[Senate Hearing 106-673]
[From the U.S. Government Publishing Office]
S. Hrg. 106-673
OVERSIGHT OF FEDERAL ASSET FORFEITURE: ITS ROLE IN FIGHTING CRIME
=======================================================================
HEARING
before the
SUBCOMMITTEE ON CRIMINAL JUSTICE OVERSIGHT
of the
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
on
FEDERAL ASSET FORFEITURE, FOCUSING ON ITS ROLE IN FIGHTING CRIME AND
THE NEED FOR REFORM OF THE ASSET FORFEITURE LAWS
__________
JULY 21, 1999
__________
Serial No. J-106-38
__________
Printed for the use of the Committee on the Judiciary
U.S. GOVERNMENT PRINTING OFFICE
66-959 CC WASHINGTON : 2000
COMMITTEE ON THE JUDICIARY
ORRIN G. HATCH, Utah, Chairman
STROM THURMOND, South Carolina PATRICK J. LEAHY, Vermont
CHARLES E. GRASSLEY, Iowa EDWARD M. KENNEDY, Massachusetts
ARLEN SPECTER, Pennsylvania JOSEPH R. BIDEN, Jr., Delaware
JON KYL, Arizona HERBERT KOHL, Wisconsin
MIKE DeWINE, Ohio DIANNE FEINSTEIN, California
JOHN ASHCROFT, Missouri RUSSELL D. FEINGOLD, Wisconsin
SPENCER ABRAHAM, Michigan ROBERT G. TORRICELLI, New Jersey
JEFF SESSIONS, Alabama CHARLES E. SCHUMER, New York
BOB SMITH, New Hampshire
Manus Cooney, Chief Counsel and Staff Director
Bruce A. Cohen, Minority Chief Counsel
______
Subcommittee on Criminal Justice Oversight
STROM THURMOND, South Carolina, Chairman
MIKE DeWINE, Ohio CHARLES E. SCHUMER, New York
JOHN ASHCROFT, Missouri JOSEPH R. BIDEN, Jr., Delaware
SPENCER ABRAHAM, Michigan ROBERT G. TORRICELLI, New Jersey
JEFF SESSIONS, Alabama PATRICK J. LEAHY, Vermont
Garry Malphrus, Chief Counsel
Glen Shor, Legislative Assistant
(ii)
C O N T E N T S
----------
STATEMENT OF COMMITTEE MEMBER
Page
Thurmond, Hon. Strom, U.S. Senator from the State of South
Carolina....................................................... 1
DeWine, Hon. Mike, U.S. Senator from the State of Ohio........... 3
Schumer, Hon. Charles E., U.S. Senator from the State of New York 3
Leahy, Hon. Patrick J., U.S. Senator from the State of Vermont... 4
Biden, Hon. Joseph R., Jr., U.S. Senator from the State of
Delaware....................................................... 7, 8
CHRONOLOGICAL LIST OF WITNESSES
Statement of Hon. Henry Hyde, A Representative in Congress from
the State of Illinois.......................................... 10
Statement of Hon. Anthony D. Weiner, A Representative in Congress
from the State of New York..................................... 13
Panel consisting of Eric H. Holder, Jr., deputy attorney general,
U.S. Department of Justice, Washington, DC; James E. Johnson,
under secretary for enforcement, U.S. Department of the
Treasury, Washington, DC; Bonni G. Tischler, assistant
commissioner, Office of Investigations, U.S. Customs Service,
Washington, DC; and Richard Fiano, chief of operations, Drug
Enforcement Administration, U.S. Department of Justice,
Arlington, VA.................................................. 15
Panel consisting of Gilbert G. Gallegos, national president,
Fraternal Order of Police, Washington, DC; Johnny Mack Brown,
past president, National Sheriff's Association, Alexandria, VA;
Johnny L. Hughes, director, government relations, National
Troopers Coalition, Annapolis, MD; Samuel J. Buffone, National
Association of Criminal Defense Lawyers, Washington, DC; and
Roger Pilon, director, Center for Constitutional Studies, CATO
Institute, Washington, DC...................................... 66
ALPHABETICAL LIST AND MATERIAL SUBMITTED
Biden, Hon. Joseph R., Jr.: Letter from Robert T. Scully,
executive director, National Association of Police
Organizations, Inc., dated July 15, 1999....................... 9
Brown, Johnny Mack:
Testimony.................................................... 70
Prepared statement........................................... 72
Buffone, Samuel J.:
Testimony.................................................... 76
Prepared statement........................................... 78
Fiano, Richard:
Testimony.................................................... 38
Prepared statement........................................... 41
Pictures of various drug seizures............................ 47
Gallegos, Gilbert G.:
Testimony.................................................... 66
Prepared statement........................................... 67
Holder, Eric H., Jr.:
Testimony.................................................... 15
Prepared statement........................................... 17
Hughes, Johnny L.:
Testimony.................................................... 73
Prepared statement........................................... 75
Hyde, Hon. Henry: Testimony...................................... 10
Johnson, James E.:
Testimony.................................................... 29
Prepared statement........................................... 31
Letter to Senator Thurmond from the Department of the
Treasury, dated July 21, 1999.............................. 34
Pilon, Roger:
Testimony.................................................... 85
Prepared statement........................................... 87
Letters to Hon. Henry Hyde from:
Americans For Tax Reform, Washington, DC, dated June 18,
1999................................................... 92
R. Bruce Josten, executive vice president, government
affairs, Chamber of Commerce, dated June 23, 1999...... 94
Edward L. Yingling, deputy vice president, executive
director of government relations, American Bankers
Association, dated May 14, 1999........................ 94
Tischler, Bonni G.:
Testimony.................................................... 35
Prepared statement........................................... 37
Weiner, Hon. Anthony D.: Testimony............................... 13
APPENDIX
Questions and Answers
Responses of Eric Holder to Questions From Senators:
Thurmond..................................................... 107
Leahy........................................................ 108
Response of James E. Johnson to a Question From Senator Thurmond. 112
Responses of Bonni G. Tischler to Questions From Senator Thurmond 113
Response of Richard Fiano to a Question From Senator Thurmond.... 115
Responses of Gilbert G. Gallegos to Questions From Senators:
Thurmond..................................................... 116
Leahy........................................................ 116
Additional Submissions for the Record
Prepared statement of:
The Federal Bureau of Investigation.......................... 118
The Department of Justice.................................... 119
The National Association of Realtors and the Institute of
Real Estate Management..................................... 123
Letter to Senator Thurmond from Richard Gallo, Federal Law
Enforcement Officers Association, dated July 20, 1999.......... 125
Letter to Hon. Henry J. Hyde, from Myrna Raeder, American Bar
Association, dated May 20, 1999................................ 125
Report to the House of Delegates from the American Bar
Association--Criminal Justice Section.......................... 126
OVERSIGHT OF FEDERAL ASSET FORFEITURE: ITS ROLE IN FIGHTING CRIME
----------
WEDNESDAY, JULY 21, 1999
U.S. Senate,
Subcommittee on Criminal Justice Oversight,
Committee on the Judiciary,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:06 p.m., in
room SD-628, Dirksen Senate Office Building, Hon. Strom
Thurmond (chairman of the subcommittee) presiding.
Also present: Senators DeWine, Ashcroft, Sessions, Schumer,
Biden, and Leahy.
OPENING STATEMENT OF HON. STROM THURMOND, A U.S. SENATOR FROM
THE STATE OF SOUTH CAROLINA
Senator Thurmond. The subcommittee will come to order. I am
pleased to hold this oversight hearing today regarding the use
of Federal asset forfeiture and its importance in fighting
crime.
The government has had the authority to seize property
connected to illegal activity since the founding days of the
Republic. Forfeiture may involve seizing contraband, like
drugs, or the tools of the trade that facilitate the crime.
Further, forfeiture is critical to taking the profits out
of the illegal activity. Profit is the motivation for many
crimes like drug trafficking and racketeering, and it is from
these enormous profits that the criminal activity thrives and
sustains. The use of traditional criminal sanctions of fines
and imprisonment are inadequate to fight the enormously
profitable trade in illegal drugs, organized crime, and other
such activity, because even if one offender is imprisoned, the
criminal activity continues.
Criminal and civil forfeiture is essential to ensure that
crime does not pay. Criminals must not be allowed to enjoy the
fruits of their illegal activity. In fact, some criminals would
prefer to spend some time in prison if they can live off the
proceeds of their illegally-gotten gains when they are
released.
Civil forfeiture is sometimes the only avenue open to law
enforcement. For example, sometimes the criminal remains in a
foreign base of operation and is untouchable from criminal
prosecution. Here, the government's only option may be to take
his illegal assets through civil forfeiture.
Asset forfeiture deters crime. It has been a major weapon
in the war on drugs since the mid-1980's, when we expanded
civil forfeiture to give it a more meaningful role. One of the
reforms at the time permitted law enforcement to keep
forfeiture proceeds, and it has become an important source of
revenue for law enforcement. This is especially true for State
and local law enforcement, which depend on the millions of
dollars in shared money for various purposes, such as officer
training and to upgrade equipment. Another benefit of
forfeiture is that some assets are returned to victim owners,
and we need to consider expanding this area even more to allow
civil forfeiture to pay restitution to victims.
At the same time, forfeiture is about the government using
its powers to take private property, and there must be adequate
restrictions to prevent abuse of this power. The Supreme Court
has imposed some limits, such as holding that criminal and many
civil forfeitures can constitute an excessive fine in violation
of the Eighth Amendment if they are grossly disproportionate to
the offense. Also, law enforcement agencies should not view
forfeiture simply as a way to make money for their agencies,
but as a way to fight crime. Prosecutors must use good judgment
in case selection and settlement posture, and show a healthy
respect for property rights. Forfeiture should never result in
the government taking the property of innocent Americans.
Most agree that additional reforms of Federal civil
forfeiture laws are needed. For example, the administration
believes that the government should have the burden of proving
that it is more likely than not that the property was involved
in the criminal activity, rather than the owner having to prove
that the property was not involved.
There is wide support for developing a more uniform
innocent owner defense. Further, some are concerned that under
current law, the government is not liable when it negligently
damages property in its possession, even when the property is
later returned to its innocent owner.
The Civil Asset Forfeiture Act that has passed the House
would fundamentally alter Federal civil forfeiture. I respect
the sincere efforts of its sponsors to achieve needed reform in
this area. However, if passed in its current form, I am
concerned that it goes too far. It may undermine the use of
forfeiture law in the war against drugs, child pornography,
money laundering, telemarketing fraud, terrorism, and a host of
other crimes.
For example, we should not make the government's burden of
proof in a civil forfeiture higher than it is in a criminal
forfeiture. Also, we should not make it so easy for anyone to
request a lawyer at government expense that it overwhelms the
system with frivolous claims.
There must be balance in any reform of the forfeiture laws.
We cannot tie the hands of law enforcement in an effort to stop
well-publicized examples of abuse. We must make certain that
reform does not give criminals the upper hand.
I wish to thank our distinguished witnesses for appearing
today and I look forward to hearing your testimony and
discussing the importance of asset forfeiture and the proposals
for reform in this complex area.
At this time I would like to place the prepared statement
of Senator DeWine into the record.
[The prepared statement of Senator DeWine follows:]
Prepared Statement of Senator Mike DeWine
I would like to make just a few brief remarks, but, before I begin,
let me thank our chairman, Senator Thurmond, for holding this hearing
today. I commend you, Mr. Chairman, for your willingness to tackle
another tough but equally important issue--asset forfeiture reform.
Asset forfeiture has emerged from its early use in admiralty cases
as a significant tool in modern law enforcement's war on drugs and
other crime. Utilizing criminal and civil forfeiture laws, today's law
enforcement officers routinely free our streets and neighborhoods of
substantial quantities of illicit drugs, unlawful assault weapons,
counterfeit currency, smuggled goods, as well as the instruments of
crime. Forfeiture has played an even greater role in proving the old
adage, ``crime doesn't pay,'' forcing criminals to forfeit the profits
of their unlawful acts and recovering property for their innocent
victims. Finally, forfeiture has provided state, local and federal law
enforcement with important additional resources with which to fight
crime.
But the great benefits of the forfeiture laws in the fight against
crime must be balanced with the rights of innocent property owners.
Significant questions related to 8th Amendment protections and Due
Process concerns must be answered. I hope we can get closer to doing so
here today. Several legislative reform proposals have been offered
seeking to strike the appropriate balance between individual rights and
law enforcement needs. I thank Congressman Hyde for his leadership in
the House in this effort, and I appreciate his willingness to share his
proposals with us here today. I am pleased that the Administration is
also constructively engaged in the debate. Mr. Holder will raise some
very important concerns with the House Reform proposal that I too
share.
I look forward to a healthy discussion. Thank you Mr. Chairman.
Senator Thurmond. We will be glad to hear from you now,
Senator Schumer.
STATEMENT OF HON. CHARLES E. SCHUMER, A U.S. SENATOR FROM THE
STATE OF NEW YORK
Senator Schumer. Well, thank you, Senator Thurmond. I
appreciate the opportunity here of you holding this hearing for
us and to give an opening statement. I want to congratulate you
for holding this hearing because asset forfeiture is a timely
and important subject for this subcommittee to be examining.
I want to welcome all of the witnesses today, and
particularly the two witnesses at the table now, my former
colleague from the House, my friend, the esteemed Chairman of
the House Judiciary Committee, whom I always had a close
relationship with, and we never let either our agreements or
our disagreements stand in the way of that friendship, and
Congressman Anthony Weiner, who holds a House seat near and
dear to my heart because, among other things, until last
November I was the occupant of that House seat.
Federal asset forfeiture and practice is one of a host of
law enforcement versus civil liberties issues that have come to
a rolling boil recently, after heating up over a number of
years. These issues transcend party lines and cut across the
usual coalitions, making them one of the most fascinating
issues to watch. They excite strong passions and they come down
to balancing competing interests, each of which is substantial
in its own right.
I think the first step to resolving this issue is to state
what this debate is not about. It is not about whether there
should be civil asset forfeiture or not, and it is not about
one side supporting reform and the other side inalterably
opposing reform.
Indeed, I suspect that every witness we hear from today,
from libertarian to law enforcement, will tell us that he or
she considers civil asset forfeiture to be a legitimate law
enforcement tool and, as well, that he or she is amenable to
some degree of reform. And from there, there is even agreement
on some of the basic elements of reform, such as assigning the
burden of proof to the government and creating a uniform
innocent defense. Unfortunately, the consensus ends at the
shores of the details.
What should be the government's burden of proof in a civil
forfeiture proceeding? There is disagreement there. What should
be the scope of an innocent owner defense? Disagreement there.
When, if ever, should seized property be returned, pending
completion of a forfeiture proceeding? What are the loopholes
in current forfeiture law that protect the fruits of illegal
activity from forfeiture in circumstances where forfeiture is
clearly appropriate? These issues, among others, represent the
fault lines of this debate.
I, for one, am concerned that the bill passed by the House,
while undoubtedly well-intentioned, may not have struck the
proper balance in terms of rewriting Federal forfeiture law. I
fear it may inadvertently give sophisticated money launderers
and drug lords too great an advantage against law enforcement
in their efforts to insulate the fruits of crime from
forfeiture.
And I am also concerned about the bill's failure to close
some inexplicable loopholes in Federal forfeiture law that
prevent forfeiture in cases where it is clearly appropriate. If
reform, in fact, worked to render civil asset forfeiture but a
paper tiger, the consequences would be dire. Instrumentalities
of the drug trade would remain in circulation rather than being
put out of commission for good. Clever criminals who knew how
to put a good distance between themselves and the proceeds of
their illegal acts could very well be able to operate without
meaningful consequence. So the right version of reform would
restore public confidence in civil asset forfeiture which is
needed without entailing such results.
I believe today's hearing will help us strike the proper
balance on this most important issue. I know that other members
of this panel share at least some of my concerns--I know you
do, Mr. Chairman--and I look forward to working with them to
ensure that, above all, we act responsibly, preserving civil
asset forfeiture as an effective means of ensuring that crime
does not pay, while addressing current law's due process
shortcomings.
Thank you, Mr. Chairman.
Senator Thurmond. Does anyone over here care to make an
opening statement?
[No response.]
Senator Thurmond. Does anyone over here care to make an
opening statement?
STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM THE
STATE OF VERMONT
Senator Leahy. Mr. Chairman, I know that asset forfeiture
is a powerful crime-fighting tool. As you suggested in your
statement, it has been a particularly potent weapon in the war
on drugs, allowing the government to take the cars and boats
and stash houses amassed by drug dealers and put them to honest
use. In fact, I think the government was able to seize about
$500 million worth of assets, cutting a big chunk out of the
criminals' profits. But it is not failsafe and it can be
abused.
In the past year, Americans have had firsthand experience
with what can happen when a prosecutor with all the powers of
his office throws judgment to the wind and succumbs to
zealotry. There is one example of a motel that was being used
by drug dealers. There was no allegation that hotel owners
participated in any crimes. Indeed, the motel people had called
the police dozens of times to report suspected drug-related
activity in the motel's rooms by some of its overnight guests.
I mean, they were doing what an honest citizen should do; they
called and reported it.
But the government said they didn't do all the security
measures suggested. What did they suggest? Well, among other
things, they said, well, you have got to raise your room rates.
And because they didn't, they were giving tacit consent to the
drug activity, and so they seized the motel.
Now, I am only a lawyer from a small town in Vermont, but I
think maybe the burden should have been on the police. They had
the crimes reported to them; the burden should have been on
them to go in, not saying, here, raise your prices. A great law
enforcement tactic that is, raise the prices. If these people
were doing enough drug-dealing that justifies forfeiting and
grabbing a motel, do you think they were going to be dissuaded
because the room rates went up $10 or $20? Of course not. The
government eventually dropped this action, but only after the
owners were forced to spend a lot of money that should have
been exacted from the drug dealers.
So we are going to hear examples of what happens when
prosecutorial zeal skirts the boundaries of due process,
leading to the taking of private property, regardless of
whether the owner is innocent of, or even cognizant of the
property's use in an illegal act.
Our Federal judges are adding their voices to the growing
chorus of concern. In 1996, the Eighth Circuit Court of Appeals
rebuked the government for capitalizing on the claimant's
confusion to forfeit over $70,000 of their currency, and
expressed alarm that the war on drugs has brought us to the
point where the government may seize a citizen's property
without any initial showing of cause.
We put the onus on the citizen to perfectly navigate the
bureaucratic labyrinth in order to liberate what is
presumptively his or hers in the first place. And if the
citizen proves inept in proving his innocence, in effect, the
government may keep the property without ever having to justify
or explain its actions. The Seventh Circuit recently ordered
the return of over $500,000 in currency that had been
improperly seized from a Chicago pizzeria.
Now, it is this notion of guilty property that enables the
government to seize property, regardless of the guilt or
innocence of the property owner. In fact, in many asset
forfeiture cases, the person whose property is taken is never
charged with any crime.
I have no problem at all, if a person is convicted, if the
courts want to order, as a part of the sentence, the seizure of
some of their property. That is fine, if they have been
convicted. If the government has proven that the property is
somehow either the gains of the defendants' criminal activity
or used in their criminal activity, fine, convict them and
seize it. That doesn't bother me a bit.
But the guilty property notion kind of explains the topsy-
turvy nature of today's civil forfeiture proceedings in which
the property owner, not the government, bears the burden of
proof. That worries me if we have a case where all the
government has to do is make an initial showing of probable
cause that the property is guilty and subject to forfeiture. It
is then up to the property owner to prove that the property was
not involved in any wrongdoing.
I think we have to look at these laws and bring them in
line with more modern principles of due process and fair play.
H.R. 1658, the Civil Asset Forfeiture Act, would provide
safeguards for individuals whose property has been seized by
the government. I think that is why this bipartisan legislation
passed the House of Representatives last month by an
overwhelming majority and deserves our prompt consideration.
The administration says that H.R. 1658 would interfere with
its ability to combat drug trafficking, alien smuggling, and so
on. Well, we should take those concerns seriously, but I think
considering some of the misuse of the forfeiture laws--and I
will tell you right now, I know we have distinguished law
enforcement people here ready to testify, but in every State in
the Union there are police officers who will tell us of misuse
of this.
Most police officers would be very careful to do it the
right way. Most police officers want to be within the law. But
in no department in any State can you go and find that people
are going to be able to say never, ever was it used as a
pressure tactic; never, ever was the determination of who to go
after based on what assets might be seized.
The right to own property doesn't include the right to keep
ill-gotten gains. But under our Constitution, deprivation of
property and due process have to go hand in hand; you can't
have one without the other. So I want to make sure we keep this
fair. I want to make sure that we have not taken something that
was meant to be a good crime-fighting tool and allowed it to
get way out of control.
If you convict somebody and they have got property they
gained from that criminal activity, fine, seize it. If you
convict them and they have got property they are using to carry
on crimes, fine, seize it. But let's not just go seizing
property because somebody wants to grab it and then the person
who owned it has the burden of proving their innocence, not the
other way around.
Thank you, Mr. Chairman.
Senator Thurmond. I understand there is a vote on in the
House. Senator Biden, if we could hear from them and then call
on you----
Senator Biden. Sure, I will forgo.
Senator Leahy. I am sorry. I didn't realize that.
Mr. Hyde. I don't intend to make the vote, so don't
readjust yourself on my account.
Senator Thurmond. Well, how about Mr. Weiner?
Mr. Weiner. Well, Mr. Chairman, would it be more convenient
if I just ran and voted--I have my car here--and just run right
back?
Senator Thurmond. Yes, go and vote and come back.
Senator Biden.
STATEMENT OF HON. JOSEPH R. BIDEN, JR., A U.S. SENATOR FROM THE
STATE OF DELAWARE
Senator Biden. I will be brief, Mr. Chairman. Let me ask
unanimous consent that my opening statement be placed in the
record as if read and just highlight two points.
One, I don't doubt the intention of the House and the
distinguished chairman of the committee in trying to correct
something. I want to be up front here.
Since you and I were the ones that wrote the forfeiture law
years ago, Mr. Chairman, I don't want it to be concluded,
although it is easy for that to happen, that my opposition to
the House position is based upon it not being invented here.
That is not the case.
I think it is really important that we have the hearing, as
we all do, because I think it is important to get into some of
the details, some of the horror stories that we just heard, for
example. If the Senator from Vermont was referring to the Red
Carpet Inn case when he was talking about it, the facts aren't
accurate. The Federal Government never did seize that motel.
With regard to the Chicago pizza case which we hear all the
time, there was a bottom-line problem. The court ruled there
was no probable cause. It did not have to do with much else, as
they concluded, as they do in many other cases, that there
wasn't sufficient probable cause.
There are some abuses of the systems. There are ways to
correct that. I have been working very closely with Senator
Schumer, as well as our staff with Senator Sessions and others.
I think we three probably come at it from a slightly different
angle than the House does, and I think and I hope we can work
our way through this to make corrections that don't over-
correct a problem that doesn't exist.
There are some problems. I acknowledge that, and I am
looking forward to the hearing and being able to delve into
some of the misconceptions. The number two man in the Justice
Department is here. I am going to say something that----
Senator Schumer. The number one man, actually.
Senator Biden. Well, the number one man, yes, the number
two person. Thank you, Senator.
Senator Leahy. You should be precise, Joe.
Senator Biden. That is right. I will be precise.
I think that both the Justice Department and the House have
exaggerated their worst case scenarios. I think they both have
exaggerated it, and I think this needs some tinkering with. I
don't think this needs a major overhaul. And my hope is here
that when you finish your hearing or series of hearings, Mr.
Chairman, that we will arrive at some consensus here.
I will conclude by ending where Senator Schumer opened. The
government acknowledges--we acknowledge that the burden should
be upon the government now. That is a reasonable, that is a
logical, that is a good change, and it is positive. There are
other changes of that nature that I think we ought to be able
to work out a compromise on that doesn't meet, I will say, the
administration's position fully, but is a far cry from where
the House is.
So I am grateful that the chairman would come over here and
testify before us. I had the pleasure of doing that in reverse
roles on a number of occasions. It is nice to see him over here
in a capacity other than the one we saw him mostly in on this
side recently. I bet he is even more overjoyed than we are that
he is here for that reason, but I look forward to the
testimony.
[The prepared statement of Senator Biden follows:]
Prepared Statement of Senator Joseph R. Biden, Jr.
I'm glad that we are taking this opportunity to talk about this
very important issue. I think it is imperative that we not rush this
process, but that we hear from federal and local law enforcement, from
concerned groups and from citizens--so that we can make educated
judgments about these significant and complex issues.
This issue is particularly important because we must find a way to
protect the due process rights of the innocent citizens of this country
while at the same time preserving one of the most valuable tools that
law enforcement has--asset forfeiture.
I have looked at the major provisions of the bill that recently
passed in the House and have reviewed similar provisions in the bill
drafted by the Department of Justice. I think neither bill provides the
kind of balance necessary to accomplish those, competing goals and that
we need to find a more moderate approach.
I believe we need legislation that incorporates some ideas from the
House bill and some from the Department of Justice bill. I would like
to see a balanced bi-partisan alternative that has a reasonable chance
of passage in both Houses and a strong likelihood of making it past the
President's desk.
I have been working with Senators Sessions, Schumer and Feinstein
on this and have likewise been working with the National Association of
Police Officers, the National District Attorney's Association, the
Federal Law Enforcement Officers Association, the International
Association of Chiefs of Police and the Fraternal Order of Police. I
want to continue to meet with law enforcement groups to learn what
issues are most important to them and get their help in crafting a
workable way to preserve this important law enforcement tool.
Bob Scully, the Executive Director of the National Association of
Police Organizations wrote me recently regarding asset forfeiture. In
that letter, he urges this Committee to carefully consider the concerns
that the National Association for Police Organizations and the law
enforcement community have regarding H.R. 1658. He asked that I make
this letter a part of the record and I'm happy to do that now.
I will do whatever is reasonable and necessary to give law
enforcement the tools that they need to do their job--while providing
our citizens with the protection against abuse that they obviously
deserve. But, make no mistake--drug dealers and their money launderers
will not be able to hide from any piece of legislation that has my
support. Drug dealers and their money launderers will never be able to
keep their ill-gotten gains--not while I'm sitting in this chair.
I encourage everyone to take a deep breath so that we can make sure
that we do the right thing. The right thing that protects law
enforcement's valuable tool against drug dealers and money launderers
and the right thing to protect innocent citizens' property.
In that vein, I look forward to hearing the suggestions of our
distinguished witnesses today.
Representative Hyde. Exultant, Senator. I am exultant being
here.
Senator Schumer. Stay in your chair. [Laughter.]
Senator Leahy. In the ecclesiastical sense, Mr. Chairman,
or in the legislative sense?
Representative Hyde. Ecclesiastical.
Senator Leahy. OK.
Senator Biden. At any rate, I just hope we all keep an open
mind here, and let's not accept at face value some of the broad
assertions were are going to hear made. Let's look at the
details of this.
I would ask unanimous consent, to further reveal my
prejudice here--and I have to admit the angle at which I am
coming to this--I have been asked by Robert T. Scully, the
Executive Director of NAPO, whether his statement at the
appropriate place could be placed in the record.
Again, I look forward to the testimony, but let's not--as
your old buddy President Reagan used to say, if it ain't broke,
don't fix it. If it is broke, fix it, but let's make sure what
part is broke before we go over this wholesale method.
Senator Thurmond. Do you want to put that in the record?
Senator Biden. I would like to put Mr. Scully's letter in
the record.
Senator Thurmond. Without objection, it will go in the
record.
[The letter referred to follows:]
National Association of Police Organizations, Inc.,
Washington, DC, July 15, 1999.
Hon. Joseph Biden, Jr.,
U.S. Senate,
Russell Senate Office Building,
Washington, DC.
Dear Senator Biden., Jr.: On June 24, 1999 the House of
Representatives passed H.R. 1658, the ``Civil Asset Forfeiture Reform
Act of 1999.'' Please be advised of the National Association of Police
Organizations' (NAPO) adamant opposition to this legislation. NAPO
represents over 4,000 unions and associations and more than 220,000
sworn law enforcement officers throughout the country.
As you know, Chairman Henry Hyde of the, House Judiciary Committee
introduced H.R. 1658, on May 4, 1999, to reform Federal civil asset
forfeiture procedures. During floor debate on H.R. 1658, Congressman
Asa Hutchinson offered a substitute amendment, supported by NAPO and
most of the national law enforcement organizations, which unfortunately
was not adopted. Ironically, in the 105th Congress, the House Judiciary
Committee overwhelmingly supported asset forfeiture legislation similar
to the Hutchinson amendment calling for moderate asset forfeiture
reform.
This year's legislation would preclude law enforcement from
properly performing their duties and at the same time, give an added
advantage to alleged criminals and drug dealers. This legislation would
limit police powers and inhibit the ability of law enforcement to seize
property such as cash, securities, cars, boats and real estate. Over
the last decade we have experienced a decline in crime. However, this
is no time to undermine the ability of law enforcement to combat drug
trafficking, alien smuggling, terrorism, consumer fraud and many other
criminal offenses.
Furthermore, police departments across this nation already have
severely restricted budgets and by lessening income potential from
asset forfeiture through this bill, the federal government would be
drastically handicapping law enforcement capabilities in seizing
illegal property. The ability of law enforcement to seize property is
an important tool in this nation's `war on drugs'. Asset forfeiture
acts as a strong deterrent and deprives drug dealers from profiting
from their illegal activities.
NAPO urges members of the Senate Judiciary committee not to move
forward with H.R. 1658 but instead to enact sensible asset forfeiture
legislation. When the Judiciary Committee debates the plight of H.R.
1658, we respectfully request that members consider the potential
consequences on law enforcement if this legislation is enacted.
There are a number of provisions in H.R. 1658 that need to be
addressed and amended in order for law enforcement to sufficiently
carry out their duties, as follows:
(1) Currently in order for law enforcement to seize property
they need `probable cause' the same standard of proof that is
required to arrest a person or secure a warrant to search a
person's home. This legislation, however, would require that
law enforcement prove by `clear and convincing evidence' that
the property was used in an illegal manner. The legislation
shifts the burden of proof in an extreme manner to the
government. NAPO feels a `clear and convincing' standard sets
the bar too high, and NAPO supports `a preponderance of
evidence' standard of proof as compromise legislation.
(2) This bill would also allow the court to appoint counsel
for `any person claiming an interest in the seized property'.
This language creates the potential to encourage an inordinate
amount of frivolous claims and litigation to seized property.
Their ``free appointed counsel'' would come at the expense of
taxpayers. NAPO supports language that provides the appointment
of counsel for those who cannot afford it. However, NAPO also
supports safeguards to prevent frivolous claims in H.R. 1658
that would entitle `anyone who simply claims an interest' in
the seized property to acquire a government funded lawyer.
(3) Similar to H.R. 1658, NAPO supports language that creates
an `innocent owner' defense so those who legitimately may not
know someone else used their property illegally can take
reasonable steps to defend against the governments claim.
However, included in the term `innocent owner' under H.R. 1658
are those who receive property through probate, which would
forever be protected against forfeiture. NAPO does not support
relatives of a drug lord who was killed in a shoot out with law
enforcement authorities, for example, to claim that they are
innocent owners of illegal property. Therefore, NAPO supports
an amendment or legislation that would close this egregious
loophole.
(4) H.R. 1658 states (section 2 (k)(1)) that a claimant ``is
entitled to immediate release of seized property if (c) the
continued possession by the United States Government pending
the final disposition of forfeiture proceedings will cause
substantial hardship to the claimant.'' However, the only
minimal burden the claimant must meet for transfer of assets is
that hardship to the claimant outweighs any risk that the
property will be destroyed, damaged, lost concealed or
transferred. NAPO supports legislation that would ensure the
government has the means to inspect that property while the
forfeiture proceeding is pending, and would make clear that
certain types of property (such as currency, evidence of the
crime and contraband) cannot be returned even if hardship is
shown.
(5) Finally, under H.R. 1658 an agency seizing property must
give written notice no less then 60 days or `it shall return
the property and may not take any further action to effect the
forfeiture of such property'. NAPO supports legislation that
would make certain that the forfeiture is not foreclosed,
merely because of an administrative mistake of not meeting the
60-day deadline.
I urge the Senate Judiciary Committee to carefully consider the
concerns that NAPO and the law enforcement community have regarding
H.R. 16S8. If I can be of any assistance on this or any other matter,
please don't hesitate to call myself or Mike Troubh, NAPO's legislative
assistant.
Sincerely,
Robert T. Scully,
Executive Director.
Senator Thurmond. Now, our first panel consists of the
distinguished chairman of the House Judiciary Committee,
Chairman Henry Hyde, and another member of the House Judiciary
Committee, Congressman Anthony Weiner. Chairman Hyde is the
primary sponsor of H.R. 1658, the Civil Asset Forfeiture Reform
Act. They are both very knowledgeable on the issue of asset
forfeiture. We are very pleased to hear from both of them.
Let us start now with Chairman Hyde.
STATEMENT OF HON. HENRY HYDE, A REPRESENTATIVE IN CONGRESS FROM
THE STATE OF ILLINOIS
Representative Hyde. Thank you very much, Senator, and I am
really delighted--``exultant'' is really too strong a word, but
I am really pleased to be here. I view every one of you as a
friend and a colleague, and I thank you, Senator Thurmond,
especially, for holding this hearing.
I would just say to my good friend, Senator Biden, if he
would look at our report--and I will leave this with you--it
cites chapter and verse on the Red Roof Motel, which was a real
happening and an abuse of the forfeiture laws, in my opinion.
There are lots of issues you deal with over a course of
years. I have been here 25 years, and I am not a novice in
negotiating with this very group of Senators. We negotiated
some years ago on the independent counsel law, and I am
suppressing the urge to say I told you so.
Senator Biden. You were right, you were right. I was wrong,
I was wrong. You were right. [Laughter.]
Representative Hyde. Very good. I may get 10 copies of that
written up.
But there are some issues that really get to you and this
is one. One of the great blessings of this job, being a
Congressman, being a Senator, is the opportunity--and I stress
opportunity--to right a terrible wrong.
Seven years ago, I read an editorial and I couldn't believe
my eyes that in my America, in your America, the police can
confiscate your property based on probable cause. You don't
have to be convicted, you don't even have to be charged, but on
probable cause, the lowest level of accusation, your property
can be seized.
Now, if you want to get your property back, you have a
magnificent 10 days to file your claim, hire a lawyer, post a
bond, 10 percent of the value, go into court and prove a
negative, prove that your property was not involved. I thought,
what a wonderful judicial system for the Soviet Union that puts
the burden of proof on its head and makes you have to prove a
negative, and you better do it within 10 days, I guess under
certain circumstances 20 days. You better have a lawyer, you
better post a bond, and you better be able to prove a negative.
I couldn't believe that was the practice in my country, but
I checked into it and I found out, oh, yes, it is, and for 6
years I have been trying to change this to get the burden of
proof where it belongs. You shouldn't be punished on probable
cause. You should be punished if you are guilty of something,
but not probable cause, the lowest level possible. I wrote a
book on this. Each of you have a copy of the book.
We put together a bill and, miracle of miracles, supporting
it are the American Civil Liberties Union, the National Rifle
Association, the Cato Institute, and a ton of very respectable
people--the U.S. Chamber of Commerce, the American Bar
Association, Americans for Tax Reform, the National Association
of Realtors, the American Bankers Association, the National
Association of Home Builders, on and on and on, a very
distinguished group of people who agree with me that you
shouldn't be punished for probable cause.
Now, we finally got the bill up in the House after many
years and it passed 375 to 48. And one of my proudest
possessions is a picture from the back of the front part of the
New York Times with John Conyers, Barney Frank, Bob Barr and me
shaking hands.
Senator Biden. That is why I am opposed to this.
[Laughter.]
Senator Leahy. It is either a good bill or one of you
didn't read it. [Laughter.]
Representative Hyde. I thought you were a coalition-
builder, Senator. That is eclecticism gone rampant. But
nonetheless, there is a balance of people who think it is
outrageous that you have to prove you are innocent, prove a
negative, to retain your own property.
Then I found out if the government confiscates your
property, if they damage it, if they shatter it, if they ruin
it, that is your tough luck. They are not accountable, they are
not responsible. And so in the bill that we put together with
bipartisan support--liberals, conservatives, moderates, quasi-
moderates, semi-liberals, the whole panoply across the board,
375 of them--the bill requires that if a property owner
challenges a seizure, the Federal Government must prove by
clear and convincing evidence the property is subject to
forfeiture. You know, the right of property was recognized in
the Ten Commandments: ``Thou Shalt Not Steal.''
Now, why clear and convincing? Because it is punishment.
When they take your house, when they take your farm, when they
take your automobile, when they take your business, when they
take your cash, they are punishing you. This isn't a civil
action merely; it is quasi-criminal. And when they punish you,
there ought to be maybe not the criminal standard of proof,
beyond a reasonable doubt, but a mere preponderance is for
fender bender cases. In this situation, if the government wants
to bankrupt you and take your property on probable cause, it
seems to me there ought to be clear and convincing evidence.
The bill allows the judge to order the property released
pending final disposition if the judge determines it would work
a terrible hardship on you. If it is your business and they
have taken possession of your business and you are going to be
a ward of the State and your family is going to be on welfare,
these are things a judge can consider. It is giving a judge
flexibility to be humane depending on the situation.
The bill allows judges to appoint counsel for indigents in
civil forfeiture proceedings. It isn't much good to say you
have the right to get your property back if you can't afford a
lawyer. They have impoverished you by confiscating your assets
and you have got to go find a lawyer that will take your case.
So this allows counsel for indigents in civil forfeiture
proceedings.
It also eliminates the requirement that you have to post a
10-percent bond. There is no earthly reason for you posting a
bond. Either you have got a case or you don't, and the bond is
just another hurdle to keep you from justice.
It provides a uniform innocent owner defense, and that was
involved in the case Senator Biden talked about where this
motel in a very tough neighborhood, a crime-ridden
neighborhood, had drug transactions going on. And the owners
repeatedly reported it to the police, withheld permission. You
try to evict some drug dealers sometime; I wish you a lot of
luck. But the police couldn't do it, and the police took his
property, and he finally got it back after the Houston
newspapers raised hell and wrote editorials, and I have them
here.
So an innocent owner defense is where you do everything you
can. You report it to the police, you withhold permission for
these illegal transactions, and that gives you a safe harbor.
That is missing from the administration's bill, but it is in my
bill and it is just and it is fair.
The bill allows a property owner to sue the government for
destroying their property. You are in a yacht and you are
floating off Miami and the DEA swoops down on you, puts you up
against the mast and takes axes and hatchets and chops your
boat up looking for cocaine. They don't find any, they wave
good-bye, and there you are on a floating wood pile. I mean,
that is right, that is a case. It happened, it is in my book.
So this says you have to take care of the property once you
have confiscated it, and the government can be accountable if
they don't. We give 30 days to file the claim rather than 10
days or 20 days, depending on the circumstances. And if they
have taken your cash, then the interest earned on that belongs
to you. That is a tenant's right in any building.
You shouldn't be punished on probable cause. I believe in
criminal asset forfeiture. I think if you are a drug dealer and
you are guilty, not just accused, but you are guilty, you ought
to lose your house, your car, and your shoes and socks. I am
for that. But when you are not guilty, when you haven't been
found guilty, when you haven't been charged, I don't want my
country confiscating property just on probable cause, I really
don't. When the government gets oppressive, you have no place
to turn, except here to Congress. And these people have done
that and that is all I want.
I will leave you with one last little famous case down in
Memphis, where an African American was a landscaper, but he
made the mistake of having $9,000 in cash in his pocket because
he was going to Houston to buy shrubs and he could get a better
deal if he paid cash. And so he went to this terminal, bought
his ticket. The ticket agent saw the money, gave the signal.
The police arrested him, confiscated his money, said it was
probably drug proceeds, and let him go. He left. They didn't
charge him with anything, but they kept his money. It took him
a couple of years, with a lawyer, to finally get his $9,000
back. That is an abuse, that is an abuse.
So that is all I want is for you to read the editorials
across the country supporting what we are doing, look at the
organizations who support it. There must be something right
about this bill when the left and the right, when the ACLU and
the NRA and the Realtors and the ABA, support it.
So I thank you for listening and I would be happy to answer
questions.
Senator Thurmond. Thank you very much.
Congressman Weiner.
STATEMENT OF HON. ANTHONY D. WEINER, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NEW YORK
Representative Weiner. Thank you, Mr. Chairman, Senator
Schumer, members of the subcommittee. Thank you for inviting me
this afternoon to discuss our civil asset forfeiture laws.
Let me say at the outset that I am in full agreement with
Chairman Hyde that reform is needed. Asset forfeiture is a
centuries-old proposition, and in many respects it is showing
its age. Laws that were originally designed to fight pirates on
the high seas need to be updated to better fight drug dealers
in our inner cities, and we need to enact these reforms so that
our civil liberties are protected.
Chairman Hyde's bill makes these reforms. He has been
pursuing this issue for many years, and he has quite literally
written the book on the subject and I applaud his efforts.
Where we differed during the House debate concerns the extent
to which the scales of justice ought to be tilted toward a
potential criminal. In my opinion, and in the opinion of every
State, local and Federal law enforcement official who contacted
us during the House consideration of this issue, Chairman
Hyde's proposal would have the potential to wholly eviscerate
our system of civil asset forfeiture.
As you begin to closely examine reform of our civil asset
forfeiture laws, I would encourage you to consider the
substitute to H.R. 1658 that I offered along with
Representatives Hutchinson and Sweeney. While it did not
command a majority, it did win bipartisan support from 155 of
my colleagues. The support was backed by almost all major law
enforcement groups, as well as the administration.
Our substitute does several things. One, it placed the
burden of proof squarely on the government to prove by a
preponderance of the evidence that property seized was used in
illegal activity. Two, it allowed for counsel to be appointed
for those people unable to afford their own lawyer during a
forfeiture proceeding. We stated that the government ought to
be able to explore whether counsel was actually needed. In my
view, this is a necessary safeguard against abuse, given that
there are over 45,000 forfeiture cases per year.
Three, we protected innocent owners in our bill as well.
Four, we provided for a claimant to recover their property
pending trial if he or she can show that the forfeiture will
cause substantial hardship. And, five, we ensured that notice
of a forfeiture action was given by the government to potential
claimants within 60 days of seizure.
Mr. Chairman, these are not new proposals. Indeed, the
House Judiciary Committee favorably reported out a civil asset
forfeiture reform bill last Congress that embodied many of
these same ideas. The vote then was 26 to 1. Senator Schumer
introduced a bill in 1997 that contained many of these same
provisions. The administration has sent draft language to the
Hill that is similar in several respects to the substitute
offered last month in the House.
I appreciate the opportunity to visit with you this
afternoon and to commend you for structuring a hearing that
will give air to all sides of this debate. As you begin your
consideration of civil asset forfeiture reform, keep the goal
of this critical crime-fighting tool in mind to make our cities
and towns safer by depriving drug dealers and felons of the
instrumentalities and proceeds of their criminal activity,
something they have no right to.
Our civil asset forfeiture laws need to be tough, but they
also need to be fair. Working with all concerned, it is my hope
that this subcommittee can begin to find the common ground
necessary so that together we can meet these twin goals.
Thank you very much for the opportunity, Mr. Chairman.
Senator Thurmond. Any questions on this side?
[No response.]
Senator Thurmond. Any questions on this side?
[No response.]
Senator Thurmond. If not, we thank you very much, both of
you, and we will now move to the next panel.
Representative Weiner. Thank you, Mr. Chairman.
Representative Hyde. Thank you very much, Senators.
Senator Thurmond. We will now turn to the second panel. Our
first witness is Eric Holder, who is Deputy Attorney General of
the United States. A graduate of Columbia University Law
School, Mr. Holder served as Associate Judge of the Superior
Court of the District of Columbia and as U.S. Attorney for the
District of Columbia prior to assuming his current position.
Our second witness is James Johnson, Under Secretary of the
Treasury for Enforcement. Mr. Johnson holds a bachelors degree
and a law degree from Harvard University. He formerly served as
an assistant U.S. Attorney and Deputy Chief of the Criminal
Division in the U.S. Attorney's office in New York City.
Our third witness is Richard Fiano, who is currently Chief
of Operations for the U.S. Drug Enforcement Administration. Mr.
Fiano's experience with the DEA spans more than 25 years. He
has served in many positions, including Assistant Country
Attache in Pakistan, Section Chief of the Office of
International Operations, Special Agent in Charge of the Office
of Special Operations, and Chief of Domestic Operations.
Our fourth witness is Bonni Gail Tischler, Assistant
Commissioner for Investigations with the U.S. Customs Service.
A graduate of the University of Florida, Ms. Tischler has
served with Customs since 1971, holding positions including Sky
Marshal, Special Agent, and Director of the Smuggling
Investigations Division.
I ask that each of you please limit your opening statements
to 5 minutes. We will submit any written testimony for the
record, without objection. We will start with Mr. Holder and go
down the line.
Mr. Holder, we will now hear from you.
PANEL CONSISTING OF ERIC H. HOLDER, JR., DEPUTY ATTORNEY
GENERAL, U.S. DEPARTMENT OF JUSTICE, WASHINGTON, DC; JAMES E.
JOHNSON, UNDER SECRETARY FOR ENFORCEMENT, U.S. DEPARTMENT OF
THE TREASURY, WASHINGTON, DC; BONNI G. TISCHLER, ASSISTANT
COMMISSIONER, OFFICE OF INVESTIGATIONS, U.S. CUSTOMS SERVICE,
WASHINGTON, DC; AND RICHARD FIANO, CHIEF OF OPERATIONS, DRUG
ENFORCEMENT ADMINISTRATION, U.S. DEPARTMENT OF JUSTICE,
ARLINGTON, VA
STATEMENT OF ERIC H. HOLDER, JR.
Mr. Holder. Thank you, Mr. Chairman. Mr. Chairman, members
of the subcommittee, I would like to thank you, congratulate
you, actually, and the Ranking Minority Member, Senator
Schumer, and all the members of the subcommittee for helping
lead the way toward improving our current asset forfeiture
laws.
In addition, I would like to thank Chairman Hyde for his
being a leader on this issue. We agree with him that there is a
need for reform with regard to asset forfeiture laws. Laws that
were designed decades ago, or even centuries ago, need to be
updated to apply to the ways in which they can be most
constructively used today--that is, to seize houses, cars,
businesses and bank accounts which are the instrumentalities
and proceeds of criminal activity--in a manner which ensures
fairness and due process.
For that reason, the Department of Justice has long
supported revisions to the asset forfeiture laws, and we have
sent a proposal to Congress which we believe would put those
revisions into effect. In addition to reforming the basic civil
asset forfeiture law, we also think that the current law needs
to be augmented to provide law enforcement with more effective
crime-fighting tools. The comprehensive forfeiture bill which
we have submitted to Congress, we believe, does both.
While my written testimony comments on the specific
provisions of that proposal and the bill recently passed by the
House, let me highlight some key areas of our proposal. We
believe we have addressed the significant concerns raised about
the asset forfeiture laws and have done so in a way that
enhances due process protections without unduly hampering
necessary law enforcement activities. But I want to stress that
we are eager to work with all sides on these issues, and I
agree with Senator Biden that we can work together to come up
with an acceptable bill here. In fact, it would be a real shame
if we did not come to that result.
First, with regard to the burden of proof, the legislation
that we have proposed places the burden of proof squarely on
the government in civil asset forfeiture cases. This is a
significant change. The government's burden would be to prove
the connection between the property and the offense by a
preponderance of the evidence. This is the same standard that
is used in virtually every other kind of civil case, no matter
how complex, in the Federal courts.
Two, with regard to innocent owners, we have proposed a
uniform innocent owner defense that will provide appropriate
protection for persons who legitimately did not know that their
property was tainted by criminal activity.
Third, with regard to a property owner's right to a
hearing, under our proposal the government must file its
forfeiture action within 90 days. And if we fail to do so, the
owner may file a motion for the return of the seized property
and has the right to a hearing before a judge on that motion.
Four, with regard to a cost bond, our current policy is to
waive the requirement that a cost bond be filed where the
property owner files his or her claim in forma pauperis. Our
proposal writes this policy into the law.
Fifth, with regard to the time for filing of a claim, the
time for filing a claim to seized property is extended from 20
to 30 days from publication of the notice of the forfeiture.
Asset forfeiture has become one of the most powerful tools
and important tools that we in Federal law enforcement have to
employ against criminals who prey on the vulnerable for
financial gain. Federal law enforcement agencies use the
forfeiture law for a variety of reasons. The modern law allows
the government to seize contraband, property that is simply
unlawful to possess, like illegal drugs, unregistered machine
guns, smuggled goods, and counterfeit money.
Forfeiture is also used to take the instrumentalities of
crime out of circulation. If drug dealers are using a crack
house to sell drugs to children as they pass by on the way to
school, the building is a danger to the health and safety of
the neighborhood. Under the forfeiture laws, we can rid the
community of that crack house.
The government also uses forfeiture to take the profit out
of crime and to return property to victims. No one has any
right to retain the money gained from bribery, extortion,
illegal gambling, or drug-dealing. Under the forfeiture laws,
we can separate the criminal from his profits and any property
traceable to it, thus removing the incentive that others may
have to commit similar crimes tomorrow. And if the crime is one
that has victims, like car-jacking or fraud, we can use the
forfeiture laws to recover the property and restore it to the
owners.
We have included a summary of just a sampling of our recent
cases involving both civil and criminal forfeiture, and I would
ask that that would be included in the record.
Now, the expansion of forfeiture laws into new areas has
been controversial. When laws that were designed to seize,
frankly, pirate ships from privateers are applied to the
seizure of homes, cars, businesses, and bank accounts, there
are a lot of concerns to address and a lot of answers to sort
out. How do we protect innocent owners? What procedures afford
due process? When does forfeiture go too far?
The executive and judicial branches of government have been
very active in this sorting-out process. We at the Department
have issued detailed guidelines and have engaged in a
substantial amount of training for our people. The courts have
been active as well. The Supreme Court has decided 11
forfeiture cases since 1992, and there have been hundreds of
other cases dealing with all other aspects of asset forfeiture
procedure in the lower courts.
It just seems to us that at a time that we consider needed
reforms to civil forfeiture laws, I would urge that Congress
expand forfeiture into new areas where it can be used to combat
sophisticated, serious domestic and international criminal
activity. From telemarketing, to terrorism, to counterfeiting,
to violation of the food and drug laws, the remedy of asset
forfeiture should be applied.
As I said at the outset, we firmly believe that the time
has come to reform our laws. We have said this repeatedly since
1993 and we have said that Congress should enact legislation to
ensure that forfeiture laws of the United States will be tough,
but fair, which is exactly what the American people have a
right to expect. I still very much believe that.
I also believe that, working together, we can craft a
balanced set of forfeiture laws that combine fairness with
effective law enforcement, and we look forward to working with
the subcommittee to do exactly that.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Holder follows:]
Prepared Statement of Eric H. Holder, Jr.
Mr. Chairman and Members of the Subcommittee, I want to
congratulate you, the Ranking Minority Member, Senator Schumer, and all
Members of the Subcommittee for helping lead the way toward improving
the asset forfeiture laws. The Department of Justice is pleased to be
in a position to work cooperatively with you toward important and
needed reforms to civil asset forfeiture law.
The time to reform the forfeiture laws has surely come. Laws
designed decades, even centuries, ago to deal with the seizure of
pirate ships on the high seas need to be updated to apply to the ways
we should be most constructively using the forfeiture laws today--to
seize houses, cars, businesses and bank accounts which are the
instrumentalities and proceeds of criminal activity, in a manner which
ensures fairness and due process. For that reason, the Department of
Justice has long supported revisions to the asset forfeiture laws, and
we have sent a proposal to Congress putting those revisions into
effect. In addition to reforming the basic civil asset forfeiture law,
we also think that the current laws can be augmented to provide law
enforcement with a more effective crime-fighting tool. A comprehensive
forfeiture bill can do both.
THE ASSET FORFEITURE PROGRAM
Before commenting on the specific provisions of that proposal and
the bill recently passed by the House of Representatives, let me
provide the Subcommittee with some background on the asset forfeiture
program.
Asset forfeiture has become one of the most powerful and important
tools that federal law enforcement can employ against criminals--from
drug dealers, to terrorists, to white collar criminals--who prey on the
vulnerable for financial gain. Derived from the ancient practice of
forfeiting vessels and contraband in Customs and Admiralty cases,
forfeiture statutes are now found throughout the federal code. We are
convinced that the large drop in crime this Nation has witnessed is
related to effective use of the asset forfeiture laws, along with other
important anti-crime measures.
WHY DO FORFEITURE?
Federal law enforcement agencies use the forfeiture laws for a
variety of reasons. Like the statutes the First Congress enacted in
1789, the modern laws allow the government to seize contraband--
property that it is simply unlawful to possess, like illegal drugs,
unregistered machine guns, smuggled goods and counterfeit money.
Forfeiture is also used to take the instrumentalities of crime out
of circulation. If drug dealers are using a ``crack house'' to sell
drugs to children as they pass by on the way to school, the building is
a danger to the health and safety of the neighborhood. Under the
forfeiture laws, we can rid the community of the crack house. Utilizing
the Department's Weed and Seed program we can often ensure that the
property goes to a community organization, which will then use it to
better the lives of those in the neighborhood. If a boat or truck is
being used to smuggle illegal aliens across the border, we can forfeit
the vessel or vehicle to prevent its being used time and again for the
same purpose. The same is true for an airplane used to fly cocaine from
Colombia or Mexico to the United States, or a printing press used to
mint phony $100 bills.
The government also uses forfeiture to take the profit out of crime
and to return property to victims. No one has any right to retain the
money gained from bribery, extortion, illegal gambling, or drug
dealing. With the forfeiture laws, we can separate the criminal from
his profits--and any property traceable to it--thus removing the
incentive others may have to commit similar crimes tomorrow. And if the
crime is one that has victims--like carjacking or fraud--we can use the
forfeiture laws to recover the property and restore it to the owners.
We have included with this testimony a summary of just a sampling
of our recent cases involving both civil and criminal forfeiture.
WHY DO CIVIL FORFEITURE?
There are several reasons why we do forfeitures. There are,
however, two kinds of forfeiture: criminal and civil. The former is
part of a criminal case against a defendant. The other is an entirely
separate civil action. If most of our cases involve an arrest or
prosecution--which they do--then why do we need civil forfeiture? Why
can't we do most of our forfeitures as part of the criminal
prosecution?
Everyone should understand that there is parallel criminal arrest
and prosecution in the overwhelming majority of civil forfeiture cases.
(In 1996, the rate was 81 percent in DEA cases.) But there are
important reasons why the government must have civil forfeiture in
addition to criminal.
First, criminal forfeiture is unavailable if the defendant is dead
or is a fugitive. There is simply no criminal case in which to pursue
forfeiture. Second, a substantial majority of the DEA and FBI's
forfeiture cases are uncontested, often because the defendant in jail
sees no point in claiming property that most likely connects him to the
crime. Civil forfeiture allows us to dispose of these uncontested cases
administratively.
Third, criminal forfeiture statutes are not comprehensive.
Forfeiture in gambling, counterfeiting, and alien smuggling cases must
be done civilly, as must almost all forfeitures of firearms, simply
because there is no criminal forfeiture statute.
Fourth, criminal forfeiture in a federal case requires a federal
conviction. If the defendant was convicted in a state case, the federal
forfeiture must be a civil forfeiture.
Fifth, criminal forfeiture is limited to the property of the
defendant. If the DEA seizes an airplane loaded with drugs and arrests
the pilot, it cannot forfeit the airplane in the criminal case against
the pilot unless he owns the airplane. But that is rarely the case; the
title is almost always in the name of a corporation abroad.
FISCAL IMPACT
The result of this law enforcement activity is that last year the
agencies of the Department of Justice took nearly $450 million out of
the hands of criminals and deposited it into the Justice Department
Assets Forfeiture Fund. That's $450 million that otherwise would have
been available to drug dealers, pornographers, loan sharks and
terrorists to use to ply their crimes against innocent citizens and
their children.
The forfeitures are put to good use. The funds are provided to law
enforcement programs, including nearly half that is shared with state
and local law enforcement agencies through the equitable sharing
program, some of which may be passed on to community-based
organizations through that program.\1\
---------------------------------------------------------------------------
\1\ In the last fiscal year, $177 million was shared with state and
local law enforcement from the Justice Assets Forfeiture Fund, of which
up to 15 percent was eligible for pass-through to community-based
organizations.
---------------------------------------------------------------------------
RESPONSE TO CRITICISMS OF THE FORFEITURE LAWS
The proliferation of forfeiture into new areas has been
controversial. When laws that were designed to seize pirate ships from
privateers are applied to the seizure of homes, cars, businesses and
bank accounts, there are a lot of concerns to address and answers to
sort out. How do we protect innocent property owners? What procedures
afford due process? When does forfeiture go too far in violation of the
Excessive Fines Clause of the Eighth Amendment?
The Executive and Judicial Branches of government have been very
active in this sorting out this process. First, the Department of
Justice has issued detailed policy guidelines governing the use of the
administrative, civil judicial, and criminal forfeiture laws by all
agencies of the Department. See Department of Justice Asset Forfeiture
Policy Manual (1996). The Treasury Department has issued similar
guidelines. Together, these guidelines help ensure that the forfeiture
laws are administered fairly and effectively, with all appropriate
consideration given to the rights of property owners. Moreover, we have
conducted an intensive series of training sessions for law enforcement
agents and federal prosecutors, including detailed instruction on how
to incorporate forfeiture into criminal cases instead of relying
exclusively on the civil forfeiture laws.
The courts have been extraordinarily active in this area, as well.
The Supreme Court has decided eleven forfeiture cases since 1992, and
hundreds of cases dealing with all aspects of forfeiture procedure have
been decided by the lower courts. These cases have given much needed
clarity and definition to the forfeiture laws and the rights of
property owners, but they have also left loopholes and ambiguities that
only Congress can resolve through legislation.
The cumulative effect of these efforts is evident. New examples of
problems in the forfeiture program have been decidedly difficult for
our opponents to find. We run a better program because our procedures
are better defined, and our guidelines are rigorously enforced. As I
said previously, the overwhelming majority of all forfeitures take
place in conjunction with a related arrest and prosecution. And as a
result of the emphasis on criminal forfeiture since 1994, approximately
half of all contested forfeiture actions are now undertaken as part of
criminal cases.
GUARANTEEING DUE PROCESS
But we can do more. The asset forfeiture program is a vital law
enforcement tool, but we recognize that no system, no program, no tool
of law enforcement, however effective at fighting crime, can survive
for long if the public thinks that it violates the basic principles of
fairness and due process that lie at the core of the American system of
justice. It is for that reason that we have supported efforts to make
further revisions to the forfeiture laws--not just by policy, not just
by case law, but by statute--to ensure fairness and procedural due
process.
We said before and we say again that the burden of proof in civil
forfeiture cases should be on the government. If the government seeks
to forfeit a person's house, the government should have to prove that a
crime was committed and that the property was involved in that crime;
the burden should not be on property owner (e.g., to prove that he did
not know that his property was being used illegally). We said before
and we say again that there should be a uniform innocent owner defense
available to claimants in all civil forfeiture cases. While the Supreme
Court held in Bennis v. Michigan that an innocent owner defense is not
mandated by the Due Process Clause of the Fifth Amendment, that does
not mean Congress cannot enact such protection by statute. We think it
should.
We said before, and we say again, that the time limits for filing
claims should be extended to ensure that everyone has an adequate
opportunity to obtain his day in court; that there should be relief for
citizens whose property is damaged while in government custody; and
that the government should pay interest on money that it seizes and
later has to return.
All of these protections for citizens and property owners are
included in the bill that we submitted to Congress. These proposals are
derived substantially from the bill that Senator Schumer introduced in
the House of Representatives in 1997, H.R. 1745, and we congratulate
him for the leadership he has shown on this issue over the past several
years.
The following is a short summary of the 13 major reforms to the
civil forfeiture laws that are codified in our proposal:
1. Burden of proof. The burden is on the government to prove the
connection between the property and the offense by a preponderance of
the evidence.
2. Innocent owners. There is a uniform innocent owner defense.
3. Return of seized property. The government must file its
forfeiture action within 90 days or give the property owner a hearing
on his motion for the return of seized property.
4. Suppression of evidence. Property seized without probable cause
may not be admitted into evidence in the forfeiture case.
5. Stay. Civil forfeiture cases may be stayed, at the property
owner's request, while criminal cases are pending to avoid conflicts
with the right against self-incrimination.
6. Proportionality. The Supreme Court's rule that forfeitures may
not be ``grossly disproportional to the gravity of the offense'' is
codified.
7. Interest. Successful claimants recover the seized property with
interest.
8. Adoptive forfeitures. Federal agencies may only adopt state
seizures if the state authorities comply with state rules requiring a
state judge to authorize the adoption.
9. Judicial approval of seizures. Arrest warrants for property
subject to forfeiture must be approved by a judge or magistrate.
10. Time for filing a claim. The time for filing, a claim is
extended from 20 to 30 days from the publication of notice of the
forfeiture.
11. Cost bond. The present policy of waiving the cost bond in cases
where the claim is filed in forma pauperis is codified.
12. Deadlines on government action. The seizing agency must send
notice of the forfeiture action within 60 days of the seizure.
13. Damage to seized property. The Federal Tort Claims Act is
amended to give property owners the right to recover damages to
property that is seized but never forfeited.
We have prepared a detailed section-by-section analysis of our
proposal, and ask that it be included in the Record.
PROBLEMS WITH H.R. 1658
Many of these proposals are included in the House bill, H.R. 1658.
We are pleased that there is much common ground. But H.R. 1658 crosses
the line between providing due process and giving unintended relief to
drug dealers, money launderers, and other criminals who victimize the
elderly and the vulnerable in our society. Let me give a few examples.
H.R. 1658 IS OVERBROAD
First, H.R. 1658 is seriously overbroad. It applies not just to
drug and money laundering cases, but to virtually every one of the more
than 200 civil forfeiture statutes in federal law. These are statutes
used to protect the environment and endangered species, to recover
artifacts stolen from Indian land, to combat terrorism, foil
counterfeiters and break up gambling and pornography rings. If there
are problems with forfeitures, those must be addressed but without the
needless weakening of a tool that has been used for decades in so many
different contexts without incident or complaint.
LEAVING PROPERTY TO THE CRIMINAL'S HEIRS
We support the enactment of a uniform innocent owner defense. A
person who does not know that his/her property is being used illegally,
or who becomes aware of the illegal use but takes all reasonable steps
to try to stop it, should not suffer the loss of the property through
forfeiture. But H.R. 1658 goes beyond that. It mistakenly bars the
government from seizing criminal proceeds if the heirs of a criminal
have acquired the property through inheritance.
Under the House bill, if a criminal dies, his fortune passes
directly to his heirs without fear of forfeiture, even if the money
consists entirely of criminal proceeds. A major drug dealer or
pornographer could amass a fortune over a lifetime of crime, and pass
it on to his heirs without the government's being able to step in and
confiscate the money. The same is true if even the criminal proceeds
were taken by fraud from innocent victims, thereby granting the fraud
artist's heirs priority over the victims of his crimes. The heirs of a
drug lord killed in a shoot out with the police or with a rival drug
gang should not be free to inherit his drug fortune.
Over the past decade, we have recovered over $70 million from the
estate of the notorious drug lord Jose Gonzalo Rodriguez Gacha after he
was killed by the Colombian police. Under H.R. 1658, Gacha's heirs
would have been entitled to all his drug money.
RETURNING PROPERTY TO CRIMINALS
H.R. 1658 also contains a provision that would require the
government to return seized property to criminals pending trial in the
forfeiture case in order to avoid a ``hardship.'' We understand that
there may be instances where an innocent person's property is seized
from a wrongdoer and held pending trial--undoubtedly to the
inconvenience of the innocent claimant. But in thousands of cases every
year, property--like cars, airplanes, cash and other easily disposable
items--is seized from drug dealers, gamblers, pornographers and money
launderers. It makes no sense to write into law a provision that allows
such people to retain possession of the seized property pending trial.
Giving a dufflebag-full of cash back to a drug courier, just because he
claims some ``hardship'' will befall him, defies reason and guarantees
the property will simply disappear regardless of what guidelines might
be engrafted on the statute.
Seizure of a flashy car from a notorious drug dealer sends a strong
message to the community that crime will not pay. If that same car is
back on the street a week later because the owner claimed some
hardship, sends the opposite message--that law enforcement is a paper
tiger, and criminals can flaunt the spoils of their trade without fear
of consequences. The same is true if the car, boat, or plane was used
as the instrumentality of crime.
The release-of-property provision will cause enormous problems for
the Immigration and Naturalization Service, which seized 27,000
automobiles a year, mostly along the Southwest Border, as part of its
enforcement program against the transportation and smuggling of illegal
aliens. If the cars, trucks, vessels and other conveyances seized by
the INS have to be returned to the smugglers to avoid a ``hardship,''
there will be little left of the anti-smuggling program.
Yet, in any case in which INS refused to release the vehicle, H.R.
1658 would permit the claimant to apply immediately to federal court
for an order forcing the agency to do so, and the court would have to
rule on the request within 30 days. The courts along the Southwest
Border are already overburdened with civil and criminal cases related
to border interdiction. To add more cases, each of which would have to
be resolved within 30 days, to the dockets of those courts could
potentially overwhelm the judiciary and threaten to bring justice to a
standstill.
Any legislation that contains a provision that requires the
government to give a seized airplane back to a drug dealer, or seized
photocopy equipment back to a counterfeiter--supposedly to avoid a
``hardship'' pending trial--crosses the line from a measure designed to
ensure fairness to become simply a windfall for criminals.
REMEDY FOR FAILURE TO GIVE NOTICE OF ADMINISTRATIVE FORFEITURE
The vast majority of forfeiture cases are uncontested. These are
cases in which the government seizes property and sends notice of the
forfeiture to the property owner, but no one files a claim. Such
administrative forfeitures account for an overwhelming majority of all
DEA and FBI forfeitures.
Pursuant to current Justice Department internal guidelines, the
seizing agency must send notice of the forfeiture action to potential
claimants within 60 days of the seizure, unless the time limit is
waived for good cause by a supervising official. Also under current
law, if the government fails to make a reasonable effort to give notice
of the forfeiture to potential claimants, and a person who did not
receive notice later claims an interest in the property, a federal
judge may order that the forfeiture action be started over again.
United States v. Woodall, 12 F.3d 791, 793 (8th Cir. 1993). Such claims
are almost invariably filed by federal prisoners who assert that they
did not receive the forfeiture notice because the seizing agency sent
it to the wrong place of incarceration as the prisoner was moved
throughout the corrections system. See e.g. United States v. Clark, 84
F.3d 378 (10th Cir. 1996); United States v. Franklin, 897 F. Supp.
1301, 1303 (D. Or. 1995); Hong v. United States, 920 F. Supp. 311
(E.D.N.Y. 1996); Concepcion v. United States, 938 F. Supp. 134
(E.D.N.Y. 1996); Scott v. United States, 1996 WL 748428 (D.D.C. 1996).
H.R. 1658 would change this process in two significant ways. First,
it would codify the 60-day guideline and require the seizing agency to
petition a court for a waiver instead of getting it from a supervising
official within the Department or agency--another process certain to
burden the judiciary unnecessarily, given the 45,000 seizures per year
made by Justice Department agencies. Second, it would change the remedy
for the failure to provide notice by allowing the claimant simply to
``void the forfeiture,'' and bar the government ever from re-initiating
the forfeiture action.
Again, this issue is one that arises almost always in the context
of a federal prisoner who did not receive notice through the prison
system. It makes no sense to give prisoners a windfall by allowing them
to ``void a forfeiture'' anytime the Bureau of Prisons is unable to
deliver notice of administrative forfeiture of property to the current
prison address. If H.R. 1658 were enacted, instead of having judges
order that forfeiture proceedings start again by returning to the
status quo ante in such cases, prisoners serving long terms of
incarceration for drug dealing, money laundering and like crimes would
receive reimbursement checks for seized proceeds.
APPOINTMENT OF COUNSEL
I now turn to the two most objectionable provisions of H.R. 1658--
those dealing with the appointment of counsel and with the standard of
proof:
The bill creates incentives for abuse by allowing anyone interested
in contesting the forfeiture to file a free claim and to request a free
lawyer. Suppose three people are stopped in a car carrying $50,000 in
drug money wrapped in rubber bands and hidden under the seat. And
suppose they say they got the money from a guy in New York and are
delivering it to a friend in Florida. Who gets the free lawyer? The
driver? The passengers? The guy in New York? The girlfriend in Florida?
Under H.R. 1658, they all would be entitled. The potential for abuse in
the context of 45,000 cases a year is staggering.
The principle that no person should be denied the means to seek
redress in the courts against unreasonable government action is
recognized in the Equal Access to Justice Act (``EAJA''). That statute
provides that any person who prevails against the government in a case
in which the government action was not ``substantially justified'' is
entitled to recover attorney's fees.
The availability of EAJA fees provides the needed protection and
there is no need to authorize the court to appoint counsel in civil
forfeiture cases. Indeed, with tens of thousands of forfeiture seizures
taking place every year, the burden on the courts just to hear the
motions for appointment of counsel is likely to be enormous, and to be
enormously expensive.
CLEAR AND CONVINCING EVIDENCE
Most troubling, H.R. 1658 would elevate the burden of proof
standard to clear and convincing evidence--a standard virtually unheard
of in civil cases, even when the case is based on a criminal violation.
If the government chooses to seek civil sanctions separately, the
standard is preponderance of the evidence. (Sanctions for knowingly
overbilling government programs are generally sought under the False
Claims Act, 31 U.S.C. Sec. 3729. The same is true when banks are
accused of money laundering, or bankers are accused of bank fraud. See
18 U.S.C. Sec. 1956(b) (civil money laundering enforcement); 12 U.S.C.
Sec. 1833a (bank fraud).) There is no sound or reasoned basis for
imposing the higher standard when we seek to take printing presses from
counterfeiters, or profits from drug peddlers.
It is important to understand that there are essentially three
issues in a civil forfeiture case.
1. Forfeitability: was a crime committed by someone, and was this
property derived from, involved in, or used to commit that crime?
2. Innocent owner: even if the property is subject to forfeiture,
was the owner of the property an innocent owner?
3. Proportionality: even if the owner was not innocent, would the
forfeiture of this property be ``grossly disproportional to the gravity
of the offense,'' and thus be unconstitutional under the Excessive
Fines Clause of the Eighth Amendment?
The standard of proof in H.R. 6658 applies only to the first issue:
the showing that the property was derived from, or used to commit, a
crime. In cases involving a field used for growing marijuana or a crack
house where drugs are sold to kids on their way to school, the
``nexus'' of the property to the crime can be confidently demonstrated
in most cases. The common questions in those cases concern applications
of the innocent owner defense and the proportionality of the forfeiture
under the Eighth Amendment. Raising the standard of proof is not likely
to affect the government's ability to prevail in those civil forfeiture
cases.
Elevation of the standard of proof to ``clear and convincing
evidence'' would have a devastating effect on the government's ability
to establish the forfeitability of the property in complex money
laundering and drug cases. In these offenses the criminal and his money
launderers work long and hard to hide the connection between the crime
and its proceeds. We are concerned that too high a burden of proof will
result in inappropriate losses of cases by the government, leading to a
windfall for undeserving criminals.
Managing the cash proceeds is one of the drug dealer's greatest
problems. If it is ``street money,'' the drug proceeds weigh 3\1/2\
times the equivalent amount of cocaine. But the drug dealer is not a
supermarket owner or amusement park operator who can simply deposit his
cash proceeds in a bank. To avoid creating a paper trail, he has to
move the money via couriers through airports, down highways, and in
containers, in his effort to get it back to South America. Or he has to
run it through otherwise legitimate businesses, off-shore banks and
shell corporations, money remitters, and accounts held by nominees, and
ultimately sell it on the Colombian Black Market Peso Exchange, all to
conceal or disguise the connection between the criminal proceeds and
the underlying crime. That's the very definition of money laundering.
See 18 U.S.C. Sec. 1956(a)(1)(B)(i). For a sophisticated money
launderer--whether he keeps the money as cash, moves it via couriers,
smuggles it out of the country, or sells it on the black market--the
trail between the crime and the money is very murky indeed.
Significantly, even in the criminal forfeiture context, Congress
recognized that the nexus between the property and the crime need only
be shown by a preponderance of the evidence. In certain drug cases
there is even a statutory presumption that the money is drug proceeds.
Statutes requiring the government to meet a ``clear and
convincing'' standard are extremely rare. See e.g. 18 U.S.C.
Sec. 3524(e)(1) (stripping non-custodial parent of visitation rights
with child when custodial parent is relocated as a protected witness).
In civil cases, such as those filed under the False Claims Act, 31
U.S.C. Sec. 3729, and the bank fraud statutes, 12 U.S.C. Sec. 1833a, to
give just two examples, the ``preponderance'' standard is routinely
applied. Our view is that preponderance of the evidence is an
appropriate standard.
IMPROVEMENTS TO THE FORFEITURE LAWS
Importantly, we are eager to see civil asset forfeiture reform that
includes provisions needed to make the asset forfeiture laws more
effective as law enforcement tools.
For example, it is right to put the burden of proof on the
government in civil forfeiture cases, but it is wrong to omit
provisions that allow the government to gather the evidence needed to
meet its evidentiary burden. Congress should enact provisions allowing
attorneys for the government to issue subpoenas for evidence in civil
forfeiture cases in the same way that they are issued in federal health
care cases, anti-trust cases, bank fraud cases and civil RICO cases.
Similarly, Congress should permit the government's civil attorneys to
have access to the grand jury material already in the possession of its
criminal prosecutors.
Also, in the course of revising the civil forfeiture laws, we
should address the problem that arises when claims are filed by
fugitives. Before 1996, the federal courts employed a rule, known as
the fugitive disentitlement doctrine, that barred a fugitive from
justice from attempting to hide behind his fugitive status while
contesting a civil forfeiture action against his property. See United
States v. Eng, 951 F.2d 461, 464 (2d Cir. 1991) (``a person who is a
fugitive from justice may not use the resources of the civil legal
system while disregarding its lawful orders in a related criminal
action'').
But in 1996, the Supreme Court held in Degen v. United States, 116
S. Ct. 1777 (1996), that as a judge-made rule, the sanction of absolute
disentitlement goes too far. Instead, it is left to Congress to enact a
statute that, as the Court described it, avoids ``the spectacle of a
criminal defendant reposing in Switzerland, beyond the reach of our
criminal courts, while at the same time mailing papers to the court in
a related civil action and expecting them to be honored.'' Degen, 116
S. Ct. at 1778. Codification of the fugitive disentitlement doctrine is
an essential part of any civil forfeiture reform.
A serious need is legislation which enhances the criminal
forfeiture laws. The recent shift to criminal forfeiture in the federal
courts has revealed numerous deficiencies in the criminal laws that
have hampered the government's ability to make full use of those
statutes.
In particular, the law should allow the government to pursue
criminal forfeiture any time a statute authorizes civil forfeiture, and
it should allow the government to restrain property subject to
forfeiture pre-trial, so that the property does not disappear or
dissipate while the criminal case is pending. Title V of the
Administration's proposal contains these and a comprehensive set of
other proposals that would make the criminal forfeiture statutes the
equal of their civil counterparts as effective crime-fighting tools.
Finally, once the needed reforms of the civil forfeiture laws are
made, I urge Congress to expand forfeiture into new areas where it can
be used to combat sophisticated, serious domestic and international
criminal activity. From telemarketing to terrorism to counterfeiting to
violations of the food and drug laws, the remedy of asset forfeiture
should be applied. Title II of our proposal contains numerous
provisions designed to achieve this goal.
CONCLUSION
As I said at the outset, we firmly believe that the time has come
to reform the forfeiture laws. We have said this repeatedly since 1993,
when forfeiture reform legislation was first introduced. We have said
that Congress should enact legislation to ensure that ``the forfeiture
laws of the U.S. will be tough but fair--tough but fair--which is
exactly what the American people have a right to expect.'' I still very
much believe that. Working together, we can craft a balanced set of
forfeiture laws that combine fairness with effective law enforcement.
We look forward to working with the Subcommittee to do exactly that.
______
How Do We Use the Forfeiture Laws?
The following are examples of recent uses of the civil and criminal
forfeiture laws. These examples are from 1997 through 1999 and update a
similar collection of examples that was included in the Justice
Department's testimony before the House Judiciary Committee in June,
1997.
FORFEITURE USED TO CLOSE ``CRACK HOUSE'' IN TENNESSEE
(Middle District of Tennessee) Drug dealers in Smyrna, Tennessee, a
bedroom community ten miles south of Nashville, used a well-known crack
house to menace the town's residents for more than ten years. The crack
house was located next to a church near the town square, and was the
scene of 40 arrests, including repeated arrests of the children and
grandchildren of the owner/resident, Joseph Frank Drennon. When the
arrests failed to put a stop to extensive drug dealing from the
property, federal prosecutors used the asset forfeiture laws to shut it
down.
CIVIL FORFEITURE USED TO RECOVER FUGITIVE'S DRUG PROCEEDS
(District of Minnesota) Seven members of a local suburban drug ring
and their two Florida drug suppliers were indicted for conspiracy to
distribute and to possess with intent to distribute cocaine.
Conservative estimates indicated that during the conspiracy as much as
160 kilos of cocaine were brought to and distributed in Minnesota, and
the conspiracy grossed as much as $6 million per year. Six members of
the conspiracy were convicted and were ordered to forfeit currency,
bank accounts and real property, which has netted approximately
$326,000 to date. One member of the conspiracy remains a fugitive, and
civil forfeiture proceedings were used to forfeit his cash and real
property.
PROCEEDS OF CHARITY SCAM GO TO CHILDREN IN NEED
(Northern District of Texas) FBI investigation of a bogus telephone
charity scam led to the civil forfeiture of $61,039.40 in Dallas,
Texas. Telephone callers solicited money for an alleged charity to
grant the last requests of dying children. In fact, donations were
going to the scam organizer's bank accounts. Considering how donors had
meant their money to be spent, the U.S. Attorney's Office and the FBI
thought it was appropriate to divide the forfeited money between the
Make a Wish Foundation and A Wish For Wings. Both organizations work to
grant the requests of very ill children.
SEIZURE OF UNLICENSED RADIO STATION ENDS THREAT TO AIRPORT TRAFFIC
(Eastern District of California) An unlicensed radio station near
Sacramento Executive Airport interfered with safe air traffic control
on four different frequencies, interrupting important radio
transmissions. Answering complaints from pilots and air traffic
controllers, the FCC ordered the radio station operator to stop
transmissions. When the operator of the unlicensed operation refused to
stay off the air, federal court action authorized the FCC and U.S.
Marshals Service agents to seize the station's equipment under the
civil forfeiture laws, ending a threat to the safety of planes and
passengers in the area.
FORFEITURE USED TO SHUT DOWN CAR DEALERSHIP LAUNDERING DRUG MONEY
(Western District of North Carolina) A used car dealership known as
``Import City'' in Charlotte, North Carolina was selling vehicles to
known drug dealers. Import City's owner, Majid Ramazanian, was indicted
on charges of money laundering and currency reporting violations, to
which he later pled guilty. In a parallel civil forfeiture case, 52 of
the dealership's cars were forfeited. The case closed down the money
laundering operation at Import City and recovered, net of expenses,
well in excess of $200,000.
CIVIL FORFEITURE USED TO SHUT DOWN HOUSE USED TO DISTRIBUTE
HEROIN IN JACKSONVILLE
(Middle District of Florida) When a federal fugitive was arrested
at a Jacksonville, Florida residence, federal officials found cash,
narcotics scales, weapons and narcotics paraphernalia, a police scanner
and a substantial quantity of heroin. The owner of the residence and
half-brother of the fugitive claimed he was unaware that his brother
was conducting these activities from the residence, although he
admitted that he permitted the fugitive to reside there. When DEA
determined that the heroin distribution activities continued from the
residence after the arrest of the fugitive, the United States filed a
civil forfeiture action against the residence and the cash which led to
the uncontested forfeiture of both. The civil forfeiture in this case
benefited the Jacksonville community in that it took out a heroin
distribution center which was located with 700 feet of a school.
DRUG HOUSE BECOMES HAVEN FOR VICTIMS OF VIOLENCE
(Eastern District of California) Convicted for growing and
distributing large amounts of marijuana, the owners of a house in
Amador County, California forfeited their indoor growing site. Through
the Weed and Seed Program, this structure, formerly used to grow
marijuana, was transferred to Operation Care, Inc. The nonprofit
organization operates the house as a shelter for women and children who
are victims of domestic violence. The facility is the first of its kind
in Amador County.
UNITED STATES RETURNS $11 MILLION TO VICTIMS OF LOTTERY SCHEME
(Western District of Washington) A fraud ring headed by James Blair
Down, who operated from Canada and Barbados, fraudulently marketed
foreign lottery products to elderly U.S. residents through direct
mailings and telemarketing. Many of the victims lost their life savings
by responding to the high pressure telemarketing and deceptively
marketed lottery promotions. More than 900 potential victims, some of
whom lost tens of thousands of dollars, were identified. Federal
prosecutors in Seattle, Washington used the civil forfeiture laws to
seize approximately $12.4 million that Down had hidden in U.S.
investment accounts held in the names of Cayman Island corporations.
Civil forfeiture statutes were the only means available for
immobilizing these assets to preserve their availability for
restitution to victims, because a criminal indictment could not be
filed until evidence located in foreign countries was obtained through
painfully difficult and time consuming requests to foreign governments
(Canada, Barbados, Switzerland, Cayman Islands, and Jersey). Down was
subsequently indicted and pled guilty. As a result of the combined use
of the criminal sentencing and civil forfeiture procedures, the
majority of the most severely injured elderly victims will receive 100
percent restitution for their net losses.
FORFEITURE PUTS EMBEZZLED FUNDS BACK IN THE USDA FOOD PROGRAM
(Eastern District of California) A state employee in the Los
Angeles area whose job it was to fund feeding centers via the USDA
child and adult food program stole over $3 million in federal funds
from the program. The employee invested the criminal proceeds in the
purchase of 5 pieces of real estate in the Los Angeles/Orange County
area. When the state employee was prosecuted, these properties were
seized by the U.S. Attorney's Office. Eighty per cent of the sale
proceeds went back to the USDA program to feed the people for whom the
money had been intended.
UNION MEMBERS AND PENSIONERS REGAIN MONEY STOLEN BY
ORGANIZATION'S PRESIDENT
(Eastern District of Washington) Forfeiture was used to regain
$24,000 in substitute assets after a union president was found guilty
of embezzling his union and pension plan. He spent the money he stole,
making it impossible to forfeit and return to the union. However, he
had other accounts which were subject to the substitute asset
provision. Even though the president had spent the original funds he
stole, the substitute asset provision of the forfeiture law made it
possible for union members and pensioners to get some of their money
back.
FORFEITURE SAVES ELDERLY WOMAN FROM DESTITUTION
(Northern District of New York) Florence Estes, a 94-year old widow
in Loudonville, New York, was stripped of her home and her life savings
by Carol Mickens, her home health care aide. Mickens looted Florence's
bank accounts and sold her home out from under her while she was living
at a nursing home by having an imposter impersonate Florence at the
closing. Mickens moved proceeds from the sale of the house into bank
accounts in Mickens' name and booked 4 suites on a New Years Eve cruise
to the Panama Canal, sending a check for $25,000 drawn on Florence's
account with a forged signature. Using the forfeiture laws, federal
agents seized Mickens' bank accounts as well as a GMC Yukon, which
Mickens bought with $32,000 of Florence's money, and tens of thousands
of dollars worth of clothing. Mickens is awaiting trial.
ESPIONAGE PROCEEDS BENEFIT CRIME VICTIMS FUND
(Eastern District of Virginia) The United States Marshal for the
Eastern District of Virginia presented checks to the United States
District Court for more than $170,000 for deposit to the Crime Victims
Fund as a result of, the seizures and forfeitures of the espionage
proceeds of convicted spies Harold J. Nicholson and Earl Edwin Pitts.
At the time they were caught, Nicholson was an official of the Central
Intelligence Agency and Pitts was a Special Agent of the Federal Bureau
of Investigation.
LAWYER BILKS IMMIGRANTS, FORFEITS PROCEEDS
(Eastern District of Virginia) For more than a year, Mr. Im, a
lawyer in Annandale, Virginia, collected large sums of cash from aliens
to obtain false immigration papers. Mr. Im also bribed an undercover
Immigration and Naturalization officer in a conspiracy to commit visa
fraud. Prosecution of Mr. Im for his visa fraud scheme resulted in the
forfeiture of more than $200,000.
PROCEEDS OF VIOLENT DRUG CRIMES FORFEITED
(Eastern District of Virginia) In Alexandria, Virginia, two drug
dealers were convicted of 5 murders in connection with their drug
enterprise. FBI, DEA, IRS, and HIDTA agents seized from them real
estate, art work, jewelry, luxury vehicles and more than $200,000 in
cash as proceeds of their crimes.
COCAINE DEALERS CONSPIRE TO MURDER MARYLAND STATE TROOPER
(Eastern District of Virginia) Convicted of engaging in a
continuing criminal narcotics enterprise and of conspiring to murder a
Maryland State Trooper, Mr. McCorkle and Mr. Barrios were sentenced to
life in prison. More than $325,000 in assets traceable to drug proceeds
were forfeited.
CONVICTED SWISS MONEY LAUNDERER FORFEITS ASSETS
(Eastern District of Virginia) Karl Burkhardt, a Swiss national,
ran a lucrative international money laundering business. At one point,
he accepted cash from an undercover DEA agent to launder overseas. Mr.
Burkhardt was sentenced to six years in prison and forfeited $2,600,000
worth of assets in the United States. These included his Palm Beach
mansion, modern art, animal skins and a luxury automobile.
CIVIL FORFEITURE STRIPS MAJOR MARIJUANA SUPPLIER OF HIS CASH IN
MINNESOTA
(District of Minnesota) A ``mule'' was instructed to contact one
``Benjamin'' by pager when he arrived with a 300 pound load of
marijuana at a predetermined location in Burnsville, MN. Officers paged
Benjamin and, while waiting, executed a search warrant at Benjamin's
residence. Officers recovered bags of marijuana and seized a 1994 Lexus
ES300, a 1985 BMW 3251 containing $147,700.00 in cash, $944.00 cash,
$54,000 cash from a Safe Deposit Box, and several bank accounts. The
government filed a civil action against the property. Before answering
the government's Complaint, Benjamin was arrested in Oklahoma on a bus
with a cache full of marijuana. His counsel declined to file a Claim
and Answer, and the government obtained a default judgment for the
seized assets.
FORFEITURE REPAYS DEFRAUDED VICTIMS OF REAL ESTATE SCAM
(Middle District of Florida) Homeowners in danger of losing their
property to foreclosure because of financial problems were ``helped''
by loan shark William McCorkle who gave them enormous loans at
impossibly high interest rates with the promise the homeowners would
eventually own their homes free and clear. In one case, McCorkle preyed
upon the fears of a woman who had lived in her house for 20 years, was
the single mother of 10 children, and had difficulty making some
mortgage payments. McCorkle loaned her five times the amount of money
she needed to pay off the loan, placed her property in his name, and
when she had finally fully paid off his loan, refused to return the
property to her. Through the forfeiture of this and other properties,
the U.S. Attorney's Office learned of the plight of the homeowners
involved and was able to help them regain legal title to their property
and to defeat sham, unconscionable mortgages.
FORFEITURE USED TO REMEDY LOSS FROM HEALTH CARE FRAUD
(Southern District of Ohio) In March 1998, Marvin D. Thomas, a
Cincinnati, Ohio, businessman pled guilty to felony mail fraud and
false claims violations arising out of a health care fraud scheme.
Thomas also pled guilty as President of USA Medical Systems, Inc. to
the company's making false claims to Medicare. Thomas and USA Medical
admitted to defrauding Medicare of at least $2,000,000 over three years
by supplying over 300,000 disposable diapers to elderly patients and
misrepresenting to Medicare that they were durable medical equipment.
As part of the guilty plea, Thomas and USA Medical agreed to forfeit
property worth almost $2,000,000, including: Thomas' residence valued
at $500,000; his vacation home valued at $191,000; $125,000 from the
sale of a lot; funds in accounts valued at $968,000; and four vehicles
worth $133,000. The government filed a parallel civil forfeiture action
to arrange a settlement with Thomas' wife regarding her asserted
interest in some of the forfeited property.
ATTORNEY FORFEITS DRUG PROCEEDS
(Eastern District of New York) Bronx attorney Pat V. Stiso was
sentenced to 87 months in prison following his guilty plea to charges
of conspiracy to distribute heroin, obstruction of justice, and
conspiracy to obstruct justice in his representation of two major
heroin trafficking organizations. Stiso was also ordered to forfeit
$600,000 as proceeds of illegal narcotics activity, and was required to
cease practicing law. Stiso admitted receiving large sums of money
which he knew were illegal drug sale proceeds from a Bronx narcotics
trafficking enterprise known as the Maisonet Heroin Organization. Stiso
further admitted holding this money to preserve and conceal the
organization's profits. Stiso received the money after law enforcement
officers seized more than $800,000 from the organization's operative in
Florida.
OVER $200,000 RECOVERED IN FOOD STAMP FRAUD IN NORTH CAROLINA
(Western District of North Carolina) Mohammad Salim Pirani and
Irfan Salim Pirani (father and son) were indicted for food stamp fraud
and money laundering arising out of their operation of several
convenience stores in the vicinity of Asheville, North Carolina. In the
course of operating the stores, the Piranis frequently purchased food
stamps from customers for less than their face value. In plea
agreements, they admitted to receiving not less than $750,000 from
their crimes and to transferring not less than $484,000 (mostly out of
the country) so that it could no longer be recovered or forfeited by
the government. Accordingly, the Piranis were required forfeiture of
substitute property consisting of currency in the amount of $32,263;
4,450 Pakistani rupees; five bank accounts totaling more than $30,000;
one promissory note for $84,000; and real property worth more than
$200,000.
UNITED STATES DISTRIBUTES OVER $1 MILLION IN RESTITUTION TO VICTIM
BANKS AND LEASING COMPANIES
(Western District of Washington) Frederick Paul Shafer, a computer
and technology consultant for Catholic Community Services (CCS), a
charitable organization affiliated with the Catholic Archdiocese of
Seattle, obtained $4.2 million from banks and leasing companies by
fraudulently claiming he was leasing computer equipment on behalf of
CSS. Shafer used the proceeds from the fraud scheme to purchase 55
automobiles, vessels, trailers, jewelry, lake front property and home
furnishings. He plead guilty to fraud and money laundering charges, and
agreed to the forfeiture of his assets. The gross sale proceeds from
the sale of the assets, mostly cars, was $1,238,452.59, which will be
disbursed on a pro rata basis to the victims.
CIVIL FORFEITURE ENDS MARIJUANA OPERATION AND BENEFITS INNOCENT
LIENHOLDER
(Western District of Arkansas) The United States filed a civil
forfeiture proceeding against 40 acres of real estate in West Fork,
Arkansas used by the owner for an indoor marijuana manufacturing
operation. A Michigan woman held the mortgage on the property and
relied on the monthly payments for her income. When the forfeiture
action was filed, the drug dealer stopped making the payments. But once
the Decree of Forfeiture was entered, the property was sold and the
escrow contract was paid off in full. The claimant was pleased to be
paid the full amount in a lump sum rather than the monthly payments she
had been receiving.
$2.3 MILLION RETURNED TO VICTIMS OF WEST VIRGINIA FRAUD SCHEME
(Northern District of West Virginia) George Fredderick Garzarek and
approximately ten other individuals were prosecuted in Wheeling, West
Virginia, for their involvement in an international securities fraud
scheme. Authorities were able to document approximately 15,000 victims
in the United States, Canada, and several other countries, who invested
over $8 million with Garzarek and his associates. The investment was
premised on a ``Ponzi-type'' scheme whereby investors were told that
their monies were needed to fund legal and investigative efforts to
release a billion dollar fortune being held by European banks following
the death of a British businessman. Garzarek spent a large portion of
the monies he received acquiring expensive vehicles, real property,
jewelry and taking luxurious vacations throughout the world. He pled
guilty to a money laundering conspiracy and securities fraud and was
ordered to pay restitution. Garzarek had basically squandered proceeds
of his fraud but due to the forfeiture allegation in the indictment,
authorities were able to recover, sell and/or liquidate numerous
vehicles, parcels of real estate, and businesses linked to the
fraudulent proceeds. Approximately $2.3 million will be disbursed to
victims who filed claims with the government.
DRUG MONEY USED TO OPEN WATER PARK IN EAST ST. LOUIS
(Southern District of Illinois) On June 16, 1997, the East St.
Louis, Illinois Park District cut the ribbon on a new water park, thus
permitting hundreds of youths to frolic in colorful sprays, jets,
showers, and fountains. The water park replaced a decaying swimming
pool which had been closed for the previous ten years due to lack of
funds for maintenance and repairs. The new water park provides kids
with something to do instead of roaming the streets and is far more
appropriate than a pool for the area's children, as 85 percent of them
cannot swim. The $350,000 cost of the water park was paid for with
federally forfeited money seized from drug dealers.
FORMER TOPLESS BAR TURNED INTO COMMUNITY CENTER
(Southern District of Illinois) In Washington Park, Illinois, a
facility that was once a topless bar owned by convicted racketeer
Thomas Venezia, is now known as the ``Lansdowne/Washington Park
Community and Youth Center.'' The Center houses the Washington Park
Library, Americorp, and a police substation, and contains one of
several ``safe havens'' in the greater East St. Louis area. A ``safe
haven'' is a place where children can safely associate off of the
streets and provides recreation, tutoring, computer training, conflict
resolution, and other developmentally appropriate activities. The
Center also serves as a base of operation for community groups and the
location of neighborhood leaders training.
FORFEITURE NETS $4.0 MILLION FOR VICTIMS OF A PONZI SCHEME IN TEXAS
(Southern District of Texas) Federal prosecutors in Houston filed a
civil forfeiture action against a $4.3 million mansion in Austin,
Texas, held in the name of a British Virgin Islands entity controlled
by Randall L. Garrett and a $1.1 million bank account controlled by
Bryan L. Sims. Garrett and Sims collected more than $25 million in 15
months by touting ``prime bank'' financial instruments that supposedly
returned an annual profit of 240 percent. They failed to invest the
funds as promised and used the funds to repay earlier investors and for
personal gain. Garrett and Sims were later indicted, and the property
originally restrained in the civil case was forfeited. After payment of
lienholders and other non-culpable claimants, the net proceeds of sale
of forfeited property will provide a pool of approximately $4.0 million
from which to compensate the more than 300 victims of the fraudulent
scheme.
criminal forfeiture used to recover restitution for victim of shooting
(District of Minnesota) Robert George Jefferson and four other
members of the 6-0-Tre Crips gang in Minneapolis were convicted in
August 1998 for their involvement in large-scale drug dealing and six
murders, including a 1994 arson in St. Paul that killed five children
of the Coppage family. Jefferson was also convicted of conspiracy to
murder an individual who owed him money for drugs. When Jefferson
demanded the money from the individual, who did not comply, a gun
battle ensued during which an innocent bystander, Robert Otto, was shot
in the head resulting in life-threatening and traumatic brain injuries.
Jefferson was sentenced to life in prison and ordered to pay over
$6,600 in restitution to Otto. Of course, the money was not
forthcoming. However, using the criminal forfeiture process, the
government forfeited vehicles belonging to Jefferson and obtained a
court order to use the proceeds from the sale of those vehicles to pay
the ordered restitution.
Senator Thurmond. Mr. Johnson, you are next.
STATEMENT OF JAMES E. JOHNSON
Mr. Johnson. Thank you, Mr. Chairman. Mr. Chairman, ranking
member, members of the subcommittee, I am pleased to appear
before you today to give Treasury's perspective on the Federal
asset forfeiture program.
Treasury law enforcement works closely with other Federal
as a well as State and local enforcement to address a diverse
range of responsibilities. Asset forfeiture is a very powerful
tool that helps us accomplish our mission. I am glad to join
Deputy Attorney General Holder, Assistant Commissioner
Tischler, and DEA Chief of Operations Fiano in support of this
valuable law enforcement tool. I assure you that we are working
to ensure that it is being used appropriately to attack
organized criminal activity.
I have a long statement, Mr. Chairman, that I would request
be added to the record, as well as a letter that has been
signed by the Treasury enforcement bureau heads, which I also
would ask to be added to the record of these proceedings.
Asset forfeiture has played a key role in some of our most
prominent recent cases. From narcotics trafficking and money
laundering to terrorism and excise tax avoidance, it has proven
its value time and time again. Not only does it disrupt the
structures that support criminal enterprises, but it uses those
instrumentalities and profits from crimes in ways that are
consistent with the purpose of forfeiture laws in combatting
crime.
Specifically, we use asset forfeiture to reimburse victims
of crime, to provide for real properties that revitalize drug-
scarred neighborhoods, and bolster law enforcement capacity and
bolster cooperation throughout the United States. Everyday,
asset forfeiture does what prisons alone cannot do in our
struggle against crime.
We know that American citizens will only be comfortable
with Federal forfeiture authorities as long as they have faith
in the integrity of the program. In our management of the
program, we have worked to secure that faith. Four principles
have informed the stewardship of the program, at least these
four.
First, we have closely managed the program. Second, we have
conducted comprehensive training for our forfeiture personnel,
and we are soon going to be making that training part of our
basic training for all Treasury enforcement agents.
Third, we have underscored the importance of considered and
responsible seizures. And, fourth, we have developed exhaustive
policy guidelines to ensure that due process rights of all
individuals affected by this program are honored and protected.
We recognize, however, that improvements can be made and we
support the reforms in the administration's bill regarding
civil asset forfeiture, and actually asset forfeiture as a
whole. And the Deputy Attorney General has addressed those
issues quite eloquently. We support, again, reform, and we have
for some time. Many of the proposed reforms are set forth in my
long statement and have already been reviewed in this hearing
today. I will highlight just a few.
The administration bill will raise the standard of proof,
put the burden of proof on the government, to the level of
preponderance of the evidence and shift the burden of proof to
the government. The bill will provide for uniform definition of
innocent ownership, and will permit the use of forfeited
property to pay for victim restitution, not just innocent owner
restitution. Such reforms can be made while still maintaining
the effectiveness of civil asset forfeiture as a valuable law
enforcement tool. It is a balanced approach that we propose
that reflects America's sense of fair play.
On the other hand, we believe that H.R. 1658, the
alternative to the administration's bill, will have a
significant negative impact on our current ability to address
the threats posed by criminal organizations. We believe that
H.R. 1658 will constrain our ability to seize and forfeit by
raising the standard of proof to clear and convincing evidence,
even higher than in the criminal context. Providing for counsel
at a cost to the government would be an additional burden. We
believe that it would enhance the chances for frivolous
litigation.
It would impose unrealistic deadlines that will cripple
administrative forfeitures and may well result in the return of
seized guns to the streets. Finally, we believe that the bill
would increase the risk of property being removed from our
jurisdiction by allowing criminal organizations to retain it
during forfeiture proceedings. In short, H.R. 1658 will cause
us to forgo numerous appropriate forfeitures that we now pursue
and will undercut our ability to exploit this very valuable
tool.
We are making important strides in our efforts against
crime, deconstructing its organization in unprecedented ways.
Needed change can be effected without undoing a longstanding
record of accomplishment.
I thank you for this opportunity to present our views to
this committee. Thank you.
[The prepared statement and letter of Mr. Johnson follow:]
Prepared Statement of James E. Johnson
Mr. Chairman and members of the Subcommittee, good afternoon. I
want to thank the Committee for holding this hearing on civil
forfeiture reform. I am pleased to appear before you today to give
Treasury's perspective on the federal asset forfeiture program--how we
use asset forfeiture, how it supports our law enforcement and other
organizations, and how we view its prospects for the future.
Day-in and day-out, Treasury law enforcement pursues a wide variety
of cases in its many areas of responsibility--including, but not
limited to, trade and financial fraud, narcotics smuggling, illegal
firearms trafficking, terrorism, counterfeiting and money laundering.
In order to effectively address this diverse range of responsibilities,
we work closely with other federal agencies and with state and local
law enforcement officials.
The Treasury Forfeiture Fund was established by Congress in 1992 to
direct a professional application of the forfeiture sanction, and to
fairly and systematically strip criminal organizations of both the
proceeds and instrumentalities that facilitate their illegal
enterprises. Thus far, though the program has enjoyed many successes,
the need for prudent reform is acknowledged and solicited and we are
here today to discuss our proposal for future direction.
Our management of the program and the use of its funds is very
important. We have taken measures in a number of areas to ensure that
we fulfill our end of this responsibility. Since the establishment of
the Treasury Forfeiture Fund in 1992, we have listened attentively to
criticisms. We have heeded valid complaints and have closely managed
our program, such as by conducting comprehensive training for all
Treasury forfeiture personnel--from our special agents and their
supervisors to our seized property managers. We have underscored the
importance of considered and responsible seizures and the need for the
pre-seizure planning that makes these possible. We have emphasized
quality in the management of seized property so that value, whether
property is forfeited or returned, is never carelessly diminished. And,
recognizing that justice delayed is often justice denied we have
directed Treasury law enforcement to stay on top of their forfeiture
caseloads, especially with regard to the adjudication of administrative
forfeitures.
We will continue to ensure that Treasury's program always affords
due process--that it notifies all affected parties of the seizure and
intent to forfeit, that it apprises them of their right to contest the
forfeiture in court, that it accommodates the indigent and that it
offers opportunities to achieve just resolutions short of forfeiture.
In short, we are striving not for advantage but for fairness.
We recognize that asset forfeiture is a powerful tool in our
arsenal and helps us accomplish our mission. As such, it must be
carefully and consistently employed and monitored to protect citizens
from abuse and unwarranted burden. As we confront large- scale criminal
organizations, we are increasingly struck by the usefulness of asset
forfeiture in dismantling their operations.
By allowing us to target the proceeds and instrumentalities of
crime, asset forfeiture strikes at the very core of criminal
organizations. It enables us to attack their criminal enterprises in
ways that the simple incarceration of the criminals could never
accomplish. It cuts to the heart of and motivation behind most criminal
activity, focusing on criminal profits. It says forcefully to all
honest Americans that we will not stand idly by and allow criminals to
keep those rewards that fuel their illicit activities. Asset forfeiture
is the tool that permits law enforcement to remove such
instrumentalities and profits of crime, to ensure that ``crime does not
pay.''
Asset forfeiture's purpose is to attack organized criminal activity
and deprive criminals of their illegal profits. As an essential part of
our overall law enforcement strategy, asset forfeiture has recently
played a key role in a number of prominent cases involving drug
trafficking, terrorism and avoiding cigarette excise taxes.
In Operation Casablanca, one of the most complex money
laundering investigations ever conducted by United States law
enforcement, Customs agents broke an integral link between
narcotics traffickers and their money launderers. Forfeiting
cash and monetary instruments, they were able to disrupt an
organization that converted drug receipts into operating
revenues for the cartels. This year, two Mexican banks pled
guilty to money laundering violations and forfeited a total of
over $13 million, while a third bank settled its charges and
forfeited another $12 million.
A husband and wife team, who operated a wholesale supply
business in Redding, California, was also an important link in
a chain that funneled precursor materials to methamphetamine
manufacturers in Mexico. IRS agents found that the couple had
been laundering the profits of this illegal trade and seized
investment accounts, vehicles and a residence, putting out of
business one source in a deadly and growing drug trade.
A naturalized U.S. citizen arrested in Israel confessed that
he had served as a financial conduit for the Hamas terrorist
organization. A year ago, the Chicago Joint Terrorist Task
Force seized his residence, a vehicle, bank accounts, safe
deposit boxes, and other property after an investigation
revealed that his funds were derived from an international
money laundering operation related to Hamas activities. In this
instance, the forfeiture sanction was a key tool in negating
this financial channel between a terrorist cell operating
within our borders and the parent organization.
The owners of a ranch within the boundaries of the Flathead
Indian Reservation in Montana would take deliveries of huge
quantities of cigarettes from a licensed wholesaler. They would
then load them into transports designed to look like mobile
campers and deliver them to smoke shop owners, circumventing
the Washington State cigarette allocation program as well as
the thirty-four percent per pack tax. These ranchers were
moving $13 million worth of cigarettes per year until ATF and
the tribal police helped bring about the arrests, convictions
and forfeitures of profits that ended the illegal operation.
Asset forfeiture places a high levy on criminal activity, taking
apart the structures that support such scourges as terrorism and the
international narcotics trade. But its benefits don't stop there. With
the authorities of the asset forfeiture funds, we have been able to
reimburse certain victims of crime, provide valuable real properties
that help resurrect crime plagued neighborhoods, make donations of
goods to charities and, very significantly, bolster law enforcement
capacity and cooperation throughout the United States.
In 1996, following a lengthy investigation by the Criminal
Investigation Division of the IRS, an individual pled guilty to
conspiracy to defraud Medicare and agreed to forfeit $32
million that had been seized from his business, which had
falsely claimed reimbursements from a Medicare insurance
carrier. That money will be reimbursed to the federal Medicare
trust fund and state Medicare insurers victimized by his
criminal scheme.
In Camden, New Jersey, a drug trafficker colluded with a
long time family friend and realtor to invest his criminal
proceeds in real estate and expensive cars. When IRS criminal
investigators and the Camden Police finally helped bring him to
justice, four forfeited properties were transferred by the
Treasury Department to the City of Camden--two to be used as
satellite police stations and two more to community service
providers under the Weed and Seed program.
Simply put, we take the property that comes into our asset
forfeiture funds and put it to good use. We take the proceeds of crime
and re-invest them in law enforcement. First, we pay the often
substantial direct expenses of seizure and forfeiture, allowing the tax
payers to avoid this burden. Second, we invest in the seizure and
forfeiture programs of our law enforcement bureaus, allowing them to
keep pace with the increasingly sophisticated criminal challenges that
they must confront. Finally, other amounts available from the asset
forfeiture fund are used to support Treasury and other federal law
enforcement efforts including victim restitution and community
programs. We do all this fairly, ever mindful of the due process rights
of citizens.
We want to assure the Committee that when we do forfeit assets, we
use those assets in responsible ways to further the purpose of the
asset forfeiture law and combat crime. The benefits that flow from the
Treasury Forfeiture Fund play out every day in many ways, including:
When tragedy struck earlier this year in high school
shootings in Littleton, Colorado, and Conyers, Georgia,
explosive detection canine teams from the Bureau of Alcohol,
Tobacco and Firearms (ATF) were deployed and assisted in
sweeping the schools for destructive devices, firearms and
evidence. Asset Forfeiture Fund resources support the ATF
canine program.
The Youth Crime Gun Interdiction Initiative is an ATF
program aimed at removing the illegal sources of guns used by
American youths. The program is now in 27 vulnerable U.S.
communities, in part, thanks to monies from the Forfeiture
Fund.
The southwest border of the United States has been a favored
point for the smuggling of currency, drugs and other illegal
contraband. The Treasury Forfeiture Fund has helped the Customs
Service cover the costs of personnel moves under Operation
Hardline to re-direct resources to where they are most acutely
needed.
When a gun is used in a crime, a positive firearms trace is
often the crucial piece of evidence needed to make an arrest.
ATF's National Tracing Center, the only operation of its kind
in the world, traces firearms recovered in crimes for federal,
state, local and international law enforcement. Again, the
Treasury Forfeiture Fund is a key resource contributing to the
Center's success.
Forfeiture monies have also enabled us to fund and train
computer investigative specialists in all the Treasury law
enforcement bureaus. This departmentwide initiative, known as
CIS 2000, educates agents in how to match and counter the
latest information technologies employed by criminals
committing financial crimes through sophisticated uses of
today's advanced computers.
Asset forfeiture and the federal forfeiture funds are also major
supporters of the unprecedented levels of cooperation that exist today
among federal, state and local law enforcement. The forfeiture funds
allow us to share equitably among all agencies that have contributed to
investigations leading to forfeiture. In fiscal year 1998, the Treasury
Fund alone shared $72 million in currency and $3 million in property
with state and local law enforcement agencies. These are amounts that
are available to supplement the resources of our state and local law
enforcement colleagues. In other years, forfeiture funds have:
built a new forensic laboratory for the New York State
Police;
aided California's Orange County police officers to educate
schoolchildren to better resist drugs and gangs; and,
permitted Florida's Broward County to hire more police
officers by matching and extending its share of grants under
the Community Oriented Policing Services (COPS) program.
When we view the future of asset forfeiture, we see it continuing
to be a valuable tool to do what prisons alone cannot do: give the
victimized a chance at restitution; build communities torn apart by
drugs and violence; and, strengthen law enforcement's ability to
protect and serve.
We recognize, however, that the citizens of the United States will
be comfortable with federal forfeiture authorities only as long as they
have faith in the integrity of the program. That faith is best secured
by Congress' enactment of necessary statutory changes to update asset
forfeiture laws as well as by our implementation and continual
refinements of policies and guidance that reflect America's sense of
fair play.
From our perspective, we also recognize that program improvements
can be made which is why we support the Administration's bill regarding
civil asset forfeiture. The Administration's Bill would:
raise the standard of proof to preponderance of evidence and
shifts the burden of proof to the government;
protect innocent owners and bona fide purchasers;
require seizure warrant for all seizures of forfeitable
property unless the 4th Amendment exception applies;
permit Attorney General to use forfeited property to pay
restitution to victims;
make government liable for pre-judgement interest; and,
establish a process for return of property pending the
outcome of the forfeiture case.
The House Bill, however, would have a significantly negative impact
on our current ability to use asset forfeiture against organized
criminal activity. Chiefly, it would:
constrain our ability to seize and forfeit criminal proceeds
when the owner is overseas or otherwise beyond the jurisdiction
of the United States;
cause us to forego numerous forfeitures we currently pursue
in order to protect our witnesses and investigations because it
would eliminate hearsay evidence in meeting the government's
initial burden;
greatly limit the use of administrative forfeitures, now
about 70 percent of all our forfeitures, through a combination
of eliminating cost bonds and providing counsel in civil
actions.
require the return to the streets of many of the guns we
seize everyday because of unrealistically short time frames for
initiating the forfeiture proceeding and because they cannot be
criminally forfeited; and,
inordinately increase the risk that property may be removed
from the jurisdiction of the United States by allowing criminal
organizations to retain their assets during forfeiture
proceedings upon a simple petition to the court.
While refinements to the asset forfeiture process would be useful,
they should not be allowed to undo asset forfeiture's longstanding
record of accomplishment in serving the best interests of American
citizens. This is especially true in the area of civil forfeiture, the
most historic and tested element of our forfeiture program. If the use
of civil forfeiture is curtailed, it will seriously undermine our
effectiveness in investigating drug trafficking, money laundering,
fraud and other financial crimes.
As I said at the start, we are making important strides in our
struggle against most types of organized criminal activity, treating it
now for just what it truly is--a subversive business enterprise that
needs to be acquired, taken over and deconstructed--lock, stock and
barrel.
I hope that I have been able to convey to you the actual intent and
application of this most valuable law enforcement tool. If change is to
be made, it should be based on a factual analysis of need, not
misconception based on anecdotal stories from the early days of the
program. I thank you for allowing us to present our views on the asset
forfeiture program. We appreciate the support of the Committee in this
area and throughout federal law enforcement. I will be pleased to
answer any questions you may have at this time.
______
Department Of The Treasury,
Washington, DC, July 21, 1999.
Hon. Strom Thurmond,
U.S. Senate,
Washington, DC.
Dear Senator Thurmond: We write to advise you of our concerns about
the provisions of H.R. 1658, the ``Civil Asset Forfeiture Reform Act,''
which passed the House on June 24, 1999. This legislation as currently
drafted will severely jeopardize the use of civil asset forfeiture by
law enforcement to combat serious crimes, including organized crime,
money laundering, and bank fraud. Asset forfeiture strikes at the very
core of criminal activity, disrupting the flow of criminal profits and
seizing the property used to commit crimes. It dismantles criminal
organizations in a way that criminal convictions against individuals
cannot. As such, it is an essential part of our overall law enforcement
strategy.
We want to stress that we are committed to fair and just civil
forfeiture procedures. We fully support asset forfeiture reform where
appropriate and needed. Indeed, the Administration is currently
proposing a bill that would enact broad reforms in both the civil and
criminal asset forfeiture laws. Unfortunately, H.R. 1658 differs from
the Administration's bill in a number of important respects. For
instance, although the Administration's bill would raise the
government's initial burden of proof in civil forfeitures to a
``preponderance of the evidence,'' H.R. 1658 would raise the standard
even further, to ``clear and convincing evidence.'' Proof by a
preponderance of the evidence is the standard that applies in virtually
all civil litigation. We do not think it should be more difficult for
the government in civil proceedings to forfeit child pornography
equipment or the proceeds of illegal drug trafficking than it is to
collect a delinquent student loan.
Additionally, in contrast to the Administration's bill, H.R. 1658
eliminates the 10 percent cost bond requirement, provides for the
return of property to claimants pending judgment in certain
circumstances, and requires the appointment of counsel for certain
types of civil claimants. We are deeply concerned that these and other
provisions will severely undermine the government's ability to forfeit
criminal assets in appropriate cases. Indeed, the greatest benefits of
the bill may redound to criminal organizations and groups, which
frequently insulate the assets of their leaders through unknowing
underlings who become the claimants in civil forfeiture cases.
The Department of the Treasury strongly supports enactment of
meaningful and balanced civil forfeiture reform legislation--
legislation that ensures fairness while protecting the due process
rights of all claimants. However, any legislation must also support law
enforcement's ability to dismantle criminal organizations and
compensate crime victims. H.R. 1658 does not embody this balanced
approach to forfeiture reform. We look forward to working with you and
other Members to craft a bill that does.
Sincerely,
James E. Johnson, Raymond W. Kelly,
Under Secretary (Enforcement). Commissioner, U.S. Customs Service.
John W. Magaw, Brian L. Stafford,
Director, Bureau of Alcohol,
Tobacco and Firearms. Director, U.S. Secret Service.
David Palmer,
Acting Assistant Commissioner,
Criminal Investigation Division,
Internal Revenue Service.
Senator Thurmond. Ms. Tischler.
STATEMENT OF BONNI G. TISCHLER
Ms. Tischler. Mr. Chairman, members of the subcommittee,
good afternoon. I am pleased to have this opportunity to
testify on the vital importance of asset forfeiture to law
enforcement. I believe this hearing will shed important light
on one of the chief instruments we use to disrupt international
crime, and we thank you for that.
The Customs Service has a proud tradition of employing
forfeiture laws effectively and responsibly. Use of forfeiture
by Customs dates back to the very founding of our agency over
200 years ago. The first Congress passed forfeiture statutes
under the customs laws of 1789. At that time, the statutes were
used primarily to confiscate pirate ships, as has been pointed
out, preying upon legitimate commerce in U.S. waters.
Today, they are employed in the battle against all aspects
of international crimes--drug smugglers, terrorists, child
pornographers, counterfeiters, and others who would compromise
the security and well-being of our citizens. Indeed, asset
forfeiture is one of the most powerful tools employed by all of
the Federal Government, not just the U.S. Customs Service.
Not only does it enable us to seize what contraband comes
into the country--illegal drugs, child pornography, counterfeit
goods--but also what is going out-illicit cash and the weapons
that promote the further expansion of criminal activity. Asset
forfeiture enables us to take the profit out of crime and
target those who would otherwise be out of our reach.
Delivering a blow to a drug kingpin living comfortably
abroad beyond our grasp often entails hitting him where it
really hurts, his bank accounts, his businesses, and all other
means he might use to launder the proceeds of his trade.
Crippling these individuals and their illicit networks involves
not just the seizure of illegal goods, but also the resources
that fuel criminal operations.
To ensure that our seizure operations are done correctly,
with the maximum precision and efficiency, Customs created
Asset Identification and Removal Groups, or AIRG's. These
groups are comprised of special agents, auditors, accountants
and contract data analysts, and are especially trained to
target the assets of criminal organizations. Personnel assigned
to these teams are trained in asset identification, removal,
and forfeiture.
The Treasury Executive Office of Asset Forfeiture funds the
training program that each group member must complete before
conducting cases. AIRG members take part in our investigations
right from the beginning and play an important role in all
phases of our investigative activities, so much so that these
groups are now located in each of our 20 SAIC offices around
the country. They have been very successful. Any weakening of
the asset forfeiture laws would have a negative effect on their
work. Let me mention a few specific examples to highlight this
point.
A suspect named Carlos Cardoen was indicted in Miami for
supplying cluster bombs to Iraq. He was never caught and he
remains a fugitive to this day. However, Customs was able to
identify and seize over $10 million that he had generated
through the sale of the bombs. Under H.R. 1658, passed recently
by the House, the Customs Service might have had to return the
$10 million to Cardoen until a court of law could decide the
issue. Under the suspect's continued control, the money could
very well have gone toward the procurement of even more
weapons. Even if a court order against Cardoen were rendered,
it is highly unlikely it would have resulted in the timely
surrender of his assets.
Another case in point: Customs works closely with Canadian
authorities in telemarketing fraud cases, many of which are
ongoing. Our Seattle office recently arrested an individual by
the name of James Down, who bilked more than 900 elderly
victims out of millions of dollars in a telemarketing scam.
Some of the victims lost their life savings, but with the help
of civil seizure and asset forfeiture laws, we were able to
freeze more than $12 million that Down had hidden in offshore
accounts.
Although we pursued criminal charges against Down, much of
the evidence needed was located in foreign countries, making
the investigation difficult and extremely time-consuming.
Thanks to civil asset seizure and forfeiture, we were at least
able to ensure that his victims were compensated.
During Operation Casablanca, civil seizure and asset
forfeiture laws were used to seize over $67 million from bank
accounts used by the drug cartels. To date, more than $30
million has been forfeited to the government. Through
negotiations with the banks and private individuals, about $10
million has been returned.
During Operation Casablanca, Customs seized money from Jose
Alvarez Tostado, an indicted leader of the Juarez cartel.
Tostado is now a fugitive and his money was forfeited. Under
H.R. 1658, Tostado, who refuses to appear in court, could fight
the forfeiture without ever having to leave his hiding place.
The administration's bill that Mr. Holder and Mr. Johnson have
spoken about would eliminate this special protection of
fugitives.
These cases highlight the potential losses we could incur
were H.R. 1658 to become law; in one instance restitution to
elderly victims, in others the financial resources of known and
indicted criminals. Moreover, the U.S. Government could be put
in the ironic position of paying for the legal representation
of terrorist organizations, drug cartels, organized crime
syndicates, and dangerous fugitives.
As international crime moves beyond our borders, so must
Customs. The capacity to seize assets allows us to extend our
reach to criminals and networks that might otherwise remain
untouchable. We are proud of our successes on this front and we
are proud of our responsible, professional and efficient use of
seizure methods.
That said, we are fully aware of the sensitivity and
caution with which one must utilize seizure and forfeiture
techniques. For this reason, Customs is committed to an asset
identification and removal program that is responsible, fair
and equitable. As I mentioned before, Customs has deployed
fully trained asset seizure teams in each of our SAIC offices.
Commissioner Kelly has mandated that all investigations
involving the potential seizure of real property and/or
operating businesses, no matter what the value, are coordinated
through these groups. There are no exceptions to this policy.
Additionally, Commissioner Kelly has implemented a policy
which calls for a preliminary review of all potential seizures
valued over $100,000. Such seizures must first be approved by a
chain of command, including the SAIC, the Assistant Director of
Asset Forfeiture, and the Director of our Investigative
Services Division. All potential seizures of over $1 million
must be approved by myself. The only exception to this review
process is generated by exigent circumstances such as border
search.
Mr. Chairman, committee members, it is certainly proper for
the Congress and the American people to seek accountability
from their law enforcement community on the sensitive matter of
forfeiture practices. It is a serious responsibility, one we
must take great pains to manage properly. Customs has been and
remains fully committed to asset identification, removal and
forfeiture programs that stand up to the strongest test of
fairness. The dedication and zeal with which we attack the
roots of international crime must be balanced against an
unwavering respect for individual rights. Our policies and
practices are designed to make sure that that balance is never
lost.
Thank you for this opportunity to present our viewpoint
today before your subcommittee.
Senator Thurmond. Thank you.
[The prepared statement of Ms. Tischler follows:]
Prepared Statement of Bonni G. Tischler
Mr. Chairman, members of the subcommittee, good afternoon. I am
pleased to have this opportunity to testify on the vital importance of
asset forfeiture to law enforcement. I believe this hearing will shed
important light on one of the chief instruments we use to debilitate
international crime.
The Customs Service has a proud tradition of employing forfeiture
laws effectively and responsibly. The use of forfeiture by Customs
dates back to the very founding of our agency over two hundred years
ago. The First Congress passed forfeiture statutes under the Customs
laws in 1789. At that time, the statutes were used primarily to
confiscate pirate ships preying upon legitimate commerce in U.S.
waters. Today, they are employed in the battle against all faces of
international crime: drug smugglers, terrorists, child pornographers,
counterfeiters, and others who would compromise the security and well
being of our citizens.
Indeed, asset forfeiture is one of the most powerful tools employed
by all of Federal law enforcement, not just the Customs Service. Not
only does it enable us to seize what contraband comes inbound--the
illegal drugs, the child pornography, the counterfeit goods--but also
what is going out--the money, and the weapons that promote the further
expansion of criminal activity. Asset forfeiture enables us to take the
profit out of crime and target those who would otherwise be out of our
reach. Delivering a blow to a drug kingpin living comfortably abroad,
beyond our grasp, often entails hitting him where it really hurts--his
bank accounts, his dummy businesses, and all other means he might use
to launder the proceeds of his trade. Crippling these individuals and
their illicit networks involves not just the seizure of illegal goods,
but also the resources that fuel criminal operations.
To ensure that our seizure operations are done right, with the
maximum precision and efficiency, Customs created Asset Identification
and Removal Groups, or AIRG's. These groups, which are comprised of
Special Agents, Auditors, Accountants, and contract data analysts, are
specially trained to target the assets of criminal organizations.
Personnel assigned to these teams are trained in asset identification,
removal and forfeiture. The Treasury Executive Office of Asset
Forfeiture funds the training program that each group member must
complete before conducting cases. AIRG members take part in our
investigations right from the beginning, and play an important role in
all phases of our investigative activities--so much so that AIRG's are
now located in each of our 20 SAC offices around the country.
Let me mention a few specific examples to highlight this point. A
suspect named Carlos Cardoen was indicted in Miami for supplying
cluster bombs to Iraq. He was never caught and he remains a fugitive to
this day. However, Customs was able to identify and seize over $10
million dollars that he had generated through the sale of the bombs.
Under H.R. 1658, passed recently by the House, the Customs Service
might have had to return the $10 million to Cardoen until a court of
law could decide the issue. Under the suspect's continued control, the
money could very well have gone towards the procurement of more
weapons. Even if a court order against Cardoen were rendered, it is
highly unlikely it would have resulted in the timely surrender of his
assets.
Another case in point: Customs works closely with Canadian
authorities in telemarketing fraud cases, many of which are ongoing.
Our Seattle office recently arrested an individual by the name of James
Down who bilked more than 900 elderly victims out of millions of
dollars in a telemarketing scam. Some of the victims lost their life
savings. But with the help of civil seizure and asset forfeiture laws
we were able to freeze more than $12 million that Down had hidden in
off shore accounts. Although we pursued criminal charges against Down,
much of the evidence needed was located in foreign countries, making
the investigation difficult and time consuming. But thanks to civil
asset seizure and forfeiture, we were at least able to ensure that his
victims were compensated.
During Operation Casablanca, civil seizure and asset forfeiture
laws were used to seize over $67 million dollars from bank accounts
used by the drug cartels. To date, more than $30 million dollars has
been forfeited to the government. Through negotiations with the banks
and private individuals, about $10 million has been returned. During
Operation Casablanca, Customs seized money from Jose Alvarez Tostado,
an indicted leader of the Juarez Cartel. Tostado is now a fugitive and
his money was forfeited. Under H.R. 1658, Tostado, who refuses to
appear in court could fight the forfeiture without ever having to leave
his hiding place. The Administration's bill that Mr. Holder and Mr.
Johnson have spoken about would eliminate this special protection to
fugitives.
These cases highlight the potential losses we could incur were H.R.
1658 to become law: in one instance, restitution to elderly victims, in
others the financial resources of known and indicted criminals.
Moreover, the U.S. Government could be put in the ironic position of
paying for the legal representation of terrorist organizations, drug
cartels, organized crime syndicates, and dangerous fugitives.
As international crime moves beyond borders, so must Customs. The
capacity to seize assets allows us to extend our reach to criminals and
networks that might otherwise remain untouchable. We're proud of our
successes on this front, and were proud of our responsible,
professional, and efficient use of seizure methods. That said, we are
fully aware of the sensitivity and caution with which one must utilize
seizure and forfeiture techniques. For this reason, Customs is
committed to an asset identification and removal program that is
responsible, fair, and equitable.
As I mentioned before, Customs has deployed fully trained asset
seizure teams in each of our SAC offices. Commissioner Kelly has
mandated that all investigations involving the potential seizure of
real property and/or operating businesses, no matter the value, are
coordinated through these groups. There are no exceptions to this
policy.
Additionally, Commissioner Kelly has implemented a policy which
calls for a preliminary review of all potential seizures valued at over
$100,000. Such seizures must first be approved by a chain of command,
including, the Special Agent in Charge, the Assistant Director of our
Asset Forfeiture Section, and the Director of our Investigative
Services Division at Headquarters. All potential seizures of over $1
million must be approved by the Assistant Commissioner for the Office
of Investigations. The only exception to this review process is
generated by exigent circumstances, such as a border search.
Mr. Chairman, it is certainly proper for the Congress and the
American people to seek accountability from their law enforcement
community on the sensitive matter of forfeiture practices. It is a
serious responsibility, one we must take great pains to manage
properly. Customs has been, and remains, fully committed to asset
identification, removal and forfeiture programs that stand up to the
strongest tests of fairness. The dedication and zeal with which we
attack the roots of international crime must be balanced against an
unwavering respect for individual rights. Our polices and practices are
designed to make sure that this balance is never lost.
Senator Thurmond. Mr. Fiano.
STATEMENT OF RICHARD FIANO
Mr. Fiano. Chairman Thurmond, members of the committee,
thank you for the opportunity to testify today on the subject
of asset forfeiture.
There is legislation pending before the Congress which will
quite simply undercut the ability of law enforcement to forfeit
illegally-gained property or property used to facilitate a
crime from drug dealers. Asset forfeiture is one of law
enforcement's most effective weapons against drug trafficking
because it takes the profit out of crime. Moreover, property is
not seized unless the government meets the standard of probable
cause. This is the same standard of proof required to arrest a
person or obtain a search warrant from a Federal judge.
Powerful international drug syndicates operate around the
world, supplying drugs to American communities. They smuggle
tons of cocaine and heroin into the United States and
distribute it and sell it in communities across the country.
These organizations generate millions, possibly billions of
dollars of U.S. currency as profit. They drain this currency
from the American economy and divert it to the personal
consumption of a few individuals living outside of the country.
Because of currency transaction reporting requirements, to
a large degree illicit profits are no longer laundered through
banks, but are smuggled in vast amounts out of the United
States and into foreign hands. Many of DEA's cases involve
seizing bulk cash smuggled out of the United States by couriers
who are well paid for their services. In many of these cases,
nobody claims ownership of this ill-gotten cash. To do so would
be to run the risk of criminal prosecution, so the monies are
administratively forfeited.
There are several circumstances where civil asset
forfeiture, pursuant to 21 U.S.C. 881, is the most effective
method of removing the instrumentalities and profits from
narcotics trafficking. In instances where law enforcement
intercepts an illegal money courier with bulk amounts of cash,
civil asset forfeiture law enables the DEA to seize and forfeit
these illegally obtained assets. In many cases, the courier
denies any knowledge of illegal activity, disavows any
ownership, and is free to leave throughout the encounter.
Therefore, criminal forfeiture is not an option. However, DEA
would be able to forfeit that currency after proving by a
preponderance of the evidence that the currency either
represents the proceeds of the narcotics trafficking or was
intended as a payment for narcotics.
Allow me to turn to some examples of how DEA has used asset
forfeiture. In most drug law enforcement cases, it is more than
clear that the individuals involved are engaged in criminal
activity and their assets are probably subject to forfeiture.
Code 31: On November 25, 1998, an investigator for the
special narcotics prosecutor's office in New York City acting
in an undercover capacity was to meet a currency counterfeiter
at a prearranged location. While the undercover officer was
waiting, an unknown male driving a Toyota stopped, motioned for
the officer to approach his car, asking if he was Code 31. Then
he asked the officer if he was there to pick up the 2 percent
at 11:30.
The officer agreed, knowing that the term ``2 percent''
referred to the money launderer's commission and that the male
was advising him that the 2-percent commission was with the
money to be laundered. The driver then opened the rear storage
area of the Toyota from inside the vehicle and told the officer
that the money was inside the compartment. The undercover
officer then removed the black bag from the storage
compartment. The driver of the Toyota then drove away.
The black bag was found to contain in excess of $200,000 in
U.S. currency. There was no way to ascertain the owner of this
cash and no one ever came forward to claim it. The money was
therefore administratively forfeited. Interestingly enough,
this officer was there working an unrelated counterfeiting
case.
When assets are forfeited, they are put into an asset
forfeiture fund which is used to help the victims of crime. One
example can be found in a recent case in Philadelphia. Two
federally forfeited properties were transferred to community
action groups for use in anti-drug and educational activities.
The properties were formerly used as stash houses by drug
organizations operating in neighborhoods or purchased by the
drug dealer using drug proceeds.
Sister Carol Kreck, who accepted the title to one of the
properties on behalf of the United Neighbors Against Drugs,
stated that the property will serve as a community center for
drug abuse prevention, job skills training programs, and safe
haven educational programs for neighborhood children.
Additionally, DEA carries out many of its activities in
partnership with State and local police. The highway
interdiction program is led by State and local agencies and is
supported by DEA's El Paso Intelligence Center. As an example,
on October 30, 1996, two troopers from the Texas Department of
Public Safety performed a traffic violation stop on a van with
New York plates on Interstate 30. They became suspicious when
they learned that one man was from New York, while the other
was from El Paso, and they were not well-acquainted. Neither
man owned the van and their stories conflicted regarding where
they were going and where they had been.
The driver and passenger consented to a search and the
troopers found 99 bundles of money hidden in the vehicle's
walls. It took 3 hours to count the $1.3 million concealed in
the van. As the officers continued their search, they
discovered another $700,000, bringing the total to $2 million.
Follow-up investigation connected this interdiction and other
seizures of money to a cocaine warehouse in Tucson and to
ongoing investigations in Texas, Arizona, Illinois, Michigan
and New York. These investigations would not be as successful
if we did not have asset forfeiture authority.
I have some pictures of some of the other seizures,
including a $5.6 million seizure made in El Paso which was
money that was going back into Mexico, that I would like to add
into the record.
Asset forfeiture plays a key role in our most complex
investigations, some of which could not take place successfully
without this vital tool. Twenty-two separate DEA, FBI and U.S.
Customs investigations under the name of Operation Rio Blanco
led to the identification of the top leaders of the trafficking
group operating in the United States, 90 arrests, and the
seizure of 3,500 kilos of cocaine and $15 million in U.S.
currency.
Public notice of the seizure of the assets would certainly
have resulted in the early culmination of the wire intercept
investigation prior to the acquisition of sufficient evidence
to prosecute the leaders of the organization. Legislation now
pending before the Congress would require that notice of such
seizures be given within 60 days of the seizure, no exceptions
without an order of the court. If this provision becomes law,
operations like Rio Blanco will be severely hindered or
compromised upon notification of the seized assets.
Aside from criminal investigation, asset forfeiture plays a
key----
Senator Thurmond. Your time is up. If you can wind up, go
ahead for another minute.
Mr. Fiano. Aside from criminal investigation, asset
forfeiture plays a key role in money laundering investigations.
The traffickers will attempt to obscure the drug profits,
making it appear that the money is legitimately-gained wealth.
DEA strategy is to direct law enforcement actions not only at
the violators, but also toward the seizure of their illegally-
obtained and laundered assets.
DEA is working with the Department of Justice and other
Federal agencies to craft legislation which can strike a
balance between the needs of law enforcement and the rights of
innocent individuals.
That concludes my statement. Thank you.
[The prepared statement of Mr. Fiano and information
referred to follow:]
Prepared Statement of Richard Fiano
Chairman Thurmond and members of the Committee, thank you for the
opportunity to testify today on the subject of asset forfeiture. Asset
forfeiture is one of the most important tools in DEA's fight against
drug traffickers. There is legislation pending before the Congress
which will, quite simply, undercut the ability of law enforcement to
forfeit illegally gained property, or property used to facilitate a
crime, from drug dealers, terrorists, alien smugglers, and other
criminals. While other witnesses on the panel can speak on the details
of the pending legislation, my testimony will focus on the central role
asset forfeiture plays in drug law enforcement. Asset seizures and
forfeitures under Title 21, U.S. Code, the vast majority of which are
generated from drug cases, give DEA the largest share of asset
forfeitures among all the Federal law enforcement agencies.
Most Americans agree that criminals, including drug dealers, should
not be allowed to benefit financially from their illegal acts. Federal
law provides that the profits and proceeds of designated crimes, as
well as property used to facilitate certain crimes, are subject to
forfeiture to the government. Asset forfeiture is one of law
enforcements most effective weapons against drug trafficking--because
it takes the profit out of crime. Not only are the profits of crime
taken away from the criminals, but the money is put into the Asset
Forfeiture Fund, which is used to help the victims and to fund law
enforcement programs to further combat crime.
Asset forfeiture has been a part of the American legal system
jurisprudence since the founding of the nation. Current Federal law
contains numerous protections against possible abuse. Property is not
seized unless the government meets the standard of ``probable cause.''
This is the same standard of proof required to arrest a person or to
obtain a search warrant from a federal judge. If a claim to the
property is made it is not forfeited unless the government meets the
standard of preponderance of evidence. There are protections against
the seizure of innocent property. The process provides for the
protection of innocent parties whose property may have been seized,
including banks and financial institutions that may have an interest in
the seized property. Such parties may elect to have the courts consider
their interests, or they may seek administrative relief without the
need to go to court.
I. DRUG ASSET FORFEITURE AND INTERNATIONAL ORGANIZED CRIME
Powerful international drug syndicates operate around the world,
supplying drugs to American communities, employing thousands of
individuals to transport and distribute drugs to American youth. They
smuggle tons of cocaine and heroin into the United States and
distribute and sell it in communities across the country. As a result
of selling their poison, these organizations generate millions--
possibly billions of dollars of U.S. currency as profit. They need to
return this profit somehow to Colombia and Mexico. The drug traffickers
take money from American citizens who become hooked on drugs. They
drain this currency from the American economy and divert it to the
personal consumption of a few individuals living outside of the
country. United States that forfeiture can be employed as an effective
weapon against drug trafficking.
Where, in the past, seizures of currency involved in drug cases
might have been in the thousands or tens of thousands of dollars, now,
seizures of bulk amounts of U.S. currency are in the millions and tens
of millions of dollars. In the nature of the international drug trade,
because of currency transaction reporting requirements, to a large
degree illicit profits are no longer laundered through banks, but are
smuggled in vast amounts out of the U.S. and into foreign hands. Many
of DEA's cases involve seizing these shipments of bulk cash being
smuggled outside of the United States. The international traffickers
isolate themselves from the monies, and have the money transported
separately from the drugs, oftentimes by couriers who are well paid for
their services. In many of these cases, nobody claims ownership of this
ill-gotten cash--to do so would be to run the risk of criminal
prosecution--so the monies are administratively forfeited.
There are large dollar amounts connected with drug asset
forfeiture, because of the nature of the drug trade. One example from
just one case will illustrate this point. During 1998, in numerous
investigations within the United States, DEA worked with other Federal,
state and local law enforcement partners to arrest members of an
international drug trafficking syndicate who were operating on U.S.
soil. Resulting from a series of cooperative investigations which
linked trafficking organizations in Mexico, Colombia and the Dominican
Republic to their operatives in New York, Los Angeles, Atlanta, and a
variety of other U.S. locations, over 1,200 individuals were arrested;
almost 13 tons of cocaine, two and a half tons of methamphetamine, 127
pounds of heroin, and almost $60 million in U.S. currency were seized
and subject to criminal forfeiture.
Asset forfeiture, both civil and criminal, is one of DEA's most
powerful weapons against narcotics traffickers. There are several
circumstances where civil asset forfeiture, pursuant to 21 U.S. C.
Sec. 881, is the most effective method of removing the
instrumentalities and profits from narcotics trafficking. Since
criminal forfeiture requires the conviction of the violator, it is not
available in cases where the drug trafficker is a fugitive, deceased or
resides outside the reach of U.S. extradition laws.
In instances where law enforcement intercepts an illegal money
courier with bulk amounts of cash, civil asset forfeiture law enables
the DEA to seize and forfeit these illegally obtained assets. In such
cases, criminal charges are rarely brought against the couriers. The
couriers, who either know little about the underlying illegal activity
or are told not to ask questions, are paid generously for their
services. Couriers are frequently chosen because they lack a criminal
drug history and are purposefully isolated from the underlying illegal
activity through an intricate system of cells which make up the
structure of the drug trafficking organization. In many cases, the
courier denies any knowledge of illegal activity, disavows any
ownership interest in the currency, may not be arrested, and is free to
leave throughout the encounter. Therefore, criminal forfeiture is not
an option. However, as a result of the investigation, DEA would be able
to forfeit that currency after proving, by a preponderance of the
evidence, that the currency either represents the proceeds of the
narcotics trafficking or was intended as a payment for narcotics.
Today's international organized criminal groups are strong,
sophisticated, and destructive organizations operating on a global
scale. They are shadowy figures who send thousands of workers into the
United States who answer to them via daily faxes, cellular phones, or
pagers. These syndicate bosses have at their disposal airplanes,
vessels, vehicles, radar, communications equipment, and weapons in
quantities which rival the capabilities of some legitimate governments.
Whereas previous organized crime leaders were millionaires, the Cali
drug traffickers and their counterparts from Mexico are billionaires.
These enormously wealthy criminals should not be allowed to enjoy the
profits of their crimes. Drug trafficking is a crime of greed and is
profit motivated. Asset forfeiture is a vital tool in striking blows at
the drug trade at one of its most vulnerable spots, the money. Law
enforcement must be able to take the profit out of drug trafficking.
One way in which these international drug traffickers use their
vast wealth is to purchase the very best, state-of-the-art
telecommunications equipment. They use this sophisticated technology to
carry out command and control their operations. Money is no object.
They have been purchasing and using some of the best available
encryption technology in an effort to secure their communications from
law enforcement. The drug lords now routinely turn on encryption
devices in the middle of their conversations with surrogates in the
United States. The content of these conversations could contain details
of shipments, storage of loads, the return of millions of dollars in
profits, the bribing of government or law enforcement officials, or the
murder of associates, rivals, or political or police officials who
stand in their way. Using court ordered wiretaps, law enforcement
intercepts these communications in order to build cases leading to the
criminals' arrests and to the seizure and forfeiting of their property.
II. ASSET FORFEITURE: DEA INVESTIGATIONS AND OPERATIONS
Allow me to turn to some examples of how DEA has used asset
forfeiture in our money laundering investigations and enforcement
operations. Financial and asset forfeiture investigative activity is an
integral part of DEA investigations today. The Asset Forfeiture Section
oversees the asset forfeiture program within DEA. No property is
forfeited unless it is determined to be a tool for, or the proceeds of,
illegal activities such as drug trafficking, organized crime, and money
laundering.
In most drug law enforcement cases, it is more than clear that the
individuals involved are engaged in criminal activity, and their assets
are properly subject to forfeiture. On November 25, 1998, an
investigator for the Special Narcotics Prosecutor's Office in New York
City, acting in an undercover capacity, was to meet a currency
counterfeiter at a prearranged location. While the undercover officer
was waiting, an unknown male driving a Toyota stopped and motioned for
the officer to approach his car, asking if he was ``code 31'', then
asked the officer if he was there to pick up the two percent at 11:30.
The officer agreed, knowing that the term ``two percent'' referred to
the money launderer's commission, and that the male was advising him
that the two percent commission was with the money to be laundered.
The driver then opened the rear storage area of the Toyota from
inside the vehicle and told the officer that the money was inside the
compartment. The undercover officer then removed a black bag from the
storage compartment. The driver of the Toyota then drove away. The
black bag was found to contain in excess of $200,000 in United States
currency. There was no way to ascertain the ``owner'' of this cash, and
no one ever came forward to claim it. The money was, therefore,
administratively forfeited.
The DEA has asset forfeiture investigative groups in nearly all of
its field divisions, and provides asset forfeiture training to
thousands of drug law enforcement officers, both domestic and
international. DEA's asset forfeiture program was responsible in fiscal
year 1997, in over 7,500 cases, for seizure of over $382 million. In
fiscal year 1998, there were more than 7,700 DEA cases, in which over
$337 million was seized. As part of over 6,000 cases so far in fiscal
year 1999, more than $451 million has been seized.
When assets are forfeited, they are put into an Asset Forfeiture
Fund, which is used to help the victims of crime. One example of how
these activities play a key role in the war on drugs, and often result
in substantial benefit to the community can be found in a recent case
in Philadelphia. Two federally forfeited properties were transferred to
community action groups for use in anti-drug and educational
activities. The properties were formerly used as ``stash'' houses by
drug organizations operating in the neighborhoods or purchased by the
drug dealer using drug proceeds. The two properties were seized
pursuant to two federal narcotics investigations involving two
organizations responsible for the distribution of significant
quantities of cocaine and heroin in local Philadelphia neighborhoods.
Thirteen defendants were arrested and convicted as a result of these
investigations and received sentences of up to fifteen years.
The groups to which the properties were transferred, United
Neighbors Against Drugs and Community United Neighbors Against Drugs
are using the properties, which were rehabilitated by government
employees and citizen volunteers, to expand programs which provide a
safe haven for neighborhood children. Sister Carol Kreck, who accepted
the title to one of the properties on behalf of the United Neighbors
Against Drugs, stated that the property will serve as a community
center for drug abuse prevention, job skills training programs and
``safe haven'' educational programs for neighborhood children.
DEA carries out many of its activities in partnership with State
and Local police. One example is the nation's most effective drug
interdiction programs which has been carried out on its highways for
over a decade, and has been responsible for seizures that match or
exceed those of other, more costly programs. The Highway Interdiction
program is led by State and Local agencies, and is supported by DEA's
El Paso Intelligence Center [EPIC]. Through EPIC, state and local
agencies can share real-time information on arrests and seizures with
other agencies, obtain immediate results to record check requests, and
receive detailed analysis of drug seizures to support investigations.
The interdiction program is active along the highways and
interstates most often used by drug organizations to move illicit drugs
money. Since the initiation of this program in 1986, the following
seizures were made on the Nation's highways: $510,000,000 in U.S.
currency; 872,777 kilograms of marijuana; 116,188 kilograms of cocaine;
748 kilograms of crack cocaine; 369 kilograms of heroin, and 3,274
kilograms of methamphetamine. In the last calender year alone, from
January 1998 through December 1998, Pipeline Seizures totaled:
$86,189,860 in U.S. currency; 121,587 kilograms of marijuana; 14,860
kilograms of cocaine; 80 kilograms of crack cocaine; 75 kilograms of
heroin; and 979 kilograms of methamphetamine. These results
dramatically show the high value of this interdiction program and the
importance of seizing and forfeiting drug related assets.
DEA Agents across the country, together with State and Local
partners, carry out controlled deliveries of the drug shipments they
seize. Our operations do not stop with intercepting the drugs or cash,
they are used to develop information on the trafficking organizations.
We follow the cash because it forms a trail to the criminals who
transport the drugs. By identifying and arresting members of the
transportation cells of drug trafficking organizations, along with the
U. S. customers, law enforcement authorities are better positioned to
target the command, control, and communication of a criminal
organization, and arrest its leadership.
Many of our investigations and enforcement operations point to the
connection between domestic law enforcement in the United States and
the problems posed by international drug trafficking organizations in
Mexico. These operations show, as do most of our investigations, that
arresting the leaders of international organized crime rings often
ultimately begins with a seemingly routine event in the United States.
For example, on October 30, 1996, two troopers from the Texas
Department of Public Safety performed a traffic violation stop (failure
to drive in a single, marked lane) on a van with New York plates on
Interstate 30. They became suspicious when they learned that one man
was from New York while the other was from El Paso, and they were not
well acquainted. Neither man owned the van and their stories conflicted
regarding where they were going and where they had been. The driver and
passenger consented to a search, and the troopers found 99 bundles of
money hidden in the vehicle's walls. It took three hours to count the
$1.3 million concealed in the van. As the officers continued their
search, they discovered another $700,000, bringing the total to $2
million.
On December 3, 1996, after receiving an anonymous call, the Tucson
Police Department and drug task force officers raided a warehouse
containing 5.3 tons of cocaine. On December 13, 1996, the same Texas
troopers stopped a northbound tractor trailer and seized 2,700 pounds
of marijuana. Follow-up investigation connected this interdiction to
their previous seizure of money, to the cocaine warehouse in Tucson,
and to ongoing investigations in Texas, Arizona, Illinois, Michigan,
and New York.
These investigations would not be as successful as they were, if we
did not have asset forfeiture authority. All of these investigations
provided our Special Agents and federal prosecutors with the key to
uncover the operations of the Amado Carrillo-Fuentes organization. This
powerful Mexican syndicate was apparently using U.S. trucks and
employees to transport huge amounts of cocaine to various U.S.
destinations. The resulting investigation, Operation RECIPROCITY,
resulted in the seizure of more than 7.4 metric tons of cocaine, 2,800
pounds of marijuana, $11.2 million in cash, and 53 arrests. RECIPROCITY
showed that just one Juarez-based organized crime cell shipped over 30
tons of cocaine into American communities and returned over $100
million in profits to Mexico in less than two years. Distribution of
multi-ton quantities of cocaine, once dominated by the Cali-based drug
traffickers, was now controlled from Mexico in cities such as Chicago,
Dallas, Denver, Houston, Los Angeles, Phoenix, San Diego, San
Francisco, and Seattle. The Carrillo-Fuentes organization was also
beginning to make inroads into the distribution of cocaine in the East
Coast, particularly New York City, the traditional stronghold of the
Cali drug cartel.
A parallel investigation, Operation LIMELIGHT, secured 48 arrests,
the seizure of $7.3 million in cash, 4,102 kilograms of cocaine and
10,846 pounds of marijuana--keeping this poison off the streets of
America.
Asset forfeiture plays a key role in our most complex
investigations, some of which could not take place successfully without
this vital tool. The 22 separate DEA, FBI, and U.S. Customs
investigations in 8 different judicial districts from August 1997 to
July 1998 came under the name of OPERATION RIO BLANCO. These
investigations led to the identification of the top leaders of the
trafficking group operating in the United States, 90 arrests, and the
seizure of 3,500 kilograms of cocaine and $15 million in U.S. currency.
Working within current legal restrictions, operations such as RIO
BLANCO can inflict significant damage on drug trafficking
organizations.
During OPERATION RIO BLANCO, drug assets were seized as a result of
information obtained through wire intercepts of command and control
communication devices. Some 30 court ordered wiretaps produced 5,000
intercepted phone calls--361 of which were encrypted. The seizure of
the drugs and drug-related profits allowed law enforcement to identify
members of the organization, trafficking routes and smuggling methods.
Public notice of the seizure of the assets would certainly have
resulted in the early culmination of the wire intercept investigation
prior to the acquisition of sufficient evidence to prosecute the
leaders of the organization. Details of ongoing investigations are
routinely included in seizure reports which will be given to defense
attorneys and their clients as part of the discovery process at the
conclusion of the case.
Legislation now pending before the Congress would require that
notice of such seizures be given within 60 days of the seizure--no
exceptions without an order of the court. If this provision becomes
law, operations like RIO BLANCO will be severely hindered. We want to
see a compromise, allowing DEA to approve a delay in the 60 day
notification requirement in situations involving long term undercover
or wire intercept investigations. Without these exceptions, many
investigations would be severely hindered or compromised upon
notification of the seizure of the assets.
Aside from criminal investigations, asset forfeiture plays a key
role in money laundering investigations. Money laundering takes place
because the drug lords need to insulate themselves from the drug
smuggling, in an attempt to avoid criminal prosecution. The traffickers
will attempt to obscure the drug profits, making it appear that the
money is legitimately gained wealth. DEA's strategy in money laundering
investigations is to direct law enforcement actions not only at the
arrest of the violators and the seizure of their contraband, but also
towards the seizure of their illegally obtained and laundered assets.
Asset forfeiture takes the profit out of drug trafficking by seizing
laundered money that can be tied to trafficking. There are several
examples of successful DEA investigations and operations that have
resulted in such seizures.
Operation DINERO was a long term DEA and IRS money laundering
undercover program initiated by the Atlanta Field Division in 1994.
During the first phase of DINERO, cash transactions and money pickups,
were used to connect drug trafficking and drug cell money groups in the
United States. These pickups were necessary in order for undercover
agents to gain greater credibility with the drug trafficking
organizations' hierarchy and to establish the traffickers trust in them
to handle large financial transactions.
The establishment of a Class B bank was designed to serve as the
vehicle for providing what appeared to be a legitimate channel for the
laundering of drug proceeds. The pick-ups were also necessary in order
that, in subsequent pick-ups of cash, the services of the undercover
bank could be offered. This was the first time that DEA established and
operated a fictitious bank. The bank was incorporated in the British
West Indies on the island of Anguilla with the cooperation of the
British government.
Phase two of this operation targeted major drug trafficker accounts
and assets. Undercover ``shell'' corporations and bank accounts were
established in several key cities throughout the United States. These
corporations were multi-purpose ``front'' businesses established for
the purpose of supplying ``money laundering'' services. These front
businesses not only gave undercover agents access to information on the
financial dealing of the trafficking organization, but also assisted
them in identifying distribution cells, which could be dismantled
without affecting the undercover operation.
Operation DINERO was concluded with worldwide impact with the
following results. Eighty-eight individuals were arrested, nine tons of
cocaine was seized, and $82 million dollars in cash and property was
seized. These results occurred in the United States, Canada, Spain, and
Italy. The operation clearly showed that these assets were, in fact,
profits of drug trafficking. Not only was a significant portion of the
international drug trafficking organization crippled by the arrests,
but a small fortune was denied for those members of the organization
who remained at large.
In a series of investigations in New York called Operation
BOOKENDS, we used selective money pick-ups from cell organizations and
offered money laundering service on a very limited and select basis to
the trafficking organization. One of these investigations had an unique
aspect, in that, one of the defendants in the 1982 case sold a DEA
undercover agent 28.5 grams of cocaine, was convicted, and sentenced to
2 years probation to be served concurrently with another conviction. In
November 1997, he negotiated with an undercover agent to launder
narcotic proceeds, and in December 1997, he was arrested for money
laundering and $9,000 was seized. The story does not end there.
In December 1997, DEA negotiated with the president of a company
associated with money laundering. During a nine-day period DEA was hand
delivered approximately $972,000 by the president of the company and
the previously mentioned convicted felon. There is no doubt these
individuals were in possession of money gotten from illegal activities.
The two were arrested for money laundering charges in violation of 18
U.S.C. 1956. At the time of their arrests additional currency was
seized, which totaled in excess of $700,000.
Another example is Operation SKYLINE, a money laundering operation
directed towards the identification and arrest of members of the Cali
Mafia. In 1995, negotiations for money laundering services had been
established, and three cash pick-ups totaling approximately $250,000
were made. Two of the negotiators stated that they were to organize the
laundering of $1.2 million dollars of cocaine proceeds. These
negotiators were arrested and $540,000 in cash was seized at the time
of arrest. A subsequent search of a hotel room resulted in the
additional seizure of another $60,000 in cash.
In a separate investigation under Operation SKYLINE, a DEA
undercover agent in Houston, Texas had been in extensive telephonic
negotiations with a suspect to provide money-laundering services. The
currency was in a parked vehicle and the undercover agent was provided
with a description of the vehicle and the license of the vehicle.
During these negotiations, the surveillance agents were able to locate
the suspect and the ``stash'' vehicle. The undercover agent ultimately
refused to take receipt of the money. Uniformed officers stopped the
vehicle on a pretext, and recovered approximately $600,000 of U.S.
Currency that was wrapped in Christmas paper in the trunk of the
vehicle. Both suspects denied knowledge or ownership of the money. Upon
the culmination of Operation Skyline over $2,700,000 was seized
administratively along with 85 kilograms of cocaine, and twenty-one
people were arrested.
These examples show how we use asset forfeiture to take the profit
out of drug trafficking. We are sure that most Americans agree that
criminals, including drug dealers, should not be allowed to benefit
financially from their illegal acts. We can work within current Federal
law. Current law provides that the profits and proceeds of designated
crimes, as well as property used to facilitate certain crimes, are
subject to forfeiture to the government. Asset forfeiture, operating
within the strict requirement of the law, is one of law enforcement's
most effective weapons against drug trafficking. If asset forfeiture
law is unduly weakened, it would severely cripple law enforcement's
ability to strike the kind of blows against drug trafficking
illustrated in these examples.
III. CONCLUSION
In conclusion, let me again emphasize that DEA's asset forfeiture
actions all take place within a legal framework with built-in
protections for the innocent. As the illustrations in my testimony
show, we conduct asset seizures against real criminals, and these
actions are a vital part of DEA's efforts to combat drug crime.
Still, we are deeply concerned with the efforts now underway to
weaken current law, making it much more difficult for law enforcement
to forfeit drug related and other criminally derived seized property.
We believe that weakening asset forfeiture laws will directly benefit
drug dealers and their criminal associates. On the other hand, we
support reforming asset forfeiture law. The DEA is working with the
Department of Justice and other Federal agencies to craft legislation
which can strike a balance between the needs of law enforcement and the
rights of innocent individuals. We hope you will give the most careful
consideration to the department's legislation, and will not support
legislation which may have potentially crippling effects on drug law
enforcement.
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Senator Thurmond. Mr. Holder, criticism of Federal
forfeiture law has focused on civil forfeiture rather than
criminal forfeiture. It appears that court filings by the
Justice Department for civil forfeitures have decreased
considerably in recent years, from over 5,900 in 1990 to less
than 2,400 in 1997.
The question is has the Justice Department attempted to
focus more on criminal forfeiture in recent years, and why?
Mr. Holder. I am not sure I would say that we have tried to
focus on criminal forfeiture more than civil forfeiture.
Depending on the circumstances, you would use one or the other.
I mean, there are instances in which you cannot use criminal
forfeiture, for instance, if the defendant is dead or is a
fugitive. Criminal forfeiture statutes are not as comprehensive
as they are on the civil side.
So it is not a question of us abandoning one or the other,
but really trying to determine where we can most appropriately
use one or the other. Our real concern, though, today is with
regard to the civil forfeiture provisions and the need to
maintain them or keep them in such a form that we can continue
to use them in the effective way that we think we have in the
past few years.
Senator Thurmond. Mr. Holder, if anyone who is searched and
interested in seized property could ask a court to provide them
free legal counsel, what impact would this have on the number
of frivolous claims?
Mr. Holder. I think there is a real potential for an
increase in the number of claims, and I think a substantial
number of them could be frivolous if a person simply walks in
and under H.R. 1658 had the ability to get a lawyer appointed
for them, did not have to post a bond. There is really nothing
to be lost by getting a lawyer, filing a claim, and then if the
government does not respond within the allotted time having the
property returned to you. Given that fact situation, it seems
to me that the potential for the filing of frivolous claims
really raises pretty dramatically.
Senator Thurmond. Senator Biden.
Senator Biden. Thank you, Mr. Chairman. Years ago, when my
son who is a prosecutor now was young, there used to be an
expression, ``get real.'' I think it is time for us to get real
here.
I am with you guys; I am on your side, but you haven't made
a very good case so far. The idea that a leader of a drug
cartel is going to seek counsel, paid for by the government, is
bizarre, absolutely bizarre, crazy, makes no sense.
Second, the DEA. I challenge you to find somebody in the
U.S. Senate or Congress who has been a stronger supporter of
DEA than me, but two of the three cases you gave us wouldn't be
affected by Hyde at all. The $1.7 or $2 million found inside
that van no one is trying to claim anyway. They are bad guys,
they left it behind. It is not in any way affected by Hyde, any
change.
Nobody is trying to do away with, including Chairman Hyde,
civil forfeiture. So making the case why civil forfeiture has
been such a valuable tool seems to me to make us who oppose the
Hyde proposal look like we are avoiding the real serious
questions about what is involved in the Hyde amendment.
I want to take you through piece by piece, to the extent my
time allows in the first round, what Hyde does. We have agreed,
General Holder, that you are not opposed to--the Justice
Department is not opposed to the burden of proof shifting,
correct?
Mr. Holder. That is correct.
Senator Biden. Is there any opposition on anybody's part to
damaged property? If you go in and screw up the property of the
person and they are able to prove in court you had no right to
take it in the first place and it is returned, shouldn't we
compensate the person for that?
Mr. Holder. Yes.
Senator Biden. Any problem with that piece?
Mr. Holder. No.
Senator Biden. OK, we have got two reforms done. Now, the
third one--I am not being facetious now by this; I am being
real serious.
The third one, does anybody have a problem--if you
confiscate that $2 million, assuming someone comes back and
claims it, assuming the court concludes you had no reason to
keep it and assuming it gained $100,000 in interest, any reason
why they shouldn't get the interest? Any opposition to that?
Mr. Holder. No.
Senator Biden. I don't think so, so we have got three
reforms done. Now, this notion of counsel. Does anybody have
any objection to the--and I want to thank you, by the way, Mr.
Holder. Your staff has been made available to me trying to
figure out whether or not we could work out some kind of
reasonable compromise, because I want to get some additional
powers in this process.
We may be able to work a deal here. If we acknowledge the
part and figure out the part that we don't think is going to do
any damage to our ability to enforce the laws property, we may
very well be able to work out something here, speaking only for
myself, where the additional changes in forfeiture that we
would like to see that give more power because of the changed
circumstances of the way crime is committed--we may be able to
work something out here.
The appointment of counsel. Now, with regard to the
appointment of counsel, is there a--and I am not sure there is
room for compromise here, but how about the case where there
is, in fact, proof of the person being an absolute indigent? I
mean, as I understand it, of the 45,000 civil forfeitures,
about 10 percent of those people were indigent. So we are
talking about the potential, based on last year's statistics,
of 4,500 people getting counsel.
I am not asking you to sign onto this or not, but I think
we should think about whether or not there is some way we ought
to be able to deal with what are the, I think, rare but real
cases where there is a mistake made by us where there is the
inability of someone to hire counsel, to be able to get
counsel. There may be a way we can work that out. I don't have
an answer.
Mr. Holder. Senator, if a person actually is indigent and
can proceed in forma pauperis in Federal court, we would not
have an objection to that. And if a person then ran up legal
fees and could show under the Equal Access to Justice Act that
he had met all the requirements of that, he could get those
legal fees paid for him. And it seems to us that there are in
place already things that would handle that person.
Senator Biden. Now, I hope someone from Chairman Hyde's
office is here because what we are talking about is you are
willing to consider making a change that you would not only get
the lawyer's fees paid, but the cost for you to pursue getting
your property back if you fit into that category.
Mr. Holder. Yes. I mean I am talking about----
Senator Biden. Existing law.
Mr. Holder. I am talking about existing law, right.
Senator Biden. Existing law, or are you talking about
extending existing law, increasing existing--how can I say it--
extending existing law to allow for the actual cost of the
attorneys?
Mr. Holder. That I would have to get back to you on,
Senator. I am not exactly sure about that.
Senator Biden. Well, my time is up and my chairman is going
to bang the gavel. Let me just close and I will come back if we
have time in the second round. I am beginning to question--and
since it has been so pilloried, this law, I probably shouldn't
acknowledge I am the guy that wrote it with the guy sitting
there chairing this hearing.
When Senator Thurmond and I back in the 1970's started this
pursuit to change the law, the focus of civil forfeiture was in
the case that the DEA indicated where someone was dead or on
the lam and we weren't able to get to them. We have gone kind
of beyond that in certain ways. So as we refocus a little bit,
I am beginning to question whether or not there should be the
requirement of a bond being filed for 10 percent to be able to
come back in and claim it is yours.
The real bad guys ain't going to come back and claim it,
and the folks who maybe have a legitimate claim to getting it
back--I should stop. He has powers that exceed even what I am
aware of. [Laughter.]
Senator Thurmond. Go ahead and finish.
Senator Biden. So my question to you is should we consider
some compromise relative to the requirement of the bond being
filed for 10 percent or up to $5,000, whichever is less, of the
forfeited property. I don't have a clear answer to this, but I
am wondering if you have a view on it.
Mr. Holder. Well, I like the law in its present form, but
as I indicated in kind of echoing what you said earlier, we are
really open to discussions about virtually all of these things
in an attempt to work out something that will inspire
confidence in this law. The law is not going to be as effective
as it might be if people perceive it as something where the
government is constantly overreaching. And if there are things
that we can do to tweak the law, to modify it, to update it, we
are willing to discuss those things.
Senator Biden. Well, I appreciate that because we haven't
been overreaching as a law enforcement community, in my view.
There are examples where it has occurred. And I can say for the
record I think it is fair to say I importuned the chairman in
the hallway and indicated to him that I personally was willing
to see whether the law enforcement agencies, local and Federal,
might find some way we could reach some compromise, whether he
was genuinely willing to make some changes, significant
changes, and he said he was.
So maybe we have the beginning--and I want to ask a second
round if we get a chance here--the beginning of the possibility
of doing something that has the effect of what you have in mind
and I do. I want the public to have confidence that we, the
Federal Government and the State governments and law
enforcement, are doing the right thing. We are, in my view; we
are, in my view. But these individual cases that are
aberrations are coming to be viewed as the norm rather than an
aberration, and that worries me about the confidence in the
system.
I thank you for the extra time, Mr. Chairman. I apologize
to my colleagues.
Senator Thurmond. Senator Sessions.
Senator Sessions. Thank you, Mr. Chairman, for having this
hearing and for the leadership you and Senator Biden and others
have provided over the years to allow law enforcement, many of
whom are going to testify in this next panel, to seize the ill-
gotten gains of criminal activity and apply them to good and
noble purposes.
It is one thing to arrest a person and put them in jail,
but that person ought not to have $1 million in the bank and be
able to keep and use it. What happens if his gang members and
his organization are able to use those assets?
I just noticed, Ms. Tischler, in Mobile, AL--I know, Joe
Bettner and his crew at the Customs Service there. There is a
great group of investigators in the Customs Service. On July 9,
in a national news release--they seized 1,100 pounds of cocaine
and froze 65 bank accounts containing $5 million.
Mr. Fiano, you mentioned the storage, but before I get to
that, I want to make another point. Senator Biden, you might
think about this I would like to raise the question of the van
with the $1.7 million. If you went to a clear and convincing
standard, what that would mean is that before those agents--
correct me if I am wrong--could seize that money, they would
have to have clear and convincing evidence that it was
connected to drugs.
It may be that they were on a drug route or that they used
drug language or that there was some drug paper or document in
there that would indicate drugs, but it might not rise to clear
and convincing. If you couldn't seize it, couldn't they drive
away with that money on the spot perhaps?
Mr. Fiano. I think that the police officers would not allow
them to drive away. [Laughter.]
Senator Sessions. I was U.S. attorney for 12 years and I
have advised a lot of police officers, but I don't think so. I
think you have got to meet the legal standard for seizing of
the assets, isn't that right?
Mr. Fiano. That is right.
Senator Sessions. And if you have got that standard too
high, it may keep you from making the quick follow-up
investigation that could confirm that that was drug-connected
and they may be gone scott-free.
Mr. Fiano. That is right.
Senator Sessions. Or these 65 bank accounts that you
seized, if you weren't able to seize them promptly before all
your investigation was complete, that money will be
disappearing out of those accounts immediately, to be utilized
by the drug cartel.
So this concession, as I see it--and we are willing to talk
about changing from probable cause to maybe a preponderance of
the evidence standard--is a major concession that probably is
the core of the danger of forfeiture. Maybe probable cause is
still low, but it is still a serious burden. You can indict
people for probable cause. You can arrest people and put them
in jail on probable cause, but we can't seize $1.7 million in
their van on probable cause.
We need to get real and really think about what is
happening. I am concerned about it. And I think what I hear you
saying is day after day, case after case by police officers and
Federal agents having to make those decisions to seize or not
to seize--if we raise that burden too high, then they are not
able to seize and the money is gone and there is nothing you
can do about it.
Does anybody want to comment on that, or am I off base?
Mr. Fiano. No. That is accurate. And from that seizure,
that seizure was tied into a multi-jurisdictional case which
resulted in about $11.1 million actually being seized.
Senator Sessions. That is the money in the truck you are
talking about?
Mr. Fiano. That is right, that van. Those two troopers
seized that money and the information from those two
individuals that were in the truck. From information we gained
from that stop and that seizure, we tied that into a number of
other seizures, including 5.3 metric tons of cocaine that was
seized a couple of weeks later in Tucson.
Senator Biden. Would the Senator yield for 10 seconds?
Senator Sessions. Yes.
Senator Biden. I want to make it clear what I meant. If you
have $2 million inside the walls of a van, two guys coming
across the border, different nationalities who don't know each
other, you have got ``clear and convincing.'' That is well
beyond ``probable.'' But my point is not that we should move
away from ``probable'' to ``clear and convincing.'' I am not
making that point. I just meant that single example. That is
all.
Senator Sessions. I think I understood you. I guess I was
just trying to suggest that as a practical matter, sometimes
these standards can cause us more trouble and we need to be
careful about how we word it so that we don't change what
doesn't need to be changed.
Mr. Holder, there is one thing in the Hyde bill that
troubled me and it has to do with notice--and those of us who
practiced law for a long time know that getting notice to the
right person at the right time can be a problem. It seems to me
that there are some dangers in demanding that actual notice be
received by the potential criminal and that that could really
cause some unfortunate results. For example, if you mistakenly
send the notice to the wrong prison (e.g. they move prisoners
around periodically) could that allow the whole forfeiture to
be voided?
Mr. Holder. Yes. The way the proposal is made is if the
notice is sent to the wrong person, we are not given an
opportunity to correct that mistake. I mean, if the government
in using all the information it had in good faith sent a notice
to somebody at a wrong address--perhaps the person has moved--
and the time limit then expired, the forfeiture effort at that
point would have to cease. And it seems to me that that is not
justice, if there is a ministerial error, and I think that is
one of the concerns we have with regard to the Hyde proposal.
Senator Sessions. Additionally, I was concerned as I read
the bill--that it would apply retroactively and allow the
reopening, perhaps, of many cases that have already been closed
under these standards? Are you familiar with that?
Mr. Holder. My understanding was that, at a minimum, it
would apply to cases that are already in progress.
Senator Sessions. In progress, but it would apply if the
standards were changed during the pendency of a case? (Some of
them do last for several years, I would think.)
Mr. Holder. That is correct.
Senator Sessions. Well, I would just say this. My time has
about passed and we do have some law enforcement officers that
will testify. I do take private property rights very seriously.
That is a protected constitutional right. I have supported a
private property bill in Congress because I believe we have
gotten too cavalier about taking property rights.
Frankly, I am less concerned about taking property from
criminal drug dealers than I am from legitimate farmers who
have a red cock-headed woodpecker land on their timber land and
they can't cut 40 acres of timber for the rest of their lives.
If the taxpayers want to protect the woodpecker, they ought to
pay for it, not the individual. I think that could amount to a
taking of property. So I am not insensitive to private property
rights.
The way this system is working, I believe that it is not
working that badly. One reason I think your numbers show a
decline, Mr. Holder--is because you have established some very
intensive internal review policies that are declining to
undertake certain cases that were undertaken in the past.
Mr. Holder. We have tried to institute within the
Department a serious review of cases in which we are trying to
make use of asset forfeiture. We have done a lot of training.
We have tried to do the right thing in using these statutes,
using these laws so that we are seen as being fair and only
using them in appropriate cases. And that might have something
to do with the fact that those numbers have declined. It
doesn't mean we are any less committed to it, but it means that
we are trying to use it only in appropriate cases.
Senator Sessions. I hear from local law enforcement that
they think that is too much. They wish the Department of
Justice would continue to handle more cases that are jointly
investigated. But I think it does go against the argument that
you are going off on a wild goose chase, seizing assets willy-
nilly. I think there has been a decline in the number of cases
that are filed.
So, Mr. Chairman, I really respect Chairman Hyde. I think
we need to listen carefully to what he says. And like Senator
Biden, I think we can answer most of those questions. I look
forward to working with you, Senators Biden and Schumer, and
Chairman Hyde in fixing some of the potential areas for abuse,
but I don't want to throw the baby out with the bath water.
Thank you, sir.
Senator Thurmond. You will work with Senator Biden, will
you, on this?
Senator Sessions. I sure will, and I look forward to that.
Our staffs are already discussing this matter.
Senator Biden. We are working on it now.
Senator Thurmond. Senator DeWine.
Senator DeWine. Thank you, Mr. Chairman.
Mr. Holder, Mr. Johnson, and anybody else who wants to
answer this question, I am trying to determine some of the
bottom line here. If the Hyde bill is adopted, what changes
will it make in the real world? And I wonder if you have done
an analysis, or sampling and analysis of the forfeitures that
you have had, say, over the last year or 2 years and if you
could tell me what percentage of those cases would come out
differently. In other words, if you went to Mr. Hyde's standard
of clear and convincing evidence, what difference would it
make?
Mr. Johnson. Senator, we can't present at this stage a
statistical analysis of all of the cases, but I can give you an
example of the type of case that probably Ms. Tischler can
amplify on that----
Senator DeWine. Excuse me just a minute. I am very
interested in examples. That is fine, but for you to come in
here today and testify about this, it seems to me either today
or at some point in the future you need to be able to give us,
because you are the experts, you are the ones who are
prosecuting these cases, you are the ones that are handling the
forfeitures--you need to be able to tell us there will be a
third of these cases, Senator DeWine, Senator Biden, and the
rest of the panel, that we just wouldn't make that we are
making today, and here is what they are. I mean, you don't have
to have it today.
Mr. Holder. We will send it over. We will endeavor to----
Senator DeWine. And I would love to hear your example and I
didn't mean to interrupt you.
Mr. Johnson. I think I would adopt the Deputy Attorney
General's point that we will endeavor to get those answers to
you as best we can. It will involve a fair amount of analysis.
But with respect to my example, very often at the border there
are seizures of large quantities of currency, and the courier
may say when asked at the border crossing either by a Customs
inspector or by an INS inspector--actually, out-bound it would
more likely be a Customs inspector--what is the source or the
origin of the funds--it may be a case even where a Customs dog
is alerted on the car.
Under the Hyde bill, we believe that--and the answers may
come back inconsistent. There may be several clearly incredible
explanations for the quantity of money that is in the car.
Under a preponderance of the evidence standard, which is what
we would propose, we could make the case for permanent seizure
of those funds. Under the Hyde bill, at the clear and
convincing evidence standard, it would be much more difficult
to make that case. And there are a fair number of cases that
occur like that at the border.
There are other aspects of the case that might also come
into play. If there are one, two, three or four other people in
the car, at a later date perhaps all of them might file a claim
under the Hyde bill for return of those funds. And we would see
that as a difficulty in a case where, under the preponderance
of the evidence standard, we believe we would be able to make
out a case for the permanent forfeiture of those funds.
Senator DeWine. Well, I thank you for the example. We would
appreciate other examples, and I certainly would like to see
some general analysis of what percentage of these cases--
obviously, this is an inexact science; this is an art. We just
ask you to use your best judgment on that, and your best
expertise.
You have raised the issue that drug dealers could pass on
their fortunes through probate. I just wonder how often that
happens, if you could give us some idea about that. You have
also raised the concern that this would create a windfall for
prisoners because the forfeiture notice might be sent to the
wrong jail and the prisoner would get his property back. I
wonder how often that happens.
Mr. Holder. Well, again, we would try to get you some
statistical information with regard to both of those questions.
But I can tell you, though, with regard to Jose Gonzalez
Rodriguez Gacha, a Colombian drug lord, we have recovered over
$70 million from him from bank accounts he has left all over
the world. And in every instance, we have had to fight with his
heirs who are claiming access or claiming the right to this
money.
If, in fact, we had a provision that was a part of the law
that allowed an innocent owner, perhaps a son or a daughter, to
get access to that money because the person legitimately
perhaps did not know--an infant did not know where the money
was coming from, I would question whether or not that is an
appropriate disposition of those kinds of funds. To give to the
heir of somebody who has gotten this money through the sale of
drugs--to give it to that person's heir, it seems to me that
that is just not where we want to have our law.
Senator DeWine. Thank you, Mr. Chairman.
Senator Biden. May I follow up?
Senator Thurmond. Senator Biden.
Senator Biden. With regard to the innocent owner or the
heir, I think it is important that we point out that we are not
saying the heir can't recover the property if they can prove
that, in fact, it is not from gains made by--this is about
whether or not while the trial of this question is pending, and
before it is resolved, the heir can get under a hardship the
money back, can say, by the way, now I know you all have got
this and I know this is going to be litigated later down the
road, but I need the money now to pay for my education at
Harvard University or something, and I need it now.
It seems to me that in this balancing piece here--and this
is a comment, but I would like you to respond to it--in this
balancing act, which all of this ends up being, one of the
things we should be looking at is the suffering that will be
undergone by the innocent owner relative to the potential loss
that the government will undertake if, in fact, they are not an
innocent owner.
And in the area of cash, when you are talking about the
seizure of cash, it is not likely that much of it will be
around for the ultimate litigation. To distinguish that from a
house, if there is a piece of real estate there, it may gall
law enforcement that a person who is claiming to be an innocent
owner, when the law enforcement folks believe they are really
guilty, is allowed to lounge in the 50-foot pool behind the
house.
Well, in that case, in the balance, I think law enforcement
has to swallow their pride. If, in fact, they can make the case
before a judge that they are an innocent owner, then go with it
because they are not going to hook a big winch to the house and
haul the house away.
So I just think that part of what we are talking about here
is balancing the equities here. And I am wondering whether or
not in terms of this whole question of innocent owner the
Justice Department thinks that there is--right now, we only
protect innocent owners and bona fide purchasers. We don't
protect those who receive other forfeitable property through
probate. That is the way the law is now, right? Am I correct?
Mr. Holder. Correct.
Senator Biden. And you are not supporting, are you, any
change in the probate piece of that?
Mr. Holder. No, we are not.
Senator Biden. OK, because again I can see where it is
possible that an heir is truly denied something that they
should have because it was not from ill-gotten gains from their
father or mother or whoever the heck the person leaving the
money was. But I just think it is a relatively rare
circumstance the other way as well, because ultimately you get
a disposition from the court if someone is going to come back
in. The heirs are contesting this of the deceased cartel
member. The courts are eventually going to decide that, right,
one way or another?
Mr. Holder. Yes. I mean, the concern we have--I mean, we
have talked about, I guess, a couple of concepts here, and that
is the release of property pending the resolution of the
matter. And the concern, as you indicated, is with things like
cash, property that is mobile. Again, we want to work with you
all so that we can figure out a way in which we can make sure
that assets that ultimately come into our possession are
undepleted, are not in any way negatively affected so that
their value is lowered.
But there are certain things, it seems to me, cash being
chief among them, that it would seem hard to see how you could
give that back to somebody on merely a showing of hardship,
with the expectation that you are going to be able to recover
those assets at the conclusion of the proceeding.
Senator Biden. Theoretically, you could give back something
that requires a transfer of title, with a prohibition on not
being able to transfer title. That would not, in fact, put you
in as much jeopardy; that is, you, the government, in as much
jeopardy. And if the case could be made there is genuine
hardship--there are 17 kids, no place to live, you are out in
the street, you know, the horror story things we hear--you are
not taking nearly the chance there as you are if there is a
Picasso hanging on the wall in that same place and they say, by
the way, I need the Picasso back, I have got a hardship problem
here, or I need the $400,000 in cash back. That stuff goes
quickly.
But if you have something that requires title, I could even
theoretically think you may be able to deal with the
possibility of automobiles or boats. But there they will just
come back and say, well, it was stolen, and it is in a chop
shop somewhere.
I think that the public listening to this, General--
everyone in here is probably very informed or they are not
likely to be in here. It is not like a topic that draws the
average person in the front door here. But people watching--
well, there are no cameras, but if people were watching this on
C-SPAN, they don't make a distinction between criminal
forfeiture and civil forfeiture. They don't understand the
differences and they don't understand the pieces that go into
you having to make the case to be able to seize civilly in the
first place.
I think the Senator from Alabama made a very good point. We
can lock someone up on probable cause. We can put them in jail.
If they can't make bail, they stay in jail. You know, I mean
that is probable cause. The idea that somehow on probable cause
we can't confiscate your property when there is an end date
here, there is an ultimate resolution--it is not like it is
being held in perpetuity, confiscated and kept or sold and
disposed of by the Federal Government. I mean, there has to be
an ultimate court disposition as to whether or not you can take
this forfeited property and distribute it to the local Boys
Club or buy new automobiles for the local police department,
all of which are good things to do.
I think as we go through this debate--and if the Senator
from Alabama and I have anything to do with it, there is going
to be a little bit of debate here. This is not going to go
quietly into the night in terms of the Hyde law passing. I just
hope we are able to do a little bit of educating here.
To the extent, Mr. Johnson--and I realize this sounds like
a tall order, but you have got a lot of Senators here--and I
will conclude my comment with this before the next panel--you
have got a lot of Senators who are very strongly pro-law
enforcement who have been smitten by this notion that there is
this unreasonable overreaching on the part of local and Federal
law enforcement. And they cite cases that really happen, and
now you have people who don't--and Senator DeWine does fully
understand this, but you have Senators who don't fully
understand this any more than I understand a certain section of
the HCFA regulations at the Department of Health and Human
Services.
They hear the one side, they see the story, and we don't
make a very--I will speak for myself--a very convincing case
and simplify for them what the counter-argument is without
exaggerating it. What won't work--and this is my plea--what
doesn't work like it used to work in 1981 is to say this will
make law enforcement harder. That used to be an automatic. All
I had to do is march up to my buddies in the police
organizations and say this will make law enforcement harder,
and Senators would stand there and go, I don't want to be on
the other side of making law enforcement harder.
But now we have had everything from Ruby Ridge, to black
helicopter folks, to the old-line liberals, and they are kind
of coming around the meeting here and so it is not so automatic
anymore. And all I am asking you to do is sort of get out of
the mode and get into--and it is going to take resources, I
acknowledge, but I really think that the suggestion that
Senator DeWine made, and he has a slightly different
perspective on this than I do, to try to go back and just pick
a random sample--I mean, prove to us it is a random sample of
50 cases that you picked out of the 4,000-some filed and apply
the Hyde standard to it and give us some sense of whether it
really would have altered it.
I think it will; I think it will alter it, but I think we
are going to have to make that case in order for us to, very
bluntly, prevail short of us being Horatio at the bridge, which
we are prepared to be. Do you understand what I am saying?
Mr. Johnson. Yes, Senator. We have got our assignment and I
think the approach you outline of sampling is something that we
will try to work our way through and come back with something
that will be more helpful.
Senator Biden. It would be useful. Understate it, don't
overstate it. Understate it.
Thank you, Mr. Chairman.
Senator Thurmond. Anymore questions by anybody?
Senator Sessions. Mr. Chairman, I would like to ask one of
Mr. Holder with regard to homes. It is the policy of the
Department of Justice that if a home is subject to forfeiture
that a notice is tacked on the door and the occupants aren't
thrown out onto the street until the court has heard the case.
Isn't that correct?
Mr. Holder. That is correct.
Senator Sessions. Maybe some States may do it differently,
but on the Federal law you monitor that closely, do you not?
Mr. Holder. Yes. In fact, there have been at least a couple
of cases in which--and these are not matters that generally
will rise to the level of the Deputy Attorney General, but
there have been at least a couple of cases where ultimately we
wanted to do something with regard to homes and it got me
involved in those particular situations. We are very careful
when it comes to----
Senator Sessions. And if Customs or DEA or the FBI or the
Secret Service wants to seize some property, real estate like
that, they still have to get the approval of the U.S. attorney
and the Department of Justice before they can do so. Isn't that
correct?
Mr. Holder. That is correct.
Senator Sessions. So it goes beyond the agents all the way
to Washington most of the time to get a final approval. There
is really an intensive review process that sometimes turns out
to be more bureaucratic and a headache for those out in the
field than it needs to be.
And I see Stef Casella back there behind you, and he is a
professional and he reviews those things. He was reviewing them
when I was U.S. attorney and I have disagreed with him at
times, but they maintain that that is not a phantom control.
That is a real control the Department of Justice maintains.
Thank you, Mr. Chairman.
Mr. Holder. I don't want to leave the misimpression that
all those matters come back to Washington with regard to the
seizure of residences or moving against residences, but there
is a U.S. attorney involved certainly in those matters.
Senator Thurmond. I wish to thank the members of this panel
for their presence and their testimony, and you are now excused
and the third panel will come up.
Senator Sessions. Mr. Chairman, while they are taking their
seats, I just want to say I am sorry I am going to have to
leave. I have got to preside at the Senate here in a few
minutes, and I want to thank these members of the law
enforcement community that have come here. They deal with this
issue on a daily basis.
Just as you can find people who have been wrongly charged
with crimes, you can find people's properties that may have
been wrongly seized. But we also don't want to eliminate our
laws against robbery and murder and those kinds of events, and
we don't need to be too much damaging and undermining this very
effective forfeiture law. I used it a long time.
Senator Thurmond. I understand that you and Senator Biden
are going to get together and maybe come up with an amendment.
Senator Sessions. We will certainly try.
Senator Thurmond. Thank you very much.
I will now introduce the third and final panel. Our first
witness on this panel is Gilbert Gallegos, National President
of the Fraternal Order of Police. He has a degree in
criminology from the University of Albuquerque and is a
graduate of the FBI National Academy. Prior to becoming FOP
National President, he served for 25 years in the Albuquerque
Police Department, retiring with the rank of deputy chief of
police.
I am especially pleased to welcome our next witness,
Sheriff Johnny Mack Brown. He has served as Sheriff of
Greenville County, SC, since 1977.
Isn't that right?
Mr. Brown. Yes, sir.
Senator Thurmond. He has also been elected as President of
the South Carolina Sheriff's Association and the National
Sheriff's Association. Sheriff Brown has been a leader in
community-oriented law enforcement and in combatting youth-
oriented crime and gang activity. He is representing the
National Sheriff's Association.
Our third witness is Johnny Hughes, Director of the
National Information Unit of High-Intensity Drug Trafficking
Areas. Mr. Hughes served with the Maryland State Police for 29
years, retiring with the rank of major. He also served in the
U.S. Army 2nd Airborne Division. He is currently Director of
Government Relations for the National Troopers Coalition.
Our fourth witness is Samuel Buffone, a litigation partner
in the Washington, DC, office of Ropes and Gray, who specialize
in white-collar criminal defense and complex civil cases. A
graduate of the University of Pittsburgh and Georgetown
University Law School, Mr. Buffone is representing the National
Association of Criminal Defense Lawyers.
Our fifth witness is Roger Pilon, Vice President for Legal
Affairs and Director of the Center for Constitutional Studies
at the Cato Institute. Dr. Pilon holds a bachelor's degree from
Columbia University, a master's degree and Ph.D. degree from
the University of Chicago, and a law degree from George
Washington University. Dr. Pilon formerly served in a variety
of positions in the Reagan administration in the Office of
Personnel Management, the State Department, and the Department
of Justice.
I ask that each of you please limit your opening remarks to
no more than 5 minutes, and all of your written statements will
be placed in the record, without objection. We will start with
Mr. Gallegos and go down the line.
PANEL CONSISTING OF GILBERT G. GALLEGOS, NATIONAL PRESIDENT,
FRATERNAL ORDER OF POLICE, WASHINGTON, DC; JOHNNY MACK BROWN,
PAST PRESIDENT, NATIONAL SHERIFF'S ASSOCIATION, ALEXANDRIA, VA;
JOHNNY L. HUGHES, DIRECTOR, GOVERNMENT RELATIONS, NATIONAL
TROOPERS COALITION, ANNAPOLIS, MD; SAMUEL J. BUFFONE, NATIONAL
ASSOCIATION OF CRIMINAL DEFENSE LAWYERS, WASHINGTON, DC; AND
ROGER PILON, DIRECTOR, CENTER FOR CONSTITUTIONAL STUDIES, CATO
INSTITUTE, WASHINGTON, DC
STATEMENT OF GILBERT G. GALLEGOS
Mr. Gallegos. Thank you, Mr. Chairman. Good afternoon, Mr.
Chairman, Senator Biden. I am Gilbert Gallegos. I am the
National President of the Fraternal Order of Police, which is
the largest law enforcement organization in the Nation. I am
here to testify on the civil forfeiture question and attempts
to reform the existing law, an issue obviously which is very
important to law enforcement at every level of government in
this country. While reform of current forfeiture law is
appropriate, it is of equal importance that any such reform not
hamper the ability of law enforcement to separate the proceeds
of illegal activity from criminals and drug traffickers.
Obviously, the impetus of this hearing has been the passage
of H.R. 1658 in the House. During floor debate of this measure,
the FOP, the Department of Justice, and a lot of other law
enforcement organizations stood together to oppose the kind of
reform that was being proposed in that legislation.
Proponents of the bill that attack law enforcement's use of
civil forfeiture made several veiled references to police
officers serving as the government's bounty hunters. Mr.
Chairman, I can assure you we are not bounty hunters, but
servants of the American people, who want criminals in jail and
their illegal assets seized and forfeited. That is our job.
And it is true, Mr. Chairman, that law enforcement believes
in the effectiveness of civil asset forfeiture. It provides
State and local agencies with much needed resources which are
used to provide equipment for officer safety and to supplement
the funds available to fight crime. But perhaps more
importantly, it comprises the second of a two-pronged approach
to winning the war on drugs.
Not only can we put criminals and drug dealers behind bars,
but we need to ensure that neither they nor their families will
be allowed to live a life of luxury from illegal profits. That
is why we worked with members of both parties to enact
legislation that would increase the protections available to
innocent property owners, while preserving law enforcement's
ability to ensure that criminals and drug dealers do not profit
from their illegal activity.
Putting someone in jail may or may not be enough to deter
them from a life of crime, but when you take away the assets
that they have, you take away their cars and their fancy
jewelry, it makes an impact on their thinking, and it makes an
impact on the other people around that understand that they may
lose their property.
The problems with the House-passed version of the bill have
been addressed. But more importantly, I want to address the
need to pass reform that will be effective; that is, in the
area of the burden of proof, and we support the idea that, yes,
it should be the government's job to have preponderance of
evidence to forfeit the property. But on the other hand, it
should be in the hands of law enforcement to determine what the
probable cause is to seize that property before forfeiture.
Also of critical concern is the innocent owner defense
which allows many criminals and drug dealers to pass on
otherwise forfeitable property to their heirs under sham
transactions. This practice may prolong the cycle of
criminality in some families. And believe me, in over 30 years
of law enforcement, I have seen where the father has been the
drug dealer and the kids have been drug dealers and the
grandkids become drug dealers. And they all have a method of
being able to use the funds that they gathered through a joint
effort to pass the money on from one family member to the
other. But we believe that there has to be some remedy in that
area.
Obviously, the first one that we need to address is the
burden of proof. A showing of probable cause does not merit the
forfeiting of a person's property to the government, but
likewise a standard of clear and convincing evidence is not
appropriate for use in civil forfeiture cases. To my knowledge,
such a standard of evidence is only used in the most serious
civil actions brought by the government, such as involuntary
separation of a child from its parents.
The second important provision that we must address is the
innocent owner defense so that property owners who take
reasonable steps can defend against the government's claims,
while protecting innocent people from seizure and forfeiture of
their property.
We need to take the profit out of crime. We think that
civil forfeiture does, in fact, do that. This is a very
important piece of legislation for this country. I urge you to
seek a balance. Senator Biden has spoken about a balance
between all the issues, and I think it is important that we
have that balance.
The decisions that you will soon be making will begin today
as we determine the future of law enforcement's use of civil
asset forfeiture. Do we continue to stand up and fight those
who peddle drugs to our kids and our grandkids, or will we
decide to surrender an important crime-fighting tool to the
critics of the Civil Forfeiture Act?
Thank you, Mr. Chairman. I think this is my time, and I
will stand for any questions.
[The prepared statement of Mr. Gallegos follows:]
Prepared Statement of Gilbert G. Gallegos
Good afternoon Mr. Chairman and distinguished Members of the
Criminal Justice Oversight Subcommittee, it is an honor to appear
before you once again. My name is Gilbert Gallegos and I am the
National President of the Grand Lodge, Fraternal Order of Police. With
over 283,000 members, the F.O.P. is the largest organization of rank-
and-file law enforcement officers in the nation. I am here today to
testify on the future of civil asset forfeiture and attempts to reform
existing law, an issue of the utmost concern to law enforcement
officers at every level of government. While reform of current
forfeiture law is appropriate, it is of equal importance that any such
reform does not hamper the ability of law enforcement to separate the
proceeds of illegal activity from criminals and drug traffickers.
The impetus for this hearing is no doubt the recent attempts to
reform forfeiture procedures through enactment of H.R. 1658, which
passed the House of Representatives last month. During floor debate on
this important measure, the Fraternal Order of Police, the Department
of Justice, and various other law enforcement groups stood together to
oppose the intent and perhaps unintended consequences of that
legislation. Proponents of the bill attacked law enforcement's use of
civil forfeiture and made several veiled references to police officers
serving as the government's bounty hunters. Several lawmakers came to
the floor to describe the ``horror stories'' of law enforcement's
supposedly unjust attempts to take property away from innocent
citizens. We were described as opposed to ``constructive'' reform of
any type and our position was described as the defenders of the status
quo. Nothing could be further from the truth.
We worked with Members of both parties not out of a desire to
thwart any type of civil forfeiture reform, but rather out of a
dedication to a common-sense reform effort that would increase the
protections available to innocent property owners while preserving law
enforcement's ability to ensure that criminals and drug dealers do not
profit from their illegal activity.
A part of the reason that I am appearing before you today, Mr.
Chairman, is to debunk these salacious assertions and give you the
perspective of the ``cop on the beat.'' It is true that law enforcement
believes in the effectiveness of civil asset forfeiture. It provides
State and local police agencies with much needed resources that can be
used to provide officer safety equipment or to supplement the funds
available to fight crime. But perhaps most importantly, it comprises
the second of a two pronged approach to winning the war on drugs. As
former U.S. Attorney General Richard Thornburgh once said, ``it is
truly satisfying to think that it is now possible for a drug dealer to
serve time in a forfeiture-financed prison, after being arrested by
agents driving a forfeiture-provided automobile, while working in a
forfeiture-funded sting operation.'' Not only can we put criminals and
drug dealers behind bars, but civil asset forfeiture allows us to
ensure that neither they, nor their families, will be allowed to live a
life of luxury off of a criminal's ill-gotten gains.
There are several problems with the House-passed version of the
bill that I believe must be addressed. First, in the event of an
administrative error, H.R. 1658 would give prisoners and criminals a
windfall by forcing the government to return forfeited property to the
prisoner with no opportunity to file a new forfeiture action against
it. For example, if the government sends notice to an incarcerated
felon that his property will be forfeited to the wrong prison, the
government has no alternative but to return that property.
Second, while H.R. 1658 appropriately places the burden of proof on
the government, it does so at the unacceptably high level of ``clear
and convincing'' evidence. This means that drug dealers would have more
protection from civil sanctions than are currently available to
doctors, bankers, and defense contractors.
Third, the legislation gives judges the authority to appoint
counsel to any and all persons who believe that they have standing to
contest a forfeiture. No safeguards are in place to prevent the abuse
of this provision by individuals filing frivolous claims and it will no
doubt cause an enormously unnecessary drain on government funds.
Fourth, this legislation establishes an ``innocent owner'' defense
that allows criminals and drug dealers to pass on their fortunes
through sham transactions. Under the provisions of this bill, criminals
will be allowed to amass sizable illegal fortunes and then pass it on
legitimately to their children, spouses, and associates through
probate.
Finally, there is the issue of the return of seized property
pending completion of the forfeiture proceedings if the person can
successfully claim that continued government possession of their
property would impose a ``substantial hardship.'' H.R. 1658 would force
law enforcement to return seized property despite the fact that there
may be overwhelming evidence that it was used to commit a crime. If
property that is currency, contraband, evidence, or an item likely to
be used to commit additional criminal acts is returned, it is highly
likely that it will be disposed of and will not be available for
forfeiture.
These are just some of the problems that law enforcement has with
the current provisions of H.R. 1658. Having said that, I want to make
it clear that I am not here today to argue that some reform is not
necessary to maintain the public's confidence in the use of civil asset
forfeiture as an effective crime-fighting tool. Since 1993, the Supreme
Court has decided no fewer than eleven cases dealing with the
procedural safeguards that must be provided to individuals who have
their property seized and forfeited. For example, forfeitures are now
subject to the Eighth Amendment's prohibition against excessive fines;
and if it would be ``grossly disproportional to the gravity of the
offense,'' it is unconstitutional. In addition, the Supreme Court has
said that residences and other real property cannot be seized without
prior notice and a hearing. In response, Federal law enforcement
agencies who conduct forfeitures have been revising and refining their
procedures to be in compliance with the Supreme Court's decisions.
Therefore, the fact that proponents of H.R. 1658 in its existing form
can only cite ``horror stories'' which occurred before the Court's
rulings indicate that the administrative reforms have been effective.
We can, however, take these efforts one step further. It is
possible to codify into law the efforts of the Department of Justice,
the Treasury Department, and the Supreme Court to reform civil
forfeiture procedures, protect the interest of innocent property
owners, and preserve law enforcement's ability to use civil forfeiture
to win the war on drugs. Despite conventional wisdom, these three goals
are not at odds with one another.
To that end, I believe that there are two important provisions that
must be incorporated into any reform legislation not included in H.R.
1658 as engrossed by the House. The first is shifting the burden of
proof in civil asset forfeiture cases from the property owner to the
government to show by a ``preponderance of the evidence'' that the
property is subject to forfeiture. It is not fair for a property owner
who believes that his or her property has been incorrectly seized to
have to prove that their property was not used in the commission of a
crime in order to avoid forfeiture. We believe that a ``preponderance
of the evidence,'' the standard used in most civil cases, is the
appropriate level of proof in civil forfeiture cases. A showing of
``probable cause'' does not merit the forfeiting of a person's property
to the government. Likewise, a standard of ``clear and convincing''
evidence is not appropriate for use in civil forfeiture cases. To my
knowledge, such a standard of evidence is used only for the most
serious civil actions brought by the government, such as the
involuntary separation of a child from its parent.
The second important provision that must be included in any final
civil asset forfeiture reform legislation is the construction of an
``innocent owner defense'' so that property owners who take certain
reasonable steps can defend against the government's claims. While
protecting innocent property owners, however, we must be careful not to
create a loophole whereby criminals can pass on the profits of their
crimes through sham transactions. First, property owners must have the
opportunity to defeat a forfeiture action if, at the time of the
criminal offense, they had no knowledge of the illegal use of their
property or upon learning of the illegal use, took all reasonable steps
to revoke permission for the use of their property.
Second, with respect to property acquired after the illegal offense
giving rise to the forfeiture, a person would be an ``innocent owner''
if they were a bona fide purchaser for value and was, at the time of
purchase, reasonably without cause to believe that the property had
been used for criminal purposes. If the property is jointly owned,
there should also be a recourse for one party to receive either the
property or a portion of the proceeds from the sale of such property.
This would enable the spouse of a criminal, who was unaware of the
illegal use of their jointly owned property to not have to forfeit
their right to it simply because of the actions of another. Here again
there is a balance that can be struck between protecting property
rights and taking property used to commit crimes out of commission.
Law enforcement officials at every level of government believe that
forfeiture is extremely effective in taking the profit out of crime and
reducing the incentive that others would have to commit similar illegal
offenses. And if it is a crime that has victims, law enforcement can
use civil asset forfeiture to recover and restore the property to its
rightful owners or at the very least, ensure a just measure of
compensation to the victim. In addition, forfeiture provides much
needed resources to state and local governments that supplement the
funds available to keep our streets safe. As I have said before, civil
asset forfeiture is one of the most effective tools we have to rid our
communities of the scourge of crime and drugs. For when law enforcement
can use a criminal's money or property to rid our communities of this
problem once and for all, then we as a nation, and as a society, can
claim a final victory in the war on drugs.
As the Senate begins its consideration of the future of civil asset
forfeiture, I would urge that you seek out that balance which I have
spoken of between defending the rights of law abiding property owners
and defending law enforcement's use of this effective crime fighting
tool. As you have heard, and will continue to hear, this is something
that we in the law enforcement community believe is sorely lacking from
H.R. 1658.
Thank you Mr. Chairman. At this time, I would be pleased to answer
any questions you may have.
Senator Thurmond. Sheriff Brown.
STATEMENT OF JOHNNY MACK BROWN
Mr. Brown. Thank you, Senator Thurmond and Senator Biden.
Thank you for letting me be here this afternoon to testify
about this critical issue of asset forfeiture.
Before I begin, let me say I concur that it is a
fundamental right for all Americans to feel secure from
unlawful searches and seizures. I have spent most of my adult
life defending these rights. Americans need to feel secure that
government will not unjustly seize their property. However,
these same Americans not only expect, but demand action to be
taken against illegal proceeds and property of criminal
enterprises. The public expects, and we will make certain, that
criminals do not profit from crimes. But without strong asset
forfeiture laws, crime does pay, and it pays well.
The primary aim of asset forfeiture is to cripple criminal
organizations by removing their ill-gotten assets which are
utilized in their continuing criminal enterprise. A secondary
benefit of asset forfeiture is the assets seized by law
enforcement can be used to continue our efforts to fight the
war on crime, while lessening the financial burden on law-
abiding citizens. Let me give you an example, Senator Thurmond
and Senator Biden, of how Federal laws have assisted us in
Greenville, SC.
In 1989, we identified an individual named Dawain Israel
Faust, Jr., as operating a large cocaine and heroin enterprise
in our area. After months of investigation, we were able to
arrest Faust and several associates. We were able to identify a
significant amount of real property and personal property which
was used in the furtherance of this enterprise.
Using the Federal forfeiture statute and working in
conjunction with the FBI, we seized these assets. After
conviction on narcotics charges in the Federal system, Faust'
property was forfeited. As a result of this forfeiture and
equitable sharing, the Greenville County Sheriff's Office
received approximately 60 acres of land and a 2,000-square-foot
home, which was transformed into a state-of-the-art law
enforcement training facility.
Our Center for Advanced Training provides advanced training
for sheriff's office personnel, along with local, State and
Federal agencies. This is just one example of how Federal
forfeiture statutes serve as a valuable weapon in the war
against drugs, while having a positive effect on law
enforcement. Without strong asset forfeiture laws, we will not
be effective in dealing with such complex, multi-State criminal
enterprises as the one headed by Faust.
Mr. Chairman, the changes being proposed to the Federal
asset forfeiture law will handcuff our efforts to eliminate
these complex organizations. While we may be able to cut off
the head of the organization by criminal enforcement, the
current asset forfeiture laws help us make certain that the
organization is thoroughly disbanded and handicapped in their
ability for further criminal activity.
While the NSA tried to work with the managers of the
legislation in the House, they were uninterested in negotiating
to make this bill acceptable to law enforcement. We applaud
your diligence and appreciate the opportunity to work with this
committee to craft an acceptable bill.
As you know, the House-passed bill will force law
enforcement and prosecutors to prove their case by clear and
convincing evidence. At first glance, Mr. Chairman and Senator
Biden, this may seem reasonable. But at closer examination, it
is an unreasonably higher standard. The clear and convincing
standard is a higher standard than probable cause, needed to
effect an arrest of an individual.
The House-passed bill makes the government's burden of
proof in forfeiture actions against drug dealers higher than
required to take the freedom in arrest situations. Does it
really make sense that the burden of proof to take property is
higher than required to take freedom?
Instead of this overly restrictive standard, the National
Sheriff's Association would support the reasonable burden of
proof which calls for a preponderance of evidence. As most of
you know, the preponderance of evidence is the accepted
standard in civil property forfeiture cases.
Second, the House bill creates an entitlement program for
lawyers. Under the House bill, anyone can challenge a
forfeiture action, and they are entitled to a free lawyer to do
so. This places an unwarranted burden on the government, in
that we would have to address any claim regardless of merit.
But we will also have to fund all claims regardless of the
ability to retain counsel. Why should our law-abiding citizens
be forced to pay for legal services for wealthy drug dealers
and criminal syndicates to defend their criminal activity?
These criminals can afford their own attorney and it would be
obscene to require them to have an appointed attorney.
The House bill further makes a mockery of law enforcement
efforts to interdict drug trafficking by forcing the courts to
release this property back to criminal defendants pending trial
if they can claim a hardship. It is even difficult for me to
believe that a seized boat, airplane or luxury car should be
returned to a drug dealer because the dealer claims a hardship.
The only hardship encountered by the trafficker would be more
difficulty in continuing his or her illegal activity without
that piece of property.
It is my job to make the lives of these traffickers as
difficult as possible, and I ask you to provide us with the
tools to ensure that they continue to suffer this type of
hardship. Finally, the House bill creates a huge loophole
through innocent owner defense. The loophole allows drug
dealers to transfer their assets and their property to so-
called innocent people.
Mr. Chairman and members of this committee, the National
Sheriff's Association strongly opposes House bill 1658. We feel
that this legislation changes the intent of asset forfeiture
and turns the tide in favor of drug traffickers. We encourage
you to support your Nation's law enforcement and ask that you
strongly oppose H.R. 1658.
Thank you for allowing me to be here this afternoon.
Senator Thurmond. Thank you very much. We appreciate your
fine service. You have been outstanding in that office.
Mr. Brown. Thank you, sir.
[The prepared statement of Mr. Brown follows:]
Prepared Statement of Johnny Mack Brown
Good Afternoon Mr. Chairman, Members of the Committee.
Thank you for inviting me to testify before you this afternoon on
this crucial issue, Asset Forfeiture. My name is Johnny Mack Brown and
I am the Sheriff of Greenville County, South Carolina. I was first
elected in 1976 and am a Past President of the National Sheriffs
Association (NSA). I remain active in the NSA and currently serve as
the Association's Treasurer.
Before I go on, let me say I concur it is a fundamental right for
all Americans to feel secure from unlawful searches and seizure, I have
spent most of my adult life defending these rights, Americans need to
feel secure that their government will not unjustly seize their
property. However, these same Americans not only expect but demand
action be taken against the illegal proceeds and property of criminal
enterprises. The public expects we will make certain that criminals do
not profit from their crimes, but without strong asset forfeiture laws
crime does pay, and it pays very well.
The primary aim of asset forfeiture is to cripple criminal
organizations by removing their ill-gotten assets which are utilized in
their continuing criminal enterprise. A secondary benefit of asset
forfeiture is the assets seized by law enforcement can then be used to
continue our efforts to fight the war on crime while lessening the
financial burden on our law-abiding citizens. Let me give you an
example of how federal forfeiture laws have assisted the citizens of
Greenville County. In 1989, we identified an individual, Dawain Israel
Faust, Jr., as operating a large scale cocaine and heroin enterprise in
our area. After months of investigation we were able to make arrests of
Faust and several associates. We were also able to identify a
significant amount of real estate and other personal property which was
used in the furtherance of this enterprise. Using the Federal
Forfeiture Statute we, working in conjunction with the FBI, were able
to seize these assets. After conviction on the narcotics charges in the
Federal system Faust's property was forfeited. As the result of this
forfeiture and equitable sharing the Greenville County Sheriff's Office
received approximately sixty (60) acres of land with a two thousand
square foot home, which was transformed into a state-of-the-art law
enforcement training facility. Our Center for Advanced Training
provides advanced training for Sheriffs Office personnel along with
other local, state and federal law enforcement agencies. This is just
one example of how the Federal Forfeiture Statute serves as a valuable
weapon in the war against drugs, while having a positive effect on law
enforcement. Without strong asset forfeiture laws we would not have
been as effective in dealing such a complex multi-state criminal
enterprise as the one headed by Faust.
Mr. Chairman, the changes being proposed to the Federal Asset
Forfeiture law will handcuff our efforts to eliminate these complex
criminal organizations. While we may be able to cut off the head of the
organization by criminal enforcement, the current asset forfeiture laws
help us make certain the organization is thoroughly disabled and
handicapped in its ability to engage in future criminal activity. While
we tried to work with the House, the managers of this legislation were
uninterested in negotiating to make this bill acceptable to law
enforcement. We applaud your diligence and appreciate the opportunity
to work with the Committee to craft an acceptable bill.
As you know, the House passed bill will force law enforcement and
prosecutors to prove their case by ``clear and convincing evidence.''
At first glance this may seem reasonable, but on closer examination it
is an unreasonably high standard. The clear and convincing standard is
a higher standard than the probable cause needed to effect an arrest of
an individual. The House passed, bill makes the government's burden of
proof in forfeiture actions against drug dealers higher than required
to take their freedom in arrest situations. Does it really make sense
that the burden of proof to take property is higher than that required
to take freedom?
Instead of this overly restrictive standard, the NSA would support
the more reasonable burden of proof which calls for a ``preponderance
of the evidence.'' As most of you know, the preponderance of the
evidence is the accepted standard in civil property actions.
Secondly, the House bill creates an entitlement program for
lawyers. Under the House bill anyone can challenge a forfeiture action
and they are entitled to a free lawyer to do so. This places an
unwarranted burden on the government in that we will have to address
any claim regardless of merit, but we will also have to fund all claims
regardless of the ability to retain counsel. Why should our law-abiding
citizens be forced to pay for legal services for wealthy drug dealers
and criminal syndicates to defend their criminal activities? These
criminals can afford their own counsel and it would be obscene for them
to receive an appointed attorney.
The House bill further makes a mockery of law enforcement efforts
to interdict drug trafficking by forcing the courts to release seized
property back to the criminal pending trial if the individual claims a
``hardship,'' even in cases where overwhelming evidence indicates the
property was used in furtherance of the crime. It is difficult for me
to believe a seized boat, airplane, or luxury car should be returned to
a drug dealer because the dealer claims a hardship. The only hardship
encountered by the trafficker would be more difficulty in continuing
his illegal activity without that property. It is my job to make the
lives of these traffickers as difficult as possible, and I ask you to
provide us with the tools to ensure they continue to suffer this type
of hardship.
Finally, the House bill creates a huge loophole through its
innocent owner defense. This loophole allows drug traffickers to
transfer their property to their friends and associates who become so-
called innocent owners. These innocent owners hold the property for the
dealers until they get out of jail or in most cases continue to support
and grow the business accumulating more property. It is not difficult
to imagine a drug trafficker claiming it is his mothers' new Jaguar and
he is just using it, while his mother has little or no legitimate
source of income. The NSA would like to see this loophole slammed shut
in the face of these drug traffickers, so only truly innocent owners
would be allowed to recover property.
Mr. Chairman, Members of the Committee, the NSA strongly opposes
H.R. 1658, the Civil Asset Forfeiture Reform Act. We feel this
legislation changes the intent of asset forfeiture, and turns the tide
in favor of drug traffickers and trial lawyers at the expense of the
men and women in law enforcement. That is not only wrong, it is
reprehensible. This Nation's Sheriffs use asset forfeiture to disrupt
criminal activity and the NSA is concerned if H.R. 1658 is enacted, law
enforcement at all levels will be adversely affected.
We encourage you to support your nation's law enforcement and ask
that you strongly oppose H.R. 1658. Asset forfeiture has allowed law
enforcement to disrupt illegal activity by seizing real property and
assets from criminals. It has made a difference in the fight against
crime and we should not erode this valuable law enforcement tool.
Thank you, Mr. Chairman. I would be happy to answer any questions
you may have.
Senator Thurmond. Mr. Johnny Hughes.
STATEMENT OF JOHNNY L. HUGHES
Mr. Hughes. Thank you, Senator Thurmond. Chairman Thurmond,
Senator Biden, fellow committee members, I am here today
representing our Chairman, Trooper Scott Reinacher of the
Michigan State Police, and the National Troopers Coalition
which represent approximately 45,000 troopers. Our troopers
range from the patrol trooper and criminal investigator up
through the ranks of administrative commissioned officers and
State police and highway patrol department heads.
State and local law enforcement efforts account for over 90
percent of criminal arrests, and troopers do the bulk of drug
interdictions. Our troopers are on the front lines daily, and
some of them are seriously injured and killed in the
performance of their duties.
Our troopers work on a daily basis with the following
Federal law enforcement agencies: Secret Service, FBI, ATF,
Border Patrol, Immigration, Marshals, and DEA. Many of our
State police and highway patrol agencies work in a joint
cooperative effort through combined local, State and Federal
law enforcement task forces. As a rule, the task forces work
quite well together, participating, sharing resources,
equipment, personnel and information. Through these joint
cooperative efforts, relationships of Federal, State and local
law enforcement are enhanced.
Asset forfeiture laws allow State and local governments to
seize the assets of convicted drug dealers. Law enforcement
officers frequently use the asset forfeiture laws in the fight
against drugs. The forfeiture laws deprive traffickers of the
fruits of their crime and return illegal profits of the drug
trade to Federal, State and local agencies for use in future
drug enforcement activities.
Law enforcement agencies across the country use the
proceeds from these investigations to finance a variety of
special investigations and other police functions. At a time
when drugs pose such a tremendous threat to our society, asset
forfeiture has been an invaluable tool for law enforcement to
implement productive drug interdiction programs and purchase
equipment for anti-drug programs.
As you know, the asset forfeiture and equitable sharing
program is the lifeblood of our drug interdiction initiatives.
The taking away of the drug kingpins' and drug couriers'
profits and property has proven to be very effective in
combatting crime. Our State police and highway patrol
organizations cannot afford to have their highly successful
programs watered down to a mere perfunctory level.
Unfortunately, law enforcement's ability to utilize asset
forfeiture will be seriously impaired if H.R. 1658, the Hyde
bill, is signed into law. There are five provisions in H.R.
1658 that we are concerned about that are going to hurt law
enforcement.
Number one, the burden of proof is too high. H.R. 1658
would force the government to prove its case by clear and
convincing evidence. The usual standard for civil enforcement
actions involving property is preponderance of evidence. Thus,
H.R. 1658 would make the government's burden in drug cases
higher than cases involving bank fraud, health care fraud,
procurement fraud, and give drug dealers more protection than
bankers, doctors, and defense contractors.
H.R. 1658 would encourage the filing of thousands of
frivolous claims by criminals, their family members, friends
and associates by, in effect, requiring Federal agencies to
publish ads stating that anyone interested in contesting the
forfeiture may do so free of charge, and by entitling each
claimant to request a free lawyer. So, a lot of work for the
lawyers.
H.R. 1658 will let criminals abscond with cash, vehicles
and airplanes. It makes a mockery of law enforcement efforts to
stop drug smuggling by forcing courts to release seized
property back to the criminal pending trial if he claims he is
suffering a hardship, even where there is overwhelming evidence
that it was used to commit a crime. If the drug smuggler gets
his airplane or his hoard of cash released pending trial, it
will disappear.
H.R. 1658 allows drug dealers to pass drug profits to their
heirs. By classifying as innocent owners anyone who receives
otherwise forfeitable property through probate, H.R. 1658
creates a legal loophole allowing drug kingpins and other
criminals to pass their illegal fortunes to their heirs, wives,
children, friends, mistresses and business associates.
H.R. 1658 would give criminals a windfall. Under the bill,
if the government sends notice to a prisoner that his property
will be forfeited but sends the notice to the wrong jail, the
remedy is to give the property back to the prisoner and bar the
government from ever reinstating a forfeiture. It also gives
prisoners 11 years to reopen old cases. I don't know what they
were thinking about there. The proper remedy would be to give
prisoners 2 years to reopen forfeiture cases if notice is sent
to the wrong address and then to reopen the proceedings so that
the prisoner can file his claim.
The National Troopers Coalition is a member of Attorney
General Reno's State and Local Working Group on Asset
Forfeiture Reform and has fervently worked on this issue for
the last 6 years. I have personally worked with Mr. Cary
Copeland, past Director; Laurie Sartorio, past Deputy Director
of the Asset Forfeiture Office; and the current Chief, Jerry
McDowell; and the current Assistant Chief, Alice Dery, of the
Asset Forfeiture Office and Money Laundering Section.
I have found these individuals to be hard-working,
honorable people, and through their talent and ability,
additional national and ethical standards have been developed
and implemented for the asset forfeiture and equitable sharing
program.
It is long past time to pass meaningful asset forfeiture
reform that would not seriously curtail law enforcement
efforts. And just to give you an example of this, I have two
sons that are troopers. One was shot in the line of duty back
in August 1996. They were actually after my one son, David;
they inadvertently shot Mike, 11 shots in a car, in an
assassination attempt. He is disabled and had to retire from
the State police.
They arrested 22 individuals--the perpetrator, Gregory
McCorkle, and his gang, several people. He got life plus 45
years, as well as some of the other ones. But this individual--
they confiscated over $13 million, and he had homes in five
States. He had been running heroin and cocaine from New York to
Florida, with DC as his base of operation.
Quickly, I would like to thank Senator Thurmond. I can't
thank you and Senator Biden enough. I thank Senator Thurmond
for your half century, and Joe Biden for your probably quarter
century, for helping law enforcement and troopers. The Delaware
troopers send their regards. And, Senator Thurmond, the South
Carolina troopers send their regards.
Thank you.
[The prepared statement of Mr. Hughes follows:]
Prepared Statement of Johnny L. Hughes
Good morning Mr. Chairman and fellow Committee members. I am here
today representing our Chairman, Mr. Scott Reinacher and the National
Troopers Coalition which represents approximately 45,000 troopers
throughout this great nation. Our troopers range from the patrol
trooper and criminal investigator up through the ranks including
administrative commissioned officers and State Police and Highway
Patrol department heads.
State and local law enforcement efforts account for over 90 percent
of criminal arrests and Troopers do the bulk of highway drug
interdictions. Our troopers are on the front lines daily and some of
them are seriously injured and killed in the performance of their
duties.
Our troopers work on a daily basis with the following federal law
enforcement agencies; United States Secret Service, Federal Bureau of
Investigation, Alcohol, Tobacco & Firearms, United States Border
Patrol, Immigration and Naturalization, United States Marshals Service,
and the Drug Enforcement Administration. Many of our State Police and
Highway Patrol agencies work in a joint cooperative effort through
combined local, state and federal law enforcement task forces. As a
rule, these task forces work quite well together with all participating
agencies sharing resources; i.e., equipment, personnel and information.
Through these joint cooperative efforts, relationships of federal,
state and local law enforcement are enhanced.
Asset forfeiture laws allow state and local governments to seize
the assets of convicted drug dealers. Law enforcement officers
frequently use asset forfeiture laws in the fight against drugs. These
forfeiture laws deprive traffickers of the fruits of their crime and
return illegal profits of the drug trade to federal, state and local
agencies for use in future drug enforcement activities.
Law enforcement agencies across the country have used the proceeds
from drug investigations to finance a variety of special investigation
and other police functions. At a time when drugs pose such a tremendous
threat to our society, asset forfeiture has been an invaluable tool for
law enforcement to implement productive drug interdiction programs and
purchase equipment for anti-drug programs.
As you know, the asset forfeiture and equitable sharing program is
the life-blood of our drug interdiction initiatives. The taking away of
the drug kingpins and drug couriers' profits and property has proven to
be very effective in combating crime. Our State Police and Highway
Patrol organizations cannot afford to have their highly successful
programs watered down to a mere perfunctory level. Unfortunately, law
enforcement's ability to utilize asset forfeiture will be seriously
impaired if H.R. 1658 is signed into law.
There are five provisions in H.R. 1658 that will hurt law
enforcement:
The burden of proof is too high. H.R. 1658 would force the
government to prove its case by ``clear and convincing
evidence.'' The usual standard for civil enforcement actions
involving property is ``preponderance of the evidence.'' Thus,
H.R. 1658 would make the government's burden in drug cases
higher than it is in cases involving bank fraud, health care
fraud or procurement fraud, and give drug dealers more
protection than bankers, doctors and defense contractors.
H.R. 1658 will encourage the filing of thousands of
frivolous claims. By criminals, their family members, friends
and associates, by, in effect, requiring federal agencies to
publish ads stating that anyone interested in contesting the
forfeiture may do so free of charge, and by entitling each
claimant to request a free lawyer.
H.R. 1658 would let criminals abscond with cash, vehicles
and airplanes. This makes a mockery of law enforcement efforts
to stop drug smuggling by forcing courts to release seized
property back to the criminal pending trial if he claims he is
suffering a ``hardship'', even where there is overwhelming
evidence that it was used to commit a crime. If the drug
smuggler gets his airplane or his hoard of cash released
pending trial, it will disappear.
H.R. 1658 allows drug dealers to pass drug profits on to
their heirs. By classifying as ``innocent owners'' anyone who
receives otherwise forfeitable property through probate, H.R.
1658 creates a legal loophole allowing drug kingpins and other
criminals to pass their illegal fortunes to their heirs,
including wives and children, friends, mistresses and business
associates.
H.R. 1658 would give criminals a windfall. Under the bill,
if the government sends notice to a prisoner that his property
will be forfeited, but sends the notice to the wrong jail, the
remedy is to give the property back to the prisoner and to bar
the government from ever re-instituting the forfeiture action.
It also gives prisoners eleven years to re-open old cases. The
proper remedy would be to give prisoners two years to re-open
forfeiture cases if notice is sent to the wrong address, and
then to re-open the proceedings so that the prisoner can file
his claim.
The National Troopers Coalition is a member of Attorney General
Reno's state and local working group on asset forfeiture reform and has
fervently worked on this issue for the last six years. I have
personally worked with Mr. Cary Copeland, Past Director, and Ms. Laurie
Sartorio, Past Deputy Director, of the Asset Forfeiture Office and the
current Chief, Gerald McDowell, and current Assistant Chief, Alice
Dery, of the Asset Forfeiture and Money Laundering Section. I have
found these individuals to be hardworking, honorable people and through
their talent and ability, additional national and ethical standards
have been developed and implemented for the Asset Forfeiture and
Equitable Sharing Programs.
It is long past the time to pass meaningful asset forfeiture reform
that would not seriously curtail law enforcement efforts.
We look forward to working with you and your staff on this most
important issue. Thank you for all your past support of this nation's
law enforcement officers.
Senator Thurmond. Mr. Buffone.
STATEMENT OF SAMUEL J. BUFFONE
Mr. Buffone. Thank you. Chairman Thurmond, members of the
subcommittee, I appear today on behalf of the 10,000 members of
the National Association of Criminal Defense Lawyers. Present
with me today in the hearing room are two of my co-chairs, Bo
Edwards and David Smith.
As Senator Biden and Senator Leahy acknowledged at the
beginning of this hearing, there is no serious debate about the
effectiveness of forfeiture laws and civil asset forfeiture as
a weapon against crime, and as an effective weapon against
crime. The appropriate debate for this committee should be,
rather, upon whether or not those weapons are used in a fashion
that deprives individuals of their property rights, their
individual rights, and their constitutional protections.
Throughout the entire debate over asset forfeiture--and I
have been involved in it since the 1970's--there has never been
serious disagreement about the underlying issues. What there
has been is an inability to come together in a meaningful way
to discuss what the real abuses are, to quantify them, and to
come up with a way to eliminate them. That was until the
proceedings in the House of Representatives that resulted in
the passage of the Hyde legislation. The NACDL strongly
supports the Hyde bill and believes that it should be passed by
the Senate as reported from the House.
As I mentioned when I began my remarks, I speak for the
organized defense bar, and on a daily basis the members of the
NACDL experience, witness, and attempt to do something about
abuse of asset forfeiture laws. These abuses are not aberrant,
these abuses are not isolated, these abuses are not frivolous.
They occur.
There is a reason why there is a public perception that
something has gone amiss with asset forfeiture, and that reason
is not because the public is attuned to the complexity of this
debate. It is because they know friends, they know neighbors
who have experienced firsthand the power of a prosecutor, not
the kinds of prosecutors and law enforcement people who we have
had here today and who have been addressed in this testimony,
but those who would abuse their power in ways that infringe the
rights of citizens.
I am going to come back to some examples of that, but an
individual who walked into this hearing room might believe that
forfeiture abuse was about things that happened to
narcoterrorists and international drug smugglers. Forfeiture
abuse is about the individual who stands on the street corner
and is improperly stopped and arrested and has the $100 in
pocket money seized and doesn't have the ability to retain an
attorney or fight through the complex system to obtain the
return of that money.
It is about the individual who makes his business by
driving a delivery van and happens to find out that somehow,
through misidentification, he is stopped and the van is seized,
and before he can get it back, he losses his business. That
might make it sound like this is a small matter limited to
small people, but it affects big business just as much.
The Red Carpet Motel case which we have heard from two
Senators--and there has been some confusion about the facts. I
spoke yesterday with the defense attorney who was responsible
for bringing that case to justice. The records in the case are
being shipped to me and I am happy to make them a part of this
record so that the committee can study them.
There was a seizure of the Red Carpet Motel. This was a
civil forfeiture case and without a seizure of the property,
the in rem proceedings could not have gone forward. Whether or
not that meant that the motel was shut down--and it was not, it
is my belief--did not affect the rights of the hotel owner.
Because a U.S. attorney decided that he wanted to change the
way the business was run so that it would be more prophylactic
in its ability to combat drug trafficking, he placed upon that
motel the mark that it was involved in drug trafficking.
Imagine the effort of the owner of that hotel to obtain
financing, to market his hotel to a better clientele, having
been branded on the basis of a civil forfeiture action as a
location, a guilty property that furthered narcotics
activities.
One of the examples that we cited in our testimony was the
case of Bob's Space Racers. Bob's Space Racers is a large and
legitimate organization that makes amusement rides for
carnivals and circuses, and services them and installs them.
Bob's Space Racers, as it was often the practice, took some of
their employees, gave them traveling and spending money and
sent them to Canada for legitimate jobs. They were stopped at
the border. Their currency was seized, under the theory that
they must have been drug traffickers or why else would all of
them be traveling with this money.
There is a risk, and this risk becomes reality, that
because we are concerned as a society about the narcotrafficker
who will cross the border with large amounts of currency that
we would disregard the rights of a small businessman who is
doing nothing more than engaging in legitimate activity.
We have heard much about the supposed windfall for
attorneys.
Senator Thurmond, I see my time is up. If I could just
complete that one thought, if you will look carefully at the
provision of the Hyde bill on appointment of counsel, it
provides that counsel is only available for those financially
unable to obtain counsel. There is discretion in judges to
determine whether or not attorneys should be appointed. And the
courts are to consider, among other things, whether or not the
claim is frivolous. These are not unbridled rights. They are
reasoned provisions that should be adopted into law in order to
eliminate real abuses.
Thank you.
[The prepared statement of Mr. Buffone follows:]
Prepared Statement of Samuel J. Buffone
Distinguished members of the Committee. I appear today on behalf of
the National Association of Criminal Defense Lawyers (NACDL). On behalf
of the NACDL I thank you for inviting us to participate in this
hearing. I currently serve as co-chair of the NACDL's Forfeiture Abuse
Task Force.
NACDL is the preeminent organization in the United States advancing
the mission of the Nation's criminal defense lawyers to ensure justice
and due process for persons accused of crime or other misconduct. A
professional bar association founded in 1958, NACDL's 10,000 direct
members--and 80 state and local affiliate organizations with another
28,000 members--include private criminal defense lawyers, public
defenders, active U.S. military defense counsel, law professors and
judges committed to preserving fairness within America's criminal
justice system.
The committee has captioned today's hearing as ``Oversight of
Federal Asset Forfeiture: Its Role in Fighting Crime.'' The issue
before this Committee should not be the importance of asset forfeiture
as an effective weapon to combat crime. All parties to the debate agree
on this point. Rather, the issue before this Committee should be
whether current forfeiture law and practice adequately protects the
rights of all Americans. Since the rebirth of forfeiture law in the
1970's, and its subsequent dramatic growth, I have been involved as an
author, litigator and spokesperson on behalf of organized bar
associations on forfeiture issues. Throughout this entire debate there
has never been a serious contention that both civil asset forfeiture
and criminal forfeiture are indeed effective law enforcement tools and
play a valuable role in fighting crime. It is appropriate for this
committee to consider how this important weapon in the arsenal of law
enforcement can be most effectively employed consistent with our
constitutional system of government and historic concern as a nation
for the personal and property rights of our citizens.
During hearings before the Committee on the Judiciary of the House
of Representatives on civil asset forfeiture reform Stefan D. Cassella,
Assistant Chief, Asset Forfeiture, Money Laundering Section, Criminal
Division, United States Department of Justice, testified regarding the
Department of Justice's position on asset forfeiture reform. Mr.
Casella stated:
I said last year that no matter how effective asset forfeiture
may be as a law enforcement tool--and this is a very effective
law enforcement tool--that no program, no tool of law
enforcement, however effective at fighting crime, can survive
long if the public thinks that it violates the basic principles
of fairness and due process that lie at the core of the
American system of justice.\1\
---------------------------------------------------------------------------
\1\ Statement of Stephan D. Casella, Hearings Before the Committee
on the Judiciary, House of Representatives, 105th Congress (June 11,
1997).
The NACDL agrees with Mr. Casella's premise that respect for the
rule of law is ultimately based on the respect for understanding of the
basis for societal regulation and the overall fairness of how that
regulation is administered. When law becomes an abstraction, as it has
in the forfeiture area, the government risks losing societal consensus
on the very need for these law enforcement tools. Such archaic notions
as the ``personification fiction,'' under which inanimate property can
be found guilty of a crime despite the innocence of its owner, is a
level of abstraction that evades all but the most attentive scholars to
the nuances of forfeiture law. The average citizen finds it difficult
to comprehend the fairness of a system under which property may be
seized on an ex parte showing of probable cause, and the property owner
must post a bond simply for the right to shoulder a higher burden of
proof to demonstrate the innocence of his property.
The NACDL strongly supports the enactment into law of H.R. 1658,
the ``Civil Asset Forfeiture Reform Act. `` The Bill as passed by the
House, addresses the most important areas of forfeiture abuse law and
rationalizes the civil asset forfeiture system in a way that will move
closer to ensuring public support for appropriate uses of civil
forfeiture. In a series of hearings before the House, a broad coalition
of organizations presented testimony regarding ongoing abuses of civil
asset forfeiture and the need for comprehensive reform. Chairman Henry
Hyde's book ``Forfeiting our Property Rights, Is Your Property Safe
From Seizure'', presented striking evidence of the pervasiveness of
civil asset forfeiture abuse.
The recent passage of H.R. 1658 was made possible in part by an
unprecedented bipartisan coalition that both recognized and supported
the pressing need for civil asset forfeiture reform. The NACDL joined
the Americans for Tax Reform, Chamber of Commerce of the United States
of America, Small Business Survival Committee, Republicans for Choice,
Institute for Justice, The Madison Project, Free Congress Foundation,
American Conservative Union, National Rifle Association, Association of
Concerned Tax Payers, Conservative Leadership Pact, Law Enforcement
Alliance of American, Eagle Forum, Seniors Coalition, Frontiers of
Freedom, American Civil Liberties Union in supporting this legislation.
H.R. 1658 passed the House with 375 votes including 191 Republicans,
183 Democrats and 1 Independent.
THE NEED FOR REFORM
The NACDL has continued to collect instances of abuse of civil
asset forfeiture reform. The following case studies illustrate how
innocent Americans can suffer substantial financial detriment based on
the application of the current civil asset forfeiture system.
Houston, Texas, Red Carpet Motel--Raise Your Prices or Else!
February 17, 1998, the U.S. Attorney's Office in Houston seized the
Red Carpet Motel in a high crime area of the city. The government's
action was based on a negligence theory--that the motel owners, GWJ
Enterprises Inc. and Hop Enterprises Inc., had somehow ``tacitly
approved'' alleged drug activity in the motel's rooms by some of its
overnight guests.
There were no allegations that the hotel owners participated in any
crimes. Indeed, motel personnel called the police to the establishment
dozens of times to report suspected drug-related activity. U.S.
Attorney James DeAtley readily bragged to the press that he envisioned
using current civil asset forfeiture laws in the same fashion against
similar types of legitimate commercial enterprises, such as apartment
complexes.
The government claimed the hotel deserved to be seized and
forfeited because it had ``failed'' to implement all of the ``security
measures'' dictated by law enforcement officials. This failure to agree
with law enforcement about what security measures were affordable and
wise from a legitimate business-operating standpoint was deemed to be
the ``tacit approval'' of illegality cited by the prosecutors,
subjecting the motel to forfeiture action.
One of the government's ``recommendations'' refused by the motel
owners was to raise room rates. A Houston Chronicle editorial pointed
to the absurdity and danger of this government forfeiture theory when
applied to a legitimate business: ``Perhaps another time, the advice
will be to close up shop altogether.'' The editorial went on to make
these additional, points:
The prosecution's action in this case is contrary not only to
the reasonable exercise of government, but it contradicts
government-supported enticements to businesses that locate in
areas where high crime rates have thwarted development. Good
people should not have to fear property seizure because they
operate business in high crime areas. Nor should they forfeit
their property because they have failed to do the work of law
enforcement * * *. This case demonstrates clearly the need for
lawmakers to make a close-re-examination of federal drug
forfeiture laws.
After more bad publicity all over Texas, in July 1998, the
government finally released the motel back to the owners and dropped
its forfeiture proceedings. It exacted a face-saving, written
``agreement'' with the motel owners. The agreement, however, in fact
only put into words the security measures and goals the owners had
already undertaken and those which it had always strived to meet.
The motel owners had lost their business establishment to the
government's seizure for several months, suffered a significant loss of
good business reputation, and were forced to spend substantial amounts
of time and money on hiring an attorney and defending against the
government's forfeiture action, which should never have been undertaken
in the first place.
Source: Houston Chronicle, Mar. 12, 1998 editorial and 1998
articles. Dallas Morning News, 1998 articles.
The motel owners were represented by NACDL member Matt Hennessy of
Houston, Texas. (unreported case)
San Jose, California, Aquarius Systems, Inc.--Your Buyer, Your Assets!
October 28, 1998, a federal judge in San Jose, California finally
granted summary judgment against the government in a civil forfeiture
action, ruling that the government must return to Los Angeles-based
Aquarius Systems, Inc. (a.k.a. CAF Technologies Inc.) the $296,000 it
had seized from it 6 years ago. Aquarius, and other computer chip
dealers, had been accused of marketing stolen chips. Local police then
seized $1.6 million of the companies' chip-buying, operating money;
Customs later adopted the seizure.
Unknown to Aquarius Systems, Inc., the buyer used by the company
had been operating for his own profit, by purchasing chips for $50.00
each while reporting to his supervisors at the company a unit cost of
$296.00 (which at the time was a reasonable price). (The buyer
ultimately served a short sentence for conspiracy to buy stolen
property.)
In his ruling ordering the government to return to Aquarius
$296,000 of its seized operating money, U.S. District Court Judge
Jeremy Fogel blamed the government for dragging its feet on due
process, by tying up the company's operating assets for so many years.
Ruled the Court: ``It is incumbent upon the government to institute
civil forfeiture proceedings expeditiously.'' The judge then denied the
government's motion for summary judgment against the company, and
granted the company's motion for summary judgment against the
government. The Court held that Aquarius Systems knew nothing about
what its buyer was doing. As the judge noted, the company was unusual
in its ability to stave off ruin from the government's seizure and
forfeiture action, and in its ability ``to fight [it] for six years.''
Source: The (California) Recorder, Nov. 17, 1998.
Chicago, Illinois, Family-Owned and Operated Congress Pizzeria--
Restaurant + Money + 3 Handguns = Forfeiture?
September 3, 1997, Anthony Lombardo, owner and proprietor of the
family business, Congress Pizzeria of Chicago, was finally returned
over $500,000 in currency improperly seized from his restaurant in
early 1993. It took him over four years, and much expensive litigation,
all the way to the Federal Court of Appeals for the Seventh Circuit,
before former U.S. Attorney and Chief Judge Bauer and his colleagues on
the Court ordered the government to return Mr. Lombardo's money.
Based on the ``confidential informant'' testimony of Josue Torres,
the Chicago Police Department conducted a search of Congress Pizzeria.
Torres, a crack addict, had been employed as a truck driver for the
restaurant up until a few months before he told his story to the
police. He told the police that he regularly fenced stolen property at
various places in Chicago including Congress Pizzeria in order to feed
his crack cocaine habit.
On this information, a warrant was issued authorizing police to
search the pizzeria and seize a camera, a snowblower, a television, and
three VCR's, which are items the informant said he sold to the sons at
the restaurant. None of these items were found. During the search,
however, the police did ``find'' and seize three unregistered guns, and
$506,076 in U.S. currency.
The money was in a make-shift safe in the family-owned restaurant--
a forty-four gallon barrel located inside either a boarded-up elevator
or a dumb-water shaft (the record was somewhat unclear). It was wrapped
in plastic bags and consisted of mostly small bills--such as might be
expected from transactions by a pizzeria.
The owner's son, Frank Lombardo, was present at the time of the
search. He was arrested and charged with possessing unregistered
firearms (the guns at the restaurant). At the state court proceeding,
the guns case was thrown out, because ``it was not apparent that the
guns were contraband per se'' and ``the guns were seized prior to the
establishment of probable cause to seize them.'' No other state or
federal criminal case was ever investigated or charged against the
Lombardos or their pizzeria.
The federal government nonetheless moved to seize and forfeit the
$500,000 ``found'' in the pizzeria, under current civil asset
forfeiture drug laws. The government's theory of why this money was
forfeitable as ``drug money'' was this: The owner's son, Frank
Lombardo, was said to have been ``extremely distraught'' and ``visibly
shaken when he was told that the money was being seized'' from his
family's restaurant; and, said the government, he had ``offered no
explanation for the cash horde.'' (Later, Frank went to the police
station to explain that the money belonged to his father, the owner of
the pizzeria, who was then in Florida.)
Drug-sniffing dogs were also brought to the police station (not in
the pizzeria), to check out the money for the presence of drugs. A
narcotics canine named Rambo was instructed to ``fetch dope'' and he
grabbed one bundle of money from the table and ripped the packaging
apart. To the amazement of the court of appeals, this behavior
apparently indicated to the officers presence of drugs on the money.
At best, as the Court noted, the dog only identified narcotics on
one bundle of the seized currency even though the officers seized
31,392 separate bills in multiple bundles. And, even the government
admitted that no one can place much stock in the results of dog sniffs
because at least one-third of all the currency circulating in the
United States, and perhaps as much as 90-96 percent, is known to be
contaminated with cocaine. (Indeed, as the court of appeals noted, even
Attorney General Reno's purse was found by a dog sniff to contain such
contaminated currency.)
On this non-evidence of any nexus between the money and drugs, the
government kept the money of Mr. Lombardo and his family Pizzeria for 4
years--until in late 1998, the First Circuit Court finally ruled that
it must be returned. The court held that the government had in fact
failed to establish even the cursory burden that it is supposed to
shoulder under current law--the establishment of ``probable cause'' to
seize property in the first place.
None of the supposed ``suspicious factors'' cited by the government
had ``any bearing on the probable cause determination. The existence of
any sum of money, standing alone, is not enough to establish probable
cause to believe the money is forfeitable.'' Nor, for the reasons
discussed above, was the police station, drug-sniffing dog episode
enough for probable cause. And, ``putting to one side the fact that the
state court suppressed the guns as evidence against Frank Lombardo,
[there is] no reason to believe that the presence of handguns should
necessarily implicate narcotics activity or that their presence need be
seen as anything other than protection in a small business setting.''
In conclusion, the Court wrote: ``We believe the government's
conduct in forfeiture cases leaves much to be desired. We are certainly
not the first court to be `enormously troubled by the government's
increasing and virtually unchecked use of the civil forfeiture statutes
and the disregard for due process that is buried in those statutes.''
(quoting U.S. v. All Assets of Statewide Auto Parts. Inc., 971 F.2d
896, 905 (2d Cir. 1992))
Source: U.S. v. $506.231 in U.S. Currency, 125 F.3d 442 (7th Cir.
1997) (Bauer, J.).
North Dakota and Daytona Beach, Florida Customs v. Rob's Space Racers--
Who's Amusement?
In 1997, on a routine business trip, a large number of circus
employees of the Bob's Space Racers Company, of Daytona Beach, Florida,
were traveling to Canada. Bob's Space Racers, a privately held company,
is one of the leading providers of amusement park games. The company
also provides entertainment at traveling circuses.
As normal, the employees had been provided with their salary and
traveling expenses for the project in cash. Thus, each of the 14
employees had several hundred dollars in his or her pockets when the
group attempted to cross the border into Canada from North Dakota.
Customs agents at the North Dakota border seized all their money on
the theory that, when the Customs agents aggregated all the money
carried by each of the 14 employees, the total came to just over $
10,000--the amount of money--triggering the regulations about
``declaring'' and filing Customs' ``cash reporting'' forms (Form 4790).
Customs had no basis for ``aggregating'' the money of the
employees. And there was no reason to believe the employees were part
of any conspiracy to smuggle money out of the country without filing
the appropriate Customs forms. Indeed, the company informed Customs
that the money was legitimate traveling expenses.
Into 1998, at least, the company was still trying to get Customs to
remit the seized employee travel expenses.
Source: National Association of Criminal Defense Lawyers (NACDL)
Asset Forfeiture Abuse Task Force Co-Chair David B. Smith, Alexandria,
Virginia.
Haleyville, Alabama--Doctor, Beware Your Banker?
In 1996, after many years and much costly litigation, Dr. Richard
Lowe of the small northwest Alabama town of Haleyville, was finally
returned his wrongfully seized life savings of almost $3 million, when
the Court of Appeals for the Eleventh Circuit ordered the government to
return it.
Dr. Lowe, MD, is something of a throwback. He's a country doctor in
small-town America, who still charged $5 for an office visit in 1997.
He drives a used car and lives in a very modest home.
When he was a small child in the Depression, he lost $4.52 in
savings when the local bank failed in his home town in rural Alabama.
His parents lost all of their savings when that bank collapsed. Because
of that experience, he has always hoarded cash. He'd empty his pockets
at night into shoe boxes in a closet at home. Over the years, he had
accumulated several boxes of cash in the back of a closet in his home.
In 1988, he consolidated his savings in the First Bank of Roanoke,
Alabama--in order to set up a charitable account for a small private K-
12 school in his hometown that was about to fail. He transferred all of
his life savings into the consolidated account. At the time the
government first wrongfully seized his account in June 1991, Dr. Lowe
had given the school over. $900,000, saving it from collapse, and was
still contributing more.
In the fall of 1990, his wife urged him to do something about the
boxes of money in the closet, the Doctor said OK, `you count it and
we'll put it in the school's account.' It came to $316,911 in
denominations of ones, fives, tens and twenties. Some of the bills were
as much as 20 years old. Dr. Lowe took the money to the bank and gave
it to the bank president, who was a longtime friend and former
neighbor. This was the first cash ever placed in the bank account; all
the other money was transferred by check from other banks when CD's
matured.
The bank president knew the Doctor was obsessive about anonymity;
he did not want to be known as a ``rich doctor.'' So, instead of
depositing the money to the account, the bank president just put the
money in the bank vault. He gave the Doctor a receipt for the deposit,
but he chose to simply put the money in the bank's vault. Then, with
some of the money over the next 6 weeks, the bank president went to
neighboring banks in the vicinity of Roanoke, and bought $6,000,
$7,000, and $8,000 cashier's checks, and then credited it to Dr. Lowe's
account.
When some of the other banks thought it was peculiar that the
Roanoke bank president was doing this, they made a report to
authorities. When FBI agents came to interview the bank president, he
told them exactly what he had done and why. He told them that it was
his idea and not Dr. Lowe's. And he told them that as he understood the
reporting laws, he had done nothing wrong. Still, the FBI and U.S.
Attorney decided to seize Dr. Lowe's account. They did not just seize
the $316,000 in cash deposits. They seized his entire account--his
entire life savings of some $2.5 million at the time.
The bank president and his son, who was vice president, were both
indicted. The bank president later made a deal with the government to
plead guilty to structuring/reporting violations, in exchange for the
government's dismissal of charges against his son. And, (a full two
years after the seizure and attempted forfeiture of the Doctor's
accounts), during which time all of his money was held by the
government, the government decided to indict Dr. Lowe as well, for the
alleged reporting transgressions of his banker.
It is, however, no violation of law, and certainly no crime, for a
bank to send cash to another domestic financial institution. That is
not within the definition of illegal ``structuring.'' In short, there
was no offense here, by even the banker, let alone the totally
innocent, ignorant bank customer, Dr. Lowe.
Prosecutors kept pursuing their case against the Doctor anyway.
With just one more week to go before his trial was to start, the
prosecutors balked at taking their shoddy case to a jury. The
government, to save face, offered the Doctor a ``pretrial diversion''
rather than simply dismissing the case, as they should have done. Under
the diversion, the Doctor had to agree to stay out of trouble for one
year and then the case would be dismissed. Of course, the Doctor had no
trouble staying out of trouble, as he had never done anything wrong to
begin with, or in his entire life.
Still, even then, the U.S. Attorney's office in Birmingham refused
to drop its civil asset forfeiture action against Dr. Lowe's life
savings account--clinging to the fact that, under current law, the
burden remained on the Doctor to prove his money innocent!
The federal district court judge did rule that there was nothing
wrong with the underlying account until the $300,000 cash deposit. And
thus, he held that these monies should be returned to the Doctor. This
was 3 years after the government's initial seizure--for 3 years, Dr.
Lowe was denied access to any of his life savings.
The federal district court judge erred in ruling for the government
on the $300,000 in currency, ``finding'' without any evidence that the
Doctor ``must have exhorted'' the bank president (his words) not to
file the technical CTR with the government, even though the government
itself had never even noticed that a CTR had not been filed when it
started its action against Dr. Lowe, the bank president and his son.
Dr. Lowe somehow had the wherewithal to continue his long fight
against the government's wrongful taking of his money, and appealed to
the Eleventh Circuit Court of Appeals. Finally, in late 1996, the court
of appeals vindicated Dr. Lowe. It reversed the lower court's erroneous
ruling, holding that, even under current, distorted civil asset
forfeiture law, the Doctor had shown by evidence clear beyond a
preponderance that he knew nothing of the banker's actions.
Meanwhile, though, he was without access to any of his seized life
savings for 3 years, and without access to $300,000 of his accounts
(which he had donated to the private school) for 6 years. He faced a
wrongful indictment and threat of criminal trial. And he endured the
financial, physical and emotional devastation of lengthy, costly
litigation against a U.S. Attorneys Office blindly pursuing his assets,
no matter the shoddy nature of its case.
Perhaps the government thought it could simply wear ``the old man''
out? The impact of this experience on him was so severe that Dr. Lowe
had to be hospitalized at least once for stress and high blood
pressure. Very few victims of such governmental abuse would have been
able to keep fighting to win, as did the extraordinary Dr. Lowe.
Source: Hearing before U.S. House Judiciary Committee, on H.R. 1835
(105th Congress), June 11, 1997 (Testimony of National Association of
Criminal Defense Lawyers (NACDL) Asset Forfeiture Abuse Task Force Co-
Chair E.E. Edwards III, Nashville, Tennessee).
Kent, Washington Maya's Restaurant--The Sins of the Brother?
In 1993, in the Seattle suburb of Kent, Washington, police officers
stormed Maya's Mexican food restaurant in the middle of business hours,
ordering customers out of the establishment, and telling the patrons
that the restaurant was being forfeited because ``the owners were drug
dealers.'' Local newspapers prominently publicized that Maya's
restaurant had been closed and seized by the government for ``drug
dealing.'' Exequiel Soltero is the president and sole stockholder in
Soltero Corp., Inc., the small business owner of the restaurant. The
actual allegation was that his brother had sold a few grams of cocaine
in the men's restroom of the restaurant at some point.
Exequiel Soltero and the Soltero Corporation Inc. were completely
innocent of any wrongdoing and had no knowledge whatsoever of the
brother's suspected drug sale inside the restaurant. According to the
informant relied upon by the law enforcement officers, the brother had
told him that he was part owner of the restaurant. This was not true.
It was nothing but puffery from the brother. The officers never made
any attempt to check it out. If they had, they would have easily
learned that Exequiel Soltero was the sole owner of the Soltero, Corp.,
Inc, and Maya's.
There was no notice or any opportunity for Mr. Soltero to be heard
before the well-publicized, business-ruining raid and seizure of his
restaurant. Fortunately, Mr. Soltero, was able to hire a lawyer to
contest the government's seizure and forfeiture action, but not until
his restaurant had already been raided and his business had suffered an
onslaught of negative media attention about being seized for ``drug
dealing.'' Further, his restaurant was shut down for 5 days before his
lawyer was able to get it re-opened.
Finally, when Mr. Soltero volunteered to take, and passed, a
polygraph test conducted by a police polygraph examiner, the case was
dismissed. However, the reckless raid, seizure and forfeiture quest by
the authorities cost him thousands of dollars in lost profits for the
several days his restaurant was shut down, as well as significant,
lingering damages to his good business reputation. And he suffered the
loss of substantial legal fees fighting the seizure of his business.
Source: National Association of Criminal Defense Lawyers (NACDL)
Asset Forfeiture Abuse Task Force Co-Chair Richard Troberman, Seattle,
Washington.
key reforms work by h.r. 1658--the civil asset forfeiture reform act
The bipartisan supported bill implements four critical reforms of
civil forfeiture law:
1. The Legislation places the burden of proof on the
government, and sets an appropriate standard, clear and
convincing evidence;
2. The Legislation provides for the appointment of counsel for
indigent claimants who have bona fide claims but lack the
resources to protect their property;
3. It establishes a uniform innocent owners defense applicable
to all civil forfeitures;
4. It establishes uniform time limits for providing notice of a
seizure and for filing a civil forfeiture complaint in court.
BURDEN OF PROOF
Under current civil forfeiture practice, the burden of proof is
placed upon the claimant. A party whose property has been seized on a
mere showing of probable cause must come to court and prove by
preponderance of the evidence, that probable cause for forfeiture does
not exist. In the alternative the claimant can show lack of knowledge
or consent to legal activities. This defense is not uniformly applied.
Normally, the burden and standard of proof is based upon the risk
of erroneous decision making. It is remarkable that the burden is
placed upon the claimant when it is the government that has instituted
the lawsuit and the greatest risk of erroneous fact finding is in
unbridled application of this governmental authority. The burden is a
constitutional anomaly in view of the quasi-criminal nature of
forfeiture and the important privacy interest at stake in forfeiture
proceedings. The House bill would reestablish a constitutional balance
by requiring that in all civil forfeiture actions the burden of proof
is on the United States to establish by clear and convincing evidence
that the property is subject to forfeiture. This provision recognizes
both the appropriateness of the United States shouldering this burden
and the necessity for a clear and convincing evidence standard in light
of the risk of erroneous fact finding and the importance of the rights
at issue. The clear and convincing evidence standard has been used
successfully by law enforcement in some of the major state
jurisdictions including California, New York and Florida.
APPOINTED COUNSEL
The House Bill provides that if a person filing a claim is
financially unable to obtain counsel, the court may appoint counsel to
represent the person with respect to the claim. The bill does not
provide counsel for all claimants, and not even all indigent claimants,
but rather requires courts to consider the claimant's standing to
contest the forfeiture and whether the claim appears to be made in good
faith and to be non-frivolous. The bill would do no more than provide
discretion to District Court judges to appoint counsel for indigent
claimants and does not constitute a radical departure from current law.
Fundamental due process considerations dictate that indigents be
provided. with counsel in order to contest the seizure of their
property. The bill would provide an important safeguard for indigents
who face civil forfeiture actions but who do not face related criminal
charges. Under current practice, those facing criminal charges have
more ready access to counsel than claimants who do not. Whatever other
reforms are passed, an indigent claimant facing the loss of a
significant portion of their property will still not face a fair
process if he must face it unrepresented.
INNOCENT OWNER
The House bill provides a uniform innocent owner defense. Under
current law a variety of standards, or none at all, govern claims by
innocent owners regarding their property that is subject to forfeiture.
The statute carefully defines the interest of an innocent owner and
provides relief only where the owner did not know of the conduct giving
rise to the forfeiture or upon learning of the conduct did all that
reasonably could be expected under the circumstances to terminate
illegal use of the property. For property interests acquired after the
conduct giving rise to forfeiture, an innocent owner must show that he
is either a BFP for value or that the interest was acquired through
probate or inheritance or at the time of the acquisition he was
reasonably without cause to believe that the property was subject to
forfeiture. Special rules apply to real property in order to ensure
that spouses or minor children of a person who committed an offense are
not unnecessarily deprived of their homestead.
This provision codifies an important standard of fairness and
centers forfeiture law in a critical area that the public can support.
The notion that even an innocent owner can lose his property because of
its involvement in a crime garners little public support.
UNIFORM TIME LIMITS FOR NOTICE OF SEIZURE AND FILING A CIVIL
FORFEITURE COMPLAINT
The bill establishes uniform and enforceable time limits for the
government to provide notice and commence a forfeiture action. First,
the bill establishes a much needed sixty day time limit for the
government to provide notice of the seizure and its intent to forfeit
the property. Second, it establishes a ninety day time limit in which
the United States Attorney must file a civil forfeiture complaint
following a receipt of a notice of claim.
CONCLUSION
As I stated at the beginning of my testimony, ultimately an
understanding of and respect for the rationale and fairness of
forfeiture laws are the best way to ensure their continued vitality.
The provisions of H.R. 1658 take critical steps towards ensuring the
necessary balance between the necessities of law enforcement and the
fairness of the processes. Additionally, the process, untethered by any
easily understood rationale, will not garner public confidence.
Forfeiture has grown on the back of arcane notions of medieval law and
complex rules relating to custom seizures that bear little relationship
to the reality of an average citizen's life. The Bill positions
forfeiture closer to the central concept that a wrongdoer should not
profit from his illegal activity. The NACDL supports Senate passage of
the Bill as passed by the House.
Note: Neither Mr. Buffone nor NACDL has received any federal grant,
contract or subcontract in the current and preceding two fiscal years.
Senator Thurmond. Mr. Pilon.
STATEMENT OF ROGER PILON
Mr. Pilon. Thank you, Mr. Chairman, Senator Biden. My name
is Roger Pilon. I am the Vice President for Legal Affairs at
the Cato Institute, and it is good to be here to be speaking on
behalf of the House bill. We are here, of course, because that
bill passed by a vote of 375 to 48.
Now, unless most of those 375 did not know what they were
doing, we must assume that there is something that is
motivating this bill, and something very serious. And as my
colleague, Mr. Buffone, has just said, unfortunately that has
not come out over the course of the last eight straight
witnesses who have testified adverse to the House bill.
What brings us all here is not the successes. This is a
point you, Senator Biden, brought out in your cross-
examination, if I may call it that, of the first panel when you
said you are doing a very bad job of defending your case. All
the successes in the world will not bring us here today. We are
here because of the failures. Indeed, the person charged with a
crime cannot pose all the good deeds he has done over the
course of his life as his defense.
The problems that surround forfeiture law are very real.
Mr. Buffone cited a few. My own testimony cites others. The
book that Chairman Hyde wrote that the Cato Institute published
is replete with examples of one abuse after another.
Sheriffs in Volusia County, FL, stopping motorists going
south on I-95, drivers fitting a drug courier profile, and
seizing on the spot any cash in their possession in excess of
$100 on the theory that it must be drug money--this kind of
thing goes on across the country everyday because there is a
perverse incentive involved in forfeiture. The police get to
keep the money. We have heard the other colleagues on this
panel discuss that very point. Through adoption procedures with
the Justice Department, 80 percent of the proceeds are returned
to the police department. This goes on all across the country.
Let me then address very briefly in the time that I have
some of the other confusions that were brought up in earlier
parts of this session. In particular, let's look at forfeiture
in a nutshell. It is an action against the property, civil
forfeiture is. The principles have been carried over
uncritically from antiquity and from medieval deodand theories
and applied to modern situations.
There is an ex parte proceeding in which, by a mere
probable cause, the prosecution seizes the property and then
the burden shifts to the owner to prove his innocence, which is
to say to prove a negative. The procedures are three-fold;
there are administrative, civil and criminal procedures. Eighty
percent of forfeitures, the Justice Department tells us, are
done thruogh administrative procedures. They are done by
default; nobody ever shows up to make the claim.
Thus, when Senator Sessions asked Mr. Fiano about whether
the police would have to prove by clear and convincing evidence
before they could seize the cash in that van, there was a
profound mistake there. It was a confusion of seizure with
forfeiture. They are two different procedures. Seizure is by
mere probable cause. Now, the burden shifts to the owner to
prove his or the property's innocence. This bill would keep the
burden with the government to prove by clear and convincing
evidence that the property is subject to forfeiture.
Again, in 80 percent of the cases, no one even comes
forward to claim the property, and there are two fundamental
reasons for that. In most cases, DOJ is probably right; the
evidence is overwhelming. Why come forward? But there are other
cases where the person simply walks away because he realizes,
especially in a small seizure, that it just isn't worth his
time. It is going to cost him more to hire a lawyer to try to
get his property back.
Indeed, look at the dilemma that the owner is put in under
those circumstances. If he files the claim and posts a cost
bond in order to offset the cost to the government, let me be
clear--if he does that, he is now faced with a perilous
situation. The government can bring either a civil action
against him or it can bring a criminal action against him,
incorporating a forfeiture count in an indictment.
If it brings a civil action against him, then discovery
takes place. During the course of discovery, the action that
originally led to the seizure could involve the person in self-
incrimination even if this action turns out to be ultimately
trivial or baseless. So he is faced with the possibility of a
criminal indictment.
Or if the government can go straightforwardly to a criminal
indictment--and in some ways the owner is better off under
those circumstances because if the forfeiture count is part of
the criminal indictment, it can follow only upon conviction by
the ultimate standard, namely beyond a reasonable doubt.
However, what you have got now is a situation whereby this
dilemma is what faces the owner, and many people facing it
simply walk away because it simply is not worth the risk,
especially if the forfeiture is of a small amount, which most
forfeitures are.
So as Chairman Hyde said, this system is simply stacked
against the owner, which is why he has called for clear and
convincing evidence because, as he said, this is a quasi-
criminal proceeding. The allegation is made that forfeiture
follows because it was property that was used to facilitate a
crime. Well, if there is a crime that is being alleged here,
let the government come forward with at least clear and
convincing evidence that that is the case.
And so let me sum up in the following way. Most forfeitures
under this bill will go on exactly as they have in the past.
Nothing will change. What will change is that the innocent
owner will finally get a break because the burden will stay
with the government and it will be clear and convincing
evidence.
Accordingly, it seems to me that this is the kind of thing
that law enforcement should get behind. Why? Because most cases
will continue as before. They will continue to get all the
proceeds they are getting now. They will get rid of the cases
that are causing all the trouble in the press, and I should
think that is a win/win for both sides.
There is no law that is going to be perfect. At the end of
the day, what we have to decide is which side we are going to
err on. Are we going to err on the side of the individual whose
property has been taken, or are we going to err on the side of
the government?
Yes, forfeiture is a useful tool and it should be
preserved, but only in a corrected form, only in a form that
will allow us to get the people who should be gotten while
protecting the innocent citizen.
Thank you, Mr. Chairman.
Senator Thurmond. Thank you, Dr. Pilon.
[The prepared statement and letters of Mr. Pilon follow:]
Prepared Statement of Roger Pilon
Mr. Chairman, distinguished members of the subcommittee: My name is
Roger Pilon. I am vice president for legal affairs at the Cato
Institute and the director of Cato's Center for Constitutional Studies.
I want to thank you, Mr. Chairman, and thank Mr. Schumer as well,
for inviting me to testify before the subcommittee today on federal
asset forfeiture law and practice.
Late last month, as we all know, the House of Representatives
passed H.R. 1658, the Civil Asset Forfeiture Reform Act. The vote was
by an overwhelming margin of 375 to 48. The bill that passed had been
refined over several years by its author, Henry Hyde, chairman of the
House Judiciary Committee, whose book on American forfeiture law I
edited and the Cato Institute published in 1995. Sponsorship of the
House bill was broad and bipartisan. For some time now an equally broad
and diverse range of citizens and organizations has urged its passage.
(I am attaching copies of several letters indicating the broad support
the bill enjoys.) That alone suggests that there is something
fundamentally wrong with our forfeiture law and practice, which is why
these hearings in the Senate are important.
PRELIMINARY MATTERS
Before discussing the substance and procedure of the matter,
however, I want to make four preliminary points. First, it should be
clear that most of those who support the House bill see a role--and an
important role--for forfeiture in law enforcement. That is why the bill
was written to reform the law, not to abolish it. I say that because
some who oppose any changes, or who advocate only minor changes,
sometimes charge that opponents of our present law want to abolish that
law entirely. That is not true.
Second, it is sometimes said, in a related way, that opponents of
our present law are really opponents of the so-called war on drugs, and
that the forfeiture reform movement is a stalking horse, the ultimate
target being the drug war. Here, too, that is not true. To be sure,
many of us are of the view, shared by a growing number of Americans,
that the war on drugs, like Prohibition before it, is an extremely
costly failure, and that drug use should be treated not as a criminal
but as a medical matter. But there is no necessary connection whatever
between that view and the view that our forfeiture law needs reform.
Indeed, in the House, many of the most ardent supporters of the war on
drugs are ardent supporters of forfeiture reform.
Third, although the law enforcement community does not speak with a
single voice in opposition to forfeiture reform--indeed, some in that
community strongly support reform--it is fair to say that the majority
there oppose the House bill. And in support of that opposition, they
will cite success after success--the use of forfeiture to deprive drug
kingpins of their ill-gotten gains and the tools of their trade, for
example. No one can deny those successes, whatever their larger effect.
But that is not the point. The point, rather, is that this body of
law--because its foundations and practices are so foreign to our system
of justice, as I will demonstrate in a moment--leads too often to
flagrant miscarriages of justice, to the seizure and forfeiture of
property from ordinary, innocent citizens. Given that stark reality,
the law needs to be reformed. Just as a man charged with a crime cannot
put up as his defense all the good deeds he has done in his life, so
too our forfeiture law cannot escape reform simply because it produces
many good results. Those results are to its credit. But it is the
wrongs that result from our forfeiture law that should concern us--and
prompt us to ask just why those wrongs are occurring. After all, it was
not for nothing that the House vote was as overwhelming as it was.
Finally, and closely related to my third preliminary point, law
enforcement often argues that forfeiture is an important tool in the
war on crime. They are right. Forfeiture is an important tool in that
effort. And under the House bill it will continue to be an important
tool, for most forfeitures will occur in the future exactly as they
have in the past. But in a free society, not any forfeiture law or
practice will do. To state the point most generally, in our society,
law enforcement officials may not use any means they wish in their
efforts to reduce or remedy crime. After all, a police state would
doubtless reduce crime. But we cannot have a police state in this
nation because we have a Constitution and a body of law promulgated
under it that limits what police, prosecutors, courts, and Congress may
do--both substantively and procedurally.
In fact, it is precisely on that fundamental point--that first
principle, the rule of law--that those of us who urge reform ultimately
rest our case.\1\ Modern American asset forfeiture law, especially
civil forfeiture, rests on animistic and authoritarian principles,
leading to practices that are utterly foreign to our first principles
as a nation. Something is terribly wrong when a body of ``law'' enables
officials to stop motorists and other travelers and seize their cash on
the spot, returning it, if they do, often years later, only after the
person proves his innocence--where such a defense is possible; when
that ``law'' enables officials to seize and sometimes destroy boats,
cars, homes, airplanes, and whole businesses because they suspect the
property has somehow been ``involved'' in a crime; or when it
encourages officials to maim and even kill in their efforts to seize
property for forfeiture to the government.\2\ Lawyers who come upon
this body of law for the first time are often taken aback by the
injustice and irrationality of it all. Imagine what the ordinary
citizen must think.
---------------------------------------------------------------------------
\1\ I have discussed the issues that follow more fully in Roger
Pilon, ``Can American Asset Forfeiture Law Be Justified?'' 39 New York
Law School Law Review 311 (1994).
\2\ For those and many more examples of abuses perpetrated under
our forfeiture law, see Henry Hyde, Forfeiting Our Property Rights
(1995).
---------------------------------------------------------------------------
FORFEITURE IN A NUTSHELL
The very styling of the relatively few cases that make it to court
tells much of the story: United States v. $405,089.23 U.S. Currency
\3\; United States v. 92 Buena Vista Avenue \4\; United States v. One
Mercedes 560 SEL.\5\ Civil forfeiture actions are brought against the
property, not against the person. They are in rem proceedings--not for
the purpose of gaining jurisdiction over a real person but for the
purpose of seizing property for forfeiture to the government. Fantastic
as it may sound, it is the property that is charged.
---------------------------------------------------------------------------
\3\ 518 U.S. 267 (1996).
\4\ 507 U.S. 111 (1993).
\5\ 919 F.2d 327 (5th Cir. 1990).
---------------------------------------------------------------------------
How can that be? Finding its origins in the Old Testament and in
medieval doctrine, in the idea that animals and even inanimate objects
involved in wrongdoing could by sacrificed in atonement or forfeited to
the Crown, modern forfeiture law, filtered through early American
admiralty and customs law, has simply carried forward, uncritically,
the practice of charging things.
Thus, officials today can seize a person's property, real or
chattel, without notice or hearing,\6\ upon an ex parte showing of mere
probable cause to believe that the property has somehow been
``involved'' in a crime. Neither the owner nor anyone else need be
charged with a crime, for the action, again, is against the thing. The
allegation of ``involvement'' may range from a belief that the property
is contraband to a belief that it represents the proceeds of crime
(even if the property is in the hands of someone not suspected of
criminal activity) , that it is an instrumentality of crime, or that it
somehow ``facilitates'' crime. And the probable cause showing may be
based on nothing more than hearsay, innuendo, or even the paid, self-
serving testimony of a party with interests adverse to the property
owner.
---------------------------------------------------------------------------
\6\ In the case of real property, that changed after 1993 when the
Supreme Court ruled that owners had to be given notice and an
opportunity to be heard before their real property could be seized.
United States v. James Daniel Good Property, 510 U.S. 43 (1993).
---------------------------------------------------------------------------
Once the property is seized, the burden is upon any owner who wants
to get his property back to prove its ``innocence''--not by a probable-
cause but by a preponderance-of-the-evidence standard. Yet that is
possible only where innocent-owner defenses have been enacted or
allowed.\7\ In defending the innocence of his accused property, the
owner must prove a negative, of course. Moreover, he must do that
against the overwhelming resources of the government. And if he has
been involved in activity that in any way might lead to criminal
charges--however trivial or baseless those charges might ultimately
prove to be--he has to weigh the risk of self-incrimination entailed by
any effort to get his property back against the value of the property.
As a practical matter, the burden is simply too high for many innocent
owners, who end up walking away from their loss.
---------------------------------------------------------------------------
\7\ Thus, in Bennis v. Michigan, 516 U.S. 442 (1996), a case the
Supreme Court decided under state law, Mrs. Bennis lost her half-
interest in the family car when officials seized the car after her
husband used it for an assignation with a prostitute. Although Mrs.
Bennis was given ``due process,'' nothing she could have said in any
proceeding would have made a difference since the law provided no
innocent-owner defense. Wronged by her husband, she was wronged again
by the Michigan law.
---------------------------------------------------------------------------
That, in a nutshell, is the state of much of our modern civil asset
forfeiture law, despite periodic efforts in the House to reform some
areas, and despite court challenges in recent years that have
succeeded, when they have, only in chipping away at the doctrine. It is
a body of law that enables prosecutors to go directly against
property--a ruse that permits the abandonment of elementary notions of
due process. And it does so, most notoriously, on the ground that the
property is guilty of ``facilitating'' a crime--a doctrine that is
infinitely elastic.
THE PROCEDURE OF THE MATTER
To illustrate more fully how this law works in practice, however,
it may be useful to distinguish three procedures--administrative,
civil, and criminal--through which the government moves to complete a
forfeiture after seizing a person's property.\8\ Administrative
forfeiture is essentially a default proceeding: if no one files a claim
to the seized property, it forfeits by default to the government. The
Justice Department's principal spokesman for forfeiture has claimed
that 80 percent of forfeitures ``are uncontested because in most cases
the evidence is so overwhelming that contesting the forfeiture would be
pointless.'' \9\ That may be true in many cases. But there are also
many other cases that involve amounts too small to make it worth the
owner's contesting the forfeiture, especially in light of the legal
fees and the extraordinary burden of proving one's innocence.
---------------------------------------------------------------------------
\8\ For a detailed discussion of forfeiture law, see David B.
Smith, Prosecution and Defense of Forfeiture Cases (1998).
\9\ Stefan D. Cassella, ``Forfeiture Is Reasonable, and It Works,''
Criminal Law and Procedure News (The Federalist Society) vol. 1, no. 2
(Spring 1997), at 8.
---------------------------------------------------------------------------
But if an owner does contest the seizure, he has to file a claim
and post a ``cost bond'' amounting to ten percent of the value of the
property or $5,000, whichever is less. That does not release the
property to the owner, however; incredibly, it is designed to defray
the government's litigation and storage costs. Once the owner files a
claim and posts a cost bond, the government has to file a complaint in
federal district court. But it can wait up to five years--the statute
of limitations--before doing so, whereas the owner has a mere ten days
to answer the complaint, failing which the property forfeits to the
government. Except in a criminal proceeding, there is no right of
counsel, which means, again, that many small seizures end by default to
the government.
Worse still, when the owner contests the seizure and posts a cost
bond, his situation is perilous; for under many statutes the government
has a choice. It can file a civil complaint, initiating a civil
forfeiture action; or it can include a forfeiture count in a criminal
indictment. Think about the dilemma that puts the owner in. If the
government initiates a civil action in response to his contesting the
seizure, not only can it wear him down through long and costly
discovery but, through that very process, it can try to generate
evidence for a subsequent criminal prosecution. Thus, the effort to get
his property back exposes the owner to the risk of self-incrimination--
even when the actions that led to the seizure in the first place prove
ultimately to be trivial or innocent. And even if he is not indicted,
the procedural hurdle the owner faces is daunting: whereas the
government has to show the court simply that there is probable cause to
believe that the property is subject to forfeiture--which it can do
using rank hearsay evidence, inadmissible in a normal trial--the owner,
once the burden shifts, has to prove the property's ``innocence'' by a
preponderance of the evidence, with no hearsay allowed.
But on the other hand, once the owner contests the seizure the
government can respond with an outright indictment. In some ways, of
course, the owner would be better off under those circumstances: the
burden of proof would be on the government; the standard of proof would
be beyond a reasonable doubt; and forfeiture, where it is included as a
count in the indictment, would follow only upon conviction. But who
wants to face a criminal indictment and trial just to get his property
back? At the same time, who wants to go through a civil action either,
against the government, just to get his property back, especially at
the risk of ultimately being indicted? Faced with that dilemma, is it
any wonder that owners often simply walk away from their loss when the
government seizes their property? Is that the kind of dilemma we want
to put often innocent citizens in? As Chairman Hyde put it, ``the
system is stacked against innocent citizens and in favor of
government''? \10\ After all, prosecutors are not empowered simply to
score victories and enrich government coffers. They have an obligation
to do justice as well. Regrettably, the conflict of interest is so
stark under our forfeiture laws that it is all too easy to shirk that
obligation.
---------------------------------------------------------------------------
\10\ Hyde, supra note 2, at 8.
---------------------------------------------------------------------------
From this much, then, it should be clear just why the House bill
puts the burden of proof on the government--where it should have been
all along--and why it requires the government to discharge that burden
by clear and convincing evidence. In a free society, if government
takes a person's property, it had better have good reason for doing so,
not simply probable cause, not even a mere preponderance of the
evidence, but clear and convincing evidence. These are, after all,
quasi-criminal proceedings: the allegation is that the property is ill-
gotten, or contraband, or that it facilitated a crime. Even though they
may be styled ``civil,'' these are much closer to criminal proceedings
than to any ordinary civil action involving a private dispute or even a
dispute with the government. If the government is going to allege
criminal activity as the ground for its taking private property, it
should at least have clear and convincing evidence to support that
allegation.
RETURNING TO SUBSTANCE
We return, finally, to the substance of the matter and to a point
made at the outset, namely, that under the House bill, most forfeitures
will continue exactly as they have until now. For if Justice is right
about most forfeitures not being contested due to the overwhelming
evidence that supports them, that will not change even if the
government does carry the burden of proof and carries it by a higher
standard of evidence. Drug dealers will still not contest a seizure if
it means running the risk of an indictment: it's simply too easy to
recoup that loss through another deal. And where there are parallel
criminal proceedings, there too the process will continue as it does
today; for if there is enough evidence to prosecute a criminal action,
there is probably more than enough evidence to effect a civil
forfeiture.
What will change is that innocent owners will finally get a break.
Here, we are not talking about contraband but about the other two most
common substantive rationales for forfeiture--ill-gotten gain (or the
proceeds of crime) and ``facilitation.'' Taking first the proceeds
rationale, with the burden on the government to prove, by clear and
convincing evidence, that the money or property it seized was derived
from crime, it will be more difficult to turn a seizure into a
forfeiture, especially if the owner is in fact innocent--which is
exactly as it should be. Does that mean that some innocent owners may
still lose their property--and that some guilty owners may keep theirs.
Of course it does. Justice can never be perfect, but it can be better
than it is today. Again, we cannot fight crime by any means. In a free
society, we err on the side of the innocent, not against them.
In the case of facilitation forfeiture, the issues are not as easy
because the rationale is not as rational. The idea that property that
``facilitates'' a crime is thereby forfeitable to the government takes
us to the darkest roots of forfeiture and to the greatest abuses in our
own time. For the ``instruments'' of crime can be read so broadly as to
include anything even ``involved'' in a crime. Indeed, for the crime of
failing to fill out a customs form saying that he was taking more than
$10,000 in U.S. currency out of the country, Mr. Hosep Bajakajian and
his family, fearful of making such a declaration, would have forfeited
the legally-acquired $357,144 they had in their possession as they
waited to board an airplane in Los Angeles in 1994--but for the five-
to-four decision of the Supreme Court last year saying that the statute
allowing the forfeiture of anything ``involved'' in the crime violated
the Excessive Fines Clause of the Eighth Amendment.\11\ Whole bank
accounts have been lost due to a single questionable deposit: the
account ``facilitated'' the laundering of money. And stories of a home
lost when one member of a family made an illegal phone call from it are
too numerous to recount.\12\
---------------------------------------------------------------------------
\11\ United States v. Bajakajian, 524 U.S. 321 (1998). See Roger
Pilon, ``High Court Reins In Overweening Government, Wall Street
Journal, June 23, 1998, at A20.
\12\ See, e.g., United States v. Real Estate Known as 916 Douglas
Ave., 903 F.2d 490 (7th Cir. 1990), cert. denied, 111 S. Ct. 1090
(1991).
---------------------------------------------------------------------------
No one has ever offered a satisfactory justification for
facilitation forfeiture, although a Justice Department spokesman,
attempting recently to explain why the Department did not limit itself
to criminal forfeitures, inadvertently exposed the irrationality of the
doctrine. The ``most important'' reason for doing civil forfeitures, he
said, is because ``criminal forfeiture is limited to the property of
the defendant. If the defendant uses someone else's property to commit
a crime, criminal forfeiture accomplishes nothing [for the government].
Only civil forfeiture will reach the property'' (original
emphasis).\13\
---------------------------------------------------------------------------
\13\ Cassella, supra note 9, at 4. For a critique, see Roger Pilon,
``Forfeiting Reason,'' Criminal Law and Procedure News, supra note 9,
at 1ff.
---------------------------------------------------------------------------
That is a striking admission. Proceeding ``normally,'' against the
accused, we can't reach the property of someone else. Thus, when Billy
Munnerlyn, who ran a charter jet service, accepted a fare from a man
who turned out, unknown to Mr. Munnerlyn, to be carrying drug money,
the government could not have seized his plane unless it had brought a
civil action--not against the drug dealer, nor even against Mr.
Munnerlyn, who did no wrong, of course, but against the plane.\14\ For
the plane, you see, was ``guilty'' for having ``facilitated'' the
crime. Yet the same Justice official who tells us how to reach property
of people who haven't committed a crime says also that ``property
doesn't commit crimes; people do.'' \15\ Just so. Then why charge the
plane? Why? Because that's the only way the government can get the
property of someone who's not guilty--by personifying the property and
charging it with ``facilitating'' a crime. We're right back with the
``goring ox'' of antiquity and with a rationale that no one any longer
believes, if anyone ever did.
---------------------------------------------------------------------------
\14\ For a discussion of this case, see Hyde, supra note 2, at 12.
\15\ Cassella, supra note 9, at 4.
---------------------------------------------------------------------------
Unfortunately, the House bill does not do away, once and for all,
with facilitation forfeiture. Nevertheless, it does mitigate the
effects of the doctrine by incorporating in all federal forfeiture
statutes a fairly robust innocent-owner defense. Here again, the bill
may not be perfect--and that defense may need to be strengthened--but
the breadth of coverage is much greater than under current law.
CONCLUSION
In sum, the House has presented the Senate with an opportunity to
help correct the considerable injustices that have been taking place
for too long in this nation under the banner of forfeiture law. As I
noted earlier, under the House bill, most forfeitures will go on as
they have in the past. The illegitimate forfeitures, the ones that
should never have taken place to begin with, will mostly fail--as they
should--assuming they are even undertaken. Those, however, are a small
fraction of all forfeitures, yet they have given the law enforcement
community--to say nothing of the victims--the greatest problems; for
they have given all of forfeiture a bad name, which is why this bill
should be welcomed even--indeed, especially--by law enforcement. But
above all, it should be welcomed by every American who wants to see our
law and legal institutions grounded on our first principles as a
nation. Forfeiture has a place in law enforcement, but like every tool
in that effort, it must spring from principles of justice if it is to
serve justice.
Thank you, Mr. Chairman and Mr. Schumer, for the opportunity to
testify before the subcommittee today.
______
Americans For Tax Reform,
Washington, DC, June 18, 1999.
Hon. Henry J. Hyde, Chairman,
House Committee on the Judiciary,
Rayburn, House Office Building,
Washington, DC.
Dear Member of Congress: We strongly urge your support for and co-
sponsorship of the ``Civil Asset Forfeiture, Reform Act of 1999.'' This
critical piece of legislation warrants your strongest consideration.
H.R. 1658 was introduced on May 4, 1999 in the U.S. House of
Representatives, by Judiciary Committee Chairman Henry J. Hyde (R-IL).
Original sponsors are Representatives Bob Barr (R-GA), John Conyers,
Jr. (D-MI) and Barney Frank (D-MA).
The Civil Asset Forfeiture Reform Act of 1999 is a bi-partisan
proposal which will provide substantive, and critically needed, reform
to this area of the law. All of us and many other organizations all
support this reform measure. The Cato Institute's Roger Pilon
testified, ``that the state of our forfeiture law today is a disgrace
is hardly in question.'' Grover Norquist, President of Americans for
Tax Reform urged, ``No greater damage could be done to our basic
liberties than to deprive U.S. citizens of their fundamental right to
property.''
In considering the impact of this legislation one must put
themselves in the innocent property owner's shoes. Imagine this. You
make the mistake of buying an airplane ticket with cash--behavior that
is deemed to fit a drug courier profile--so you are detained and
searched. No drugs are found, but the agents seize the cash in your
wallet, saying they have ``probable cause'' to believe that the money
was intended to buy drugs. You are allowed to leave and are not charged
with any crime, but the agents keep your property.
What recourse do you have to get your property back. Very little,
because the law treats the property, rather than you, as the offending
object. None of the Constitutional or procedural safeguards of the
criminal law are available, because you are not being threatened with a
deprivation of liberty. In fact, the law doesn't require that you ever
be charged with a crime. You have to prove a negative, that your
property was never used in a crime., that it was ``innocent''. But the
alleged criminal conduct needn't even involve you--it could just as
easily be a crime allegedly committed by the previous owner of your
property, or by someone who, unbeknownst to you, used your property in
a criminal endeavor.
And if this wasn't bad enough, you must provide a 10 percent cost
bond for the privilege of even contesting the government's seizure.
Don't expect to have attorney provided to help you if you are indigent,
but familiarize yourself with legal procedure quickly--you have less
than 20 days to file your claim. Even assuming you somehow prevail, the
government is not liable for any interest on your money, or in the case
of seized property, any damage caused by its handling or storage.
As unbelievable its this all seems, this is now the law! It is
incumbent on the Congress to reform the system to make it consistent
with the basic presumption in American law--that you are innocent until
proven otherwise, and that you should not lose your property without
due process of law. This bill puts the burden of proof back where it
belongs--with the government. The strongest provisions of the Bill are
those which clearly safeguard or clarify existing Constitutional
rights, including the following:
Placing the burden of proof on the government to prove by
``clear and convincing evidence'' that the property is subject
to forfeiture;
Prohibiting the forfeiture of an innocent owner's interest
in the property under any civil forfeiture statute;
Allowing for the immediate release of seized property under
certain circumstances evidencing substantial hardship to the
claimant, pending the final disposition of the forfeiture
proceedings;
Providing, out of appropriated funds, court-appointed
counsel to property owners who are financially unable to assert
their rights and interests in seized property (e.g. because the
government has seized all of the individual's or business'
assets); and
Granting property owners the right to sue the federal
government for damages done to property due to handling and
storage of seized assets while in government custody, if the
property is not ultimately forfeited.
We also urge your strong opposition to any amendments to this bill
which would expand the Department of Justice's powers to seize property
and file forfeiture complaints. Such amendments serve no other purpose
than to undermine and severely compromise the bill's essential purpose.
Some unacceptable amendments include:
Altering or reducing the burden of proof on the government
from ``clear and convincing evidence'' to ``preponderance of
the evidence;''
Permitting an ``After-Acquired Evidence Exception'' to the
government (i.e. Seize Now, Fish Later) which would allow the
government to seize and hold property without probable cause
until the government completes discovery to ``justify'' its
seizure of property;
Granting U.S. Attorneys the option of pursuing criminal
forfeiture proceedings as an alternative to civil forfeiture,
if civil forfeiture is otherwise authorized; and
Restricting the appointment of counsel for indigent
claimants or subjecting citizens,to broad cross-examination by
the federal prosecutor before any appointment can be
undertaken.
The Civil Asset Forfeiture Reform Act of 1999 is solid legislation
which undertakes fundamental reforms needed to prevent further
forfeiture abuse. We as for your consideration of this matter and
request that you become a co-sponsor of this legislation, as it is of
great concern to our members. If you are interested in co-sponsoring
this bill, please contact George Fishman. counsel at the House
Judiciary Committee office at 225-5727.
Thank you very much for your consideration. If you have any
questions on this or related issues, please do not hesitate to contact
any of us.
Americans For Tax Reform Small Business Survival Committee
Republicans For Choice Institute For Justice
The Madison Project Free Congress Foundation
American Conservative Union NRA/ILA
Association of Concerned Taxpayers Conservative Leadership PAC
Law Enforcement Alliance of America Eagle Forum
Seniors Coalition Frontiers of Freedom
National Association of Criminal
Defense Lawyers ACLU
Chamber of Commerce,
Washington, DC, June 23, 1999.
Hon. Henry J. Hyde, Chairman,
House Committee on the Judiciary,
Rayburn House Office Building,
Washington, DC.
Dear Chairman Hyde: The U.S. Chamber of Commerce supports passage
of H.R. 1658, the bipartisan Civil Asset Forfeiture Reform Act reported
from the House Judiciary Committee on June 18, 1999. The Chamber
opposes the addition of any weakening amendments to this legislation,
such as the Hutchinson-Weiner amendment that would lower the bill's
burden of proof standard.
As the world's largest business federation, representing over three
million businesses and organizations of every size, sector and region,
the Chamber has a vital interest in protecting the private property
rights of business owners.
Criminal asset forfeiture can be a legitimate means for punishing
criminal acts and has served as a valuable law enforcement tool.
However, within the area of civil asset forfeiture, we are witnessing
an increasing number of property seizures in cases where no crime has
been committed, nor any criminal charges ever filed. Under current
civil asset forfeiture law, federal agencies may seize private property
simply for ``probable cause,'' the same minimal standard used to obtain
search warrants. In our view, probable cause, may certainly be a
sufficient basis for seeking ``evidence'' of wrongdoing, but it should
not serve as the basis for the permanent seizure of an individual's
property.
As a result of civil asset forfeiture, individuals and business
owners are often robbed of more than their property; they are robbed of
their basic due process rights. Once an individual's property is
seized, it is the property owner not the government that must establish
by a ``preponderance of the evidence'' that the property in question
was not involved in criminal wrongdoing. This amounts to a presumption
of guilt where, in order to regain one's property, a business owner
must essentially prove the negative, Moreover, individuals and business
owners who wish to contest a property seizure must first produce a bond
valued at 10 percent of the assets seized merely to receive a review of
their case. Clearly, this law must be reformed.
H.R. 1658 would provide several important changes to current civil
law to achieve these necessary reforms. By requiring the appropriate
``clear and convincing'' standard of proof, the bill would reestablish
the time-honored presumption of innocence to individuals subject to
asset forfeiture. In addition, the bill contains a hardship release
provision, which would allow businesses to continue operating pending
an actual judicial determination as to whether the government's seizure
is warranted. The Chamber also supports language in the bill that
allows for a court-appointed counsel mechanism for individuals of
limited resources facing a civil forfeiture proceeding.
Once again, the U.S. Chamber supports passage of H.R. 1658, as
reported from the House Judiciary Committee, and will oppose the
addition of any weakening amendments, such as the Hutchinson-Weiner
amendment.
Sincerely,
R. Bruce Josten,
Executive Vice President, Government Affairs.
__________
American Bankers Association,
Washington, DC, May 14, 1999.
Hon. Henry J. Hyde, Chairman,
House Committee on the Judiciary,
Rayburn House Office Building,
Washington, DC.
Dear Chairman Hyde: Thank you for your recent letter to the
American Bankers Association concerning the Civil Asset Forfeiture
Reform Act of 1999 (H.R. 1658). ABA has long supported the use of the
civil forfeiture laws as deterrents to crime. However, we remain
opposed to the use of those same laws to either punish innocent
lienholders, or to delay justice and increase bank's costs by placing
the burden of proof on a bank instead of on the government agency
bringing the civil forfeiture. Your bill takes the necessary step of
requiring the government to establish, by clear and convincing
evidence, that the property being seized is subject to forfeiture. This
is truly a fair approach.
In addition, the measure will protect lenders from quickly losing
the value of their interest in property by creating streamlined and
efficient rules in all civil forfeiture proceedings. Our Association
also supports the provision in the bill that protects innocent owners
who acquire the property interest after the illegal conduct occurred.
Mr. Chairman, the ABA supports your bill as a truly bipartisan
approach to the problem of balancing legitimate law enforcement needs
with the free flow of commerce. Our Association stands ready to work
with you on this proposal as you move it through Congress.
Sincerely,
Edward L. Yingling,
Deputy Vice Presdent,
Executive Director of Government Relations.
Senator Thurmond. Senator Biden.
Senator Biden. Thank you, Mr. Chairman.
Dr. Pilon, let me pick up where you left off, and you make
a very persuasive case. Let me ask the threshold question.
Would you support legislation that would eliminate civil
forfeiture? Do you think it would be better just to simplify
civil forfeiture?
Mr. Pilon. No, because there are going to be some cases
where you are going to have to do that and those are the cases
of, for example, a deceased owner or an owner who has fled the
jurisdiction, especially abroad, in which case you will have a
default procedure. Now, it will not be a civil procedure in the
sense that no one will come forward to make a claim. It will be
a default procedure, and therefore an administrative procedure.
Senator Biden. I was under the impression that ultimately,
although you believe that the Hyde amendment--and I may be
totally mistaken--that the Hyde amendments improve it, the best
way to improve it would be to scrap it, to scrap the entire
civil forfeiture statute as it exists now and not replace it.
Mr. Pilon. Well, you will be left then with cases in which
property has been abandoned, and the question arises, well,
whose property is it, because you can't bring a conviction and
get it through a forfeiture count in a criminal indictment.
Senator Biden. I just wanted to established then that my
impression was mistaken. Now, let me ask you another question.
You pointed out that the burden of proof shifts to the owner to
prove the negative and you said that is a bad thing, and
apparently everyone agrees with you, including the Deputy
Attorney General of the United States.
Mr. Pilon. I, too, am struck by how much agreement there is
that we need to reform. I think all we need now is a vehicle
coming out of the Senate.
Senator Biden. And that is what I am trying to get to.
There are two pieces of the burden of proof argument. One is
shifting the burden from the claimant to the government, and
there seems to be agreement on that. The second piece is
raising the standard from probable cause to clear and
convincing.
And I don't want to put words in your mouth, but I thought
you said, in the circumstance you were describing of civil
versus criminal forfeiture, that, in fact, it might be better
for the government to come forward with a criminal charge and
establish through clear and convincing evidence that the
forfeiture was justified. Why would you raise the standard
beyond what any other criminal charge would call for, and that
is come forward with a criminal charge and have probable cause
that the charge is justified?
In other words, it seems to me you speak against your own
case. You want the standard in civil forfeiture, once the
burden is shifted back to the government for what constitutes
the appropriate level of justification for confiscation in the
first place, to be higher than it would be if it were criminal.
Is that correct?
Mr. Pilon. I don't believe so. Criminal would be beyond a
reasonable doubt.
Senator Biden. Not for the confiscation in the first
instance.
Mr. Pilon. That is mere probable cause for the seizure.
Senator Biden. For the seizure. So you are not suggesting
that the seizure require anything beyond probable cause?
Mr. Pilon. That is right, that is absolutely right.
Senator Biden. OK.
Mr. Pilon. I mean, we have to distinguish the two
procedures, as I said.
Senator Biden. I thought you were suggesting the seizure
required clear and convincing.
Mr. Pilon. Oh, no, no. In fact, that is the confusion that
came up in the colloquy between Senator Sessions and Mr. Fiano.
Senator Biden. Now, let me ask you one other question. You
indicated that the Justice Department suggests that 80 percent
of the forfeitures are administrative, and 80 percent of those
are a consequence--I am going to ask you to correct me. There
is administrative, civil and criminal. The majority are
administrative, you said, I thought. And did you say 80 percent
are administrative, or 80 percent are defaulted?
Mr. Pilon. I will read from Mr. Casella, who has been
quoted more than once here today.
Senator Biden. OK.
Mr. Pilon. He is Mr. Forfeiture in the Justice Department.
``An administrative forfeiture is essentially a default
proceeding. It occurs when property is seized and no one files
a claim contesting the forfeiture. By definition, all
administrative forfeitures are uncontested. Between 80 and 85
percent of all forfeitures handled by the Department of Justice
fall into this category.''
Senator Biden. Now, what percentage of those 80 to 85--and
then what you did is you then parsed that further. You said
there are those cases where clearly they are uncontested
because they are bad guys. They are not going to come back and
say I want my drug money back.
Mr. Pilon. Probably, most of them.
Senator Biden. Most of them. And then you said there are
some, though, where it is just too difficult; it is too risky
in terms of involvement in a potential criminal charge and too
expensive relative to the value of what was seized. What
percentage fall in that second category? And I know you don't
have any empirical data to prove it, but I mean what is your
sense of what percentage falls into that second category?
Mr. Pilon. Well, you are absolutely right. I don't have the
data, but then neither does anyone else have the data.
Senator Biden. No, I am not suggesting anyone does. I am
just wondering how big a problem this is. I am trying to get a
sense of it.
Mr. Pilon. In fact, if I am not mistaken, there is some
data to the effect that most forfeitures are under $5,000. I
believe either David Smith, who is the author of a case book on
the subject, or Bo Edwards, who is an attorney who is here in
the room as well, can address that.
Do you know, Sam, what the actual figure is?
Senator Biden. I don't want to pressure----
Mr. Pilon. Under $10,000, or under $5,000, actually, under
$5,000.
Senator Biden. To the extent that you can supply for the
record any reasonable guess as to what percentage of the
default cases are defaulted because either they don't want to
run the risk, they are innocent and don't want to run the risk,
or it is not worth the candle----
Mr. Pilon. The seizure of a $5,000 car and it is going to
cost you $10,000 to get an attorney.
Senator Biden. Well, to the extent that you can give us any
data to sustain that point and what percentage of the defaults
that makes up, it would be useful for us to have for the
record. You don't have to do it now, but if you could do it to
the extent you can, it would be a useful thing for us to know.
Mr. Pilon. And mind you, this is not a large number, I
expect, in the grand total of things, but that is just my
point. Most forfeitures under this bill will continue exactly
as they have in the past. The huge forfeitures especially will
continue exactly as they have in the past.
Senator Biden. Well, let me explain how this pedestrian
mind working in this field for 28 years kind of approaches it.
And I say to Mr. Buffone, in my other life I was a defense
attorney. So I believe you guys are good guys, not bad guys. I
don't approach it from the perspective that whatever you have
to say doesn't make sense. I approach it from the perspective
that you are looking out for people's civil liberties.
But having said that, what I have found as I kind of look
at this is the way I am breaking this out, Mr. Pilon, for me--
and again I realize I may be suffering from the sin--when I got
here at age 29, I used to accuse some of my more senior
colleagues that they wrote a law, they got wedded to the law
and they couldn't bring themselves to change what they wrote.
I admit to you that I may be suffering from the criticism I
used to apply 25 years ago to folks who were then as senior as
I am now. I acknowledge that up front. But I am trying to
educate myself, and to the extent that I am mistaken about how
this law applies, and to the extent that the abuses are not
aberration but are a standard practice or something close to
that, then I want to be educated on it.
But here is how I look at this. I look at this in the
context of if there are only a few cases--I am going to
oversimplify it for the purposes of time and for my ability to
understand it. If the abuses are few in number and the remedy
to eliminate those few abuses allows for a circumstance where
we provide great latitude for the criminal element that these
guys are going after, then I start balancing that in my mind
because I am not talking about, in my view, a constitutional
right here when we are on an edge. We are not denying people
because ultimately they get their day in court. Ultimately,
they get their day in court to determine whether or not it was
rightly or wrongly confiscated at the end of the day.
You are correct, I believe, at least in some
circumstances--and I think less than you think--that the day in
court may be denied for practical reasons because I don't want
to spend the money, I don't want to run the risk, the cost is
too high, et cetera. But that is the case in a whole range of
civil circumstances where I don't sue AT&T because of the fact
that they have--and by the way, if the Cato Institute and
others have their way, we will have no class actions and no one
like me will ever be able to sue because relative to AT&T it
ain't worth me trying to recover the $4.70 I think they cheated
me out of by rounding up instead of rounding down. But that is
another question for another hearing.
My point is this. It is important for us to be able to on
this side of the table figure out the balance here, which will
lead me, Mr. Buffone, to a question to you. I don't doubt for a
moment that you can cite for me myriad cases whereby you think
there was an abuse of the civil forfeiture process. What I
would like to ask you--and the best way for me to try to get at
this again for me to understand it is of the reforms in the
Hyde legislation, could you prioritize for me which ones you
think would remedy the most common abuse that takes place, in
your view?
In other words, if I said to you, OK, boss, here is the
deal, I guarantee I can give you two of the six or seven or
eight major Hyde reforms, which two do you want to solve the
problem you believe exists out there?
Mr. Buffone. Senator, there are two answers to your
question. First, we believe that the Hyde bill is that effort;
it is the effort to focus only on what is necessary. Not all
abuses----
Senator Biden. I have got that, but you are not going to
get that. So as I said to the Justice Department, let's get
real. Which ones do you think are the most important?
Mr. Buffone. Four principal reforms that we believe are
necessary. First of all is the shift of the burden of proof and
the standard of proof to an appropriate standard of clear and
convincing evidence. Second, indigents under appropriate
circumstances will be provided with counsel so that they can
contest forfeitures; third, the establishment of a uniform and
meaningful innocent owner defense; and, fourth----
Senator Biden. And what do you think that entails? What
uniform innocent owner defense do you think this should be? I
mean, can you tell me?
Mr. Buffone. I think it is in the Hyde bill. I think it has
been stripped down to its bare essentials.
Senator Biden. OK, that is what I am asking. For example,
bona fide transfer of the innocent owner--are you just talking
about the innocent owner?
Mr. Buffone. I am talking about the entire provision of the
Hyde bill, Senator, that deals with both those that acquire an
interest after a criminal act and must establish one standard,
and those who have a preexisting claim to property prior to the
commission of the offense. And, finally--and I would put this
fourth on the list--rationalization of forfeiture notice, time
and bond provisions.
Senator Biden. Well, let me ask both you gentlemen the
notice question. Let's say we stop legally four folks on I-95--
five folks, six folks, on I-95 in an automobile. And the
trooper smells marijuana in the automobile and he asks the
occupants to step out of the car, and under the seat he notices
there is what is later determined to be after they bring in
dogs $50,000 and a quantity of cocaine after the canine unit
comes in.
The driver says he got the money from a guy in New York,
and the guy in New York said the money is going to be taken to
his sister in Florida and the sister in Florida is going to
send it to Mexico, to a guy in Mexico. And now you seize the
$50,000 and you send out notices and notice only gets to five
of the six folks. Do you have to return under the Hyde bill the
$50,000 if only five of the six got notice? What do you think?
How would the Hyde bill work? By the way, do they all get a
free lawyer?
Mr. Buffone. First of all, I am not sure any of them get a
free lawyer. I don't know whether or not they are indigent,
whether or not they have non-frivolous claims, and whether or
not you could persuade a district court judge that he should,
in fact, appoint one.
Senator Biden. Are they required under Hyde to be indigent?
Mr. Buffone. They must be not able to afford an attorney.
Senator Biden. The same standard you get for a public
defender?
Mr. Buffone. To be honest with you, Senator, I am not sure
whether or not the provisions of the Criminal Justice Act would
apply under this.
Senator Biden. I am just wondering because I don't know
from the Hyde bill how that is determined. But it is probably
written there and I----
Mr. Pilon. This is all done under the supervision of the
presiding judge, and what the Hyde bill does is give him a
certain discretion that currently he does not have.
Senator Biden. Well, when you say ``certain,'' it means it
gives him total discretion, right?
Mr. Pilon. No, not total discretion.
Senator Biden. Well, let me put it this way. It says what?
What is the operative language the judge has to apply to
determine whether or not he or she makes a judgment that they
get a free lawyer?
Mr. Pilon. Well, here is, for example, the language on page
9 of the bill relating to the hardship issue. ``A claimant's
likely hardship from contingent possession by the government of
the property outweighs the risk that the property will be
destroyed, damaged, lost, concealed, or transferred.'' That is
about the best you can do in a statute.
Senator Biden. I have got it, but that is the judge has
total discretion within that definition.
Mr. Pilon. That is right. How else are you going to do it?
Senator Biden. I don't want to get off on that. I want to
focus again on what Mr. Buffone and I were talking about.
Two issues. Notice gets sent out and it gets to five of the
six people in the car where the property was seized. Does that
mean the government, if it can't get to all six, has to return
the $50,000?
Mr. Buffone. Senator Biden, first of all, I believe that
the provision of the bill requires only reasonable notice to
those the government knows have a claim over the property.
Senator Biden. Well, all of them are claimants in the car.
None of them said they owned the car, the rental car.
Mr. Pilon. Well, the statute reads, ``Unless the agency
shows good cause for a failure to give notice to that person or
that the person otherwise had actual notice of the seizure.''
So I mean I think it has covered the bases.
Senator Biden. Wait a minute. How does that cover the
bases? You know, the example used in the book, I am told, and
in the hearings was, well, they are in prison. And the one guy
is in prison and he gets moved to another prison he didn't get
notice, and therefore the government cannot keep the property,
cannot dispose of the property.
Mr. Pilon. The statute reads that the court may extend the
period for filing a notice for good cause shown, and among the
good causes are that he----
Senator Biden. He is not at the address I sent it to.
Mr. Pilon. That is right.
Senator Biden. That is sufficient? I thought that was the
abuse you were trying to correct.
Mr. Pilon. No, that is not an abuse we are trying to
correct.
Senator Biden. I thought that is what characterizes the
abuse. The guy is not at the right address. You can't find him,
and what you have done is you have gone ahead and gotten rid of
his property. And doggone it, you should have followed further;
he had moved from that address.
Mr. Buffone. Senator Biden, I think it is a well-
established concept, as I know you are aware, in both civil and
criminal jurisprudence that a fundamental element of due
process is notice.
Senator Biden. Right.
Mr. Buffone. You simply don't proceed against an individual
or his property in other circumstances without service of
process upon him or some notice of the proceeding.
Senator Biden. Or a legitimate attempt to serve him.
Mr. Buffone. Well, in some circumstances even that
legitimate attempt wouldn't work, as you know, if you didn't
have personal jurisdiction over someone.
Senator Biden. That is right.
Mr. Buffone. Here, we have jurisdiction over the property.
Senator Biden. Yes.
Mr. Buffone. The jurisdiction of the court is based on the
$50,000 that was seized under the seat. So the question
becomes, given that circumstance where you don't have to go
through the normal process of service of process and other
forms of notification, what is fair and equitable. And I think
the Hyde bill requires nothing more than fundamental fairness.
Make an effort to locate those individuals that you know have a
claim and provide them with actual notice.
If for some reason you didn't do that and that rises to the
level of good cause--the individual absconded; you weren't
aware through the exercise of due diligence that they had, in
fact, been moved--then you can get additional time and try it
again. But the real abuse here is what happens to the person
who has a claim? The government knows it, and through no fault
of his own he simply hasn't been told that his property has
been confiscated.
Senator Biden. Well, see, that is the point I am trying to
make because I don't know that many--how often does that
happen? I mean, I am not aware--I may be wrong, but how often
does that happen? I mean, I have asked my staff. I have been
banging them over the head for the last 3 weeks.
OK, I agree with that. If, in fact, they haven't been
notified and the government really hasn't tried to notify
them--the old sheriff says, look, I tell you what I am going to
do down here. I am going to build myself the Strom Thurmond
Training Center, in South Carolina. I know old Jones is living
over there in Harford County. I know he has moved and I am not
going to tell him, and therefore we are going to confiscate. I
mean, I don't hear where that happens. I don't know what you
all are trying to correct here. Right now, you are required to
give notice, aren't you?
Mr. Pilon. Senator Biden, may I invite you to read
carefully the Hyde book, where you will see case after case of
the kinds of abuses we are talking about.
Senator Biden. On notice?
Mr. Pilon. Some of them involving notice, others----
Senator Biden. I am just focusing one at a time. I am
focusing on notice here.
Mr. Pilon. Well, frankly, I think this is probably a
relatively small aspect of the overall reform.
Senator Biden. Good. That is all I am trying to get at.
Mr. Buffone. Senator Biden.
Mr. Gallegos. Senator----
Senator Biden. Go ahead, finish your thought, and then you,
Gil.
Mr. Buffone. I will finish my thought. I think there is
certainly a kernel of wisdom in what you are saying. The NACDL
certainly doesn't want to press for reforms where reforms are
not necessary. I think there should be study and analysis of
the scope of the notice problem. If it is not a big problem
and, as you apparently believe, it is one that could be easily
solved----
Senator Biden. I don't know that it is a big problem. That
is what I guess I am trying to say.
Mr. Buffone. No one is looking for a ``gotcha'' provision
here for the guilty to get out of their responsibility for
forfeiture of property.
Senator Biden. Let me tell you what one of my hang-ups here
is in this whole thing. I remember when we started writing this
legislation years ago the ACLU, my allies in many things, did
not like it, period, period, period, in any way, shape or form,
number one. Number two, I know from experience now the black
helicopter guys don't like it, period, period, under any
circumstances, period.
So I am looking at this bill and it looks to me like
overkill. It looks to me like built into this bill is a big
chunk of ``gotcha.'' Now, maybe I have been here too long, and
that is why I am trying to be as precise or methodical as I can
about what provisions do what because it seems to me, taken
together, there are provisions in this bill that are overkill.
I mean, look, this crew sitting down in front of you to
your right, even though I am a defense attorney, they are my
buddies. I have been working with them for 27 years. Gil, for
example, can tell you when I think the cops are wrong, they
have got a problem with me. And I told them right up front I
think we have got a problem on this notion in terms of burden
of proof, and I told the Justice Department that. I think we
should change that.
So what I am trying to get down to here is I think if we
all sort of go back to what I said in the beginning--and I will
end with this after the witnesses, Mr. Chairman, say what they
have to say because I won't press this any longer. I think we
both exaggerate; both sides of this are exaggerating what is at
stake here, and that is I think there is a logical, reasonable
way to make about a third of the changes that the Hyde bill
does, or some compromise on those changes, to get this thing
straight.
But I don't see the notice provision. It seems to me that
the notice provision should be basically, look, did the
government make a good-faith effort to try to notify. If they
did, bingo, period, done, over. That is what I think. But the
way I read the Hyde bill, it goes a heck of a lot further than
that.
Now, again, I am taking too much time, Mr. Chairman, and as
usual you are indulging me and I appreciate it.
Mr. President, you wanted to say something, and Sheriff
Brown wanted to say something, and with the chairman's
permission, why don't you comment?
Mr. Gallegos. My understanding is that the sixth person you
asked about, even if they didn't receive notice, may come back
at a later time because of the extended time limits and make a
claim at that time that the government would have to defend.
And I think that is a real issue, and then the government would
have to prove maybe 10 years later that they gave notice and
that there may be some difficulty in that. So I think that that
is a practical problem with the notice issue and the time
limits to lay claim on that. And then you might have to give
them back the $50,000.
Senator Biden. Sheriff.
Mr. Brown. Senator Biden, in the late 1970's you and
Senator Thurmond gave law enforcement the greatest tool it has
had in years. If we are abusing it, let's punish the abusers,
but let's don't whip the whole class because Johnny misbehaved
in class.
Senator Biden. Well, let me conclude, and I don't want to
cut off Mr. Pilon and I don't want to cut off Mr. Buffone, but
let me say this. I hope there is enough, and I am confident
there is enough goodwill here that we get the defense bar, the
police organizations, the Justice Department, the Cato
Institute and other well-respected intellectual fora together
to figure out whether or not we can put together something that
makes sense here.
And I would just say in answer to Mr. Pilon's question
about the lop-sided vote, I will bet you if you asked 60
percent of the people who voted, because it is not their thing,
there is a bit of confusion about asset forfeiture. And I think
if we can sort of work our way through it, we may get something
done.
Mr. Chairman, my intention is that--and I can't guarantee
this, but as one Senator I can probably affect it. The Hyde
bill, as is, I am going to do all in my effort to make sure
does not become law, and I think I can probably do that in this
session.
Conversely, I say to my friends in law enforcement you have
to figure out and you have got to admit to the extent you can
where you, in fact, think the changes would work to protect
individuals, yet at the same time not hamper what you are
doing. And I think there is a middle ground here, and it
doesn't mean it is down the middle. There is a middle ground
here. I strongly encourage you all to do that, but I think we
can get something positive done here.
Mr. Chairman, I will yield to the----
Mr. Gallegos. Mr. Chairman, if I may just say something,
we, in fact, did try that in the House and were rebuffed at
every turn.
Senator Biden. Well, this is old Joe Boy you are talking to
now, so you have got somebody who will listen. And we may be
able to get something done because I think on both sides of the
aisle here, including the chairman and Senator Sessions and
others, there is a receptive ear to trying to figure out if we
can work this out.
I am not implying that either side has been unwilling. I am
just suggesting that we are where we are now and maybe it is
the time now to focus on the most egregious things. And that is
why I asked you, Mr. Buffone, if you only got one or two, what
were the most important things to change. And that is why I am
asking the police officers the reverse, what are the things
that are the least that they could handle in terms of the
practical application of civil forfeiture. What are the most
damaging aspects, in their view, of the Hyde bill?
Mr. Pilon. Senator Biden, the way you have couched the
matter puts us to a kind of Sophie's choice. You have said
which of your principles are you willing to abandon?
Senator Biden. You got it.
Mr. Pilon. That is right, and I think that there are a
number of us who think that justice is not a matter of a
utilitarian calculation. And it behooves you, if you are going
to do all you can to resist this bill, to show what it is that
is offensive about it, and I have yet to hear anything from the
other side, including your side, that shows what precisely it
is that you find offensive.
Do you find offensive the burden of proof shift?
Senator Biden. No.
Mr. Pilon. Apparently not. Do you find offensive the
innocent owner defense?
Senator Biden. Yes, the way you have it written.
Mr. Pilon. You do?
Senator Biden. The way it is written, yes.
Mr. Pilon. Well, in fact, the innocent owner defense is in
some respects weaker in this bill than is the case under
current law with respect to the scienter thing.
Senator Biden. I understand.
Mr. Pilon. And I realize your pride of authorship, and as
an author myself I can understand that. But there are times
when it seems to me that you have got to look at these issues
and say where are the real problems. And the real problems are
occurring out there in the world.
Senator Biden. That is exactly right.
Mr. Pilon. They are occurring in the form of people who are
utterly innocent and are losing their property because, as
Chairman Hyde said, the system is stacked against them. That is
what needs to be addressed, and in addressing it, it may turn
out that he has just struck upon the right principles for doing
it whereby we can get the guilty and allow the innocent to go
free.
Senator Biden. The bottom line is I do not believe that is
what the bill does. I do not think it does that.
Mr. Pilon. We need further hearings, I guess.
Senator Biden. Well, no. It is easy in this outfit. Do you
know what I mean? It is one of the strange things about a
democracy and the way the Senate works. So what I am doing is
inviting you to tell me what you think your bottom line is, for
me to determine personally whether or not I think it is
principled in terms of what I think the legislation should be.
Otherwise, you have an alternative. You can run for office and
you can be here and you can then decide. That is kind of the
way it works. It is a funny system.
But at any rate, I don't have anything more to say, Mr.
Chairman. I thank you for your time. I would like to work with
you all to see if there is a, ``principled way'' we can correct
the abuses without eliminating the system. And if we can, I am
prepared to do that. In the meantime, I don't think the Hyde
bill does that.
Thank you. Thank you, Mr. Chairman.
Senator Thurmond. Thank you, Senator. I just have a few
questions before we wind up.
Mr. Gallegos, in your statement you say that Federal civil
forfeiture provides State and local agencies with important
supplemental resources. Are these resources critical to many
agencies?
Mr. Gallegos. Absolutely, they are, Mr. Chairman. The civil
forfeiture statutes have provided funds, as has been asserted
here, for additional officers, equipment, and to fight the war
on drugs and for other purposes. And a reduction in the civil
forfeitures would, in fact, have a very profound effect on the
efficiency of law enforcement throughout this country, and
especially the fact that this very Congress is now looking at
cutting back on funds for State and local law enforcement,
especially in the area of drug interdiction and drug
enforcement.
Senator Thurmond. Sheriff Brown, how does equitable sharing
of forfeited assets help improve cooperation between local law
enforcement and Federal law enforcement?
Mr. Brown. Mr. Chairman, the 60 acres in South Carolina was
seized during a task force operation with Federal, State and
local law enforcement all working together to better the
community. So having this asset forfeiture and equitable
sharing gives all of us an opportunity to work together and get
the proceeds from our hard work.
Senator Thurmond. Sheriff Brown, I understand that up to 15
percent of the money that State and local law enforcement
receives from equitable sharing can be used to support
community-based programs. Can you explain how this money is
being used to benefit communities?
Mr. Brown. Yes, sir. Some of the monies, I know, have been
given to Boy Scouts of America. I have personally out of our
accounts given money to the Urban League in Greenville for
furtherance of drug education of young people who could not
afford to go anywhere to get it. So the money is being used, up
to 15 percent, in community projects all across the country.
Some of us obviously have councils at home and supervisors
at home that don't like to spend money, so the monies we use
are furthering our efforts to have the best training at our
training center, building a good training center to help
everybody.
Senator Thurmond. Mr. Hughes, what provision of the Civil
Asset Forfeiture Reform Act that was recently passed by the
House causes you the most concern and why?
Mr. Hughes. I brought out five points, Mr. Chairman, and
the one that bothers us the most----
Senator Thurmond. Speak into your loud speaker.
Mr. Hughes. The one that bothers us the most is the one
that Senator Biden brought up, and we were elaborating on that
and what that does. As you know, asset forfeiture is the
lifeblood of law enforcement organizations, and when you talk
about frivolous claims and when you talk about property, under
the criminal windfall provision the government sends notice to
a prisoner that his property is going to be forfeited, but
sends it to the wrong jail, the remedy currently is to give the
property back to the prisoner. Quite frankly, that is wrong; it
stinks.
Senator Thurmond. Mr. Buffone, you note in your testimony
that you believe the government should have the burden of
proving a civil forfeiture by clear and convincing evidence. It
appears to me that most areas of civil law require proof by a
preponderance of the evidence. Do any areas of civil law
currently require proof by clear and convincing evidence?
Mr. Buffone. No, Your Honor, Judge--excuse me--Senator
Thurmond, they do not.
Senator Biden. By the way, he is a judge, a general, and a
Senator. You can use any title and it will fit. [Laughter.]
Mr. Buffone. Senator Thurmond, no, to my knowledge it does
not, and I think there is a good reason for that. It is, first
of all, that civil forfeiture is one of the rare areas of the
law that are quasi-criminal. They are unlike other civil
proceedings because they are a hybrid proceeding involving both
aspects of civil and criminal law.
Second, traditionally the burden of proof and the standard
of proof is determined by allocating the risk of erroneous
fact-finding. And in civil forfeiture, the risk of erroneous
fact-finding is particularly unique because only the property
is in court and not the owner or the person who can defend it.
Senator Thurmond. Now, my last question is to Dr. Pilon. In
your prepared testimony, you described forfeiture as being
rooted in authoritarian principles leading to practices that
are utterly foreign to our first principles as a Nation. Isn't
it true that forfeiture has been authorized within the American
legal system since the founding years of our country,
especially in the area of admiralty law?
Mr. Pilon. Yes, and its use there was perfectly
understandable. It was because the customs duties, which were
the only revenue source for the Federal Government, unlike
today, were very important to the Federal Government. And so
when a ship captain did not pay the duties, the only way to get
custody or to remedy the matter was to seize the ship and its
cargo because the owner of the cargo and/or the ship was 3,000
miles away. So it was primarily for jurisdictional reasons, and
if the duties were not forthcoming, then, of course, the
forfeiture would follow.
Senator Thurmond. Senator Biden, do you have any more
questions?
Senator Biden. I was just going to say kind of like drug
trafficking.
Mr. Pilon. No, it isn't at all.
Senator Thurmond. Now, before adjourning the hearing, I
would like to place into the record a written statement from
the Federal Bureau of Investigation.
[The statement referred to appears in the appendix:]
Senator Thurmond. I would also like to place in the record
a letter from the Federal Law Enforcement Officers Association.
[The letter referred to appears in the appendix:]
Senator Thurmond. We will leave the hearing record open for
one week for additional materials to be placed in the record
and for follow-up questions.
Is there anything else to come before the hearing?
[No response.]
Senator Thurmond. If not, we stand adjourned, and I want to
thank all of you for your presence and your testimony.
[Whereupon, at 5:06 p.m., the subcommittee was adjourned.]
A P P E N D I X
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Questions and Answers
----------
Responses of Eric Holder to Questions From Senator Thurmond
Question 1. Mr. Holder, I understand that the Civil Asset
Forfeiture Reform Act as passed by the House would apply retroactively
to pending forfeiture cases. What impact would the retroactive
application of a forfeiture reform bill have in this area?
Answer. The civil asset forfeiture reform bill passed by the House,
H.R. 1658, would elevate the government's burden of proof in civil
forfeiture cases, and would apply that burden of proof not only to
future but also to pending cases. There are currently thousands of
forfeiture cases now pending in the federal courts and before federal
law enforcement agencies, including cases pending on appeal. Making the
change in the burden of proof apply retroactively to pending cases will
cause substantial disruption to law enforcement and judicial functions
and cause hundreds of cases to have to be re-tried.
Question 2. Mr. Holder, please explain how funds from the
Department's Asset[s] Forfeiture Fund are disbursed, and how they are
used in the Weed and Seed Program.
Answer. The primary purpose for existence of the Assets Forfeiture
Fund (AFF) is to provide a stable source of funds to cover the many
costs (including satisfaction of innocent lien- holder, victim, and
owner claims) associated with execution of a national asset forfeiture
program. Authority to spend AFF monies is established through a formal
allocation process. Each fiscal year, the Department's Asset Forfeiture
Management Staff (AFMS) requests budget submissions from the AFF member
agencies. AFMS analyzes the requests and prepares funding
recommendations, taking into account an estimate of the funding that
will be available, primarily from the upcoming year's revenues. The
allocation recommendations are forwarded to the Office of the Deputy
Attorney General for review and approval. Allocations are amended
during the year in response to changing needs.
Allocations are based on projected forfeiture program costs of the
member agencies. Allocations are reimbursements of eligible costs, not
grants based on estimated revenues to the AFF produced by a particular
agency's forfeiture activities. Since inception of the AFF, the
Department has purposely avoided a ``quid pro quo'' approach to
allocations to discourage a ``bounty hunter'' mentality in the federal
forfeiture program. The U.S. Marshals Service (USMS) consistently
receives the largest annual AFF allocation, approximately 60 percent of
the total. The USMS is both the custodian of property seized for
federal forfeiture, as well as the disbursement office for the program.
The USMS issues equitable sharing payments to state and local
governments, payments to innocent parties with a recognized interest in
forfeited property, and payments to contractors who provide custodial
and disposal services.
The highest priority for allocations must be satisfaction of the
business expenses of the forfeiture program, including asset management
and disposal costs, third party-payments, case-related expenses, awards
based on a forfeiture, and equitable sharing payments. Second, AFF
monies are made available to support general forfeiture program
expenses, including training, audits, ADP equipment, and contract
support.
Once these direct forfeiture program expenses are covered, if
sufficient funds are estimated to be available, allocations are
provided for other purposes, authorized under the AFF statute, that are
not directly related to the forfeiture program. These expenses include
support for state and local law enforcement officers engaged in joint
law enforcement operations with an AFF member agency, as well as
general federal investigative expense needs, including informant
awards, purchase of evidence and equipping of conveyances.
Investigative expense allocations are provided only when a portion of
AFF funds are appropriated for that purpose. Since fiscal year 1997,
Congress has permitted $23 million per year to be used for general
investigative expenses.
Since 1994, a portion of AFF funds have been made available each
fiscal year under our joint law enforcement operation authority to the
Department's Weed and Seed Program. To date, more than $55 million in
AFF monies have been provided for this purpose, including $9 million in
fiscal year 1999. The funds are used for, state and local officer
costs, primarily overtime salaries, for ``weeding'' activities in areas
designated as Weed and Seed sites. Determinations regarding what sites
receive AFF monies are made by the Executive Office for Weed and Seed.
In addition, the Weed and Seed program has benefited from excess
unobligated balances produced by the forfeiture program. At the end of
each fiscal year, after expenses are covered and earmarked funds are
reserved, a portion of the unobligated AFF balance is retained as
carryover to meet initial program expenses for the subsequent fiscal
year. If additional unobligated balances are available, this excess
balance, or surplus, may be used by the Attorney General, with prior
notification to Congress, to meet any federal investigative, litigative
or correctional expenses, or other needs of the Department of Justice.
During fiscal year 1999, the Attorney General used $6.5 million of the
available surplus to support the Weed and Seed program. These monies
may be used to make Weed and Seed grants to support both ``weeding''
and ``seeding'' activities in the designated Weed and Seed locations.
Funds for state and local officers in joint operations, for general
federal investigative expenses, and for other needs under our authority
to distribute surplus balances from prior years are sensitive to
declines in AFF revenues. If revenues decline sharply, these largely
discretionary uses will be affected first. Civil forfeiture reform
could result in a sharp decrease in AFF revenues, depending on the
nature of the specific reform provisions. For example, the Department
estimates that the House-passed reform bill will reduce annual revenues
by almost $200 million. This approach to the needed reforms will have a
serious adverse effect on AFF allocation levels and virtually eliminate
the possibility of end-of-year surplus funds. The Department supports
civil forfeiture reform but in a manner that avoids this result.
__________
Responses of Eric Holder to Questions From Senator Leahy
Question 1. One of the questions that always arises in the debate
over civil forfeiture is why the government cannot handle more civil
forfeitures as criminal forfeitures, so that property owners are
afforded the same due process protections as criminal defendants. You
gave a number of responses to this question on page four of your
written testimony. Among other things, you explained:
``[A] substantial majority of the DEA and FBI's forfeiture
cases are uncontested, often because the defendant in jail sees
no point in claiming property that most likely connects him to
the crime. Civil forfeiture allows us to dispose of these
uncontested cases administratively.''
Would you agree that other factors play a role in a property
owner's decision not to contest a civil forfeiture, including that the
property owner cannot afford an attorney, the cost of an attorney is
greater than the value of the property, or the owner cannot hope to
meet his burden of proof under existing civil forfeiture laws?
Answer. As an initial matter, the Department of Justice does not
agree, as implied in the question, that criminal forfeiture provides
additional due process protections for property owners. It is not
necessarily the case that persons other than the defendant would prefer
that the government use criminal forfeiture instead of civil
forfeiture. While the procedures governing third party claims are very
much the same in most respects, there are critical differences that
make civil forfeiture the better environment from the third party's
perspective in some cases, and criminal forfeiture the better one in
others.
In both cases, the third party is entitled to notice of the
forfeiture proceeding, and has a fixed time in which to file a claim.
In civil cases, however, the third party is able to litigate his claim
immediately. In criminal cases, third party issues are deferred until
after the criminal case against the defendant has been resolved.
In civil cases, the third party is entitled to a jury trial, but he
or she must prove that he was an ``innocent owner'' of the property. In
criminal cases there is no jury trial, but the third party only has to
prove that he or she was a ``superior owner'' of the property;
innocence is not required. Spouses, unindicted co-conspirators and
other associates of the defendant who have an interest in the property
used to commit the offense, and who collaborated with the defendant in
the commission of the crime, therefore tend to favor criminal
forfeiture. Truly innocent owners, on the other hand, may favor civil
forfeiture in some cases and criminal forfeiture in others.
For these and many other reasons, it is impossible to say that
third parties necessarily benefit if the government chooses criminal
forfeiture.
The Department of Justice believes that the principal reason a
substantial majority of DEA and FBI forfeiture cases are uncontested is
that the seizure in such cases was carried out in a lawful and proper
manner and that seized property was either used in the commission of a
crime (facilitating property) or is the proceeds of criminal activity,
and that the property owner knows or reasonably believes that the
United States would therefore prevail on the merits in any civil
forfeiture litigation. An additional reason may be, as stated in Deputy
Attorney General Eric Holder's testimony, the property owner's
knowledge or belief that the property may constitute evidence of a
crime or criminal activity on his part, and he therefore does not want
to admit or assert any relationship with the property.
We would agree that in some civil forfeiture cases, as in any other
type of civil litigation, a property owner or other potential plaintiff
may decide not to litigate a particular case based on other factors,
including economic; e.g. that the cost of litigation, including
attorney's fees, would ultimately be greater than the value of the
property.
With respect to the burden of proof, the Administration supports
revision of current asset forfeiture laws to require that the burden of
proof in a civil forfeiture case be on the government to prove by ``a
preponderance of the evidence'' that a crime was committed and that the
seized property was involved in that crime.
Question 2a. A study done by the Pittsburgh Press in 1991 concluded
that as many as 80 percent of the people who lost property to the
federal government through forfeiture were never charged with any
crime. This would appear inconsistent with your testimony that there is
a parallel criminal arrest and prosecution in the ``overwhelming
majority'' of civil forfeiture cases. Please explain this apparent
inconsistency.
Answer. The 80 percent figure in the Pittsburgh Press article
appeared to represent the percentage of forfeiture cases reviewed by
The Press which were completed through administrative forfeitures.
Administrative forfeiture is a non-judicial process by which certain
types of property seized by federal law enforcement agencies (cash or
monetary instruments, vehicles or other conveyances used to transport
illegal drugs, illegally imported property and personal property valued
at not more than $500,000) may be forfeited to the United States where
no person files a claim for return of the property. An administrative
forfeiture is a civil action against the seized property itself, and is
separate from any arrest or criminal prosecution of the property's
owner or any other person. No criminal charges are filed in any
administrative forfeiture proceeding. The Press appears to have
mistakenly assumed that because no criminal charge against an
individual was made or adjudicated as part of the administrative
proceeding by which the property was forfeited in 80 percent of the
cases the newspaper looked at, this meant that the forfeiture was
unrelated to any arrest or criminal prosecution in 80 percent of all
forfeiture cases. This assumption was, and is, in error. Based on a
review by the Department of Justice in 1996, the Department concluded
that there was a related or parallel federal or state criminal arrest
or prosecution in 80 percent of the cases where there was a seizure for
forfeiture.
Question 2b. Please provide the committee with specific numbers for
the past five years of the people who had their property seized by the
federal government who were also charged with a crime.
Answer: The Department of Justice does not maintain records showing
the specific number of individuals from whom property was seized by the
federal government who were also charged with a crime, whether federal
or state. There is no existing database that provides the government
with a list of all properties seized and forfeited, which is also
cross-referenced to those persons who were arrested in connection with
the specific seizure by either federal or state authorities. Many
criminal cases are related to corresponding administrative, civil
judicial and criminal forfeiture cases. These cases may be resolved in
a variety of ways, including litigation, plea agreements, and/or
settlement agreements where the defendants or others with an interest
in the property either agree to forfeit the property or otherwise do
not pursue the forfeiture administratively or judicially. To determine
those property owners who have had their property seized for forfeiture
and were also charged with either a federal or state crime would
require a manual review of each case file for each of the last five
years.
Question 3. When the government has the choice of instituting
either a criminal or a civil forfeiture proceeding, what are the
relevant considerations, and who is responsible for making the final
determination?
Answer: There are numerous considerations that go into the decision
whether to file a forfeiture action criminally, as part of a criminal
indictment, or civilly, as either an administrative forfeiture or a
civil judicial forfeiture. The decision is made by the Assistant U.S.
Attorney assigned to the case, in consultation with the seizing agency,
if property has been seized.
The most important consideration is whether Congress has enacted
statutory authority for both civil and criminal forfeiture, or only for
one or the other. Most forfeiture statutes authorize only civil
forfeiture, and some recently- enacted statutes authorize only criminal
forfeiture. In those instances, the government has only one choice as
to how to proceed.
If both types of forfeiture are authorized, the first consideration
is whether the forfeiture is contested. Uncontested forfeitures are
generally handled administratively (i.e., as civil forfeitures handled
exclusively by the seizing agency), even if there is a parallel
criminal prosecution. A great many forfeitures fall into this category.
If the forfeiture is contested, and the government has the option
of proceeding either criminally or civilly, the following factors come
into play:
1. Is there going to be a criminal prosecution? Criminal forfeiture
is only available if there is a criminal conviction. If there is no
prosecution--because, for example, the defendant is dead or is a
fugitive, is abroad and cannot be extradited, or cannot be identified--
there can be no criminal forfeiture.
2. Is the defendant being prosecuted for the same crime as the one
leading to the forfeiture? In criminal forfeiture, the court may only
order forfeiture of the property involved in the offense for which the
defendant is convicted. If a drug dealer, for example, is convicted of
conducting a certain drug sale, only the proceeds of, or property used
to facilitate, that particular sale may be criminally forfeited.
Proceeds obtained by the defendant from other drug sales would have to
be forfeited civilly.
3. Are there third party claims to the property? Criminal
forfeiture is limited to the property of the defendant. If a defendant
uses a family member's property to commit a crime, that property may
not be forfeited in the criminal case, even if the family member had
full knowledge of the crime and consented to the use of his or her
property to commit it. That is because the family member is not a party
to the criminal case. In such cases, the government must file a
parallel civil forfeiture.
4. Was the property transferred after the crime to a third party?
The criminal forfeiture statutes bar a defendant from transferring
property subject to forfeiture to innocent third parties for the
purpose of avoiding forfeiture. Only if the third party is a ``bona
fide purchaser'' can the third party successfully challenge a
forfeiture action against property he did not acquire until after it
was involved in an offense. The civil forfeiture statutes have no bona
fide purchaser requirement, thus allowing criminals to defeat civil
forfeiture by transferring property to innocent donees. To avoid this
result, the government must proceed with the forfeiture criminally.
5. Should the forfeited property be returned to victims as
restitution? The criminal forfeiture statutes allow the Attorney
General to restore forfeited property to victims; the civil forfeiture
statutes do not, except in cases where the victim is the ``owner'' of
the property and thus could have filed a successful judicial challenge
to the forfeiture. For this reason, the government must use criminal
forfeiture in cases involving restitution to non-owner victims.
6. Is the case ripe for prosecution? In many cases, the government
must seize property to prevent its being dissipated, hidden, or
transferred abroad before the grand jury has completed its
investigation of the underlying criminal case. In such cases, the
property is generally seized under the civil forfeiture laws, and the
government then files a civil forfeiture action which may or may not be
stayed until a grand jury indictment is returned. It is quite common
for cases to begin as civil forfeitures but later be turned into
criminal forfeitures for this reason. See United States v. Candelaria-
Silva, ------ F.3d ------, 1999 WL 16782 (1st Cir. Jan. 22, 1999)
(there is nothing improper in the government's beginning a forfeiture
case with a civil seizure, and switching to criminal forfeiture once an
indictment is returned; it is commonplace).
7. What prosecutorial resources are available? Forfeiture law is
complex and requires specific expertise. In many U.S. Attorneys'
Offices, the forfeiture experts are in the Civil Division of the
office, and hence are inclined to bring cases civilly where all other
factors are equal. In other U.S. Attorneys' Offices, a high percentage
of the criminal prosecutors have been trained in criminal forfeiture
law, or the forfeiture experts are co-located with those prosecutors.
In those offices, the inclination is to file forfeiture actions
criminally, where all other factors are equal.
Question 4. The Justice Department opposes the appointment of
counsel for indigent claimants in civil asset forfeiture cases, and
argues that claimants are already adequately protected by the Equal
Access to Justice Act (``EAJA''). That statute provides that a court
shall award fees and expenses to certain prevailing parties (i.e.,
small businesses and individuals whose net worth does not exceed $2
million) in civil actions brought by or against the United States,
``unless the court finds that the position of the United States was
substantially justified or that special circumstances make an award
unjust,'' 28 U.S.C. Sec. 24120(d)(1)(A).
a. Over the last five years, (i) how many times has a
prevailing claimant in a civil asset forfeiture action sought
an award of fees and other expenses under EAJA? (ii) how many
times has the United States opposed such an award? (iii) how
many times has the claimant prevailed? and (iv) what percentage
of the claimant's actual fees and costs were awarded?
Answer. The Department of Justice does not maintain records showing
how many times the prevailing claimant in a civil asset forfeiture
action sought an award of fees and other expenses under EAJA, how many
times the United States opposed such an award, how many times the
claimant prevailed or what percentage of the claimant's actual fees and
costs were awarded.
However, the Department of Justice was able to identify payments
made during the last five fiscal years (fiscal year 1994 through fiscal
year 1998), totaling $625,517.51 from the Assets Forfeiture Fund in
attorneys' fees and other costs assessed against the Department under
the Equal Access to Justice Act in forfeiture cases broken down as
follows:
Fiscal year 1994: 4 claims totaling $356,920.
Fiscal year 1995: 4 claims totaling $102,276.
Fiscal year 1996: 1 claim totaling $4,700.
Fiscal year 1997: 1 claim totaling $150,608.
Fiscal year 1998: 1 claim totaling $11,013
b. EAJA is, in effect, a ``bad faith'' provision; prevailing
parties cannot recover under EAJA unless they can show that the
position of the United States was not ``substantially
justified.'' Presumably, the position of the United States is
``substantially justified'' with respect to most civil asset
forfeitures. If so, then most indigent property owners whose
property is seized by the Government will not be able to
recover under EAJA, even if judgment is entered in their favor.
Would the Department object to a more automatic fee-shifting
provision in civil forfeiture cases, such that a claimant who
substantially prevailed would be entitled to reasonable
attorney fees and other litigation costs reasonably incurred by
the claimant?
Answer. The Department of Justice opposes any revision of the Equal
Access to Justice Act to permit a person to recover from the government
attorneys, fees or other litigation costs in any case where the
position of the United States was substantially justified. Under EAJA,
a prevailing claimant is entitled to recover unless the government's
position was substantially justified at all stages of the litigation.
United States v. Real Property known as 22245 Dolorosa Street ------,
F.3d ------, WL 692000 (9th Cir. September 8, 1999). In other words, if
the government starts out with a case that is substantially justified,
but later learns through discovery or otherwise that its position is
not what it seemed at the outset, the government must abandon its
position or be subject to EAJA fees. Id. Thus, a provision that awarded
attorneys' fees beyond what EAJA provides would provide a windfall for
claimants where the government was justified at every stage of the
proceeding but for whatever reason failed to convince a jury that it
should prevail. We cannot support such a rule.
Question 5. Please explain whether the Department would support a
provision authorizing the appointment of counsel in a civil forfeiture
case under any of the following conditions (and if not, why not):
a. where,the Government seeks to forfeit real property that is
being used as a primary residence?
b. where the claimant is eligible for legal assistance under
the poverty guidelines established by the Legal Services
Corporation (45 C.F.R. 1611)?
c. where the claimant is also a defendant in a related Federal
criminal case, and is represented by a court-appointed attorney
in that case?
Answer. The Department of Justice is opposed to authorizing the
appointment of counsel in civil forfeiture cases. We believe that the
availability of attorney's fees under the Equal Access to Justice Act
provides the needed protection for innocent property owners in civil
forfeiture cases. In addition, indigent claimants may file a petition
In Forma Pauperis for waiver of the cost bond.
Question 6. As the Senate considers civil forfeiture reform, we
need to know how much various local law enforcement agencies gain from
using federal equitable sharing in asset forfeiture. Please provide the
Committee with a list of all shared money from asset forfeiture for all
law enforcement agencies nationwide for the past three years, with
specific information on the amount of cash and type of asset, and the
police agency and location participating in the equitable sharing.
Answer. Enclosed, on a computer disk, is information from the
Consolidated Asset Tracking System (CATS) for calendar years 1996,
1997, 1998 and 1999. We are providing it on disk because the complete
printouts of the data contained on the disk is over 1,500 pages. For
each reported year, there are two saved files. The first is a Equitable
Sharing Distribution Summary Report listing the amount, in dollars, of
sharing received by each recipient state or local law enforcement
agency. The second is a Equitable Sharing Distribution Detail Report,
which includes more specific information on the type of assets shared
(cash or currency, vehicles, real property, etc.), as well as monetary
value of such shared assets, listed by recipient state or local law
enforcement agency NCIC/ORI code number. The NCIC/ORI numbers are
utilized in CATS for agency identification and asset tracking purposes.
__________
Response of James E. Johnson to a Question From Senator Thurmond
Question. What reforms has Treasury implemented internally in
recent years regarding its use of civil asset forfeiture?
Answer. Since the establishment of the Treasury Forfeiture Fund in
1992, the Treasury forfeiture program has always set as one of its
principal goals the safeguarding of individual rights. While civil
forfeiture actions can be pursued either administratively by the
seizing agency or judicially in court, they always proceed against
property and not persons. It is, however, readily apparent that
property, by definition, cannot exist without someone, somewhere,
having an ownership or other interest in it. Fairness demands that
those persons having any interest in seized property be notified of the
seizure and the intent to forfeit so that they may have an opportunity
to come forward and be heard. In Treasury's forfeiture program, such
notice begins a process designed to safeguard the rights of affected
parties. Some of the main points of this process include:
Personal Notice--This is the most direct form of notice and
occurs whenever the true owner or owners of the property are
known or if there is a valid lien against the property held by
an individual or an institution. In these circumstances, these
persons must be extended personal notice of the seizure and
intended proceedings by registered or certified mail. We have
even held discussions with the Bureau of Prisons to be certain
that interested parties who may be incarcerated actually
receive the notice of intent to forfeit.
Publication--To be sure that anyone with an interest in the
property is not overlooked, even if they are unknown to the
seizing agency, personal notice is supplemented by publishing a
notice of the specific seizure and pending proceedings in a
newspaper of general circulation.
The Claim and Cost Bond--Upon being notified of the seizure
of the property, the interested person may choose to contest
the forfeiture of the property by filing a claim and cost bond.
This action stops the investigative agency from ruling on the
forfeiture and requires that the matter be resolved in civil
court. At this point the action is referred to the U.S.
Attorney. If an interested person cannot afford the cost bond,
he or she may file an in forma pauperis petition to have the
requirement of the cost bond waived and still move the matter
into the judicial arena.
Petitions for Remission or Mitigation--Filing a claim and
cost bond is only one course of action available to the
interested party. Alternatively, the party may acknowledge the
validity of the seizure and file what is known as a petition
for remission or mitigation. In this course of action, the
party is asking, in effect, that the property be pardoned. For
a remission, the party must prove that they have an interest in
the property and that they had no knowledge that the property
would be used illegally. If the petition for remission is
granted, the government will return the property or make a
payment equal to the petitioner's interest in the property. A
mitigation is a partial pardon and usually results in the
government returning the property on the condition that the
petitioner pay a penalty.
We go to great lengths to ensure that federal civil forfeiture is
not a covert activity bereft of concerns for process and rights.
Whether civil forfeiture is accomplished administratively by the
investigative agency or judicially in a court of law, the Department of
the Treasury insists that it always proceed through a very structured
and delineated process--a process that comprehensively notifies
affected parties, invites arguments against the intention to forfeit,
accommodates the indigent and offers opportunities to achieve
compromise resolutions short of forfeiture.
To further ensure that the Department of the Treasury and its law
enforcement bureaus are vigilant in seeing to it that due process is
fully granted in civil asset forfeiture cases, our Executive Office for
Asset Forfeiture issued a policy directive in 1995 on the timely
processing of administrative and civil judicial forfeitures. Twice each
year, Treasury enforcement bureaus are asked to examine their open
civil forfeiture cases and determine how many have exceeded what are
general timeliness standards in the administrative and judicial
categories. If more than a minimal amount are found to be untimely,
i.e. older than six to nine months in the administrative category or
older than two years in the judicial category, then a report on these
cases is forwarded to our Executive Office for Asset Forfeiture. This
policy promotes active caseload monitoring so that all seized property
will either proceed to forfeiture or be returned to an interested party
without suffering any undue delay.
Additionally, in cases involving real property, seizures are
usually accomplished with explicit instructions from a court.
Typically, when a warrant of arrest in rem for the real property is
issued, our agents serve the warrant on the individuals occupying the
premises and post a copy of the notice of intent to forfeit in a
conspicuous place on the property. Our institution of this post and
walk policy, as it is known, has allowed claimants to remain in
possession of the premises while contesting the forfeiture proceeding
in court.
Our management of the forfeiture program and the use of its funds
are very important. We have taken measures in several other areas to
ensure that we effectively fulfill our responsibilities to the public.
We have conducted comprehensive training for all Treasury forfeiture
personnel--from our special agents and their supervisors to our seized
property managers. We have repeatedly underscored the importance of
considered and responsible seizures and the need for the pre-seizure
planning that makes these possible. We have emphasized quality in the
management of seized property so that its value, whether the property
is forfeited or returned, is never carelessly diminished.
In sum, we believe that we have implemented appropriate
administrative measures to achieve our goal of having a civil asset
forfeiture program that safeguards individual rights. While specific
refinements to the asset forfeiture process would be useful, they
should not be allowed to undo asset forfeiture's longstanding record of
accomplishment in serving the best interests of our citizens. If the
use of civil forfeiture is curtailed, it will seriously undermine our
effectiveness in investigating drug trafficking, money laundering,
fraud and other financial crimes.
__________
Responses of Bonni G. Tischler to Questions From Senator Thurmond
Question 1. If the Congress changed the government's burden in
civil forfeiture to ``clear and convincing evidence,'' what impact
would this have on border cases?
Answer. H.R. 1658 would require the Government to establish the
forfeitability of property by clear and convincing evidence. This
higher burden of proof will more adversely affect the Customs Service
than other law enforcement agencies, such as the Drug Enforcement
Administration or the Federal Bureau of Investigation. Most of Customs
seizures occur at the borders with the discovery of property imported
in violation of law, such as illegal drugs or adulterated foods.
Generally in these cases there is neither any prior notice of illegal
activity nor any opportunity for previous investigative work. Thus, the
owner of the property is in the best position, and perhaps the only
one, to know the purpose of the shipment of goods and any mitigating
circumstances.
Currently, the Government must establish the appropriateness of a
seizure, and therefore the forfeiture, under a probable cause standard,
which makes hearsay evidence admissible (a crucial point). The claimant
then must establish by a preponderance of the evidence that the
property was not used illicitly. If the claimant succeeds in such a
showing, the Government then bears the burden to demonstrate by a
preponderance of the evidence that the forfeiture is justified. This
has been the statutory scheme for civil forfeitures for over 200 years,
the constitutionality of which is beyond challenge. See Calero-Toledo
v. Pearson Yacht Leasing Co., 416 U.S. 663 (1974).
BORDER FORFEITURES
It is important for national self-protection reasons not to
increase the burden of proof for border forfeitures. Congress has long
enacted civil forfeitures to ensure strict compliance with the Customs
laws. Desiring aggressive enforcement at the border to protect the
nation from contraband and to protect the revenue, Congress placed the
burden of proof on claimants to show that property seized for
forfeiture was not illegally used. Congress built in the protection
that the Government would have to demonstrate to the court, probable
cause for forfeiture before a claimant was required to meet his burden.
Congress also vested the Secretary of the Treasury with broad
remission/mitigation authority to temper the severity of any
forfeiture's incurred. See 19 U.S.C. 1618.
In establishing this scheme, Congress realized that any other rule
would seriously impede enforcement of laws at the borders. This is
precisely why Congress created in rem forfeitures which focus on the
property's use (rather than the property owner's state of mind, as in
criminal cases). Realizing that property owners, not Customs, are in
the best position to know how and why property was used, Congress
placed the burden on them to explain why property seized pursuant to
probable cause was not subject to forfeiture.
H.R. 1658 fundamentally alters this long-standing statutory rule
and will make civil forfeiture more like a criminal case, focusing on
state of mind, rather than illegal use of the property, with the result
that the Government will lose one of its few tools against violators.
This is because unlike investigative cases where the Government can
attempt to establish intent before conducting a seizure, in almost all
cases at the border Customs comes across a forfeiture violation without
any prior information. Given this fact, and the sovereign's interests
in protecting its borders, it makes imminent sense to allow the
Government to institute border forfeiture actions on probable cause
rather than clear and convincing evidence or a preponderance of the
evidence.
OTHER FORFEITURES
Imposing the stringent burden of establishing by clear and
convincing evidence will adversely affect other forfeitures as well. To
cite a few examples:
In United States v. Four Million, Two Hundred Fifty-Five Thousand,
etc., et al., 762 F.2d 895 (11th Cir. 1985), the court found, among
other evidence, that (1) money was delivered by Colombian couriers,
many of whom were unidentified, (2) the couriers did not request and
even at times refused receipts for cash, (3) that on one occasion the
couriers delivered the cash in the trunk of a car equipped with a
secret compartment, and when followed, abandoned the car, (4) the cash
consisted of small and medium denomination bills, and was delivered in
suitcases, cardboard boxes, duffel and flight bags, (5) the alleged
``sellers'' of cash were not on record with Customs as exporters or
importers, and (6) the sheer amount of money involved, over
$242,000,000 during a period of less than 8 months, established
probable cause to believe that a ``substantial connection'' existed
between the forfeited money and narcotics transactions. That the
government's evidence was circumstantial and did not show a connection
with a particular narcotics transaction was found irrelevant by the
court; the circumstances supported a finding of probable cause. Using
these facts as a basis, the government would not have met the burden of
``clear and convincing'' evidence and the money would not have been
forfeited.
In United States v. Brock, 241 U.S. App. D.C. 324, 747 F.2d 761
(D.C. Cir. 1984), the forfeited property consisted of jewelry found in
the attic of a house. Drugs, money, a gun, and narcotics equipment were
found in a different room of the same house. The D.C. Circuit noted
that ``there was no direct evidence to connect the jewelry with the
claimant's alleged narcotics activities,'' although they affirmed the
judgment of forfeiture. The court explained that ``circumstantial
evidence and inferences therefrom are good grounds for a finding of
probable cause in a forfeiture proceeding.''
In United States v. $13,000 in United States Currency, 733 F.2d 581
(8th Cir. 1984), the forfeited money was found in the shoulder bag of a
person who previously had been charged with conspiracy to distribute
cocaine, but who was released on bond. Also found within the bag were
plastic bags, tape, and rubber bands. The seizure was made at an
airport, the person was using an assumed name, and was about to board a
plane for New York. The person had placed several toll calls to the
same apartment in New York that he had called just prior to his arrest
on the cocaine conspiracy charge. From this circumstantial evidence,
and in the absence of any direct evidence of narcotics, the 8th Circuit
concluded that the person intended to use the $13,000 in exchange for a
controlled substance.
HEARSAY EVIDENCE
A point that cannot be ignored is that the increased burden of
proof would preclude the Government from using hearsay evidence to
establish border forfeitures. Currently, a law enforcement officer can
offer as testimony, hearsay information from a confidential informant
or cooperating witness, in support of the forfeiture. See e.g., United
States v. Parcel of Land and Residence at 18 Oakwood Street, 958 F.2d 1
(1st Cir. 1992); United States v. One 1986 Chevrolet Van, 927 F.2d 39
(1st Cir. 1991); United States v. 1964 Beechcraft Baron Aircraft TC-
740, 691 F.2d 725 (5th Cir. 1982). Under the Hyde bill, this use of
hearsay would no longer be allowed, complicating or making impossible
certain cases (e.g., where the witness is unavailable or where the
witness is a confidential informant and cannot testify without
jeopardizing his or her life or compromising ongoing criminal
investigations).
Question 2. As you know, seized conveyances sometimes devalue from
aging, lack of care, inadequate storage, and other factors while
waiting for forfeiture. What is Customs doing to protect the value of
seized assets prior to the government being successful in a forfeiture
action?
Answer. The Department of the Treasury maintains a national seized
property contract, by which the U.S. Customs Service, and other
Treasury Departments, consign seized property for storage and upkeep. A
major requirement of this contract is that the contractor must maintain
the seized property in the same or better condition than when
originally seized by the government. This unique requirement mandates
that a maintenance plan is tailored for each asset transferred to the
Customs contractor for storage. The use of such a program is required
for seized property, because in the majority of cases the property is
returned to the original owner upon the payment of a fine in lieu of
forfeiture or a mitigated penalty.
The Customs Service has worked closely with the contractor to
establish maintenance plans and to hire specialized subcontractors to
store and maintain all types and quantities of seized items. Depending
on the type of property consigned various factors are taken into
account. For example, vintage and exotic automobiles are stored in
humidity-controlled facilities and the vehicles are checked each month
for routine maintenance requirements. Vessels are routinely removed
from the water where appropriate, and all essential equipment removed
and properly stored and covers installed. Aircraft receive special
review by a FAA certified mechanic, the logbooks are secured and stored
in a hangar or appropriate storage facility. Before any aircraft or
vessel is transported to a storage facility, our contractor ensures
they meet FAA Certifications and Coast Guard Vessel Safety Standards.
Should a conveyance fail a maintenance review, the Customs Service may
authorize repairs for such items as broken windows, bad tires,
batteries and safety equipment. All storage facilities utilized by the
contractor must meet government security requirements to protect
against loss or pilferage. While no action can be taken to halt the
depreciation of a seized article from the date of seizure to the date
of adjudication, Customs has taken extraordinary measures to maintain
the value of seized property until a disposition is reached by the
court.
Question 3. I understand that the government is currently not
liable when property that it has seized is damaged while in its care,
even when the property is eventually returned to the owner. Would it be
fair to hold the government responsible when it negligently damages
property while in its care?
Answer. Normally, the government is considered to be self insured,
however in regard to the Department of the Treasury's national seized
property contract, the contractor is required to carry an insurance
policy covering all seized property that has been placed in contractors
custody. The majority of property seized by the Customs Service is
consigned to the contractor for storage with the only exceptions being
narcotics, weapons, and currency. Should property be damaged while in
the hands of the government or the contractor, it will be repaired
prior to return to the owner, or in the case of a complete loss, the
owner will be paid the fair market value of the items destroyed. This
policy also insulates the government in case of natural disasters such
as hurricanes, tornadoes, and fires which can destroy seized property
regardless of storage method or location.
__________
Response of Richard Fiano to a Question From Senator Thurmond
Question. Mr. Fiano, I understand that the courts have rejected the
fugitive disentitlement doctrine, and fugitives are allowed to
challenge civil forfeitures in Federal court while they remain in
another country outside the reach of our law enforcement. Is this a
problem in drug cases, and should Congress prohibit such fugitives from
challenging civil forfeitures?
Answer. In response to conflicting conclusions by the Federal
Courts of Appeal considering the issue; the U.S. Supreme Court rejected
the application of the fugitive disentitlement doctrine in civil
forfeiture proceedings. In the absence of legislation barring fugitives
from challenging civil forfeitures, courts must now resort to
protective orders, sanctions and other ad hoc devises to prevent
fugitives in a drug cases from abusing the discovery rules available in
civil forfeiture proceedings or otherwise taking advantage of their
fugitive status when litigating a civil forfeiture. These devises,
however, are not adequate to address the problems that arise when
fugitives contest civil forfeitures. Moreover, if a forfeiture action
involves a business, perishable property, or any other asset whose
value depreciates with time, the government cannot simply seek a stay
in the civil case until the fugitive is apprehended. Lastly, the law
should not facilitate the spectacle of a defendant who successfully
thwarts the jurisdiction of the court in the criminal prosecution while
simultaneously invoking such jurisdiction in a related civil forfeiture
proceeding. The following provision addresses these concerns and I hope
that you and the other Committee members will consider this remedy in
any future legislation affecting civil forfeiture.
``Any person who, in order to avoid criminal prosecution, purposely
leaves the jurisdiction of the United States, declines to enter or re-
enter the United States to submit to its jurisdiction, or otherwise
evades the jurisdiction of the court in which a criminal case is
pending against the person, may not use the resources of the courts of
the United States in furtherance of a claim in any related civil
forfeiture action or a claim in third-party proceedings in any related
criminal forfeiture action.''
__________
Response of Gilbert G. Gallegos to a Question From Senator Thurmond
Question. Mr. Gallegos, are you concerned that fundamental changes
in Federal civil forfeiture laws might have a ripple effect, causing
States to greatly restrict their civil forfeiture laws?
Answer. The question of possible ramifications on State forfeiture
laws stemming from a fundamental reform of Federal law depends solely
on the type of reform enacted by the Congress. The success of asset
forfeiture in helping to rid our communities of the scourge of crime
and drugs, as well as the deterrent effect that it has on individuals
considering a life of crime, is unquestioned. However, as I stated in
my testimony before the Subcommittee, there are certain reforms that
could be enacted which would not weaken law enforcement's use of this
important crime-fighting tool and would ensure that the property rights
of law abiding citizens are protected.
The reforms incorporated in H.R. 1658, as passed by the House of
Representatives, overstep the bounds of what the Fraternal Order of
Police would consider appropriate reform of existing forfeiture laws.
Enactment of legislation which mandates the return of a criminal's,
ill-gotten gains for an administrative error, places an unacceptably
high burden of proof on the government, and establishes an ``innocent
owner'' defense that allows criminals and drug dealers to pass on their
property through sham transactions, would set a bad precedent for the
States to follow when considering possible reform initiatives.
However, codifying in law the administrative reforms established by
the Justice and Treasury Departments and the holdings of the Supreme
Court on this issue may actually have a positive effect on forfeiture
in State and local jurisdictions. These provide a firm basis from which
to draft legislation which would adequately address the concerns of
both law enforcement officials and anti-forfeiture advocates.
As I stated in my testimony before the Subcommittee, the Fraternal
Order of Police believes that while existing forfeiture laws are not
perfect, it is of critical importance that any contemplated revision
does not hamper the ability of law enforcement to separate the proceeds
of illegal activity from criminals and drug traffickers.
__________
Response of Gilbert G. Gallegos to a Question From Senator Leahy
Question. H.R. 1658's ``innocent owner'' provision protects bona
fide purchasers for value who were, at the time of their purchases,
reasonably without cause to believe that the property was subject to
forfeiture. Please explain your contention that this provision would
allow criminals to pass on their fortunes ``through sham
transactions.''
Answer. In the decision of Bennis v. Michigan, the Supreme Court
held that the Constitution does not require an ``innocent owner''
defense in civil forfeiture statutes. The Fraternal Order of Police
believes, however, that this is an important provision which should be
included in any final civil asset forfeiture reform legislation. One
that enables property owners who take certain reasonable steps to
defend against the government's claims.
During my testimony before the Subcommittee, I stated that property
owners must have the opportunity to defeat a forfeiture action, if, at
the time of the criminal offense, they had no knowledge of the illegal
use of their property; or upon learning of the illegal activity, took
all reasonable steps to revoke permission for the use of their
property. In addition, I stated that a person should be considered an
innocent owner if they were a bona fide purchaser for value and were,
at the time of purchase, reasonably without cause to believe that the
property had been used for criminal purposes.
It was never the contention of the Fraternal Order of Police that
protecting a bona fide purchaser for value would allow criminals to
pass on their fortunes ``through sham transactions.'' That statement
referred to our position with respect to Sec. 2 of H.R. 1658, which
creates new section 981(j), subsection (6)(C)(i)(II) of 18 USC. This
section states, among other things, that a person is also to be
considered an ``innocent owner'' if they acquire ``an interest in
property through probate or inheritance.'' Thus, under the provisions
of H.R. 1658, a criminal could be allowed to amass sizable illegal
fortunes and then pass it on legitimately to their children, spouses,
or associates. This could place normally forfeitable assets into the
hands of individuals who may or may not have had prior knowledge of
criminal offenses committed with the property or purchased with the
ill-gotten gains of a crime.
Allowing individuals to maintain possession of the means of a
criminal act or criminal proceeds simply because they obtained the
property through a divorce settlement or inheritance could create a
loophole for criminals and drug traffickers not available under current
law. Therefore, it is not outside the realm of possibility to envision
situations where a criminal who believes that the civil forfeiture of
their property is imminent, could pass on his ill-gotten gains through
``sham transactions.''
Additional Submissions for the Record
----------
Prepared Statement of the Federal Bureau of Investigation
THE FBI'S USE OF CIVIL ASSET FORFEITURE TO ADDRESS MAJOR CRIME PROBLEMS
The civil asset forfeiture statutes are important tools which the
FBI is using to attack some of the most critical criminal and national
security threats facing the United States at the close of the 20th
Century. Money is the lifeblood of the vast majority of the criminal
and terrorist organizations against which the FBI is directing its
resources. While the existing forfeiture statutes are not perfect, they
enable the FBI to disrupt and dismantle dangerous enterprises by
destroying their financial infrastructure. In many instances it is not
possible to convict the property holder, and thus civil forfeiture
offers the only potential means for achieving this objective.
Much of the recent discussion of civil asset forfeiture has focused
on its use in drug and money laundering investigations, particularly as
it relates to the seizure of vehicles and cash. Although the FBI also
uses asset forfeiture extensively in drug investigations, it is
important to recognize the other types of cases in which civil asset
forfeiture is utilized. In many of these instances, the forfeited
assets are ultimately returned to the victims of the crime.
CIVIL ASSET FORFEITURE IN INTERNATIONAL TERRORISM CASES
The FBI has recently begun to use civil asset forfeiture to
dismantle the financial structure of groups which are, involved in
international terrorism. Certain of these organizations raise money
from expatriates living in the United States, often by misrepresenting
how the funds will be used. These monies are then laundered through
various banks accounts and transferred out of the country to fund
terrorist activities. By working with foreign law enforcement and
intelligence agencies, the FBI has been able to obtain evidence
sufficient to seize bank accounts containing these funds. These cases
must be done using the civil statutes since the seizure is ultimately
based on foreign crimes and the terrorists are not available for
prosecution in the United States.
CIVIL ASSET FORFEITURE IN FRAUD CASES
While court-ordered restitution is a valuable remedy, it is often
the case that a very small percentage of the restitution which is
ordered is ever paid. In many instances, by the time restitution is
ordered at sentencing the defendant is able to claim that he or she is
unable to make any substantial payments. Under the criminal forfeiture
laws, assets can usually only be restrained if the defendant has been
located, arrested, and convicted. The civil asset forfeiture statutes
provide a means whereby criminal proceeds can be immediately restrained
at the time they are discovered by law enforcement before they can be
wired out of the country, transferred to relatives or associates, or
used to maintain an extravagant lifestyle. This ensures that the assets
will be available to be returned to the victims, whether they are
elderly victims of telemarketing fraud, government agencies, banks,
health insurance companies, etc.
The return of forfeited assets to victims is one of the major goals
of the FBI asset forfeiture program. The FBI refuses to allow forfeited
funds to be used to fund law enforcement if it is at all possible to
return those funds to victims. One of the problems with the existing
civil forfeiture statutes is that they limit the instances in which
funds can be returned to the victims of the crime. The FBI strongly
supports any legislative proposals which will increase its ability to
return money to the victims of crime.
CIVIL ASSET FORFEITURE IN INTERNATIONAL MONEY LAUNDERING CASES
For a number of reasons, including the gains in our stock market
and the stability of our currency, the United States is a favored
location for international organized criminal organizations to invest
the proceeds of foreign crimes. This is particularly true with regards
to groups operating in Eastern Europe and Asia. These groups operate
without regard to international borders, committing crimes in many
foreign countries while the whereabouts of the leadership is often
unknown. While the United States may never be able to identify, arrest,
and convict the leaders under United States law, by cooperating with
foreign law enforcement agencies it is sometimes possible to develop
enough information to seize and forfeit the assets of these groups. The
resulting funds are restored to foreign crime victims whenever possible
under the existing statutes, or shared with the foreign law enforcement
agencies which cooperated in the investigations if the laws allow.
CIVIL ASSET FORFEITURE IN CHILD PORNOGRAPHY CASES
The subject of a recent FBI case died during the pendency of the
investigation. The subject had made sexual videos of at least four
minors. Because of his death, the only means for the government to
obtain legal title to the instrumentalities of this heinous activity so
that they may be destroyed is through civil forfeiture. Without civil
forfeiture the government is placed in the position of having to offer
to return the property to the subject's estate as it sought to obtain
title through the abandonment process.
INNOCENT OWNERS AND THE STRATEGIC USE OF CIVIL ASSET FORFEITURE
One of the major issues in civil asset forfeiture is the handling
of property in instances where there are ``innocent owners''. FBI
policy indicates that under no circumstances will property be forfeited
from ``innocent owners''. This term is defined differently in various
statutes, but generally refers to persons who did not consent to the
illegal use of their property, or who reasonably should not have known
that the property was the proceeds of crime or otherwise subject to
forfeiture. The FBI strongly supports the creation of a uniform
innocent owner statute.
An example of the FBI's emphasis on protecting innocent owners is a
forfeiture initiative currently underway in the drug program. Along the
U.S.-Mexico border many properties and businesses have been utilized by
drug trafficking organizations to smuggle their product. The FBI and
the U.S. Border Patrol are working with the property owners to prevent
the further illegal use of their properties, and are only seeking
forfeiture in those instances in which the owners are themselves shown
to be drug traffickers or where they actively assist the traffickers.
The civil asset forfeiture statutes are an essential tool of law
enforcement as it strives to deal with increasingly powerful and
sophisticated criminal and terrorist threats, particularly those who
function without regard to national boundaries. These laws provide an
important means to protect our society and economy from the damaging
effects wrought by the vast wealth of many criminal enterprises.
__________
Prepared Statement of The Department of Justice--The Facts
RED CARPET INN
The Red Carpet Inn was a center for illegal drug trafficking and
other crimes including auto theft, aggravated robbery, kidnaping and
sexual assault. Calls to the Houston Police and subsequent arrests at
the hotel for drug-related offenses increased over 300 percent when the
current owner took over in 1994, and police seized narcotics worth
nearly $800,000 at the hotel in 1996 and 1997.
The hotel's owner and manager were well aware of the illegal drug
activity. The Houston City Attorney sent numerous letters to the owner
putting him and the corporation on notice of the ongoing criminal
activity, and officers from a Houston anti-drug task force held
repeated meetings with the hotel's owner/manager to discuss recent drug
and criminal activity and to offer suggestions for controlling
narcotics activity at the hotel. These requests and suggestions were
ignored.
After nearly three years of fruitless appeals by Houston officials
to the hotel's owner for cooperation in curtailing illegal drug
activity at the hotel, the United States Attorney's Office commenced a
civil legal action in February 1998 seeking forfeiture of the Red
Carpet Inn. The hotel was never seized, controlled or operated by the
United States or any federal agents; it remained at all times in the
possession and control of its owner, who continued to operate the
business; and we have no evidence to confirm that an employee suggested
raising the room rates, this would have been inappropriate and
something we wouldn't condone. Faced with the prospect of forfeiture,
however, the owner finally agreed in July 1998 to implement steps
suggested by local law enforcement authorities to help curtail illegal
drug activity and other crimes on the property, including the
installation of additional lighting, maintaining and monitoring the
hotel's existing security cameras 24 hours a day, and having a licensed
security guard on the premises at night who would notify the police if
he became aware of any drug law violations. In return, the United
States Attorney agreed to discontinue the forfeiture lawsuit. Since
that agreement, the number of narcotics-related police service calls
for the Red Carpet Inn has declined and police narcotics officers have
observed significantly less drug activity at the hotel.
u.s. v. $506,231 in u.s. currency (chicago pizzeria case)
In February 11, 1993, the Chicago Police Department obtained and
executed a search warrant for the Congress Pizzeria, a Chicago business
owned by Anthony Lombardo, based on information provided by a Jose
Torres, who told police that he regularly fenced stolen property at
that location in order to feed his crack habit. Torres said he brought
stolen property to the pizzeria's back door, where he would sell it to
Anthony Lombardo's sons. Executing the warrant, police did not find any
stolen property, but did find and seize three unregistered guns and
$506,076 in U.S. currency, consisting of mostly small bills wrapped in
plastic bags inside a 44-gallon barrel, which was located in a boarded-
up elevator or dumbwaiter shaft.
After a drug detection dog alerted to the presence of drugs on the
money, a judge issued a seizure warrant, finding probable cause to
believe that the money was subject to federal forfeiture under the
federal drug laws. The government then filed a complaint, and the U.S.
District Court granted summary judgement in favor of the government and
ordered the money to be forfeited to the United States.
The 7th Circuit Court of Appeals vacated the district court
judgment on the ground that the government did not establish probable
cause to believe that the currency was tied to drug trafficking. The
government's case failed because there was no allegation that cocaine
was ever brought inside the pizzeria, and there was no other allegation
of narcotics trafficking or use inside or at the pizzeria. Despite the
alert by the drug dog, the circumstantial evidence was insufficient to
meet the probable cause standard.
MAYA'S MEXICAN RESTAURANT
Exequiel Soltero was the owner of Soltero Corporation, Inc., whose
sole asset was Maya's Mexican Restaurant in Kent, Washington. Exequiel
Soltero's brother, Roberto ``The Onion'' Soltero, known to local law
enforcement authorities as a high level drug trafficker in southern
King County, was reportedly using the restaurant to conduct his drug
business. The police also had information that Exequiel Soltero had
been present in the restaurant during some of Roberto's drug deals.
Using a confidential informant, the police made several drug purchases
from Roberto Soltero at the restaurant. The informant, who had numerous
meetings with Roberto Soltero at the restaurant discussing drug
trafficking, money laundering and concealing drugs and money from the
police, arranged to purchase one kilo of cocaine from Roberto Soltero
for $26,000 at the restaurant. The police thereafter arrested Roberto
Soltero, and in executing several search warrants found cocaine at the
home of Rosalba Soltero, Vice President of Soltero Corp.
Roberto Soltero had boasted to police informants that he was, in
fact, the real owner of the restaurant. He was also the person who
handled all face-to-face dealing with the Liquor Control Board for the
restaurant's liquor license. Exequiel Soltero's wife told police that
Roberto and Exequiel Soltero were each half-owners of the restaurant,
as did a waitress present at the restaurant during the service of the
search warrant. Roberto Soltero's wife corroborated this information in
a written statement. Acting on this information, the Kings County
Prosecutor's office seized the restaurant under a state law permitting
forfeiture of property used to facilitate violations of the state's
Controlled Substances Act. The County Prosecutor's office later agreed
to vacate the seizure after Exequiel Soltero submitted to a polygraph
examination which indicated he was being truthful when he stated that
he was the sole owner of the restaurant and that he had no knowledge of
his brother's drug dealings in the restaurant. Roberto Soltero was
convicted on drug charges and sentenced to state prison.
There was no federal involvement in this case, which was handled
entirely by local and county law enforcement officers and the King
County Prosecutor's office, acting pursuant to state criminal and
forfeiture statutes.
U.S. V. $1,646,000/CAF TECHNOLOGY, INC.
In October 1992, in the course of an investigation by the Santa
Clara Police Department into the trafficking of stolen computer chips
in Silicon Valley, an undercover police officer and a confidential
police informant met in a motel room with two individuals who expressed
an interest in purchasing computer chips. One of those individuals,
John Priadi, was a purchasing agent for CAF Technology, Inc. (CAF). The
police officer repeatedly told Mr. Priadi that the chips had been
stolen from the Intel Corporation. Priadi acknowledged this and told
the officer that once purchased, the chips would be shipped to Taiwan.
Priadi also indicated that he had previously been involved in the
purchase of stolen computer chips. Priadi subsequently contacted his
boss, CAF Chief Executive Officer Earl Yang, telling him of the
availability of the chips and of the possibility that they might be
stolen. Yang initially told him not to make the purchase because it was
``illegal,'' but several days later he contacted Priadi and told him
that due to a shortage of such chips in Taiwan, CAF would buy some of
the stolen chips if the seller would provide a fake invoice to make the
sale appear legitimate. Arrangements were then made for CAF to purchase
1,000 stolen chips for $296,000.
Yang directed CAF's accountant and financial officer, Evan Tseng,
to use CAF funds to obtain $ 10,000 cash and three cashiers checks in
specific amounts totaling $286,000, payable to individuals, and to
deliver the funds to the hotel room where John Priadi was registered.
When Tseng arrived at the hotel, a desk clerk called the police, and
the cashiers check and cash were seized.
The Santa Clara police investigation led to the seizure of a total
of $1,646,000 from CAF and five other companies. The seizure was
subsequently adopted by federal authorities and in November 1992 a U.S.
Magistrate authorized federal seizure warrants. The five other
companies filed claims and answers, which were promptly resolved. CAF,
however, chose to avail itself of a provision of Customs law that
permits a property owner to waive its right to immediate commencement
of forfeiture proceedings in favor of asking Customs to act favorably
on a Petition for Remission or Mitigation. The Customs Service denied
the petition in June 1995. At any time during this period, CAF could
have withdrawn its petition and requested immediate commencement of
administrative forfeiture proceedings, but did not do so. In July 1995,
CAF posted a bond and requested referral for judicial forfeiture. The
matter was referred to the U.S. Attorneys Office, which filed a
Forfeiture Complaint in April 1997.
The U.S. District Court held that the evidence established probable
cause for the seizure, but it found that there had been undue delay
between the date of the seizure and the scheduled trial of the
forfeiture action. On that basis, the Court granted summary judgement
in favor of CAF.
BOB'S SPACE RANGERS
Long-standing federal law requires persons transporting more than
$10,000 in currency into or out of the United States to declare the
currency to the U.S. Customs Service. It is also an offense to divide
the money among travelers to avoid the reporting requirement. See 31
U.S.C. Sec. 5324(b). The reporting requirement is essential to the
ability of the United States to control currency smuggling, and the
penalty for this violation includes forfeiture of the entire amount
being transported.
Bob's Space Rangers is a Florida-based circus and amusement park
company. In 1997, a large number of employees were traveling to Canada
from the U.S. When they reached the border in North Dakota, the
company's Operations Manager, Jack Cook, entered a Customs Service
office to complete the required declaration form stating that the
business was not transporting more than $10,000 in currency. He
declared that he was carrying $1,000 in currency on his person and that
his wife was carrying $2,800 in currency on her person. But he failed
to declare an additional $6,000 in a safe in one of the office trailers
and identical envelopes containing between $300 and $700 in other
vehicles. In all, a total of $15,212 was found.
Questioning of Mr. Cook by Customs officials revealed that Mr. Cook
and his corporation had been crossing the U.S. border for 21 years and
were well aware of the currency reporting requirements. Mr. Cook also
admitted that in previous years, the money had been split between
drivers so that no one individual was carrying more than $10,000 in
currency. The Customs Service then seized the currency. In light of Mr.
Cook's and the company's admitted knowledge of the currency reporting
requirements and their deliberate violations of those requirements, the
Customs Service assessed a 25 percent penalty ($3,800). The balance of
the money was returned to the company.
FERNANDO MARQUEZ
As part of a three-year investigation by New York City law
enforcement authorities into the illegal gambling activities of two
brothers, Raymond and Robert Marquez, their nephew, Peter Marquez, and
associates, police executed a court-approved search warrant at the home
of Peter's father, Fernando Marquez. During the search, police observed
Fernando Marquez attempt to hide behind a couch what turned out to be
safe deposit box keys. The safe deposit boxes, belonging to PM
Pinebrook, Inc., were found to contain a total of $490,920 in cash.
Fernando Marquez is the President and sole shareholder of PM Pinebrook,
Inc., his son Peter is the Vice-President.
At the request of the New York County District Attorney's office,
the F.B.I. commenced administrative forfeiture proceedings against the
money. Fernando Marquez filed a claim seeking return of the seized
money on behalf of himself and the corporation, and the matter was
referred to the U.S. Attorney's office for judicial forfeiture. The
federal court initially ruled that it lacked in rem jurisdiction over
the money because, under New York state law, even though federal
authorities had initiated their forfeiture proceedings at the request
of the N.Y. County D.A., since the money had been seized by state or
local officials, it was still under the jurisdiction of state court
until that court relinquished jurisdiction.
After returning to state court, where the judge advised federal
authorities to seek an anticipatory seizure warrant for the funds, the
case returned to federal court. The federal court granted the
Government's request for a anticipatory seizure warrant, stating in its
decision: that ``the Government attempted in good faith to satisfy (the
state court judge's) order and fulfill its prosecutorial
responsibilities under the federal forfeiture statutes''; that the
Marquez Organization was involved in a large-scale illegal gambling
business generating approximately $31 million in gross revenue; that
the claimants had acknowledged that they would ``abscond'' with the
money ``if given the chance''; that claimant Fernando Marquez has a
history of engaging in illegal gambling activities and PM Pinebrook,
Inc., was not actually engaged in the conduct of business, and; ``that
probable cause exists to believe the Funds represents proceeds
traceable to illegal gambling activities and are subject to
forfeiture'' under federal law. United States v. $490,930 in U.S.
Currency; 937 F.Supp 249 (S.D.N.Y. 1996). Following the issuance of the
seizure warrant, Fernando Marquez agreed to forfeit half of the seized
funds. Peter Marquez and Robert Marquez were convicted of felony
gambling charges.
DR. RICHARD LOWE
In October 1990, Dr. Richard Lowe contacted Joseph Lett, President
of First Bank of Roanoke, Alabama, and a long-time friend, about
depositing approximately $60,000 in cash into the bank account of the
Chambers Academy, a private, all-white school organized after
desegregation of the local public schools. Federal banking regulations
require banks to file currency transaction reports (CTR's) for cash
transactions over $10,000. In February 1990, Dr. Lowe had a
disagreement with another bank over the filing of a CTR when his wife
withdrew $11,000 in cash to purchase a car. Aware that large currency
transactions are subject to federal reporting requirements, Dr. Lowe
discussed with Bank President Lett depositing the money in increments
of less than $10,000 over a period of time, to avoid the reporting
requirement.
In November 1990, Dr. Lowe arrived at Mr. Lett's home after banking
hours and gave him $315,520 in cash. The following day, Mr. Lett took
the money to the bank, but rather than depositing it in the school's
account, he placed it in the bank's vault. No CTR was prepared to
reflect a cash deposit. Mr. Lett then used the money to make numerous
purchases of cashier's checks and other instruments in amounts less
than the $10,000 reporting threshold, which he deposited into the
school's account. Although the deposits were supposedly a donation by
Dr. Lowe to the school, and the account was listed in the name and
under the tax number of the school's board of directors, Dr. Lowe
maintained complete control over the account, and had to approve any
withdrawal by the board.
Lett was indicted and pleaded guilty to federal ``structuring''
charges based on his handling of Dr. Lowe's deposit and his evasion of
the reporting requirement. Dr. Lowe was indicted for conspiracy in
connection with the structuring scheme. He entered into a ``pre-trial
diversion agreement,'' in which he accepted responsibility for
committing the alleged offense and agreed to serve a one year
probationary period, at which time the charge against him would be
dismissed. The U.S. District Court entered an order forfeiting the
deposited cash, holding that the money was subject to forfeiture
because Dr. Lowe had caused the bank to fail to file a CTR when the
funds were deposited. A divided panel of the 11th Circuit Court of
Appeals reversed the forfeiture, holding that while the district court
was correct in finding a factual basis for the forfeiture, it erred
with respect to Dr. Lowe's ``innocent owner defense.'' The panel held
that he had produced sufficient evidence demonstrating that he did not
have actual knowledge that First Bank would fail to file a CTR on the
cash delivered to Mr. Lett's home for deposit into the CCEF account. In
his dissenting opinion, Senior Judge Fay stated that the findings and
conclusion of the district court were reasonable and that this was a
close case which ``could have gone either way.'' U.S. v. Account No.
50-2830-2, Located at First Bank, 95 F.3d 59 (11th Cir. July 31, 1996)
(Table), reversing 884 F. Supp. 455 (M.D. Ala. 1995).
WILLIE JONES
The most oft-repeated tale of so-called forfeiture abuse involves
Mr. Willie Jones who testified before the House Judiciary Committee in
1996. On February 27, 1991, Mr. Jones, carrying only a small overnight
bag, went to the American Airlines ticket counter at Nashville Airport,
where he purchased a round trip ticket to Houston with cash. The
itinerary allowed him only a short time (90 minutes) in Houston. A
ticket agent alerted the Drug Interdiction Unit (DIU) at the airport.
After observing Mr. Jones for a period of time, DIU officers approached
him and asked the purpose of his trip to Houston and for consent to
search his bag. The officers then noticed a bulge under Mr. Jones
shirt, and in a subsequent search discovered that Jones was carrying a
pouch containing $9,000 in currency, in small denomination bills
bundled with rubber bands in $1,000 increments. Such packaging is
consistent with the way drug money is transported. Mr. Jones was then
taken to the DIU office, where a narcotics-trained dog twice, in
separate tests, alerted to the pouch containing the money. The currency
was seized by the police and was later the subject of a forfeiture
proceeding by the U.S. Drug Enforcement Administration.
Jones contended that he was traveling to Houston to purchase plant
stock for his landscaping business from nurseries that offered better
prices than nurseries in the Nashville. The district court concluded
that Jones' explanation was ``not credible.'' Jones v. U.S. Drug
Enforcement Administration, 819 F. Supp 698, 708 (M.D. Tenn. 1993). It
concluded that ``Mr. Jones created the story after the seizure to
support his claim that the trip has a legitimate purpose.'' Id. As for
the source of the $9,000, Jones contended that $1,500 was loaned to him
by a Mr. Gentry, $6,200 came from a Mr. Alexander ($3,500 for work
performed and a $2,700 loan) and the remaining $1,300 came from his own
funds. The court found this explanation ``entirely unpersuasive.'' Id.
at 710. Mr. Gentry not only denied having loaned Jones the money, but
testified that Jones and Alexander had telephoned him after the seizure
asking Gentry to lie to the authorities and tell ``whoever asked'' that
Gentry had loaned Jones the money in anticipation of his trip to Texas.
The district court concluded, however, that the DIU officers lacked
sufficient probable cause for the search of the bulge under Mr. Jones'
shirt which led to the discovery of the pouch containing the money. It
also held that the agents lacked a sufficient basis to detain him in
the DIU office while the drug dog tests were performed. The court
therefore excluded the evidence pertaining to Mr. Jones' possession of
the currency, the way it was packaged and carried, and the drug dog
alert. Absent such evidence, the court concluded that the government
had failed to prove probable cause for the forfeiture.
__________
Prepared Statement of the National Association of Realtors'
and the Institute of Real Estate Management
On behalf of the over 730,000 members of the NATIONAL ASSOCIATION
OF REALTORS, and its affiliate, the Institute of Real Estate
Management, we thank the Subcommittee for holding this important
hearing on civil asset forfeiture.
Our nation's forfeiture laws were originally enacted nearly 200
years ago to protect our nation from smugglers. These same laws are now
being used by law enforcement officials as an aggressive weapon in the
war against drugs. In recent years, the federal government has seized
millions of dollars in property and cash. These laws hit the drug lords
where it hurts--in the ill- gotten profits of their drug trade.
Innocent property owners, however, are being caught in the crossfire.
The NATIONAL ASSOCIATION OF REALTORS' and the Institute of
Real Estate Management encourage the swift, timely eviction of drug
dealers. We support the war on drugs, and advocate the development and
implementation of community programs designed to alleviate drug
activity. However, seizure of rental property where there may be an
innocent owner constitutes a taking of private property without just
compensation.
We are concerned that the rights of innocent real property owners
be upheld in all cases of the forfeiture of real property. Innocent
real property owners are those who had no knowledge of the use of their
property for illegal activity or who, if they had such knowledge, made
reasonable efforts to alleviate the use of their property for illegal
drug activity. Any legislation addressing the forfeiture of real
property needs to contain language which protects the rights of
innocent owners. We strongly support H.R. 1658, the ``Civil Asset
Forfeiture Reform Act of 1999'', which passed the House with an
overwhelming bipartisan vote earlier this summer.
We have heard a number of anecdotal stories that demonstrate the
serious need for reform of these laws. A property owner in Jackson,
Mississippi, alerted the police of possible drug activity in his
apartment building. The property owner had successfully evicted the
tenants involved in this activity, but now non-residents were coming
onto the property to deal drugs. This owner contacted the police in the
hopes of getting their help in stopping this illegal activity. Instead,
the law enforcement agency used this information to seize the building
out from under him. Although the property owner had evicted the tenants
he knew were involved, and remained in constant contact with local
police while attempting to clean up the property, the property was
seized.
In another case, police had been investigating a rental property
for suspected illegal activity. Although their investigation lasted for
over half a year, the property owner (who lived in a neighboring town
and was registered as the legal owner and contact for the property) was
never notified about the suspected activity. The owner only learned
about any investigation after receiving notice that his property had
been seized. If the owner had been made aware of the suspected
activity, he may have been able to work with police to rid the property
of the offenders.
There are a number of reforms, which would preserve the valuable
tool of property seizure, while protecting the rights of innocent
property owners. We urge that the federal government, when enacting
seizure procedures, require proof of owner complicity in the illegal
drug activity before authorization for seizure of real property can be
granted. The government should not be allowed to seize property without
clear and convincing proof of that property owner's involvement in the
crime. Further, those owners whose property is seized must be given
time to contest the forfeiture and access to legal counsel. If found
innocent, a property owner must have the ability to receive
compensation for negligence or loss of property due to seizure, and the
cost to recover such assets. We would like the following changes to be
made to protect innocent property owners:
1. Place the burden of proof on the government, requiring
them to provide clear and convincing evidence that the property
is subject to forfeiture, and not belonging to an innocent
citizen.
2. Allow for the appointment of counsel for individuals who
are financially unable to obtain representation.
3. Allow for the release of property pending the final
decision of the case when the owner can show substantial
hardship caused by the holding of the property.
4. Create a uniform ``innocent owner'' defense, so that
either lack of knowledge or lack of consent by the owner is
sufficient defense, assuming the owner took reasonable steps to
prevent the illegal use of the property.
Reasonable steps should include that the owner: gave timely
notice to law enforcement officials; or revoked permission to
those engaged in the activity to use the property; or worked
with local law enforcement officials to discourage or prevent
the illegal use of the property. As owners have met with
reluctance from some law enforcement officials in the past,
attempts to work with such offices should also be defined as
reasonable. In addition, owners should not be required to take
such steps that he/she believes would be likely to subject them
to physical danger.
5. Allow property owners sufficient time to challenge a
forfeiture, a minimum of 30 days.
6. Eliminate the cost bond requirement for the property
owner.
7. Allow innocent property owners to recapture costs
associated with damage or loss of the property while in the
government's possession, by allowing them to sue for
negligence.
8. Require law enforcement officials to notify property
owners if illegal activity is suspected in their property. This
will allow them to work with law enforcement to discourage/
remove the offending parties.
We believe these common sense reforms will allow law enforcement
officials to continue to use forfeiture laws, without taking away the
civil rights of innocent property owners. Our nation was founded on the
principal that we are innocent until proven guilty. As currently
written, these laws violate that underlying tenant of our Constitution
by requiring property owners to prove their innocence. Again, the
NATIONAL ASSOCIATION OF REALTORS, and the Institute of Real Estate
Management thank you for holding this hearing today, and urge you to
quickly introduce a companion bill to H.R. 1658 in the Senate, to
complete the important work the House has begun.
Federal Law Enforcement Officers Association,
East Northport, NY, July 20, 1999.
Hon. Strom Thurmond,
U.S. Senator,
Russell Building,
Washington, DC.
Dear Mr. Chairman: On behalf of the more than 16,000 members of the
Federal Law Enforcement Officers Association (FLEOA), I am taking this
opportunity to state, for the record, FLEOA's strong opposition to H.R.
1658, the Civil Asset Forfeiture Reform Act of 1999, passed by the
House of Representatives. FLEOA views civil asset forfeiture as an
important tool for all of law enforcement. Our opposition does not
imply total satisfaction with the forfeiture laws. Some areas should be
amended and improved. However, improvement should not be rushed through
Congress; it should, come only after a deliberative process ensuring a
fair and effective deterrence to crime.
FLEOA has several misgivings regarding H.R. 1658. We request the
Senate to carefully debate its elements, and ask itself if the
provisions are really necessary to protect innocent citizens or are
instead only likely to benefit criminals and their lawyers.
Instead of accelerating the process for Congressional passage, the
Senate should hold up H.R. 1658 to the sunlight and carefully review
several provisions, such, as:
Burden of Proof;
Appointment of Counsel;
Release of Property;
Notice of Seizure; and,
Innocent Owner Defense (especially through probate).
FLEOA believes the sanitizing light of a deliberative process
allows for the ramifications of the debilitating provisions to become
fully known. Several elements are purely punitive in nature, and not
rooted in common sense. Regarding the five points above, we sincerely
hope the Senate listens to reason and the vast majority of law
enforcement.
FLEOA truly appreciates your contribution to this debate, and we
look forward to working with you and your staff. If you have any
questions, or need further information please free feel to contact me.
Richard Gallo.
__________
American Bar Association,
Criminal Justice Section,
Washington, DC, May 20, 1999.
Hon. Henry J. Hyde, Chairman,
Committee on the Judiciary,
U.S. House of Representatives,
Washington, DC.
Dear Chairman Hyde: I write to you to express the ABA's support for
H.R. 1658, the Civil Asset Forfeiture Reform Act of 1999. We commend
you for your leadership in addressing an area of law which,
unfortunately, has been characterized by varied, ambiguous and
conflicting statutory provisions, which often lack basic elements of
procedural due process.
The ABA has been an advocate of forfeiture law reform for more than
a decade. This advocacy was memorialized in February 1996 when the
ABA's House of Delegates endorsed a Statement of Principles calling for
specific legislative reforms of current forfeiture laws. A copy of this
Statement is attached. The adoption of the Statement reflected a
consensus within the ABA that civil forfeiture laws, while important
and useful law enforcement tools, place considerable power in the hands
of the government to take private property and that measured reform is
necessary to ensure that these powers are not abused.
While our ABA policy does not address all the provisions of H.R.
1658, the legislation embodies many of the principles for revision of
the federal asset forfeiture laws supported by the Association. It
encompasses the Statement of Principles' call for uniformity and
simplicity, as well as the recognition that civil forfeiture laws are
important law enforcement tools. The legislation also includes several
specific legislative reforms consistent with other provisions of the
Statement, including a uniform innocent-owner defense for all civil
forfeitures, although the ABA has no position on whether an ``innocent
owner'' includes someone who obtains forfeitable property through
probate (Principle 3); shifting of the burden of proof to the
government to prove that assets are forfeitable, although the ABA
recommends a ``preponderance'' standard (Principle 5); and the
extension of time limits to contest forfeitures (Principle 6). The
legislation also provides that the court may appoint counsel to
represent an individual filing a claim in a civil forfeiture proceeding
who is financially unable to obtain counsel.
H.R. 1658 seeks to balance the need to enhance the ability of
property owners to contest forfeiture actions while ensuring that civil
forfeiture remains a useful tool of law enforcement. In this regard, we
recommend two changes to further this goal. First, we suggest that the
time period allowed an agency conducting a seizure of property to
notify interested parties be lengthened. Second, we recommend that the
Committee report clarify that the ``appropriate conditions'' the court
is authorized to impose on the release of property pending final
disposition of the case under a claim of hardship may include the
appointment of special masters and the imposition of a cash bond.
The criminal forfeiture laws are also in need of reform, but many
of the civil forfeiture proposals circulated to date actually expand
the government's forfeiture authority and introduce new levels of
complexity to forfeiture law. Such controversial criminal forfeiture
proposals should not be allowed to delay the enactment of H.R. 1658, a
principal virtue of which is its limited focus on critical reforms to
the civil asset forfeiture system.
H.R. 1658 is an important step in addressing the inconsistencies
and unfairness in the use of civil forfeiture laws and we urge prompt
passage of the legislation.
Sincerely,
Myrna Raeder.
______
Adopted February, 1996.
American Bar Association--Criminal Justice Section
Report To The House of Delegates
recommendation
RESOLVED, That the American Bar Association urges that federal
asset forfeiture laws be amended to comply with the attached
``Statement of Principles on the Revision of the Federal Asset
Forfeiture Laws,'' dated November 11, 1995.
statement of principles of the revision of the federal
asset forfeiture laws
(November 11, 1995)
1. Uniformity and simplicity. The statutory procedures regarding
administrative, civil and criminal forfeiture are mutually inconsistent
and unnecessarily complex. In revising these statutes, Congress should
simplify the procedures and make them as uniform as possible.
2. Terms used to describe what is forfeitable. Likewise, the
statutory language describing what property is subject to forfeiture
should be amended to avoid use of confining and inconsistent terms such
as ``proceeds,'' ``gross receipts'' and ``gross proceeds'' in favor of
uniform, well-defined terms.
3. Innocent owner defense. Congress should enact a uniform innocent
owner defense applicable to all civil and criminal forfeitures.
4. Forfeiture as a law enforcement tool. The seizure and forfeiture
of the proceeds and instrumentalities of criminal acts is an important
and appropriate tool of federal law enforcement. Congress should
encourage the continued use of both civil and criminal forfeiture not
orgy to deter and diminish the capacity of the criminal to commit
future criminal acts, but to provide a means of restoring criminal
proceeds to victims.
5. Burden of proof. Civil forfeiture statutes should be amended to
provide that the government bears the burden of proof regarding the
forfeitability of property at trial. That is, the government should be
required to prove, by a preponderance of the evidence, that the crime
giving rise to the forfeiture occurred, and that the property bears the
required relationship to the offense.
6. Time limits. To enhance the ability of property owners to
contest forfeiture actions, Congress should extend and make uniform the
time limits for filing claims in civil and administrative forfeiture
proceedings.
7. Third party interests in criminal cases. Congress should amend
the provisions of the criminal forfeiture statutes regarding pre-trial
restraining orders to provide a mechanism for addressing the interests
of third parties in a timely manner that does not unduly interfere with
the criminal trial.
8. Attorneys fees. The civil and criminal forfeiture statutes
should contain a mechanism by which the court may make an early
determination as to whether seized or restrained property may be made
available to a criminal defendant to pay attorneys fees.
9. Restraint of substitute assets. If Congress provides for the
pre-trial restraint of substitute assets in criminal cases, it should
exempt assets needed to pay attorneys fees, other necessary cost of
living expenses, and expenses of maintaining the restrained assets.
10. Forfeiture of criminal proceeds. No person has a right to
retain the proceeds of a criminal act. Accordingly, Congress should
provide for the civil and criminal forfeiture of the proceeds of all
criminal offenses, and it should authorize the government to restore
forfeited property to the victim of the offense. In particular, this
change in the law will eliminate the risk of overuse of the money
laundering statues to forfeit proceeds and restore property.
11. Scope of criminal forfeiture. To avoid the necessity of filing
and defending successive criminal and civil forfeiture proceedings
arising out of the same course of conduct when property is held jointly
by defendants and non-defendants, Congress should provide a mechanism
for adjudicating the forfeitability of the non-defendants' interests in
the forfeited property as part of the ancillary proceeding in criminal
cases.
12. Facilitating property. When property used to facilitate the
commission of a criminal offense is made subject to forfeiture,
Congress should enact a standard defining the required nexus between
property and the offense.
13. Availability of criminal forfeiture. Current law outside of the
drug enforcement context requires the government to bring most
forfeiture actions as civil actions. The statutes should be amended to
give the government the option, in all instances where civil forfeiture
is presently authorized, of bringing a criminal forfeiture action as
part of the criminal indictment in accordance with the standard rules
for criminal forfeiture.