[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

                              ----------                              


                         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.

                                

  
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