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Federal Bonding Conference Call

Speakers: Pam Target, Ron Rubin

Transcription provided by:

Caption First, Inc.

P.O. Box 3066

Monument, CO 80132

US & Canada: 800-825-5234

International: +001-630-790-1341

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>> PAM TARGET: Okay, well let's go ahead and get started, according to my clock it's about a minute after the hour. And again, this is Pam Target and on behalf of the Homeless Veterans Reintegration Program National Technical Assistance Center Virginia Commonwealth University I want to welcome you here today for the HVRP conference call on federal bonding. Today we'll be hearing more on this topic from Ron Rubin and Roland Brack with the Federal Bonding Program.

Ron Rubin has over 35 years of in-depth management and program experience with the private/public sectors involving the development, implementation, and oversight of employment and training programs targeting at-risk job seekers who face many barriers to employment.

Much of his career was with the Department of Labor's Employment and Training Administration. Mr. Rubin's currently the national corrector of the Department of Labor's federal bonding program with the McLaughlin Company which is designed to provide fidelity bonding at the state and local levels as a placement tool to assist at-risk job applicants and especially ex-offenders with locating suitable employment.

He's joined by Roland Brack who is the coordinator for the Federal Bonding Program. The majority of Mr. Brack's civilian career has been associated with the United Nations Department of Labor. After a year at the Bureau of Labor Statistics and two years with the United States Army, Mr. Brack's worked 30 years with the Employment and Training Administration. His assignments included the administration of employment and training programs for Indians and Native Americans and staff work for the Secretary's commission on achieving necessary skills.

Also, he served as project officer for a variety of research and demonstration projects that included youth opportunity grants, a national relocation project and special targeted youth employment initiatives. So with that I'd like to turn the program over to Mr. Rubin and Mr. Brack.

>> RON RUBIN: Good morning, folks and thank you, folks in Oregon for getting up so early, I guess it's -- well it's not so bad, it's 8:00 there, I presume.

Okay, here we're gonna talk about the Federal Bonding Program this morning. I don't know if you all have the slides in front of you, the PowerPoint presentation; I'm on page two which on the top says "background." And I'm going to go through this, I'll ad-lib a lot because I don't like following a script. But the Federal Bonding Program was established by the McLaughlin Company, an insurance agency, in Washington, D.C. in collaboration with the U.S. Department of Labor in 1966. It's one of the four programs that has survived the war on poverty: The Head Start Program, Job Corp, Peace Corp and the Federal Bonding Program which is quite interesting.

The whole concept of the program is it's an employer hiring incentive that guarantees job honestly for at-risk job seekers. There's federal financing of the Federal Bonding Insurance Program issued at no charge to employers -- that's a very key thing and you'll understand that as we move along -- there's no charge for having somebody bonded or insured through this program to the employer or to the job seeker.

It enables delivery of bonding service as a unique job placement tool. It assists ex-offenders and other at-risk hard-to-place job applicants such as: recovering substance abusers, welfare recipients, folks with poor credit history, people -- we're going now on to page four -- people also that are young people that have no work history or anything like that.

The various state employment service offices made up the national delivery system for issuing these bonds to employers for years. Bonds were originally purchased from the Aetna Casualty and Surety Company and currently the bonds are underwritten by Travelers, the nationwide insurance company that I'm sure you're all familiar with.

The need. Job seekers who have committed fraud or dishonest acts or who demonstrated behavior casting doubt on credibility or honestly are often, as you know, more than often -- almost always -- rejected for employment. Employers get nervous when they hear that somebody -- especially ex-offenders -- they just feel that this is not the kind of person they want to hire even though the offense may have been minor, whatever, they get nervous about the concept that somebody had been incarcerated or on welfare.

Employers view applicants as at-risk and potentially they're untrustworthy. Fidelity Bond Insurance -- we're on page five now -- six -- I'm sorry. Fidelity bond insurance commercially purchased to protect against employee dishonesty usually will not cover at-risk persons. Many employers say that they have an umbrella, a bonding policy and anyone that works for them is covered by their company umbrella bond. As it turns out, there's always fine print that says people that are ex-offenders are not covered by the umbrella bond. They are designated by insurance companies as not bondable.

Going on to the next page which is page seven. At-risk job applicants: ex-offenders, anyone with a record of arrest, conviction or imprisonment and anyone who has ever been on probation or parole. Total number of persons under correctional supervision in the United States is around 7 million people. It's one out of every 32 adults is either in jail, in prison, federal or state; on probation, on parole -- obviously it's like epidemic proportions. More than 600,000 inmates get out of prison every year and are returned back to their communities and every state has their share of ex-offenders that we now refer them as reentrance.

At-risk applicants. 67 percent of those who get out of prison, roughly 67 percent will end up being recidivist. That means that they'll return to crime and incarceration within three years of release.

The failure to become employed, as it turns out, is a major factor contributing to recidivism. If they get out, get frustrated, can't find a job, they tend to go back to the very things that got them in trouble in the first place.

Records of arrest. Conviction or imprisonment, as we said before, is a significant barrier to employment.

Other folks that are at-risk or not bondable -- we're now on page 9 -- recovering substance abusers, as we said, welfare recipients, those are poor credit or declared bankruptcy -- which is happening more and more nowadays because of the economy, there are more people with bad credit reports -- economically disadvantaged young people with little or no work history, military people with dishonorable discharges. Others can be classified at-risk if failure to work can be eliminated by making them bondable.

Is there any questions at this point? I hate to just go on incase somebody's got a burning issue. Okay. But if you do, just interrupt me, we'll have opportunities for other questions as we move along.

Fidelity bonding insurance purchase to indemnify employers for loss of money or property sustained through the dishonest acts of their employee. That is theft, forgery, larceny or embezzlement. This is also known as employee dishonesty insurance. It's considered good business management practice and purchased by most employers, but bonding in general. Other types of commercially purchased insurance set premiums and very according to risk and life insurance. Fidelity bonding premiums are also low due to being based upon taking low risk.

So the important thing to realize here is that employers -- as we said earlier, do not pay for this insurance, the state agency or whoever has purchased the bond or in the case of Oregon the state has received -- they haven't purchased bonds as a state but they've been given some free or promotional bonds by the U.S. Department of Labor. Oklahoma, that gentleman, they do purchase bonds and later on I'll give you, if you don't have the name and the phone number for the state bonding coordinator, I'll give that to you.

Now we're on page 12. The results: Insurance companies usually will not cover at-risk persons under commercially purchased federal bonds. Practice has created special barriers to employment for those who encounter the criminal justice system and others.

Employers can determine if an applicant has criminal record or has poor financial credit history. It's estimated now that about 80 percent of employers do background checks to determine if this job applicant has a record or is in financial distress or whatever, bad credit and that sort of thing. The background checks have increased significantly since 9-11. People are obviously, as you know, are much more security conscience than they were prior that.

So in summary, not bondable under commercial employee dishonestly insurance, that is fidelity bonds, usually purchased by employers. Employers often think that everyone they hire is covered automatically and that's not true if they're ex-offenders. Led to increase in persons routinely denied jobs, bonding becomes a barrier to employment, the inability to become bonded becomes a barrier to employment. The only way to become bondable for ex-offenders is by participation in the Federal Bonding Program.

Okay, now we're on page 15. Federal Bonding job placement tools: guaranteed employer job honestly of at-risk job seekers. Employers receive bonds free of charge, as I said earlier, as an incentive to hire at-risk job seekers. 90 percent of the people in our program that we've bonded since this program's inception in 1966, 90 percent of them have been ex-offenders.

We reimburse employers for any loss due to employee theft or money or property with no deductible amount to become employer's liability. That is 100 percent bond insurance coverage. This is an important feature because unlike automobile insurance, when you have an accident, you pay your deductible before you get reimbursed for the balance of the cost to repair the car, replace the car. In this program, there is no deductible. So most bonds for $5,000 for six months. If an employee steals something that's say worth $2,000, the bond is for $5,000, the employee, once there's a proof of loss established, the employer can collect the $2,000 with no deductible. That always appeals to employers.

On page 16: the great successes of the program. Over 44,000 job placements made for at-risk job seekers since 1966 who were automatically made bondable because of this program. Of these 44,000, only 460 -- give or take a few -- have proved to be dishonest. That means that one percent of the people that have been bonded through this program -- and keep in mind, 90 percent of them are ex-offenders -- only one percent have defaulted on a bond in something dishonest where a claim had to be paid. That statistic always surprises a lot of people. Bonding services as job placement (indiscernible) considered to have the 99 percent success rate.

Fidelity Bonding services delivery: fast and user friendly. There's no special application form for the job seeker to complete in terms of getting bonded. No bond approval processing. Local staff instantly issue bonds to employers. Once there's been an effective date, a date where the employer says yes, this individual may start work say July 1st and that bond is submitted to us in Washington by the individual or the agency that controls the bonds, that person is bonded as of the first day of employment.

There are no papers for the employer to submit or sign to obtain free bond incentive for job hire. There's no follow-up and no termination actions required for the bond issued. In other words, when one of your clients is bonded for six months, at the end of six months, the bond automatically ends. There's no trap where the employer receives a notice and says if we don't hear from you the bond will continue and you'll have to pay such and such amount of money. The bond just ends after six months.

If the employer wishes to continue to bond that person, they can contact Travelers and all these instructions are in the actual bond that the employer receives. They can contact the McLaughlin Company and/or Travelers and they can buy a commercial bond for this individual. But no other insurance company will bond an ex-offender. Travelers will because they've gone through this trial, so to speak, and bondable for indefinite period of time, as long as the employer contacts the insurance company and pays the commercial rate.

It's Fast and Friendly. We're on page 18 now. There's no deductible in bond insurance amount if the employee dishonestly occurs -- we've already said that. There's no age requirement for bondees other than that they be the legal working age for hire in the state in which they are working. So they must be at least the minimum working age.

No other U.S. program provides fidelity bonding, as I said, and no federal regulations cover the bonds issued. We have guidelines that we make available to folks that use the program, but there's no federal regulations, there's no body of laws and rules or regulations to complicate the program. So we do have a lot of flexibility with the issuing of the bonds.

Bond insurance applies to any job, any employer and in any state. In other words it could be a public or private job, it can be a job in the city, in the country. Any employer is covered and it covers any employee that's bonded. The only people that we will not bond, that Travelers will not bond, are those who have defaulted on a bond. Remember I mentioned the one percent? Anyone that has defaulted on a bond and there has been a proof of loss and the insurance had to go ahead and pay a claim on them, they cannot be bonded again. And in my ten years with the program I've had no one ever asked, nor have we ever found anyone that was already disqualified to apply for a bond again. So that doesn't seem to be much of an issue.

We're on page 20 -- while assisting job seekers and securing employment is the main goal of the Federal Bonding Program, bonds are also issued to cover already employed workers who need bonding to prevent being laid off or to secure transfer or promotion to a different job at their company. In other words, you don't just have to be a new applicant to be bonded for a job. If someone is already working -- and our objective is to keep that individual in the workforce. So if they're going to get a promotion or something changes on the work site where the employer can't keep the individual unless he or she is bonded, then a bond can be used for that purpose so they can hold onto the employment and the bond will be good from the day it's issued for six months. So it's not just unemployed people getting a job who can get bonded, but in some instances it can be people that are already employed. The whole idea of the program, it's a tool to help people get into and stay in the labor force.

Service delivery. Efficiency is inherent to bonding because its costs occur only when a job placement is generated or maintained for an individual whose background is a significant barrier to him securing or retaining employment.

Any full or part-time employee paid wages. That's with federal taxes automatically deducted from pay, can be bonded. Including persons hired by temp agencies. So in other words, you cannot be self-employed and be bonded to this program. You've got to be somebody's employee and they define employee as somebody where there's an employee/employer relationship where federal taxes are automatically deducted from the paycheck.

And in the case of temp agencies, about five or six years ago when it became apparent, the temp agencies were becoming major employers in this country, we adjusted the program so that if someone's working for a temp agency and being out stationed in various sites, the temp agency is considered the employer because they're issuing the paycheck for this individual. If the individual does anything dishonest at the work site -- steals a computer or something, the employer -- which is the temp agency -- will file a claim once there's a proof of loss and be reimbursed for the loss. Again, this happens very infrequently.

Now we're up to page 22. 1997, USDOL ordered a redirection of the Federal Bonding Program. Prior to 1997, all states received free bonds, free insurance policies, if you want to call them that instead of bonds, same thing. They received them at no charge and the U.S. government paid for them. After 1997 the Department of Labor decided that they wanted states and localities to use their own funds to purchase bonds and this was a major shift in the program and that's why in the two states that are in my audience today, in the case of Oregon, they've never purchased the bonds. However, they do receive a small number of promotional bonds or freed bonds. And in the case of Oklahoma, Oklahoma uses their funds to purchase a package of bonds, so they have enough bonds on hand to help their clients and if they run out of bonds they can purchase another package.

Any public agency or private community-based organization or private industry group can directly acquire bonds and deliver bonding services through purchase of a bond package in accordance with the guidelines on the purchase and use of fidelity bonds. These guidelines were issued by the McLaughlin Company as exclusive agents or Travelers for the Federal Bonding Program and the guidelines of course were cleared by the U.S. Department of Labor to make sure there was nothing egregious in them and there's not.

We're on the last page. The program, I think as Pam mentioned early on, the McLaughlin Company, which is an insurance brokerage firm in Washington, D.C. who has had this contract with the Department of Labor since 1966, they're the ones that handle the contract. Roland and I work for the McLaughlin Company, our expenses are reimbursed by the U.S. Department of Labor, just so you'll understand what the relationship here is. The McLaughlin Company a national insurance brokerage firm. It serves as the exclusive agent for Travelers which issues fidelity bonds nationwide under this program.

As Pam said, I am the director of the program, Roland Brack is the associate director and that's the end of the formal part of the presentation. I hope there's a few questions because I went kind of fast and to me it seems like simple but that's because I've been saying the same thing for 10 years. So if there's any questions, I'd be glad, or Roland and I will be glad to answer any. Any questions?

Let me just get the gentleman from Oklahoma, are you there? Is the gentleman from Oklahoma there?

>> RON RUBIN: Hello? I wanted to give you the name of the bonding coordinator in Oklahoma.

>> MALE PARTICIPANT: Okay.

>> RON RUBIN: His name is David Slimp, S-l-i-m-p and he's with the Oklahoma Employment Security Commission. And he's in Oklahoma City. His number's 405-557-5474. You got that?

>> MALE PARTICIPANT: Yes, sir.

>> RON RUBIN: Okay. So in both cases I think there's just the two states represented today. Both cases for Oklahoma and for Oregon, if you have clients that you think could benefit from the Bonding Program, what you should do is contact your bonding coordinators -- we've given you their names and phone numbers -- they will tell you the process in basically what I've said, but it's a very simple process.

Even though it says Federal Bonding Program, the minute people hear "federal" they say, oh, there's gonna be tons of forms and stuff. There is not. There's virtually one or two papers that have to be filled out and the state bonding coordinator or the program in your community that runs the program, the one-stop center, the career center, will take care of that.

So those are two critical contacts for you and I would urge you to contact those folks if you think one of your clients could benefit from the Bonding Program. We do no screening here. When we get that certification form here in Washington at the office, we don't do any screening, we don't look into that individual and say, gee, is he really an ex-offender? Is he really this, that, or the other? We assume that when you folks wish to bond somebody and the bonding coordinator approves it, that we assume that you know what you're doing and we issue the bond to the employer. And that's usually done within 10 or 15 work days. But the bond is effective as of the first day of employment.

>> PAM TARGET: I have a question, this is Pam.

>> RON RUBIN: Yes, ma'am.

>> PAM TARGET: Let's see. You were talking about the employees that are covered and they can be covered whether they're on the premises or not. But what if the person commits a crime to the employer when they're not at work, like either off-hours or what if it happens after they're terminated and they're not covered by the bond?

>> RON RUBIN: Yeah, not covered. It has to be a theft, forgery, or embezzlement done at the work site. Even if it's not at the temporary agency's office, if it's done, say they put somebody in your office and they steal something --

>> PAM TARGET: But what if it's after hours?

>> RON RUBIN: If it's after hours it's not covered.

>> PAM TARGET: (inaudible) -- and something happens after 5:00 when I've left the premises?

>> RON RUBIN: Wait, and the person is still there?

>> PAM TARGET: Well let's just say I left and went home for the evening but I came back and stole the safe. I mean is that person bonded if I was the employee? I was just not at work at the time but I --

>> RON RUBIN: I think that would be up to the insurance company to make that determination. So you're saying if Joe Blow, everybody left work at 5:00, Joe Blow, the person that was bonded, comes back at 6:00 and steals something?

>> PAM TARGET: Yes.

>> RON RUBIN: Yeah, the insurance company, Travelers would have to make that determination. I have a feeling if it's stolen on the premises that probably would be covered. But if it's somewhere else, they don't cover just random crimes here, there, and everywhere.

>> PAM TARGET: If the person had been terminated and then came back and did something out of retaliation, they wouldn't be covered?

>> RON RUBIN: No. If the bond is terminated then they're not covered.

>> PAM TARGET: But the person, they terminate employment, that's when the bond ends, is that correct?

>> RON RUBIN: Yes.

>> PAM TARGET: If I get fired then the bond ends?

>> RON RUBIN: Yes. That bond is only good for one person for one job. So if you bond Joe Blow again, and Joe stays on the job for three weeks and then goes on to something else for whatever reason, that bond cannot be transferred to a new job, the bond just ends. So there's always a chance that you're issuing a bond for somebody who may not remain on the job for six months. But if he or she does remain on the job for six months, that bond covers them for six months.

>> PAM TARGET: Okay, thank you.

>> RON RUBIN: Okay.

>> MALE PARTICIPANT: Ron, what if that person -- this is David in Oregon -- say they use the entire length of the bond and they stay employed for a year or two and then are laid off and they're in the process of looking for more work and they have the opportunity to be reemployed again, are they able to apply for the bond a second time?

>> RON RUBIN: Yes, under those circumstances if they can get another job and bonding will make the difference -- the only people we won't bond, as I've said before, are people that have committed an infraction, who have defaulted on the bond. But in that case that's up to the people that control the bonds. But more than likely they should be willing to bond that individual because again, the idea of the program, to use this tool, is to try to help people get into the labor force, to stay in the labor force or return to the labor force, or they're getting a promotion, or whatever. Yeah, so the answer to that is yes, they can try to get another bond, yes.

>> MALE PARTICIPANT: Okay, thank you.

>> PAM TARGET: Can you tell us a little bit more about where we can access the handouts that we might want to use for employers for marketing purposes?

>> RON RUBIN: Okay, there's two ways you can get those things. Number one is I would urge you folks to contact your bonding coordinator, the state bonding coordinator and the names and phone numbers which Roland and I have given you. The other is to go to our web site: . It's bonds, B-o-n-d-s, the number 4, . .

There's a whole slew of materials including an 11-minute video which you can use for employers or for your staff or for your clients that describes this program, basically says everything that I've said but says it in 11 minutes and probably says it much better. So you can download anything and copy anything on that web site because it's all public information, there's no copyright or prohibition. Does that answer your question, Pam?

>> PAM TARGET: Yes, thank you.

>> RON RUBIN: And another way to get into this program, by the way, I don't know if we mentioned this, is if your superiors find that this would be a very useful tool for you to use in placing your homeless veterans, you can purchase your own package of bonds, you don't have to go through the Department of Labor in the state or you can just buy bonds directly. The guidance for that is in that web site, , and the minimum package of bonds you can buy is a package of 25 - $5,000 bonds.

That means that you can buy a package of bonds and you can bond 25 different individuals for $5,000 worth of coverage for a six-month period. The bonds that you buy, that bond package is good for a two-year period. So in other words you have two years in which to utilize, issue, those 25 bonds. At the end of two years if you haven't use all the bonds and have a few left, and you buy another package, those can be grandfathered in with a new expiration date, be good for another two years or we can just extend your package which we do, especially during this downturn in the economy; the insurance company is very liberal about saying hey, your package is good for another three months because they're trying to help people out because of the massive numbers of unemployed people in the country.

So you can purchase your own package of bonds. In that case you would go to the web site and see what it says about purchasing a package. You can certainly call either Roland or me if you have any questions. If you have any interest in us helping you, either coming out and talking to your board or something like that, that's always a possibility. Okay?

>> PAM TARGET: Yes, does anyone else have any questions? Okay. Well again on behalf of Homeless Veterans Reintegration Program National Technical Assistance Center, we want to thank all of our participants for being here today and also thank our speakers. Thank you very much and we look forward to listening in or talking to you next time when we have a call. Thank you.

>> ALL: Thank you.

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This text is being provided in a rough draft format. Communication Access Realtime Translation (CART) is provided in order to facilitate communication accessibility and may not be a totally verbatim record of the proceedings.

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