LITTLE ROCK — Tough economic times have brought on a rush of foreclosures, and it’s bringing a personal financial windfall to some circuit clerks.
In two cases, it’s huge.
Washington County Circuit Clerk Bette Stamps collected more than $100,000 in fees from judicial auctions last year, and Benton County Circuit Clerk Brenda DeShields could eclipse that amount this year if a judge approves a fee from an auction last week.
Tuesday’s auction of 10 Pinnacle Point office park buildings in Rogers for $24.1 million to Hunt Ventures LLC will net DeShields a $24,100 fee if the circuit judge approves the sale.
“I haven’t even figured it myself,” DeShields said of the fee she’ll receive from the Pinnacle auction. “That’s not normal to have a sale like that. I haven’t sat down and done the math, and it’s not confirmed by the judge.
“I don’t know that the court has ever been faced with that kind of commission.I don’t do it for the money.”
Circuit clerks in other parts of Arkansas also collect fees from the auctions often held on courthouse steps, but they aren’t seeing large amounts since foreclosures are most abundant in the two Northwest Arkansas counties.
By acting as the commissioner of a property auction under Arkansas Code Annotated 21-6-412, circuit clerks can collect one-tenth of 1 percent of each foreclosure sales price as personal income.
A circuit clerk stands to make $100 when a house sells for $100,000 during a judicial foreclosure. Because there’s no limit on how much a circuit clerk can make in a single transaction, a multimillion-dollar sale puts thousands of dollars in a circuit clerk’s pocket.
DeShields, whose annual county salary is $73,586, estimates she’s earned $75,000 in commissioner’s fees so far this year. That doesn’t include the $24,100 from Tuesday’s sale.
“I put in a lot of hours,” DeShields said. “Does it justify the amount? I don’t know. It’s a sad situation so it’s hard to talk excitedly about it.”
Stamps refused to say how much she’s earned in commissioner’s fees on top of her $80,459 annual salary.
“I’m not going to discuss that,” Stamps said. “It’s a personal matter. I have to declare it on my income taxes.”
However, Stamps sends an e-mail each year to an employee in the county comptroller’s office, asking for the woman’s help in filling out an Internal Revenue Service 1099 form. In one of the e-mails, Stamps said she earned $104,458 in commissioner’s fees last year.
Stamps’ increased profit has coincided with the rise in Northwest Arkansas foreclosures. She earned fees of $6,590 in 2006, $9,815 in 2007 and $31,951 in 2008, she told comptroller’s office employee Barbara Jones by e-mail.
Stamps said she conducted 222 judicial foreclosures last year. Among the biggest was the June 6 sale of property owned by Fayetteville developer Brandon Barber and his companies. Enterprise Bank & Trust purchased the property for $7 million, and Circuit Judge Mary Ann Gunn approved a $7,000 fee for Stamps.
How much clerks make through the auctions is hard to determine because many clerks don’t want to discuss their second stream of income.
Chris Villines, director of the Arkansas Association of Counties, wrote in an e-mail that circuit clerks have “good reputations in their communities” and lawyers, bankers and judges trust them to do good work as they oversee the sales.
“These laws have been in place for many decades, and the issue that you raise has obviously been magnified by current economic times,” Villines wrote. “Many ancillary industries surrounding the foreclosure process have seen heavy increases in business, for instance, newspapers, which must run the legal notice ads which accompany these sales.”
Some state legislators said the fees are excessive, and they talked about changing state law.
State Rep. Eddie Cheatham, D-Crossett, vice chairman of the House State Agencies and Governmental Affairs Committee, suggested a cap on fees collected by circuit clerks seems appropriate. After learning of the fees collected in Northwest Arkansas, he talked about capping the fee at $35 to $100 per transaction for the state’s 75 circuit clerks, or changing the law so that the money goes to the circuit clerk’s office rather than an individual.
“I’m fixing to make 75 men and ladies mad,” Cheatham said. “I’ll be drafting a bill in the next few days about this.”
State Rep. Rick Saunders, D-Hot Springs, described the amount made by DeShields last week as “ludicrous.”
“I think I knew there was some personal gain involved, but I never really knew it was that much,” said Saunders, the committee’s chairman. “I’m surprised.
“My God, son. Damn. I may come and run for circuit clerk in Benton County.”
An Arkansas Supreme Court case addresses the question of whether county officials may collect fees as ex-officio commissioners in addition to their salaries.
A majority decision in Lonoke County v. Swaim of 1925 determined Lonoke County Circuit Clerk Pat M. Swaim couldn’t collect additional fees as an ex-officio commissioner.
However, Little Rock attorneys John Kooistra and Philip Anderson said it isn’t clear whether the opinion includes fees collected as a court-appointed sales commissioner, and the appointment of a circuit clerk by a circuit judge as a sales commissioner isn’t ex-officio.
“We don’t think the fees the circuit clerk collects as the sales commissioner applies to the 1925 case,” said Kooistra, a real estate attorney. “It’s been the practice for as long as I’ve been a lawyer to pay the fees. If it’s wrong, it would have been challenged a long time ago.”
Foreclosures aren’t nearly as lucrative for circuit clerks acting as sales commissioners in other counties.
Madison County Circuit Clerk Phyllis Villines estimated she’s earned $1,200 in fees this year, and Searcy County Circuit Clerk Wesley Smith determined three judicial foreclosures this year have brought him $1,185.
Smith, whose salary is $29,600 a year, didn’t know DeShields stands to make $24,100 for a single transaction.
“That’s a lot of money,” Smith said.
Garland County Circuit Clerk Vicki Rima refused to say how much she’s made handling foreclosures.
“That’s personal business,” Rima said.
When asked if she’s made more this year than previous years, Rima wouldn’t say.
“Sorry,” she said. “Don’t intend to answer that question.”
In Pulaski County, Circuit Clerk Pat O’Brien doesn’t take the commissioner’s fees or handle judicial foreclosures.
“The statute allows the circuit clerk to take the fee as personal money,” O’Brien said. “To my knowledge, the other 74 circuit clerks take it personally.”
Steve Sipes, Pulaski County’s circuit court administrator, handles most of the foreclosure auctions, and he doesn’t accept commissioner’s fees, either. That’s caused $14,208 to build upin a circuit clerk’s office account, said Scott Davis, the office’s chief deputy. Some office employees do accept the fee when they conduct the sale when Sipes isn’t available, Davis said.
Crittenden County Circuit Clerk Donna Palmer received $1,566 in commissioner’s fees this year.
“It’s not a big amount of work,” Palmer said.
Front Section, Pages 1 on 10/03/2010