The state does perform due diligence but they do not make the defendant sit in jail while they complete the complicated process. That's not how it works.
Think of it this way. Millions of fraudulent mortgages were made by fraudulent mortgage brokers unbeknownst to the underwriters who did not audit 100% of their loans until too late or they were in default.
The same holds true in the surety business where a defendant partners with, in this case, another fraud that packaged FD's proposal -- including fraudulent real estate appraisals, to secure his $6 mil bond.
Sureties (as with the mortgage brokers and loan underwriters) have a relationship with their agents to produce good bond applications and this type of incident by FD is not the norm.
Lastly comes the State insurance regulator whose job is to protect the state. The insurance regulator is also reliant on the face of the certificates produced by prequalified firms authorized to do business in the State. However, the regulator does in fact audit/verify the security in a reasonable period of time. For FD's bond, -- it took about 20 days and when the bond failed the test it was immediately scheduled to be pulled at an emergency hearing.
MOO
