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Friday, July 10, 2020 11:44 AM | Andrea Orozco

PPIAC Sunset Report

Colorado has a rich, colorful history with private investigators and the licensing of the profession. Colorado’s original PI law, passed in 1887, was the first PI licensing law in the United States. There is a booklet published that described Colorado’s PI licensing law. “Know the Law” The Detective Law Book and Practical Advisor documents Colorado’s PI licensing law as it existed in 1899. (pg. 9) “This State has a license law, requiring the applicant to file his petition with the Governor of the State; that the Governor shall determine the extent of the bond to be given, which shall not be less than $3,000 nor more than $20,000; that upon approval of the petition and acceptance of the bond the license shall be issued on the payment of $100, extending for a period of two years, but subject to revocation by the Governor for cause. Acting without the statutory license is made a misdemeanor, and punishable by a fine of not less than $300 nor more than $1,000, or imprisonment for a period of not less than three months nor more than one year in the county jail, or both by fine and imprisonment. This statute, however, provides that the licensed detective, or detective agency, may employ agents, servants, employees and assistants, who shall not be required to take out a license for themselves, but for the acts of such agents the principal is responsible under his bond.”

Early in Colorado’s history, well known detectives were attracted to this beautiful and prosperous state. Legendary Pinkerton Detective James McParland, famous for his undercover work in the Mollie Maguires case, became Pinkerton’s Denver Office Assistant Superintendent in the summer of 1887 and was then appointed the Western Division Manager in 1903. He resided on Columbine Street in Denver, and the Pinkerton office was located in the Opera House Block at Sixteenth and Arapahoe Streets.

The country’s oldest PI license was ruled to have an insufficient definition for the term “detective business” in 1977. After decades of no PI licensing statute in Colorado, a new law took effect in 2015. Like other licensed professions, the reason PI licensing in Colorado was requested was to assure a greater degree of protection to the consumers, as well as Colorado residents who may be affected by the work of PIs. The effort to bring PI licensing to Colorado was spearheaded by the Professional Private Investigators Association of Colorado. Before licensing, PPIAC received frequent emails and phone calls from individuals who had complaints against investigators and were seeking recourse. On rare occasions, a complaint involved a PPIAC member and the association could take steps to address the complaint with the member. Even with members, any actions by PPIAC are limited to membership status, and at most can result in revocation of membership. The vast majority of complaints received involved non-member investigators for which the association could do nothing to assist the individual seeking recourse.

Investigations, both in definition as well as in types/specialties, is very broad in scope. Colorado legislators studied the occupation over several years and in 2013 held stakeholder meetings to better identify those areas best suited for PI licensing. The legislators, along with the input of PPIAC, drafted a bill which was introduced to the Colorado Legislature in 2014. Many private individuals who had been harmed or negatively affected by private investigators testified at several hearings in the Colorado Legislature in 2014. Proponents and allies of PI licensing were boosted by bi-partisan support. The bill became law and took effect July 2015.

One of the key aspects of Colorado regulatory law is the Sunrise and Sunset provision that determines the need to regulate a profession or occupation. With PI licensing in Colorado currently undergoing a sunset review, and due to repeal in 2020, the occupation is being studied to determine if there is a continued need for consumer and general public protection by regulation and licensure. Since the implementation of PI licensing, PPIAC has had a drastic decrease in investigator complaints. Of the few it does receive each year, PPIAC directs the individuals to DORA. Licensing assures the public that private investigators have met a minimum set of qualifications to obtain a license. DORA, who oversees the PI licensing program, held rulemaking meetings with the profession and established Rules which licensed PIs have to operate within. The rules also describe behaviors and methods which are not acceptable. The PI law, along with DORA’s Rules for PIs, have provided crucial standards of practice and ethics for an occupation previously having no such standards of practice. Discussions PPIAC has had with non-member PIs strongly indicate a propensity to practice within the standards set in the law and DORA’s Rules.

Private investigators routinely handle sensitive business and personal matters for clients, which require the use and protection of confidential and proprietary information and the safeguarding of valuable client assets and personnel. Without licensing, any individual did/could present themselves to the public at large as a “private investigator” and make outrageous claims as to what they could do. Without licensing, the public was/would be in constant danger of exploitation by fraudsters, sexual predators and scam artists.

As an illustration of the services provided by private investigators, the following are the most common. Attorneys, the general public, and businesses comprise the majority of clients. The general public uses private investigators either indirectly through attorneys, insurance companies, and businesses; or directly, most common in domestic relations matters – such as child support and child custody, and evidence used in personal protection / restraining orders. These are services not provided by law enforcement and often required by the judicial system. Common cases for attorneys, insurance companies, businesses and individual members of the public include:

1.    Personal Injury and Negligence Cases: review accident reports, conduct scene inspections and evidence examinations. Interview witnesses and vet expert witnesses. Provide support to counsel during depositions and trial preparation.

2.    Criminal Defense Cases: Develop incident timelines, review police and other first responder reports, locate and interview witnesses, and escort defense witnesses to trial. Other litigation support services, including background investigations of potential jurors (voir dire) and expert witnesses.

3.    Insurance Defense Investigations: Conduct surveillance and other investigative activities in insurance fraud cases. Conduct background and asset investigations for insurance defense attorneys and insurance company special investigation units.

4.    Estate and Probate Investigations: Conduct background investigations on caregivers and facilities. Search for missing or unknown heirs for a family or an executor requiring due diligence for probate purposes.

5.    Family Law Investigations: Petitions for alimony, child custody and support, including modifications, violations dissolution decrees, surveillance.

6.    Business Matters: Services include pre-employment and background screening requiring special knowledge of relevant federal and state employment laws. Workplace investigations to include surveillance on workplace violence, suspected stalking, sexual harassment and disability cases. Conduct due diligence investigations on mergers and acquisitions. Intellectual property investigations for copyright and trademark infringement. Compliance violations in franchise agreements.

7.    Property Services: Mortgage fraud investigations, real estate and personal property services, and fraudulent transfers and stolen property.

Prior to PI licensing, the methods by which consumers of Colorado private investigator services could be victims of nonfeasance, and even outright fraud were many. Here are some examples:

  • 1.    Failure to fulfill obligations to the consumer
  • Unless a consumer possesses some knowledge and abilities of a private investigator, it is extremely unlikely the consumer will have a reasonable basis for challenging the work product he/she receives from a PI. Licensing, at a minimum, asserts a force upon PIs to perform the work required; and at a maximum, provides real penalties for willful non-performance.
  • 2.    Deception in the presentation of qualifications and credentials
  • There exists the notion that the consumer can make an educated decision based on reputation in selecting a private investigator. The opposite is the case. Most consumers know little or nothing about the profession and would have to guess as to whether one private investigator or the other is the best or most qualified choice. Licensing provides the assurance of passing a fingerprint background, passing of jurisprudence exam, and the protection of a bond.
  • 3.    Direct, personal risks to consumers
  • A consumer should have an expectation that the PI he/she employs will not engage in trespassing, theft, fraud, stalking, blackmail, criminal deception, or other criminal or unethical conduct in the pursuit of an assignment. Such illegal and/or unethical conduct can, and often will, leave the client open to serious repercussions that certainly may include lawsuits for criminal damages or even criminal charges.

Despite the protections incorporated into the PI licensing law and the PI Rules and Regulations, questions continue to arise of the need for PI licensing. There are no statistics on complaints against Colorado private investigators prior to 2015, as there was no avenue for the public or central location for filing complaints. Since 2015, there is now a baseline for which to compare the effectiveness of the program from one sunset period to another. Statistics can even be compared from year to year to determine any patterns or trends. Also, the confidential nature of this profession is such that consumers are likely to be unwilling to come forward with complaints unless the state continues to take a positive stance toward their protection.

Clients entrust PIs with a wide array of sensitive and personal information. A search of DORA’s website indicates a total of 138 industries and professions DORA regulates. Of the industries and professions DORA currently regulates, PPIAC is confident none of those industries and professions are entrusted with the diversity of sensitive information clients entrust private investigators with. The current Colorado PI law defines a Private Investigator to include the vast amounts of information clients may entrust on a private investigator. Also, private investigators are frequently hired by attorneys who in Colorado are licensed to practice by the Colorado Supreme Court. Rule 5.3 of the Colorado Rules of Professional Conduct require the conduct of private investigators hired by attorneys to be compatible with the professional obligations of the lawyer. However, Rule 5.3 does not provide disciplinary measures for the nonlawyer assistants, to include PIs. PI licensing provides a reasonable bolstering of Rule 5.3, with disciplinary measures available through the Colorado PI licensing law if the private investigator violates the PI law, and congruently Rule 5.3. It is important to consider Colorado’s PI licensing program is less than 5 years old. As such, educational outreach to attorneys and other professionals in the legal field is still in its infancy. 

Qualified and ethical private investigators assist the public for a vast array of services, including services which law enforcement may not have the time, ability, or statutory obligation to assist in. Frauds, scams, impersonations, cyber security and privacy concerns, and identity theft are on the rise. According to the FTC, consumers reported losing nearly $1.4 billion to fraud, an increase of $406 million over 2017. Identity theft reports were 444,602 in 2018, compared to 371,034 in 2017. According to the Consumer Sentinel Network Data Book 2018 published by the FTC, Colorado ranks #12 in fraud reports per 100K population. The public should have the opportunity to hire licensed private investigators who meet specific background and jurisprudence criteria to assist in these matters.

Without private investigator licensing, criminal case investigations would inherently favor the prosecution as there are measures in place to assure there is adequate training, qualifications, and expertise on the prosecution end. For the criminal defense end, a lack of PI licensing creates an invitation for unqualified, untrained, and otherwise inexperienced investigators to represent the accused when they are at their most legal need.

Colorado’s PI license law, in less than five years since passing, has served both the public and the profession well by providing the protections it sought to provide, and by providing a low barrier of entry for budding investigative entrepreneurs. Before the passing of the law, there were estimates of 100 – 400 PIs in the state. As of June 2019, there are nearly 1,000 Colorado actively licensed private investigators. The number of licensees is one factor for the extremely affordable renewal rates of just over $30 per year. These rates are even more impressive considering this program started with a deficit created from a failed voluntary PI licensing program.

Here are some of the highlights of consumer protections the current PI law offers:

§   Background check and jurisprudence exam

o   Consumers do not have the resources to conduct a competent background check, nor the time to do so in their often-urgent matters; and

o   For consumer protection, it is important the private investigator be vetted to provide assurances any risk to the consumer is mitigated before the enter into any retainer agreement and financial obligation.

§  Bond of $10,000 for consumer protection

o   DORA required this in the Act, as agency liability insurance does not protect the consumer;

o   This provides consumer protection, as private investigators require a financial retainer and funds on deposit to work the case;

o   Any risk to the consumer is mitigated in advance, and recourse is available without the additional cost, delay, and uncertainties of legal action;

o   DORA does not check the Colorado Courts system for any negative acts by the licensee at the time of application or renewal – therefore, any civil actions taken against a licensed or unlicensed private investigator are otherwise unknown; and

o   Without licensing, there was/would be no central repository of consumer complaints and redresses. Under DORA’s rules, any actions taken on behalf of the consumer are centralized – giving DORA additional information during any licensee application and renewal.

§  Contract requiring disclosure of services, fee, and verbal or written report

o   Without licensing, the use of contracts was/would be at the discretion of the private investigator, and often not in use; and

o   The specific protections for both the consumer and private investigator were not codified and also at the discretion of the private investigator – possibly offering no protections to the consumer, and only to the private investigator.

§  Standards of Practice for Reports, Conflicts of Interest, Confidentiality, Recordkeeping, and Advertising

o   Without licensing, there was/would be no requirement – or consumer recourse – for a verbal or written report from the private investigator. Together with the bond requirement, the consumer has both the assurance and recourse for the enforcement.

o   Without licensing, there was/would be no protections of confidentiality to the consumer – unless they were retained by an attorney and working under the doctrines of Attorney-Client Privilege, and also Attorney Work-Product – it is important all consumers and private investigators have the protection of confidentiality, and recourse if there is a violation; and

o   Without licensing, there was/would be no standards of advertising, including private investigator title protection, and the consumer had no means to verify the minimal competency of a private investigator, as offered by DORA vetted licensure.

§  Prohibits use of any law enforcement equipment – uniforms, badges, emergency lights, etc.

o   Without licensing, some investigators were known to use a badge to identify themselves as a private investigator. This presented issues of both intended and unintended harm to the consumer and public as potential misrepresentation as a law enforcement officer. With documented incidents of law enforcement impersonation, this prohibition is important to both consumer and private investigator protection from potential nefarious activities.

§  Prohibits engaging in any illegal or unethical conduct, or discrimination

o   Without licensing, the only manner of prohibition against illegal or unethical acts was/would be by potential involvement of the courts. Historically, this is not a practice either law enforcement or the Office of the Attorney General pursues, and consumers most often fail to report;

o   In those times of reporting, this burdens the courts and presents potentially additional financial burdens on the consumer – now protected by both DORA regulations and oversight, as well as the surety bond; and

o   As private investigators are important to, and involved, in the judicial system, there is no place for discrimination in the profession. However, without licensing, there was/would be no defined or codified protections for the consumer.

§  Without licensing, the potential for public harm through nefarious acts of persons fraudulently portraying themselves as private investigators – by simply having a business card and business filing. However, with no regulation there would be no legal foundation of fraud – effectively otherwise legitimizing such activities of public harm. These acts include scams, frauds, cyber security concerns, impersonations, etc.

§  With licensing, the licensee has numerous protections, as well as compliances to maintain licensure.

The Colorado PI licensing program has very minimal financial impact on private investigators, a great mechanism of checks and balances for both the consumer and the private investigator and has more involvement than ever anticipated by DORA or anybody giving input at the program's inception.

To make any significant changes, including merging / eliminating levels I and II, to this program would cost more time and money and would be passed along to the individual investigators, as opposed to leaving a healthy program intact and continuing.

The program gives the consumers - general public, attorneys, insurance companies, other private investigators, etc. - a vetting process, and resource for any activities intended to be protected by the program. To return to a time before licensing, would be to return to a vetting process consisting of the private investigator having a business card and business filing with the Secretary of State. As has been demonstrated before, and now with the program, this is not a manner of consumer protection and would re-introduce the potential of public harm. The consumer may be turning over credit card and other financial information and/or personal information to the unknown private investigators – and have no protections and recourse now available to them.

Is the licensing of Colorado private investigators necessary for current day consumer protection needs? PPIAC believes there continues to be a clear and present need for PI licensing originally determined by DORA.

 The licensing of private investigators is essential and necessary for two primary reasons:

1.    Public Safety

2.    Consumer Assurance

An unscrupulous investigator can potentially use their skills and techniques for nefarious purposes such as physical stalking, third party stalking, cyber stalking, financial theft, identity fraud and cybercrimes, blackmail, impersonation of law enforcement and other public officials, frauds, scams, intimidation, violating an individual’s expectation of privacy, illegal audio recording of an individual, deceptive consumer practices and more. Each of these are with no recourse unless arising to criminal charges and/or civil litigation. The former is a cost to the taxpaying general public, and the latter to the injured party. For this, the current PI Law provides central complaints, DORA investigations paid via licensure fees, and administrative actions as may be promulgated. PI licensing provides a means by which the public can report an investigator who may have violated the licensing law and/or DORA’s Rules for PI’s and ensures a checks and balances to the sensitive nature of the work private investigators do.

In closing, PI licensing is the single most effective way to protect the public fromunscrupulous, predatory and unqualified operators and provides the confidence consumers need to hire professional private investigators. Legendary private detective Allan Pinkerton may have best summarized the need for consumer protections in the profession: “There are but few detectives that are honest and reliable.”

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