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Lois Artz made an honest mistake.

The 72-year-old Petaluma resident wrote a check for $26.61 to buy a carton of cigarettes back in 2005, and it bounced.

Distracted by the burdens of caring for a daughter with breast cancer, Artz, a retired Bank of America manager who lives on a fixed income, said she simply didn't keep a close enough eye on her checking account balance.

"My daughter was so ill, my attention had been totally on her," Artz said. "I was going to make the deposit, but I completely forgot."

Artz soon received a letter from the Sonoma County District Attorney Bad Check Restitution Program. The letter informed her that she could avoid prosecution for her crime if she paid a fine and completed an education program. The cost: $196.62 -- more than seven times the amount of her bad check.

If she did not, the letter informed her, she could be prosecuted and sent to jail or prison for up to a year and face up to $1,000 in fines.

"It scared the living hell out of me," Artz said recently from the mobile home where she has lived for more than 25 years. "I've never done anything wrong in my life."

The official-looking letter did not come from Sonoma County District Attorney Stephan Passa-lacqua, even though it carried his name and was embossed with the seal of his office.

Instead, it was sent by a San Clemente firm that works with hundreds of county prosecutors to collect bad checks and divert people from the court system.

The company, American Corrective Counseling Services, is at the center of a legal battle over the way district attorneys across the nation have entered into partnerships with private companies to go after people who owe money.

Supporters say the company helps merchants recover debts, allows prosecutors to reduce costs, and gives offenders an alternative that keeps them out of the crowded court system.

But critics say ACCS intentionally blurs the lines between a company pursuing profits and government officials charged with protecting the public. It doesn't do enough to distinguish between people who make inadvertent mistakes and criminals who intentionally commit fraud, according to critics.

Shakedown allegations

Artz is part of a nationwide class-action lawsuit accusing ACCS of shaking down innocent customers for excessive fees.

The company lost a key round last month when a federal appeal court rejected its claims that it acts as an arm of the government and therefore is immune from civil prosecution.

"As two appellate courts have recognized, they are not the government," said Paul Arons, one of the attorneys who sued ACCS. "The reality of the situation is they are a very, very profitable private enterprise collection agency renting the name of the district attorney in order to scare people into paying money they don't owe."

ACCS did not return a call for comment.

Arons claims the company has systematically defrauded hundreds of thousands of Californians who accidentally bounced checks, but were bullied into paying steep fines under a false threat of prosecution.

Not everyone who bounces a check has committed a crime. For that, prosecutors must demonstrate an intent to defraud the merchant. In most cases, people who have made honest errors quickly learn of the problem, make restitution to the merchant, and pay the bank's insufficient funds charge.

If, however, merchants try but can't collect the debt within a reasonable period, they can report the person to the Bad Check Restitution Program, which has been in existence in Sonoma County since 2001.

Hundreds use service

Since its inception, more than 1,500 local merchants have taken advantage of the program, helping them recover nearly $1 million, Passalacqua said.

About 4,000 people have gone through the program, which requires them to make restitution and complete a course on the ills of bad check writing. Those who successfully complete the program never have to appear in court and will not have a criminal record.

The program has helped free prosecutors to spend time on higher priority cases and reduces court caseloads, Passalacqua said.

"We're trying to make sure we use our limited resources in an effective manner," he said.

Last year, the District Attorney's Office received $17,000 from ACCS, for a total of $102,000 since its inception. Outsourcing the program reduces the need to run the program with tax dollars, and the money from ACCS helps fund other programs, including victims' services and community outreach, according to a statement from the District Attorney's Office.

Critics, however, say ACCS has a financial incentive to cast the net as wide as possible and to make its letters forceful and even misleading.

No word from merchant

Artz said she never received a letter from the merchant telling her the check had bounced, as the program guidelines require. When she realized what she had done, she went to the store but was told her case had already been submitted to collections, she said.

The subsequent letter informed Artz, in underlined and bold letters, that "The Sonoma County District Attorney's Office has received a CRIME REPORT alleging that you have violated Penal Code 476(a) of the California State Statute: Issuing a Worthless Check."

It was signed by Kenneth J. Gnoss, chief deputy district attorney.

But in fact, the report didn't go to the district attorney. It went directly to ACCS, which runs the program and its Web site. Once there, the company followed guidelines to determine who should get a notice letter.

No official review

While the guidelines have been approved by Passalacqua's office, prosecutors do not review individual cases before demand letters are sent out. That's what Arons has a real problem with -- the law does not allow prosecutors to outsource legal judgments, he said.

And while Artz was instructed to mail her payment to "Sonoma County District Attorney" at a Santa Rosa address, that payment actually went directly to ACCS.

The District Attorney's Office is aware of the criticisms and is reviewing the program, particularly the wording dealing with the punishments, Passalacqua said.

"We are always evaluating our services, striving to achieve public safety while treating all people involved in the criminal justice system with fairness, respect and dignity," his office said in a statement.

"With that goal in mind, we are in the process of reviewing the letter to see if the way we inform individuals that they have written a worthless check and are responsible for repaying the debt . . . can or should be revised."

You can reach Staff Writer Kevin McCallum at 521-5207 or kevin.

mccallum@pressdemocrat.com.

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