A city official in Avon Lake, Ohio, apparently ran afoul of the city charter by working for the last 18 months without being properly bonded.

Tom DiLellio was appointed Avon Lake’s finance director in 2008 but didn’t purchase a surety bond valued at $200,000 until Wednesday, July 14. The Avon Lake city charter requires the finance director to be bonded before taking office.

Avon Lake’s mayor, Karl Zuber, told The Morning Journal that he thought DiLellio purchased a bond in January 2009, and said there will be “some kind of action against (DiLellio).”

City finance directors typically manage millions of dollars. Surety bonds are required to prevent embezzlement or other unethical acts. There is no evidence that DiLellio committed such an act, but one council member wants him suspended and another has called for his firing.

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Florida authorities have cracked down on a Texas surety company that allegedly sold unauthorized bonds to school districts and businesses contracted by the U.S. military.

The Florida insurance commissioner recently issued a final cease-and-desist order against Texas-based Infinity Surety and its president, George D. Black Sr. Officials claim Infinity Surety sold more than $2 million in surety bonds to Florida contractors, but had only a starter-home in Texas — valued at $130,700 — to back up the bonds. Officials said the company had no legal authorization to sell bonds in the Sunshine State.

Black was indicted in March by a federal grand jury on mail fraud charges. He allegedly earned $2.8 million in fees by selling bonds online to 150 different companies. Weeks after his arrest, Florida insurance officials issued Infinity an initial cease and desist order. The final order, issued near the end of June, means the company must stop its Florida operations.

But Florida wasn’t the only state wary of Infinity Surety. In December, Louisiana insurance officials filed a lawsuit against the company, claiming it lacked the proper certification and licenses.

A month later, the state’s insurance commissioner, Jim Donelon, started raising red flags about bid bonds and performance bonds issued by the company.

Black was released on bond in late March.

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With floodwaters in Nashville and an oil spill in the Gulf, small businesses have their eyes set on moving into these afflicted areas. Doing so would be made easier by the U.S. Small Business Administration’s proposed increase in surety bond guarantee limits. The purpose is to make bigger contracts in disaster areas more accessible to service-sector and construction businesses.

The recent proposals
The SBA posited new rules, including:

• A bond may be issued if the product or service will be manufactured or performed, respectively, in the disaster area for non-federal contracts and orders up to $5 million.

• If a federal contract or order up to $5 million will directly assist the impacted area the performance site does not need to be within the area.

• Federal contracts or orders can have a guarantee of $10 million per the request of an agency’s head that is aiding reconstruction efforts.

All of these proposals add to surety bond increases that the American Recovery and Reinvestment Act of 2009 made possible. Pending the SBA’s extension for the increased amounts of a specific disaster, the higher bond guarantee limits would be effective for one year after the disaster declaration.

The SBA Office of Surety Guarantees
For almost four decades, the office has helped small and minority business earn more contracts. The office of Surety Guarantees oversees the Surety Bond Guarantee (SBG) program by partnering with the surety industry. Companies that work with the SBA issue bonds. A percentage of these bonds are backed by the SBA in case of a contractor’s default. Two different programs in the SBG program guarantee either 90 percent or 70 percent of bonds issued by a surety company.

Through September 2010, the SBA will guarantee bonds on contracts valued up to $5 million. It is a temporary increase that remains in place through September 2010. Contracting officers that prove a guarantee is in the government’s best interest, the SBA will guarantee contracts up to $10 million.

How surety bonds work
Surety bonds, unlike insurance, involve three parties: the principal, the obligee and the surety. Rather than protect any party from financial loss, surety bonds simply compensate the obligee, or project owner, if the principal, or contractor, fails to fulfill all contractual agreements.

The SBA teamed up with surety industry to make more bonds available to companies that would struggle to get them in the general market. In doing so, surety companies are repaid for losses incurred when a contractor defaults.

More on the SBA’s proposed rules
In the proposal, the SBA emphasizes that it does not pay insurance or indemnification costs that are a part of a bonded contract. In 2008, an act increased eligible amounts for orders and contracts related to a certain disaster. For a list of recently declared disasters, businesses can check the Federal Emergency Management Agency website.

“These proposed changes are one more way we can help small businesses, particularly in the construction and service sectors, compete for and win critical contracting opportunities that help them grow their business and create jobs,” said the SBA Administrator Karen Mills in a press release.

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Even though a new federal law was passed back in 2008 to toughen up requirements for licensed mortgage brokers, some states have been slow to implement their version of the law, which in some states has increased the amount of surety bond brokers must carry. Earlier this month, I wrote about some of the states where deadlines to comply with new rules have yet to take effect.

I’ve since discovered there are more states where deadlines fall somewhere in 2010 for compliance with the federal SAFE Act rules. Here are a few more states where it took a while to get new laws into effect. Some of these deadlines are coming up this year:

• Tennessee: Any brokers grandfathered in from having to comply with the new rules have until July 31, and then they must be re-licensed through the Tennessee Department of Financial Institutions. The state now has a net-worth requirement of $25,000 and a surety-bond requirement of $90,000.
• Utah: Established brokers have to pass both the national and local broker’s exam by the end of the year, but new brokers need to get it done soon, by May 1. No surety-bond requirement is in force here.
• Ohio: One of the stiffer surety-bond requirements here — $50,000 for main offices plus $10,000 per branch, up to $150,000 for companies and $100,000 for individuals. This one just went into effect in January.
• Nevada: This new broker law took effect last October, requiring a surety bond of $50,000 for any principal brokerage office and $25,000 additional if there is more than one branch.
• Oregon: Effective last July, the surety bond amount was raised from $25,000 plus $10,000 per branch to a minimum of $50,000.

As you can see, the new mortgage-broker laws are a confusing patchwork, with regulations and deadlines that are different in each state. If you need a mortgage broker bond, the experts at SuretyBonds.com can help you make sure you have the coverage required in the states where you operate.

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While most people carry car insurance to cover their vehicle liability, in many states there is another option — taking out a surety bond. If drivers do not want to pay the cost of car insurance, they can opt to self-insure, demonstrating independent of car insurance that they have the financial means to pay for any damage to other people or cars if they get in an accident. The primary way to self-insure is by taking out a bond.

In California, for instance, any vehicle owner can demonstrate their financial responsibility by offering up a $35,000 cash deposit to the DMV, or obtaining a $35,000 surety bond. Since obtaining the bond does not require locking up 35 grand in cash — most sureties only require deposit of a small percentage of the bond’s face value — it’s by far the more popular option.

In some states, only owners of many vehicles can take the self-insurance route and post a surety bond. In that case, it can be a good option for companies that have a fleet of vehicles. For instance, in Washington State, you must own 26 vehicles to qualify to self-insure. The bond must be for at least $60,000, filed with a bonding company authoried to do business in the state.

At SuretyBonds.com, we’re licensed to sell bonds in all 50 states. If you have questions about whether self-insuring could be an option for you, feel free to contact one of our experts.

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It’s a sad fact of business life: employees steal. There are two kinds of employee theft a company needs protection against, and different surety bonds cover each one.

It can be a confusing situation, because the term “fidelity bonds” is sometimes used to refer to both these bond types. A look at the two types:

Dishonesty bonds

The first type of theft is the kind where your workers rip off your company — they embezzle money, forge checks, pocket cash, commit computer fraud, sneak merchandise into their bags or steal company equipment. Dishonesty bonds protect your company against this type of employee theft.

Business owners in a wide variety of industries take out dishonesty bonds. Any type of business where a company bookkeeper, chief financial officer or accountant oversees the books or cuts checks would be wise to have a fidelity bond for that financial employee. If a shop owner has several employees who all ring up sales and use the cash register, the owner might be wise to have all those workers bonded as well.

Without a dishonesty bond, a small business could be devastated by a theft scandal. Lacking the resources to replace the stolen funds or merchandise, companies can go under. And small businesses are the most vulnerable to these types of thefts because they don’t have the resources for the costly security or theft-prevention programs used by bigger companies.

Business service bonds

The second type of employee theft takes place when you send your workers out to customer locations — an office building, private home, hospital or college campus. There, your workers may walk off with customers’ laptops, steal jewelry or cash, damage property, assault customers or commit other crimes.

Business service bonds are essential for any company that has workers on the job at customer locales. Common businesses where much of the work is done on-site include janitorial services, maid services, gardeners, exterminators, pool cleaners, security guards, carpet cleaners, painters, locksmiths, movers, pet-sitters, plumbers, and appliance repairmen.

Fortunately, both dishonesty and business service bonds are fairly easy to obtain, and relatively inexpensive. Coverage amounts vary greatly from $5,000 to $100,000 or more, depending on your company size and situation. Bond terms offered may vary from one year to three years.

It’s important to note that in most cases, neither of these bond types will not pay off if you do not prosecute the employee involved in the theft. An arrest and/or conviction will be needed to prove the theft was real.

Purchasing dishonesty and business service bonds offers your company more than protection from worker theft. These bonds also have the added advantage of reassuring customers that you have vetted your employees, and have financial protection in case workers misbehave on the job.

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It’s that time again.

Florida auto dealers are on the hook for a new surety bond by the month’s end. Florida auto dealer bonds provide consumers in the Sunshine State with a degree of protection against fraud or misrepresentation.

These bonds are also a mandatory part of the licensing process by the Florida Department of Highway Safety and Motor Vehicles, which acts as the obligee. These bonds expire on April 30 of each year.

Auto dealer bonds, which are also called MVD bonds or DMV bonds, are currently set at a $25,000 amount in Florida. Obtaining these bonds can prove costly for applicants with poor credit or minimal assets, with high-risk premiums ranging anywhere from 3 percent to 20 percent.

But applicants with good credit and solid assets can typically find a premium in that 1-3 percent range.

MVD bonds ensure that auto dealers follow applicable laws and regulations.  They also provide a built-in protection for consumers , who can file a claim against an auto dealer bond if the dealership is misrepresenting merchandise or engaging in unethical business practices.

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A sweeping federal mortgage-loan reform bill passed in 2008 is slowly changing laws in every state, bringing new surety-bond requirements for mortgage lenders. The Secure and Fair Enforcement for Mortgage Licensing Act of 2008, better known as the SAFE Act, requires states to implement stricter regulation of mortgage loan originators and mortgage brokers within two years. The SAFE Act also mandates ongoing professional education and testing to national standards.

Some states acted quickly to change their laws to comply with SAFE, in some cases passing legislation as an emergency mandate that was implemented immediately. Other states have been slowly formulating their implementation plan. In most cases, new laws designed to comply with the SAFE Act include a surety-bond requirement.  In states where bonding was already required, the amount of the bond needed increased in some cases.

For professionals involved in mortgage lending in multiple states, there are a boggling array of changes to their licensing rules, as states set different compliance deadlines. In some cases individual mortgage lenders need bonds, while in others they are covered by the bond obtained by their company or sponsoring broker – the rules vary from state to state.

Here’s a digest of some of the deadlines and bonding changes at the state level:

Massachusetts: Established companies are being grandfathered in and have until Dec. 31, 2010 to meet the new rules. Newer companies must comply on rolling deadlines from July to October. Details of the bonding requirement are still being hammered out.

Montana: The new law here was enacted back in July 2009, but implementation is still rolling out through May 2010, depending on when a mortgage loan originator’s license expires. Mortgage professionals must either have a surety bond or meet a net-worth requirement.

Colorado: State-licensed loan originators needed to comply with all the new rules starting in January 2010, but the surety requirement took effect earlier on an emergency basis, back in April 2009.

Kentucky: New law was effective June 2009. Mortgage originators must have a surety bond or be covered by their employer’s bond.

Arkansas: In an example of how surety requirements are increasing, this state previously required a $100,000 surety bond for mortgage bankers and servicers and a $50,000 bond for brokers. The new law passed in April 2009 requires brokers to have a bond not less than $100,000, to be set by the banking commissioner.

Delaware: Another state that’s increasing the bond minimums. Previously, state law required a $25,000 bond of brokers and a $50,000-$200,000 bond bsaed on loan volume. The new law requires surety-bond coverage for all loan originators that reflects their loan volume, to be set by the state bank commissioner.

States are tinkering with their implementation plans and continuing to finalize new laws to comply with the SAFE Act. If you have questions about your state’s rules, consult your state Department of Financial Institutions or a qualified broker. The experts at SuretyBonds.com can help you make sense of the changes coming to mortgage lender bonds.

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Janitorial and cleaning companies have to place a significant amount of trust in their employees.

Business owners send their workers into all manner of businesses and homes. Janitorial company employees may be scrubbing an office complex in the wee hours or cleaning residential sites during the work day. No matter the locale, business owners have to protect themselves and their customers from potentially illicit or illegal activities conducted by their employees.

That protection typically comes in the form of a Janitorial Services Bond.

These ultra-specific surety bonds insulate business owners from financial harm in the face of employee dishonesty or theft. They also give consumers an avenue of financial recourse if they can prove in court that their property was stolen.

How to Obtain These Bonds
These are among the simplest bonds for businesses to secure. Companies can get coverage amounts varying from $5,000 to $100,000. Sureties can issue the bond for a single year or up to three years. Most standard applications can be processed within a day.

In terms of surety bond cost, janitorial service bonds provide a great deal of coverage at a minimum cost. A $5,000 bond that covers no more than five employees can be obtained for as little as $100 per year in bond premiums. A $100,000 bond for up to 20 employees may cost qualified applicants around $650 annually.

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States are trying to make it tougher for landscape contractors and landscape architects to take homeowners’ money and leave them with half-finished projects by toughening up their surety-bond laws. On Jan. 1 this year, the state of Oregon updated its landscaping contractor law, which now requires bonds ranging from $3,000 for jobs costing $10,000 or less, rising up to a maximum of $15,000 for jobs over $25,000.

North Carolina revamped its landscape contractor law a year ago, and now requires a minimum $10,000 bond.

The State of California goes even further than these states, advising homeowners to ask landscape contractors to take out a bond for the full amount of their job.

With state laws changing, it can be confusing to determine the size bond a landscape contractor is required to obtain for a particular project. The experts at SuretyBonds are ready to help.

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