SIOUX FALLS, S.D. – Pawn shops are full of things people want or need to get rid of – jewelry, watches, televisions, guns.
For quick cash, decluttering or just because, the business of secondhand stores is attractive.
For buyers, there’s the opportunity to buy something gently used at a good price.
But there’s also a risk – is this ring stolen? How do you know?
Pawn-shop owners and police have worked together for years to ensure that customers at pawn shops only buy items that were legally obtained.
For the past three years, they’ve used a website to track pawn and secondhand shop sales in Sioux Falls – a system that’s saved money for the city and been more efficient for law enforcement.
But the changes frustrate some pawn-shop owners.
They worry about having their customers’ information entered into a database for law enforcement. And they’re angry that when police do find stolen items, they take them without compensation for the pawn dealer.
Sioux Falls police, at the urging of Councilor Kenny Anderson Jr., has compiled a report of the LeadsOnline program to see whether the efforts of business owners are paying off for crime victims.
Last year, $71,000 worth of stolen property was recovered from cases in which police queried the online system, and pawn shops paid $13,000 for the goods that turned up.
“At least on the surface, those look like pretty good numbers,” said councilor Dean Karsky, a committee member.
Given that pawnbrokers had worked with police without the database for decades, detractors of the city rules say the number doesn’t justify the burden it places on singled-out businesses.
“They would have gotten that property back anyway,” said Dean Nasser, a lawyer who represented several pawn shops during debate on an ordinance in 2011.
An ordinance was intended to update a longstanding police practice.
Terry Mixell, the property crimes detective who administers the program, said pawn-shop owners began tracking transactions in 1957.
Since 1994, Sioux Falls pawn shops have been required to provide transaction data to police. Officers would provide pre-printed tickets to shops, whose employees would fill them out for each sale and hand them to police.
Until 2008, officers collected the tickets, called shops when they couldn’t read an employee’s handwriting, then gave the information to the records division, where it was entered manually. A computer upgrade in 2009 made the system obsolete.
At that point, the department reached out to LeadsOnline.com, an agency that collects data from pawn shops for police departments and holds it indefinitely. Instead of filling out paper tickets, pawn and jewelry shop employees enter the data into a computer and send it to the agency.
Lindsay Williams, spokeswoman for LeadsOnline, said the data is owned by the agencies and information is secured using the same systems in place for federal government agencies and banks.
Only law enforcement can make an inquiry, and the inquiries search through items from 32,830 businesses from all states.
The information isn’t available for research agencies or competitors, she said.
“Businesses cannot see data from other businesses,” Williams said.
Police Chief Doug Barthel said the ability to search far and wide for stolen goods, combined with the man hours saved by cutting ticket collection from the department’s job duties, makes the $8,000 annual fee worth it.
“The eight grand doesn’t even come close to what we were spending in man hours with the old system,” Barthel said.
Buyers of secondhand goods admit that the new process is easier than the old system.
“Doing LeadsOnline is easier than it would be to keep the paper records,” said Gary Dodd, owner of Action Pawn and Gun.
Dodd’s issue with the new scheme is more bread-and-butter, and has little to do with the online system.
“The only thing that’s changed is we don’t get paid” when police seize merchandise suspected of being stolen, Dodd said.
Instead, buyers can contest the ownership of goods for which they paid in a court hearing that pits crime victims versus pawn shop owners, or ask for restitution from a thief after a conviction.
Restitution is a losing proposition for shop owners, he said, because thieves often are unable to pay a victim, whether it’s the property owner or a pawn shop that paid money for the property in what was thought to be a legal transaction.
As for contesting the ownership of a suspected stolen item in court, he said, that’s a difficult position – even if a pawn shop is out thousands of dollars and suspects that the property doesn’t actually belong to the victim.
“Who wants to go to court and take on a victim?” Dodd said.
At least the option is there, Nasser said. In the past, the city didn’t take steps to allow the business owners to contest the seizure of property.
“One of the pieces of progress we made was that they have to keep track of it now,” Nasser said.
Still, there is a cost to businesses, he said. Last year, pawn shops and jewelry dealers paid slightly less than $13,000 for goods later identified as possibly stolen. Nineteen recovered items were returned to the owners; three were returned to pawn shops. There were three hearings to dispute ownership, and the victim won each time.
Anderson’s inquiry as to the effectiveness of the program at a council meeting last month was a result, in part, of his concern that owners were getting a chance to make their case.
“I just wanted to make sure that we have a program that’s fair to these businesses,” Anderson said.
Anderson doesn’t think the city should go back to paying pawn shops up front, however.
Council members Karsky and Michelle Erpenbach, as well as Police Chief Barthel, say the losses are a cost of doing business for pawn shop owners.
“That’s not a line item I’d approve,” Erpenbach said. “What would taxpayers think of that?”
The new ordinance has helped victims recover property, Barthel said.
Last year, Sioux Falls Police made inquiries to LeadsOnline in connection with stolen property worth a total of $98,764. The department received 59 hits from the database, which helped them find suspects and recover $71,181 worth of property.
Not all of the property was sold to or recovered from pawn shops, however. In several cases, officers found stolen property at pawn shops or in a suspect’s home.
One suspect stole $4,500 in goods. After a LeadsOnline inquiry, $850 worth of property was recovered from pawn shops. Another $2,800 worth was returned by the suspect.
“There’s no doubt in my mind that we’re collecting more for victims under the new system,” Barthel said.
Part of the returned property figure has to do with the expanded reach of the law. In the past, only pawn shop owners were required to report their sales. Now, jewelry and other secondhand stores are reporting sales as well.
This year, 50 Sioux Falls stores are entering data.
That’s one reason why National Pawn Co. owner Dan Reynertson is pleased with the new system. Reynertson has stores in Minnesota and Wisconsin, too, but not every city requires secondhand stores to register goods.
Reynertson said he hasn’t seen a surge in seizures of suspected stolen property since the ordinance took effect, but he’s pleased about the law’s expanded reach.
In some cities, Reynertson has to hold purchased goods for a week or longer before he can sell them – in Sioux Falls it’s 14 days – but his competitors could immediately sell them or convert them to cash.
“It can be hard when you’re competing with stores that can just take the jewelry and melt it down 15 minutes after buying it,” Reynertson said. “This creates a level playing field.”
Strict reporting and hold times can be a burden, he said, but he sees the payoff in the value it creates in public perception. Pawn shops are legitimate businesses, he said, and a strong reporting ordinance sends that message to the public.
“We are not here to fence stolen goods. We don’t want them,” he said. “I like the fact that I can tell my customers that everything we sell here is checked by the police department.”
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