Restitution letter puts fear in debtors

Probation department warns state tax refund can vanish

February 19, 2008 

With the specter of the tax collector looming, some local crime victims are reaping redress because of a program that can confiscate state tax refunds from past and present probationers who owe money.

Larry Melton got a check in early February for almost $25,000.

"It's a great thing the probation department has done," the 59-year-old Modestan said. "Without it, I never would have gotten the check."

In the late '90s, Melton's secretary embezzled tens of thousands of dollars from him, he said. For several years, she made restitution payments as ordered by the Stanislaus County Probation Department. But the money tapered off when she completed her five-year probation.

"It was kinda like shutting the switch off," Melton said. "One or two checks did drift in somewhere. A year goes by, there was $100. The next year, $200."

Then, in November, his former secretary was one of nearly 13,000 people in the county to whom the probation department sent a foreboding letter.

"Our records show that you have a delinquent debt ...," the letter reads. "You have 30 days to voluntarily pay this amount before we submit your account to the Franchise Tax Board (FTB) for interagency intercept collections."

Soon afterward, the former secretary, who hadn't made a payment in two years, called the probation department, according to Chief Probation Officer Jerry Powers.

"She called our accounting office and asked how to avoid us taking her tax returns," he said. "We told her she could pay the money."

And pay the money she did. The accounting department received the check in December and delivered a payment recently to Melton's attorney.

"Most people fear the tax man more than they fear the police man," said Powers. "The bottom line is we attempt to get victim restitution using all legal avenues available to us. We aren't always as successful as victims or we would like, but programs like the tax intercept program are one of our most effective methods of recovering money."

More than $1 billion brought in

Californians with delinquent loans have been subject to tax refund interception since 1975. The statewide effort, called the Interagency Intercept Collections program, has brought in more than a billion dollars statewide that might not have been collected otherwise, according to the Franchise Tax Board.

In 2004, the board intercepted $142.2 million on behalf of 224 agencies throughout the state. The money intercepted includes lottery winnings and goes to pay child support, outstanding property taxes, college debts and restitution.

Of the roughly 7,500 adults and 750 juveniles on probation in Stanislaus County, about 3,200 owe restitution totaling nearly $14 million, according to pro- bation department accountant Vicki Martin.

Restitution can cover damage to a vehicle, counseling after a traumatic attack or funeral costs, deputy probation officer Victoria Gibson said. It may be ordered by the court as part of a criminal sentence. After sentencing, the victim fills out a form to describe what kind of restitution would be fair. The defendant can agree to the request or contest it.

"Most of them do agree with the damages claimed," Gibson said. "You show them the bill or the receipt, and they say, 'OK.' "

When the system works, defendants pay off the restitution all at once or through a payment plan in which they agree to give a certain amount monthly. They can pay in person, by mail or through automatic credit card payments. Restitution does not accrue interest.

"We've had payments for 62 cents," said Karen Curci, the probation department's administrative services manager. "We shake them down in the hallway whenever they come in. What- ever they have in their pockets, that's what we get."

For those who pay according to plan, the tax board never needs to get involved. During fiscal year 2006-07, the department collected $346,362 in restitution, from compliant defendants and through tax intercept.

Program provides leverage

But once people complete probation and the threat of incarceration is removed, the tax- intercept program is the department's only real leverage to get restitution.

"We're just the arm twisters at this end," said Curci. "We're getting more aggressive because this is a court-ordered debt and you owe it."

Although the intercept program has been around more than three decades, the probation department has been working harder to collect outstanding restitution payments. After this year's letter went out in November, nearly $180,000 came in from past and present probationers. It's much more than the previous year's takings, but it's still a fraction of the overall money owed.

In addition to the $25,000 check that came in December after the letters went out, other big payments included $8,374 from a defendant who went on probation in 2002 and $7,300 from one dating to 2003.

Curci cited several reasons for the bump in collections this year. For one, the pool gets larger every year as long-standing delinquent accounts are joined by the current year's offenders. Also, the accounting department is getting better at finding addresses for defendants. This was the first year the department turned in defendants to the tax board who could not receive the warning letter because their address no longer was good.

Married couples who file joint returns can lose a spouse's refund if one of them owes restitution. The whole refund can be intercepted, regardless of which partner was the defendant. It's possible the spouse doesn't know about the defendant's legal troubles, said Curci. So some people jump to respond to the letter.

"Maybe they were counting on that money to buy a new car. Perhaps they already spent it. Or maybe they're thinking, 'I have a new wife and a new life now,' " she said. "They don't want that part of their life revealed."

Melton, who owns and man- ages about six properties, said the $25,000 check was a welcome surprise.

"Nobody wants to turn down money, especially when it's owed to you," he said. "Espe- cially when you go through all that devastation of having somebody rip you off."

The embezzlement changed the way he does business, he said. At the time, the 10 or so properties he managed and had partnerships in included 150 to 200 tenants. His secretary, he said, stole money in various ways: depositing his tenants' rent checks into her account, intercepting cash payments from the mail and adding her utility bill to the company payment.

"The last six months, she was taking so much money there was nothing left," Melton said. "It's easy to joke about it now, because that was almost 10 years ago. For a long time, I wouldn't let anybody touch my mail."

Payment doesn't erase trauma

Natascha Roof, the manager of the probation department's adult division, said restitution, even like Melton's huge payout, doesn't remove the trauma of betrayal or violence.

"Even when you receive full payment on money lost, you're still a victim," she said. "We're certainly not going to bring a victim back to where they were. It's a small part of the healing process."

Bee staff writer Emilie Raguso can be reached at eraguso@modbee.com or 578-2235.

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