginning to turn a profit. I hate to say this, but I was a legend in my own mind. I knew I could make it, but I also knew that I needed something else besides bounty hunting. Wesley is our bookkeeper, and he was like, ‘Boss, we aren’t making it!’ I told him, ‘Wesley, we can do it, if we can get a television show.’ And, of course, we did. On the other hand, there wouldn’t be a television show if it wasn’t for Da Kine Bail Bonds.”
However, what’s good for television isn’t necessarily good for the bail bond business bottom line. Beth, who runs Da Kine Bail Bonds’ operations, has just reviewed their 2005 tax returns and she’s pissed. Season two was hard on Da Kine Bail Bonds. The business posted huge losses. Gross revenues, which Beth declined to disclose, were down 60 percent and expenses were through the roof. Every time she gathers her posse together in Honolulu for a hunt, it costs her $1,500. Of course, Mainland hunts cost more.
In 2005, Dog caught between zoo and 250 fugitives, down from the 300 to 500 he caught before the television show started shooting. Approximately half of his bounties were Da Kine clients. This decreased activity has actually been good for business, since Dog doesn’t collect on any of his bounties. He considers taking criminals off the streets a public service,
The problem is that the Chapmans just aren’t in the office enough. The television show shoots year round, on a three-weeks-on and two weeks off schedule. As a result, in zoos, Beth wrote only 20 bonds a month, a fraction of what she used to write. Of course, when the Chapmans are in the office, they have to deal with the phone and foot traffic.
Season three has had additional challenges. Beth’s father, who was integral to the Chapman’s Colorado operations, passed away earlier this year. The couple also spent weeks fighting a bill before the state legislature that would have prohibited anyone convicted of an offense in which a dangerous weapon was used from being a bounty hunter. (In 1976, Dog was convicted of felony murder). In addition, the Chapmans are planning a gala wedding on the Big Island in May, and the network will step up Dog’s shooting schedule, filming two seasons in one year.
“If you detect a little hostility in my voice when we go out on our hunts, it’s because I am,” says Beth. “I’m irritated by the fact that we have to spend all this money to hunt this guy down when all he had to do was call us up. Financially, bounty hunting does nothing for business.”
IMAGE IS EVERYTHING
While it is commonly associated with the Wild West, the bail-bonding system actually goes back as far as the Middle Ages, when suspected criminals were released into the custody of a family member or a friend. The third party became a surety, someone who would ensure the jailer or village council that the defendant would show up for trial or punishment. If he didn’t, the surety would take his or her place. The system offered a very strong incentive to keep tabs on wayward errant defendants.
Surety evolved into a financial system sometime in the 18th century. A hundred years later, as cities grew larger and more complex and places to hide multiplied, the professional bounty hunter emerged.
“The origins of the bond system really tell you a lot of how and why it works today,” says Dr. Eric Helland, a Claremont-McKenna College economics professor, who co-wrote a 2004 study on the economic efficacy of the bail-bonding industry. “In actuality, the defendant is never really released from prison. You are released into my custody The idea is that I’ll be able to track you down if you run, because I know you and it is my head on the line now. In the Middle Ages, that was literally the case.”
The modern bail-bonding system isn’t as punitive as the old days, but it still has some powerful incentives built into it: A bond agent pays the bail of a felony defendant awaiting trial, guaranteeing his or her appearance in court and releasing him or her from jail and, technically, into the agent’s custody. In return, the agent charges the defendant a fee of 10 percent of the bail, usually paid in a combination of cash and property. Underwriting the agent’s bond is a large insurance company, which charges the agent a portion of the m-percent fee. If everything goes right, money flows up and down this indemnity chain. However, if the defendant runs, or “skips,” as they say in the industry, a chain reaction is set off. The court’s bond will always be paid, thanks to the insurance company, but the bond agent faces massive losses if he or she is unable to apprehend the defendant. Enter the loss-prevention agent, the bounty hunter.
Therefore, the foundation of a good bail-bonding business isn’t necessarily built upon the ability to catch skips. Rather, a successful company is one that prevents clients from running in the first place. Besides choosing their clients carefully, effective bond agents also have to do a fair amount of babysitting, checking up on their charges on a regular basis and even making wake up calls on the defendant’s court day.
“These guys [bail agents] are very clever. They’re street smart and are good judges of human nature,” says Helland. “They can quickly evaluate the flight risk of these people and they are very good at it. A good bond agent isn’t much different from someone who writes up malpractice or auto insurance policies. By in large, the bail bond industry isn’t about kicking in doors or running around with weapons. That makes good television, but the reality is much more mundane.”
This is not to say that the bounty hunter isn’t an important component of any bail-bonding business. While he or she accounts for little or no cash flow, the “recovery agent” does provide things that are nearly as important: credibility and image. “Bail bondsmen will have a story about how they tracked someone across the country and hauled them back to their office,” says Helland. “Even though they may have lost a ton of money doing so, they’ll tell that story over and over. And you know who they’ll tell it to? Their prospective clients. No one wants the reputation of being someone who won’t track you down.”
A DOG-EAT-DOG WORLD
The bail bonding industry is large and growing. Depending on which study you subscribe to, the amount of penal liability in the United States is between $7 billion and $10 billion, with 14,000 bail agents and approximately 15 insurance companies collecting 10 percent. According to Bill Kreins, vice president of Safety National Casualty Corp. and contact for the Professional Bail Agents of the United States, the industry is growing at 13 percent to 15 percent per annum. While criminal activity has been on the rise, the growth rate is largely due to rapidly rising bail schedules instituted by courts around the country.
“It’s a tough business, but it’s not so tough if you do it right,” says Kreins. “You don’t write every bail that walks in your door. For the ones that you do write, you can minimize your losses with the collateral you’re holding. But still, the business isn’t for the faint of heart.”
According to Kreins, of the too bonds that most bondsmen write, about 90 percent make their court dates without any problems. The remaining 10 percent has to be located. Many of these wayward souls have just forgotten about their court dates or have overslept. Some are in the hospital or have died. Others have run. Kreins estimates that, on average, bondsmen have to pay 1.5 bonds for every 100 they write. The Chapmans are below that industry standard, with three out of 10 of their clients running. However, according to the Chapmans, Dog always gets his man, so Beth rarely ever pays a bond.
The razor-thin margins may make bail bonding one of the toughest ways to make a living, but they also make the industry an important cog in the nation’s justice system. In their study “The Fugitive: Evidence on Public Versus Private Law Enforcement from Bail Jumping,” co-authors Helland and Alexander Tabarrok found that people released to commercial bond agencies were 28 percent more likely to show up for court. If they did choose to run, they are 50 percent more likely to be caught if they are chased by a bounty hunter. Every year, bounty hunters catch about 25,000 to 35,000 fugitives.
People on the brink of bankruptcy make dogged pursuers, and municipal police departments are both understaffed and overwhelmed by their own duties. According to a February 2006 story in The “Honolulu Advertiser,” the Honolulu Police Department and the state’s Sheriff’s Department Division had a combined backlog of 61,000 arrest warrants. The bail bonding system is an effective (and was probably the first) form of government outsourcing.
In Hawaii, the bail-bonding industry is largely unregulated, so accurate statistics are unreliable and hard to come by. There are approximately eight bail-bonding businesses in the Islands, which fall under the purview of the Department of Commerce and Consumer Affairs’ Department of Insurance. Because they are surety insurance agents, they are subject to the same licensing requirements as any other insurance agents. The number and value of bonds that these agents write is unclear, because they aren’t separated out from any other surety bonds. According to insurance commissioner J.P. Schmidt, there were $23 million in surety bonds written in 2003. Most of them were written by the construction industry, to ensure the delivery of building materials.
Beth Smith says that Da Kine Bail Bonds and its five sister bail-bond offices in Hawaii and Colorado wrote approximately $10 million in bonds in 2005. Their 10 percent fee gives the business approximately $1 million in gross revenues, but the business, which has a total of 15 employees, only receives 60 percent of the fee. It pays out the rest to its insurance company and the courts. In addition, every time a client skips, besides bounty hunting expenses, Beth has to hire a lawyer at $250 a pop.
“We’re not rich people,” says Dog. “Before the show, I didn’t have a nice car or a boat. Today, I still don’t have a nice car or boat. It’s always been about feeding my kids and sending them off to school.”
Of course, there is more to Dog Corp. than just the bail bonding business. A&E reportedly paid the Chapmans $2.6 million for season three. It’s a sum Dog vehemently denies, but, when asked, Beth breaks out in a sparkling Cheshire Cat smile. “I’m not going to confirm it, but I can’t deny it either,” she says.
Whatever the amount, Dog says that the couple has poured some of their television money back into their bail-bond business. They’ve taken over the adjacent space, doubling the size of their downtown office. Beth also plans on hiring three to four more staff and will double the amount of bonds she’s written. Even though their shooting schedule will get more hectic, more of the shows will be shot in Hawaii, so the couple will be able to spend more time at home and in the office.
In addition, this year, the Dog line of merchandise will extend beyond T shirts to include toys, a cartoon and video games. The Chapmans are looking into opening a store in Waikiki to sell the goods, which will relieve some of the traffic at their office. With season four a sure thing and five and six looking likely, the Chapmans seem to have successfully minimized their risk, no matter how many bounties they bring in in the future.
“This is a big train and it took a lot to get it moving,” says Beth. “We’re not at full steam, but we’re moving pretty fast.”
How about long term goals and fore casts? What happens after season six, if there is a season six?
“I used to think that I wanted to be sheriff someday, but I’m too old for that,” says Dog. “Now, politics is looking really good to me. Since I’ll be making more money, I won’t have to have the people pay my salary. I can just help the people. I can help out with the laws.”
Stay tuned, folks.
A BREED APART
This dog can bark. Whether he’s strategizing his next bounty hunt, editorializing while on the chase, or sermonizing to captured fugitives, Duane “Dog” Chapman speaks a language all his own. It’s a combination of street talk, evangelical Christian preaching, pop psychology chitchat and New Age self help lingo. And it’s no wonder, considering Dog’s unique pedigree.
Chapman’s mother was a Native American evangelical preacher, who would take her eldest son, Duane, with her as she ministered at a nearby Navajo reservation in New Mexico. When he was in his late teens, he joined the motorcycle gang the Devil’s Disciples, riding with them on the weekends while selling Kirby vacuum cleaners during the week. He would be arrested 18 times for robbery, and in 1977 Chapman was convicted of felony murder when a drug dealer was killed in a scuffle. After five years in a Texas prison, Dog became a prolific bounty hunter. His dramatic turnaround story caught the attention of self-help guru Tony Robbins, who asked the bounty hunter to join his lecture tour with other inspirational speakers.
“I’ve sat down with Forbes 500 executives and I use what I’ve learned there on drug addicts,” says Chapman. “It is good to be able to walk with the kings but also sit in the alleys.”
Dog’s varied background makes for fascinating television, but his criminal record is a continual source of consternation among his colleagues in the bail bonds industry.
“I know Dog and Beth and their family, and they are genuinely nice people. But I don’t advocate anyone with Dog’s background being a bounty hunter,” says Bill Kreins, vice president of Safety National Casualty Corp. and media contact for the Professional Bail Agents of the United States. “From a liability standpoint, we can’t have convicted felons picking people up. Our industry has a stigma attached to it since the 1900s. The image that Dog portrays has been counter productive. However, the general public has become more aware of bail and what we do. For our industry, it ["Dog The Bounty Hunter"] has been two steps forward and one step back.”–DKC