[House Report 106-192]
[From the U.S. Government Publishing Office]






106th Congress                                                   Report
  1st Session           HOUSE OF REPRESENTATIVES                106-192

======================================================================



 
                   CIVIL ASSET FORFEITURE REFORM ACT

                                _______


 June 18, 1999.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. Hyde, from the Committee on the Judiciary, submitted the following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 1658]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 1658) to provide a more just and uniform procedure 
for Federal civil forfeitures, and for other purposes, having 
considered the same, reports favorably thereon with amendments 
and recommends that the bill as amended do pass.

                           TABLE OF CONTENTS

                                                                  

                                                                 Page
The Amendment..............................................           2
Purpose and Summary........................................           2
Background and Need for the Legislation....................           2
Hearings...................................................          19
Committee Consideration....................................          20
Vote of the Committee......................................          20
Committee Oversight Findings...............................          20
Committee on Government Reform Findings....................          21
New Budget Authority and Tax Expenditures..................          21
Committee Cost Estimate....................................          21
Constitutional Authority Statement.........................          21
Section-by-Section Analysis and Discussion.................          21
Changes in Existing Law Made by the Bill, as Reported......          27
Dissenting Views...........................................          34

    The amendments (stated in terms of the page and line 
numbers of the introduced bill) are as follows:

    Page 6, line 7, strike ``receive'' and insert ``acquired''.

    Page 6, line 8, insert ``or inheritance'' after 
``probate''.

    Page 6, line 9, strike ``receipt'' and insert 
``acquisition''.

    Page 10, beginning on line 17 strike ``CONFORMING'' and all 
that follows through ``AND'' on line 18 and insert 
``AMENDMENT''.

    Page 10, strike line 20 and all that follows through page 
11, line 13.

    Page 11, line 14, strike ``(b) Controlled Substances 
Act.--''.

                          Purpose and Summary

    H.R. 1658, as reported by the Committee, would create 
general rules relating to federal civil forfeiture proceedings 
designed to increase the due process safeguards for property 
owners whose property has been seized.

                Background and Need for the Legislation

I. Antecedents of Civil Asset Forfeiture
    Civil asset forfeiture is based on the legal fiction that 
an inanimate object can itself be ``guilty'' of wrongdoing, 
regardless of whether the object's owner is blameworthy in any 
way. This concept descends from a medieval English practice 
whereby an object responsible for an accidental death was 
forfeited to the king, who ``would provide the [proceeds, the 
`deodand'] for masses to be said for the good of the dead man's 
soul . . . or [would] insure that the deodand was put to 
charitable uses.'' \1\
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    \1\ Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 681 
n.16 (1974).
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    The immediate ancestor of modern civil forfeiture law is 
English admiralty law. As Oliver Wendell Holmes noted, ``a ship 
is the most living of inanimate things. . . . [E]very one gives 
a gender to vessels. . . . It is only by supposing the ship to 
have been treated as if endowed with personality, that the 
arbitrary seeming peculiarities of the maritime law can be made 
intelligible.'' \2\
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    \2\ Holmes, Jr., The Common Law 25 (1881).
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    Justice Holmes used this example:

          A collision takes place between two vessels, the 
        Ticonderoga and the Melampus, through the fault of the 
        Ticonderoga alone. That ship is under a lease at the 
        time, the lessee has his own master in charge, and the 
        owner of the vessel has no manner of control over it. 
        The owner, therefore, is not to blame, and he cannot 
        even be charged on the ground that the damage was done 
        by his servants. He is free from personal liability on 
        elementary principle. Yet it is perfectly settled that 
        there is a lien on his vessel for the amount of the 
        damage done, and this

        means that the vessel may be arrested and sold to pay 
        the loss in any admiralty court whose process will 
        reach her. If a livery-stable keeper lets a horse and 
        wagon to a customer, who runs a man down by careless 
        driving, no one would think of claiming a right to 
        seize the horse and the wagon.\3\
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    \3\ Id.

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    Holmes then provided the rationale:

          The ship is the only security available in dealing 
        with foreigners, and rather than send one's own 
        citizens to search for a remedy abroad in strange 
        courts, it is easy to seize the vessel and satisfy the 
        claim at home, leaving the foreign owners to get their 
        indemnity as they may be able.\4\
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    \4\ Id. at 26.

II. Federal Civil Asset Forfeiture Statutes
    Soon after the creation of the United States, ships and 
cargo violating the customs laws were made subject to federal 
civil forfeiture.\5\ Such forfeiture was vital to the federal 
treasury for, at that time, customs duties constituted over 80% 
of federal revenues.\6\
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    \5\ See Act of July 31, 1789, secs. 12, 36, 1 Stat. 39, 47.
    \6\ See Piety, Scorched Earth: How the Expansion of Civil 
Forfeiture Doctrine Has Laid Waste to Due Process, 45 U. Miami L. Rev. 
911, 940 n.137 (1991).
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    Today, there are scores of federal forfeiture statutes, 
both civil and criminal.\7\ They range from the forfeiture of 
animals utilized in cock-fights and similar enterprises,\8\ to 
cigarettes seized from smugglers \9\ to property obtained from 
violations of the Racketeer Influenced and Corrupt 
Organizations Act.\10\
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    \7\ Criminal forfeiture requires an antecedent criminal conviction 
of the property owner.
    \8\ See 7 U.S.C. Sec. 2156.
    \9\ See 18 U.S.C. Sec. 2344.
    \10\ See 18 U.S.C. Sec. 1963.
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    The Comprehensive Drug Abuse Prevention and Control Act of 
1970 made civil forfeiture a weapon in the war against drugs. 
The Act provides for the forfeiture of:

          [a]ll controlled substances which have been 
        manufactured, distributed, dispensed, or acquired in 
        violation of this subchapter . . . [a]ll raw materials, 
        products, and equipment of any kind which are used, or 
        intended for use, in manufacturing . . . delivering, 
        importing, or exporting any controlled substance[s] . . 
        . in violation of this subchapter . . . [a]ll property 
        which is used, or intended for use, as a container for 
        [such controlled substances, raw materials, products or 
        equipment] . . . [a]ll conveyances, including aircraft, 
        vehicles or vessels, which are used, or intended for 
        use, to transport, or in any manner to facilitate the 
        transportation, sale, receipt, possession, or 
        concealment [of such controlled substances, raw 
        materials, products or equipment]. \11\
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    \11\ 21 U.S.C. Sec. 881(a).

    In 1978, the Act was amended to provide for civil 
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forfeiture of:

    [a]ll moneys, negotiable instruments, securities, or other 
things of value furnished or intended to be furnished by any 
person in exchange for a controlled substance in violation of 
this subchapter, all proceeds traceable to such an exchange, 
and all moneys, negotiable

instruments, and securities used or intended to be used to 
facilitate any violation of this subchapter . . . .'' \12\
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    \12\ Section 301(a)(1) of the Psychotropic Substances Act of 1978 
(found at 21 U.S.C. Sec. 881(a)(6)).

    In 1984, the Act was amended to provide for the forfeiture 
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of:

          [a]ll real property . . . which is used, or intended 
        to be used, in any manner or part, to commit, or to 
        facilitate the commission of, a violation of this 
        subchapter punishable by more than one year's 
        imprisonment. . . .\13\
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    \13\ Section 306(a) of the Comprehensive Crime Control Act of 1984 
(found at 21 U.S.C. Sec. 881(a)(7)).

III. The Success--and Abuse--of Forfeiture
    Prior to 1984, the monies realized from federal forfeitures 
were deposited in the general fund of the United States 
Treasury. Now they primarily go to the Department of Justice's 
Assets Forfeiture Fund \14\ and the Department of the 
Treasury's Forfeiture Fund.\15\ The money is used for 
forfeiture-related expenses and various law enforcement 
purposes.\16\
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    \14\ See 28 U.S.C. Sec. 524(c)(4)).
    \15\ See 31 U.S.C. Sec. 9703.
    \16\ See 28 U.S.C. Sec. 524(c)(1)).
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    In recent years, enormous revenues have been generated by 
federal forfeitures. The amount deposited in Justice's Assets 
Forfeiture Fund (from both civil and criminal forfeitures) 
increased from $27 million in fiscal year 1985 to $556 million 
in 1993 and then decreased to $449 million in 1998.\17\ Of the 
$338 taken in 1996, $250 million was in cash and $74 million 
was in proceeds of forfeitable property; $163 million of the 
total was returned to state and local law enforcement agencies 
who helped in investigations.\18\ As of the end of 1998, a 
total of 24,903 seized assets valued at $1 billion were on 
deposit--7,799 cash seizures valued at $349 million, 1,181 real 
properties valued at $205 million, 45 businesses valued at $49 
million, and 15,878 other assets valued at $398 million.\19\
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    \17\ See Office of National Drug Control Policy, National Drug 
Control Strategy: Budget Summary 1999, at 107 (hereinafter cited as 
``National Drug Control Strategy''); Civil Asset Forfeiture Reform: 
Hearing Before the House Comm. on the Judiciary, 105th Cong., 1st Sess. 
116 (1997)(statement of Stefan Cassella)(hereinafter cited as ``1997 
Hearing''); U.S. Dept. Of Justice, Asset Forfeiture Fact Sheet (1993); 
Annual Report of the Dept. Of Justice Asset Forfeiture Program: 1993, 
at 15.
    \18\ See 1997 Hearing at 116 (statement of Stefan Cassella). Under 
``adoptive forfeiture'', state and local law enforcement officers seize 
property and then bring it to a federal agency for forfeiture (provided 
that the property is forfeitable under federal law). The federal 
government then returns as much as 80% of the net proceeds to the state 
or local agency that initiated the case. Also, state and local law 
enforcement agencies that have cooperated in federal law enforcement 
actions often receive a percentage of the net proceeds.
    The Committee is concerned about two aspects of adopted forfeiture. 
The first is that since property or funds returned to state or local 
law enforcement agencies through adoptive forfeiture can be kept by 
these entities, the process can be used to bypass provisions of state 
laws or state constitutions that dictate that property forfeited 
(pursuant to state forfeiture provisions) should be used for non-law 
enforcement purposes such as elementary and primary education. A recent 
series in the Kansas City Star highlighted this problem in Missouri. 
See Karen Dillon, Missouri Police Find Ways to Keep Cash Meant for 
Schools, Kansas City Star, Jan. 2, 6, 11, 20, 21, Feb. 5, 9, 10, 12, 
27, Mar. 14, 25, Apr. 23, May 7, 8, 1999. Second, while the property 
returned through adoptive forfeiture must be used for law enforcement 
purposes, state and local governing bodies do not exercise their normal 
oversight role over how the property is used since it is not 
appropriated through the normal legislative process. Consequently, 
there have been many disturbing reports of state and local law 
enforcement using forfeited property, or the proceeds from its sale, 
for unnecessary or needlessly extravagant expenditures and uses. See, 
e.g., Hyde, Forfeiting Our Property Rights: Is Your Property Safe from 
Seizure? 37 (1995)(hereinafter cited as ``Forfeiting Our Property 
Rights''). The Committee plans to continue to closely monitor these two 
issues. In addition, the Committee urges state and local law 
enforcement agencies to use forfeited property only for legitimate 
purposes and urges local communities to engage in oversight over the 
use by their law enforcement agencies of forfeited property (while not 
unduly limiting the flexibility of law enforcement).
    \19\ See National Drug Control Strategy at 108.
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    So, federal forfeiture has proven to be a great monetary 
success. And, as former Attorney General Richard Thornburgh 
said: ``[I]t 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.'' \20\
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    \20\ Richard Thornburgh, Address Before the Cleveland City Club 
Forum Luncheon (May 11, 1990).
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    The purposes of federal forfeiture were set out by Stefan 
Cassella, Assistant Chief, Asset Forfeiture and Money 
Laundering Section, Criminal Division, U.S. Department of 
Justice, in testimony before this Committee: \21\
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    \21\ 1997 Hearing at 112.

          Asset forfeiture has become one of the most powerful 
        and important tools that federal law enforcement can 
        employ against all manner of criminals and criminal 
        organizations--from drug dealers to terrorists to white 
        collar criminals who prey on the vulnerable for 
        financial gain. . . .
          Federal law enforcement agencies use the forfeiture 
        laws for a variety of reasons, both time-honored and 
        new. . . . [They] allow the government to seize 
        contraband--property that it is simply unlawful to 
        possess, such as illegal drugs, unregistered machine 
        guns, pornographic materials, smuggled goods and 
        counterfeit money.
          Forfeiture is also used to abate nuisances and 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 
        shut it down. 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 Peru into 
        Southern California, 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 far more effectively than the restitution 
        statutes permit.
          Finally, forfeiture undeniably provides both a 
        deterrent against crime and a measure of punishment for 
        the criminal. Many criminals fear the loss of their 
        vacation homes, fancy cars, businesses and bloated bank 
        accounts far more than the prospect of a jail sentence.

    However, a number of years ago, as forfeiture revenues were 
approaching their peaks, some disquieting rumblings were heard. 
The Second Circuit stated that ``[w]e continue 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.'' \22\ Newspaper and 
television exposes appeared alleging that apparently innocent 
property owners were having their property taken by federal and 
local law enforcement officers with nothing that could be 
called due process.\23\
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    \22\ United States v. All Assets of Statewide Auto Parts, Inc., 971 
F.2d 896, 905 (2nd Cir. 1992).
    \23\ See, e.g., Brazil & Berry, Tainted Cash or Easy Money?, 
Orlando Sentinel, June 14-17, 1992; Schneider & Flaherty, Presumed 
Guilty: The Law's Victims in the War on Drugs, Pitt. Press, Aug. 11-16, 
1991; Poor & Rose, Hooked on the Drug War, St. Louis Post-Dispatch, 
Apr. 28-May 5, 1991, Oct. 6-11, 20, 1991.
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    Congress investigated these charges through a series of 
hearing held by the House Committee on Government Operations' 
Subcommittee on Legislation and National Security under then-
Chairman John Conyers \24\ and then by this Committee.\25\
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    \24\ See Review of Federal Asset Forfeiture Program: Hearing Before 
the Subcomm. on Legislation and National Security of the House Comm. on 
Government Operations, 103rd Cong., 1st Sess. (1993); Department of 
Justice Asset Forfeiture Program: Hearing Before the Subcomm. on 
Legislation and National Security of the House Comm. on Government 
Operations, 102nd Cong., 2nd Sess. (1992).
    \25\ See 1997 Hearing; Civil Asset Forfeiture Reform Act: Hearing 
Before the House Comm. on the Judiciary, 104th Cong., 2nd Sess. 
(1996)(hereinafter cited as ``1996 Hearing'').
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    The stories of two of the witnesses at the Judiciary 
Committee hearings provide a sampling of the types of abuses 
that have surfaced. Willie Jones (and his attorney E.E. (Bo) 
Edwards III) testified before the Judiciary Committee on July 
22, 1996. Mr. Jones' testified as follows: \26\
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    \26\ 1996 Hearing at 12-14.

    [Chairman] Hyde: Would you please state your name and where 
you live.
    Mr. Jones: My name is Willie Jones. I live in Nashville, 
Tennessee.
    1Mr. Hyde: Very well, sir. Would you tell us your story 
involving asset forfeiture.
    Mr. Jones: Yes. On February 27, 1991, I went to the Metro 
Airport to board a plane for Houston, TX, to buy nursery stock. 
I was stopped in the airport after paying cash for my ticket.
    Mr. Hyde: What business are you engaged in or were you 
engaged in?
    Mr. Jones: I am engaged in landscaping.
    Mr. Jones: I paid cash for a round-trip ticket to Houston, 
TX, and I was detained at the ticket agent. The lady said no 
one ever paid cash for a ticket. And as I went to the gate, 
which was gate 6, to board the plane, at that time three 
officers came up to me and called me by my name, and asked if 
they could have a word with me, and told me that they had 
reason to believe that I was carrying currency, had a large 
amount of currency, drugs. So at that time----
    Mr. Hyde: Proceeds of a drug transaction; you had money 
that was drug money then, that's what they charged you with?
    Mr. Jones: Yes, sir.
    Mr. Hyde: Were you carrying a large amount of cash?
    Mr. Jones: Yes, sir. I had $9,000.
    Mr. Hyde: $9,000 in cash. Why was that, sir? Was your 
business a cash business?
    Mr. Jones: Well, it was going to be if I had found the 
shrubbery that I liked, by me being--going out of town, and the 
nursery business is kind of like the cattle business. You can 
always do better with cash money.
    Mr. Hyde: They would rather be paid in cash than a check, 
especially since you are from out of town?
    Mr. Jones: That is correct.
    Mr. Jones: So we proceeded to go out of the airport. . . . 
I was questioned about had I ever been involved in any drug-
related activity, and I told them, no, I had not. So they told 
me I might as well tell the truth because they was going to 
find out anyway. So they ran it through on the computer after I 
presented my driver's license to them, which everything was--I 
had--it was all in my name. And he ran it through the computer, 
and one officer told the other one, saying, he is clean. But 
instead, they said that the dogs hit on the money. So they told 
me at that time they was going to confiscate the money.
    Mr. Hyde: They determined from the dog's activities that 
there were traces of drugs on the money?
    Mr. Jones: That is what they said.
    Mr. Hyde: That is what they claimed? \27\
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    \27\ A federal court later found that ``[t]he presence of trace 
narcotics on currency does not yield any relevant information 
whatsoever about the currency's history. A bill may be contaminated by 
proximity to a large quantity of cocaine, by its passage through the 
contaminated sorting machines at the Federal Reserve Banks, or by 
contact with other contaminated bills in the wallet or at the bank.'' 
Jones v. U.S. Drug Enforcement Administration, 819 F. Supp. 698, 720 
(M.D. Tenn. 1993)(citation omitted).
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    Mr. Jones: Yes, sir.
    Mr. Hyde: Therefore, they kept the money?
    Mr. Jones: They kept the money.
    Mr. Hyde: Did they let you go?
    Mr. Jones: They let me go.
    Mr. Hyde: Were you charged with anything?
    Mr. Jones: No. I asked them to, if they would, if they 
would count the money and give me a receipt for it. They 
refused to count the money, and they took the money and told me 
that I was free to go, that I could still go on to Texas if I 
wanted to; that the plane had not left.
    Mr. Hyde: Of course, your money was gone. You had no point 
in going to Texas if you can't buy shrubs.
    Mr. Jones: No.

    Willie Jones did not challenge the forfeiture under the 
normal mechanism provided by law \28\ because he could not come 
up with the 10% cost bond required.\29\ He instead filed suit 
in federal district court alleging that his Fourth Amendment 
right to be secure against unreasonable searches and seizures 
had been violated.\30\ The court determined that the ``frisk'' 
which produced the $9,000 in currency was an unconstitutional 
search,\31\ and that the seizure of the currency was undertaken 
with no probable cause and therefore an unconstitutional 
seizure.\32\ The court did determine that there was 
``insufficient proof that the officers' investigation of Mr. 
Jones [who is African-American] himself was racially 
motivated[,]'' but that other investigations were so 
motivated.\33\
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    \28\ The money was seized pursuant to 21 U.S.C. Sec. 881(a)(6), 
under which ``[a]ll moneys . . . furnished or intended to be furnished 
by any person in exchange for a controlled substance . . .'' are 
subject to civil forfeiture. If Jones challenged the forfeiture, he 
would have the burden of proving by a preponderance of the evidence 
that the currency was not subject to forfeiture, provided that the 
government first showed probable cause that the currency was subject to 
forfeiture. See 19 U.S.C. Sec. 1615.
    \29\ See 1996 Hearing at 15 (statement of E.E. (Bo) Edwards III). 
See 19 U.S.C. Sec. 1608.
    \30\ Jones, 819 F. Supp. at 716.
    \31\ See id. at 718.
    \32\ See id. at 721. Probable cause is ``a reasonable ground for 
belief of guilt, supported by less than prima facie proof but more than 
mere suspicion.'' Id. (citation omitted).
    \33\ See id. at 723.
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    The court's final comments gave rise for pause:

          The Court also observes that the statutory scheme as 
        well as its administrative implementation provide 
        substantial opportunity for abuse and potentiality for 
        corruption. [Drug Interdiction Unit] personnel 
        encourage airline employees as well as hotel and motel 
        employees to report ``suspicious'' travelers and reward 
        them with a percentage of the forfeited proceeds. The 
        forfeited monies are divided and distributed by the 
        Department of Justice among the Metropolitan Nashville 
        Airport and the Metropolitan Nashville Police 
        Department partners in the DIU and itself. As to the 
        local agencies, these monies are ``off-budget'' in that 
        there is no requirement to account to legislative 
        bodies for its receipt or expenditure. Thus, the law 
        enforcement agency has a direct financial interest in 
        the enforcement of these laws. The previous history in 
        this country of an analogous kind of financial interest 
        on the part of law enforcement officers--i.e., salaries 
        of constables, sheriffs, magistrates, etc., based on 
        fees and fines--is an unsavory and embarrassing scar on 
        the administration of justice. The obviously dangerous 
        potentiality for abuse extant in the forfeiture scheme 
        should trigger, at the very least, heightened scrutiny 
        by the courts when a seizure is contested.\34\
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    \34\ Id. at 724.

    Mr. Jones's case typifies the kind that this Committee is 
gravely concerned about--except that this time there was a 
happy ending. Individuals very likely innocent of any crime 
justifying forfeiture meet some sort of ``drug courier'' 
profile [here, by buying an airplane ticket with cash] and are 
subject to a search or investigation. If they have large sums 
of cash, it is seized. They may not be tried for a crime (Civil 
forfeiture requires no related criminal conviction or even 
criminal charge. However, if there is a prosecution, acquittal 
does not bar a subsequent forfeiture action. The government 
need only show probable cause for the seizure to justify a 
civil forfeiture.). To get their property back, owners have to 
overcome tremendous procedural hurdles such as posting a cost 
bond and having to prove their property was ``innocent'' (once 
probable cause has been shown). The abuse seems even worse 
under certain state forfeiture laws.\35\
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    \35\ See Forfeiting Our Property Rights at 38-40.
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    Billy Munnerlyn testified before the Judiciary Committee on 
June 11, 1997. Following is a short summary of his experience 
with federal civil forfeiture laws:

          For years Billy Munnerlyn and his wife Karon owned 
        and operated a successful air charter service out of 
        Las Vegas, Nevada. In October 1989, Mr. Munnerlyn was 
        hired for a routine job--flying Albert Wright, 
        identified as a ``businessman,'' from Little Rock, 
        Arkansas, to Ontario, California. When the plane 
        landed, DEA agents seized Mr. Wright's luggage and the 
        $2.7 million inside. Both he and Mr. Munnerlyn were 
        arrested. The DEA confiscated the airplane, the $8,500 
        charter fee for the flight, and all of Munnerlyn's 
        business records. Although drug trafficking charges 
        against Mr. Munnerlyn were quickly dropped for lack of 
        evidence, the government refused to release his 
        airplane. (Similar charges against Mr. Wright--who, 
        unbeknownst to Munnerlyn, was a convicted cocaine 
        dealer--were eventually dropped as well.) Mr. Munnerlyn 
        spent over $85,000 in legal fees trying to get his 
        plane back, money raised by selling his three other 
        planes. A Los Angeles jury decided his airplane should 
        be returned because they found Munnerlyn had no 
        knowledge Wright was transporting drug money--only to 
        have a U.S. district judge reverse the jury verdict. 
        Munnerlyn eventually was forced to settle with the 
        government, paying $7,000 for the return of his plane. 
        He then discovered DEA agents had caused about $100,000 
        of damage to the aircraft. Under federal law the agency 
        cannot be held liable for damage. Unable to raise 
        enough money to restart his air charter business, 
        Munnerlyn had to declare personal bankruptcy. He is now 
        driving a truck for a living.\36\
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    \36\ Id. at 12 (based on reporting by Schneider & Flaherty & 
Miniter, ``Property Seizures on Trial,'' Insight, Feb. 22, 1993, at 10, 
33).

    For Mr. Munnerlyn, there was no happy ending.
    Neither the state of the law nor its usage have improved in 
recent years. Since 1974, many observers assumed that the 
Constitution mandated an ``innocent owner'' defense to a civil 
forfeiture. However, in 1996, the Supreme Court in Bennis v. 
Michigan \37\ ruled that the defense was mandated by neither 
the due process clause of the Fourteenth Amendment (and 
presumably that of the Fifth Amendment) nor the just 
compensation clause of the Fifth Amendment. The Court found 
that ``a long and unbroken line of cases holds that an owner's 
interest in property may be forfeited by reason of the use to 
which the property is put even though the owner did not know 
that it was to be put to such use.'' \38\
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    \37\ 516 U.S. 442 (1996).
    \38\ Id. at 446.
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    The dissenting justices in Bennis argued that:

          The logic of the Court's analysis would permit the 
        States to exercise virtually unbridled power to 
        confiscate vast amounts of property where professional 
        criminals have engaged in illegal acts. Some airline 
        passengers have marijuana cigarettes in their luggage; 
        some hotel guests are thieves; some spectators at 
        professional sports events carry concealed weapons; and 
        some hitchhikers are prostitutes. The State surely may 
        impose strict obligations on the owners of airlines, 
        hotels, stadiums, and vehicles to exercise a high 
        degree of care to prevent others from making illegal 
        use of their property, but neither logic nor history 
        supports the Court's apparent assumption that their 
        complete innocence imposes no constitutional impediment 
        to the seizure of their property simply because it 
        provided the locus for a criminal transaction.\39\
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    \39\ Id. at 458-59 (Stevens, J., Souter, J., and Breyer, J., 
dissenting).

    And, Justice Thomas stated in his concurrence that, 
``[i]mproperly used, forfeiture could become more like a 
roulette wheel employed to raise revenue from innocent but 
hapless owners whose property is unforeseeably misused, or a 
tool wielded to punish those who associate with criminals, than 
a component of a system of justice.'' \40\
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    \40\ Id. at 456 (Thomas, J., concurring).
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    The Seventh Circuit recently issued a decision containing a 
stinging rebuke of the federal government's use of civil 
forfeiture. United States v. $506,231 in U.S. Currency \41\ 
involved the Congress Pizzeria in Chicago. In 1997, the court 
ordered the return to Anthony Lombardo, the owner and 
proprietor of this family-owned business, of over $500,000 in 
currency improperly seized by police from the restaurant in 
1993. The court found the need to remind a U.S. Attorney that 
``the government may not seize money, even half a million 
dollars, based on its bare assumption that most people do not 
have huge sums of money lying about, and if they do, they must 
be involved in narcotics trafficking or some other sinister 
activity.'' \42\ The court also found the need to say that 
``[w]e 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.' '' \43\
---------------------------------------------------------------------------
    \41\ 125 F.3d 442 (7th Cir. 1997).
    \42\ Id. at 454 (emphasis in original).
    \43\ Id., quoting U.S. v. All Assets of Statewide Auto Parts, 971 
F.2d at 905.
---------------------------------------------------------------------------
    Civil asset forfeiture does not just impact civil liberties 
and property rights. It can work at total cross purposes with 
the professed public policy goals of the federal government. 
Few will argue against the proposition that more private 
investment needs to be made in our inner cities in order to 
offer residents hope of a better life. How, then, would anyone 
explain the actions in 1998 of the U.S. Attorney's Office in 
Houston in seizing a Red Carpet Motel in a high-crime area of 
the city? \44\ 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 in the motel's rooms by some of its 
overnight guests. However, the government claimed the hotel 
deserved to be seized and forfeited because management had 
failed to implement all of the ``security measures'' dictated 
by law enforcement officials, such as raising room rates. 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 ``tacit approval'' of 
illegality, subjecting the motel to forfeiture. The U.S. 
Attorney 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.
---------------------------------------------------------------------------
    \44\ See Deborah Tedford, Hotel Owners Agree to Beef Up Security, 
Houston Chron., July 18, 1998; Steve Brewer, Seizure of Hotel Sets 
Precedent, Houston Chron., March 7, 1998; Deborah Tedford, No Vacancy 
for Drug Dealers: Feds Seize Hotel, Houston Chron., Feb. 18, 1998.
---------------------------------------------------------------------------
    A Houston Chronicle editorial pointed to the absurdity and 
danger of this government forfeiture theory against legitimate 
business: ``Perhaps another time, the advice will be to close 
up shop altogether.'' \45\ The editorial then correctly noted 
that:
---------------------------------------------------------------------------
    \45\ U.S. Attorney Here Overstepped Bounds in Motel Seizure, 
Houston Chron., Mar. 12, 1998.

          More than due to shortcomings of the motel owners, 
        this situation appears to be the result of ineffective 
        police work and of . . . prosecutors' inability to 
        build cases against scofflaws operating in an open drug 
        market.
          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 much bad publicity, the government dropped its 
forfeiture proceedings after exacting a written ``agreement'' 
with the motel owners as to certain security measures that the 
owners would undertake. The motel owners had lost their motel 
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. The resolution does not detract from the fact that 
business owners who dare to invest in high crime areas are at 
the complete mercy of our civil asset forfeiture laws and the 
predilections of prosecutors.
IV. H.R. 1658, the Civil Asset Forfeiture Reform Act
    H.R. 1658 is designed to make federal civil forfeiture 
procedures fair to property owners and to give owners innocent 
of any wrongdoing the means to recover their property and make 
themselves whole after wrongful government seizures. H.R. 1658 
amends the rules governing all civil forfeitures under federal 
law except those contained in the Tariff Act of 1930 or the 
Internal Revenue Code of 1986.
            The Eight Core Reforms of H.R. 1658

                           1. Burden of Proof

    When a property owner goes to federal court to challenge 
the seizure of property under a federal civil forfeiture law, 
the government is required to make an initial showing of 
probable cause that the property is subject to forfeiture. 
Under current law, the property owner must then establish by a 
preponderance of the evidence that the property is not subject 
to forfeiture. \46\ The government can meet its burden without 
having obtained a criminal conviction or even having charged 
the owner with a crime. Since the government doesn't need the 
proof beyond a reasonable doubt required for a criminal 
conviction, even the acquittal of the owner does not bar 
forfeiture of the property allegedly used in a crime. The 
probable cause the government needs is the lowest standard of 
proof in the criminal law. It is the same standard required to 
obtain a search warrant and can be established by evidence with 
a low indicia of reliability such as hearsay.\47\
---------------------------------------------------------------------------
    \46\ See 19 U.S.C. Sec. 1615.
    \47\ See United States v. A Single Family Residence and Real 
Property Located at 900 Rio Vista Blvd., Ft. Lauderdale, 803 F.2d 625, 
629 n.2 (11th Cir. 1986).
---------------------------------------------------------------------------
    Allowing property to be forfeited upon a mere showing of 
probable cause can be criticized on many levels:

          [T]he current allocation of burdens and standards of 
        proof requires that the [owner] prove a negative, that 
        the property was not used in order to facilitate 
        illegal activity, while the government must prove 
        almost nothing. This creates a great risk of erroneous, 
        irreversible deprivation. ``The function of a standard 
        of proof, as that concept is embodied in the Due 
        Process Clause and in the realm of fact finding, is to 
        `instruct the fact finder concerning the degree of 
        confidence our society thinks he should have in the 
        correctness of factual conclusions for a particular 
        type of adjudication.' '' Addington v. Texas, 441 U.S. 
        418, 423 . . . (1979) . . . The allocation of burdens 
        and standards of proof implicates similar concerns and 
        is of greater importance since it decides who must go 
        forward with evidence and who bears the risk of loss 
        should proof not rise to the standard set. In civil 
        forfeiture cases, where claimants are required to go 
        forward with evidence and exculpate their property by a 
        preponderance of the evidence, all risks are squarely 
        on the claimant. The government, under the current 
        approach, need not produce any admissible evidence and 
        may deprive citizens of property based on the rankest 
        of hearsay and the flimsiest evidence. This result 
        clearly does not reflect the value of private property 
        in our society, and makes the risk of an erroneous 
        deprivation intolerable.\48\
---------------------------------------------------------------------------
    \48\ United States v. $12,390, 956 F.2d 801, 811(8th Cir. 
1992)(Beam, J., dissenting).

    Some federal courts have even intimated that probable cause 
---------------------------------------------------------------------------
is an unconstitutional standard:

          The Supreme Court . . . has recently expanded the 
        constitutional protections applicable in forfeiture 
        proceedings to include those of the Eighth Amendment. . 
        . . We therefore agree with the Second Circuit: ``Good 
        and Austin reopen the question of whether the quantum 
        of evidence the government needs to show in order to 
        obtain a warrant in rem allowing seizure --probable 
        cause--suffices to meet the requirements of due 
        process.'' United States v. One Parcel of Property 
        Located at 194 Quaker Farms Road, 85 F.3d 985, 990 (2nd 
        Cir.), cert denied . . . 117 S. Ct. 304 . . . (1996).
          [W]e observe that allowing the government to forfeit 
        property based on a mere showing of probable cause is a 
        ``constitutional anomaly. . . .'' As the Supreme Court 
        has explained, burdens of proof are intended in part to 
        ``indicate the relative importance attached to the 
        ultimate decision.'' . . . The stakes are exceedingly 
        high in a forfeiture proceeding: Claimants are 
        threatened with permanent deprivation of their 
        property, from their hard-earned money, to their sole 
        means of transport, to their homes. We would find it 
        surprising were the Constitution to permit such an 
        important decision to turn on a meager burden of proof 
        like probable cause.\49\
---------------------------------------------------------------------------
    \49\ United States v. $49,576, 116 F.3d 425, 429 (9th Cir. 
1997)(citations omitted).

    This Committee finds probable cause too low a standard of 
proof for the government to meet. Therefore, H.R. 1658 provides 
that the burden of proof should not shift to a property owner 
upon a showing of probable cause, but should remain with the 
government with a standard of clear and convincing evidence 
that the property is subject to forfeiture.
    Why ``clear and convincing evidence'' and not ``a 
preponderance of the evidence?'' The Justice Department used to 
argue that federal civil forfeiture provisions were not 
designed to punish anybody. Justice argued that forfeiture 
served purely remedial functions--such as to remove the 
instruments of the drug trade and thereby protect the community 
from the threat of continued drug dealing, and to compensate 
the government for the expense of law enforcement activity and 
for its expenditure on societal problems resulting from the 
drug trade. The Department made this argument in order to 
provide a rationale for not applying to civil forfeitures the 
Eighth Amendment's prohibition against excessive fines. In its 
1993 decision in Austin v. United States, \50\ the Supreme 
Court rejected Justice's argument, finding that:
---------------------------------------------------------------------------
    \50\ 509 U.S. 602 (1993).

    In light of the historical understanding of forfeiture as 
punishment, the clear focus of [the instant forfeiture 
provisions] on the culpability of the owner, and the evidence 
that Congress understood those provisions as serving to deter 
and to punish, we cannot conclude that [the provisions serve] 
solely a remedial purpose. We therefore conclude that 
forfeiture under these provisions constitutes ``payment to a 
sovereign as punishment for some offense. . . .'' \51\
---------------------------------------------------------------------------
    \51\ Id. at 621-22 (footnote omitted), quoting Browning-Ferris 
Industries of Vermont, Inc. v. Kelco Disposal, Inc., 492 U.S. 257, 265 
(1989).

    One might ask, punishment for what? Clearly, the punishment 
is for a property owner's alleged involvement in drug 
trafficking. Civil forfeiture is being used to punish a 
property owner for alleged criminal activity. The general civil 
standard of proof--preponderance of the evidence--is too low a 
standard to assign to the government in this type of case. A 
higher standard of proof is needed that recognizes that in 
reality the government is alleging that a crime has taken 
place. As the Supreme Court has said, civil forfeiture actions 
are in essence ``quasi- criminal in character'' designed ``like 
a criminal proceeding . . . to penalize for the commission of 
an offense against the law.'' \52\ Since civil forfeiture 
doesn't threaten imprisonment, proof beyond a reasonable doubt 
is not necessary.\53\ The intermediate standard--clear and 
convincing evidence--is more appropriate.
---------------------------------------------------------------------------
    \52\ One 1958 Plymouth Sedan v. Pennsylvania, 380 U.S. 693, 700 
(1965).
    \53\ Some states do require proof beyond a reasonable doubt. The 
Supreme Court of Nevada has ruled that because of the ``quasi-criminal 
nature of forfeiture actions,'' ``[p]roof beyond a reasonable doubt is 
therefore appropriate in order that the innocent not be permanently 
deprived of their property.'' A 1983 Volkswagen v. Country of Washoe, 
101 Nev. 222, 224, 699 P.2d 108, 109 (Nev. 1985). Others provide only 
for criminal forfeiture in most situations, which of course leads to 
the same result. See, e.g., Cal. Health and Safety Code Sec. 11470.
---------------------------------------------------------------------------
    The Florida Supreme Court has ruled that the Florida 
Constitution mandates a clear and convincing evidence standard 
in civil forfeiture proceedings commenced under Florida law, 
stating that:

          In forfeiture proceedings the state impinges on basis 
        constitutional rights of individuals who may never have 
        been formally charged with any civil or criminal 
        wrongdoing. This Court has consistently held that the 
        [Florida] Constitution requires substantial burdens of 
        proof where state action may deprive individuals of 
        basic rights.\54\
---------------------------------------------------------------------------
    \54\ Department of Law Enforcement v. Real Property, 588 So.2d 957, 
967 (Fla. 1991). See also Cal. Health and Safety Code Sec. 11470 (clear 
and convincing evidence in cases involving drug proceeds over $25,000); 
N.Y. Civ. Prac. L. & R. Sec. Sec. 1311(1), 1310(6) (clear and 
convincing evidence in drug cases); Wisc. Stat. Ann. Sec. 973.076(3) 
(requiring proof ``satisfying or convincing to a reasonable certainty 
by the greater weight of the credible evidence'').

    Under H.R. 1658, a property owner would still have the 
burden of proving affirmative defenses, such as the ``innocent 
owner'' defense, by a preponderance of the evidence. Also, 
property can still be initially seized by the government based 
on probable cause, and this standard is sufficient to effect 
forfeiture in cases where a claim to the seized property is not 
filed.

                       2. Appointment of Counsel

    There is no Sixth Amendment right to appointed counsel for 
indigents in civil forfeiture cases, since imprisonment is not 
threatened.\55\ This is undoubtedly one of the primary reasons 
why so many civil seizures are not challenged. As the cochairs 
of the National Association of Criminal Defense Lawyers' 
Forfeiture Abuse Task Force stated before this Committee in 
1996: ``The reason they are so rarely challenged has nothing to 
do with the owner's guilt, and everything to do with the 
arduous path one must journey against a presumption of guilt, 
often without the benefit of counsel, and perhaps without any 
money left after the seizure with which to fight the battle.'' 
\56\ This Committee believes that civil forfeiture proceedings 
are so punitive in nature that appointed counsel should be made 
available for those who are indigent, or made indigent by a 
seizure, in appropriate circumstances.
---------------------------------------------------------------------------
    \55\ See United States v. $292,888.04 in U.S. Currency, 54 F.3d 
564, 569 (9th Cir. 1995); United States v. 7108 West Grand Ave., 
Chicago, Illinois, 15 F.3d 632, 635 (7th Cir. 1994), cert. denied, 114 
S. Ct. 2691 (1994).
    \56\ 1996 Hearing at 289-90 (statement of E.E. (Bo) Edwards III, 
David Smith, and Richard Troberman).
---------------------------------------------------------------------------
    H.R. 1658 provides that a federal court may appoint counsel 
to represent an individual filing a claim in a civil forfeiture 
proceeding who is financially unable to obtain representation. 
In determining whether to appoint counsel, the court shall take 
into account the claimant's standing to contest the forfeiture 
and whether the claim appears to be made in good faith or to be 
frivolous. Compensation for appointed counsel will be 
equivalent to that provided for court-appointed counsel in 
federal felony cases. Currently, maximum compensation would not 
exceed $3,500 per attorney for representation before a U.S. 
district court and $2,500 per attorney for representation 
before an appellate court. These maximums can be waived in 
cases of ``extended or complex'' representation where ``excess 
payment is necessary to provide fair compensation and the 
payment is approved by the chief judge of the circuit.'' \57\
---------------------------------------------------------------------------
    \57\ 18 U.S.C. Sec.  3006A(d).
---------------------------------------------------------------------------

                       3. Innocent Owner Defense

    The impact of Bennis \58\ is limited by the fact that many 
federal civil forfeiture provisions contain statutory innocent 
owner defenses. For instance, real property used to commit or 
to facilitate a federal drug crime is forfeitable unless the 
violation was ``committed or omitted without the knowledge or 
consent of [the] owner.'' \59\ Conveyances used in federal drug 
crimes are not forfeitable ``by reason of any act or omission 
established by that owner to have been committed or omitted 
without the knowledge, consent, or willful blindness of the 
owner.'' \60\ Property involved in certain money laundering 
transactions shall not be forfeited ``by reason of any act or 
omission established by that owner or lienholder to have been 
committed without the knowledge of that owner or lienholder.'' 
\61\ Other federal civil forfeiture statutes contain no 
innocent owner defenses. For instance, the statute providing 
for forfeiture of any property, including money, used in an 
illegal gambling business contains no such defense.\62\ Many 
courts require that to qualify as an innocent owner, an owner 
have done all that reasonably could be expected to prevent the 
illegal use of the property.\63\
---------------------------------------------------------------------------
    \58\ 516 U.S. at 442.
    \59\ 21 U.S.C. Sec.  881(a)(7).
    \60\ 21 U.S.C. Sec.  881(a)(4)(C).
    \61\ 18 U.S.C. Sec.  981(a)(2).
    \62\ 18 U.S.C. Sec.  1955(d).
    \63\ See, e.g., United States v. One Parcel of Property Located at 
755 Forest Road, Northford, Connecticut, 985 F.2d 70, 72 (2nd Cir. 
1993); United States v. One Parcel of Real Estate at 1012 Germantown 
Road, Palm Beach County, Fla., 963 F.2d 1496, 1506 (11th Cir. 1992).
---------------------------------------------------------------------------
    Not only are these statutory innocent owner defenses 
nonuniform, but the protections of the ones using the 
``committed or omitted'' language have been seriously eroded by 
a number of federal courts ruling that qualifying owners must 
have had no knowledge of and provided no consent to the 
prohibited use of the property.\64\ Such an interpretation 
means that owners who try to end the illegal use by others of 
their property cannot make use of the defense simply because 
they knew about such use.
---------------------------------------------------------------------------
    \64\ See, e.g., United States v. Lot 111-B, Tax Map Key 4-4-03-
71(4), 902 F.2d 1443, 1445 (9th Cir. 1990) (per curiam). See, contra, 
United States v. 141st St. Corp. by Hersh, 911 F.2d 870, 877-78 (2nd 
Cir. 1990), cert. denied, 111 S. Ct. 1017 (1991).
---------------------------------------------------------------------------
    Believing that a meaningful innocent owner defense is 
required by fundamental fairness, the Committee sets out an 
innocent owner defense in H.R. 1658 designed to provide such a 
defense for all federal civil forfeitures, to make that defense 
uniform, and to ensure that it offers protection in all 
appropriate cases.
    The innocent owner defense in the bill provides that, with 
respect to a property interest in existence at the time the 
illegal conduct giving rise to the forfeiture took place, an 
innocent owner is an owner who did not know of this conduct or, 
upon learning of it, did all that reasonably could be expected 
under the circumstances to terminate such use of the property. 
One way in which an owner may show that he did all that 
reasonably could be expected is to demonstrate that he, to the 
extent permitted by law, (1) gave timely notice to an 
appropriate law enforcement agency of information that led the 
person to know the conduct would occur or has occurred, and (2) 
in a timely fashion revoked or attempted to revoke permission 
for those engaging in such conduct to use the property or took 
reasonable actions in consultation with a law enforcement 
agency to discourage or prevent the illegal use of the 
property.
    Thus, a safe harbor is created for an owner who notifies 
police and revokes or attempts to revoke (to the extent 
permitted by law) permission to use the property by those who 
are using it in the course of criminal activity. The owner's 
obligations end right there--property owners should not have to 
assume the responsibilities of police to stop crime. In the Red 
Carpet Motel incident described earlier, the hotel owner could 
have taken advantage of the bill's safe harbor by (as he did) 
notifying police of drug sales taking place at the motel and 
making a good faith attempt to evict the responsible motel 
guests from their rooms. In the situation of an apartment 
building where a tenant is selling illegal drugs, the owner 
could take advantage of the safe harbor by notifying police and 
making a good faith attempt to evict the tenants. The term 
``good faith attempt'' is used because in many instances, an 
owner may be constrained in revoking permission to use property 
because of provisions of local, state or federal law (i.e., 
contract or landlord- tenant law). For instance, in many parts 
of the country it is extremely difficult to evict a tenant 
because of allegations of illegal drug sales without the tenant 
having already been convicted of drug trafficking.\65\
---------------------------------------------------------------------------
    \65\ In some areas of the country, it might be generally agreed to 
be impossible to evict a tenant without a preexisting criminal 
conviction--in such a case, the bill would not require an owner to go 
through the futile motion of seeking eviction in order to enjoy the 
protection of the safe harbor.
---------------------------------------------------------------------------
    Finally, an owner is not required--in order to do ``all 
that can reasonably be expected''--to take steps that he 
reasonably believes would be likely to subject any person 
(other than the wrongdoer) to physical danger.
    With respect to a property interest acquired after the 
conduct giving rise to the forfeiture has taken place, an 
innocent owner is generally one who, at the time he acquired 
the interest in the property, was a bona fide purchaser or 
seller for value and reasonably without cause to believe that 
the property was subject to forfeiture. This formulation is 
required because much fraud could result were innocent donees 
allowed to be considered innocent owners. As Justice Kennedy 
noted in dissent in United States v. A Parcel of Land (92 Buena 
Vista Ave.),\66\ criminals would then be allowed to shield 
their property from forfeiture through transfers to relatives.
---------------------------------------------------------------------------
    \66\ 113 S. Ct. 1126, 1146 (1993).
---------------------------------------------------------------------------
    However, the bill makes exceptions to this formulation in 
two instances to avoid unjust results. First, a person is 
considered to be an innocent owner if he acquired an interest 
in property through probate or inheritance, and was at the time 
of acquisition reasonably without cause to believe that the 
property was subject to forfeiture. The risk of a moral hazard 
here is slight. It is hardly likely that many criminals will 
commit suicide for the express purpose of foiling imminent 
seizures by having their property devolved to their heirs. And 
this policy has a sound basis. A person may have inherited 
property from a relative without cause to believe that it had 
been involved in some criminal activity. Years later, the 
government might decide to institute forfeiture proceedings 
against the property. Without the availability of an innocent 
owner defense, the inheritor would be put in the position of 
having to rebut the government's case that the property was 
forfeitable, that it had been involved in criminal activity. To 
do this, the inheritor would have to know what a dead person 
had done with the property and what was in the mind of that 
dead person. It is fundamentally unfair to put someone in this 
position.\67\
---------------------------------------------------------------------------
    \67\ The Committee has heard testimony from the executor of an 
estate who was placed, along with the beneficiaries of a house, in the 
position of having to fight a seizure based on ``an unnamed person in 
prison [having] told an unnamed government agent that an unnamed vessel 
was used by unnamed persons to offload cocaine at the home of the 
decedent . . . on an unspecified date in December 1988.'' 1997 Hearing 
at 38 (testimony of Susan Davis).
---------------------------------------------------------------------------
    Second, if the property is real property, the owner is the 
spouse or minor child of the person who committed the offense 
giving rise to forfeiture, and the owner uses the property as a 
primary residence, an otherwise valid innocent owner claim 
shall not be denied because the owner acquired his interest in 
it not through a purchase but through dissolution of marriage 
or by operation of law (in the case of a spouse) or as an 
inheritance upon the death of a parent (in the case of a minor 
child). However, to be considered an innocent owner, the spouse 
or minor child must have been reasonably without cause to 
believe that the property was subject to forfeiture at the time 
of the acquisition of his interest in the property.

             4. Return of Property Upon Showing of Hardship

    Even should a property owner prevail in a civil forfeiture 
proceeding, irreparable damage may have been done to the 
owner's interests. For instance, if property is used as a 
business, its lack of availability for the time necessary to 
win a victory in court could have forced its owner into 
bankruptcy. If the property is a car, the owner might not have 
been able to commute to work until it was won back. If the 
property is a house, the owner may have been left temporarily 
homeless (unless the government let the owner rent the house 
back). In cases such as this, even when the government's case 
is extremely weak, the owner must often settle with the 
government and lose a certain amount of money in order to get 
the property back as quickly as possible.
    The case of Michael and Christine Sandsness is instructive:

          Michael Sandsness and his wife, Christine, owned two 
        gardening supply stores called ``Rain & Shine'' in 
        Eugene and Portland, Oregon. Among the items sold were 
        metal halide grow lights, used for growing many indoor 
        plants. The grow lights also can be used to grow 
        marijuana, but it is not illegal to sell them. Because 
        some area marijuana gardens raided by [the Drug 
        Enforcement Administration] had the lights, the agency 
        began building a case to seize the gardening supply 
        businesses. [T]he DEA sent undercover agents to the 
        stores to try to get employees to give advice on 
        growing marijuana. Unsuccessful in those efforts, the 
        agents then engaged an employee in conversation, asking 
        advice on the amount of heat or noise generated by the 
        lights, making oblique comments suggesting that they 
        wanted to avoid detection and commenting about High 
        Times magazine. They never actually mentioned 
        marijuana. The employee then sold the agents grow 
        lights. DEA raided the two stores, seizing inventory 
        and bank accounts. Agents told the landlord of one of 
        the stores that if he did not evict Sandsness, the 
        government would seize his building. The landlord 
        reluctantly complied. While the forfeiture case was 
        pending, the business was destroyed. Mr. Sandsness was 
        forced to sell the remaining unseized inventory in 
        order to pay off creditors.\68\
---------------------------------------------------------------------------
    \68\ Forfeiting Our Property Rights at 13.

    Current law does allow for the release of property pending 
final disposition of a case upon payment of a full bond.\69\ 
However, most property owners do not have the resources to make 
use of this provision. Therefore, in order to alleviate 
hardship, H.R. 1658 provides that a property owner is entitled 
to release of seized property if a court determines that its 
continued possession by the government pending the final 
disposition of forfeiture proceedings will likely cause 
substantial hardship to the owner and that this hardship 
outweighs the risk that the property will be destroyed, 
damaged, lost, concealed, or transferred it if is returned 
during the pendency of the proceedings. The court may place 
such conditions on release of the property as it finds are 
appropriate to preserve the property's availability for 
forfeiture.
---------------------------------------------------------------------------
    \69\ See 19 U.S.C. Sec.  1614.
---------------------------------------------------------------------------

   5. Compensation for Damage to Property while in the Government's 
                               Possession

    The federal government is exempted from liability under the 
Federal Tort Claims Act for damage to property while detained 
by law enforcement officers.\70\
---------------------------------------------------------------------------
    \70\ 26 U.S.C. Sec.  2680(c).
---------------------------------------------------------------------------
    Seized property awaiting forfeiture can be quickly damaged:

          Seized conveyances devalue from aging, lack of care, 
        inadequate storage, and other factors while waiting 
        forfeiture. They often deteriorate--engines freeze, 
        batteries die, seals shrink and leak oil, boats sink, 
        salt air and water corrode metal surfaces, barnacles 
        accumulate on boat hulls, and windows crack from heat. 
        On occasion, vandals steal or seriously damage 
        conveyances.\71\
---------------------------------------------------------------------------
    \71\ U.S. Comptroller Gen., U.S. Gen. Accounting Office, Better 
Care and Disposal of Seized Cars, Boats, and Planes Should Save Money 
and Benefits Law Enforcement, at ii (GAO/PLRD-83-94, 1983).

    It cannot be categorized as victory when a boat owner gets 
back, for instance, a rusted and stripped hulk of a vessel. The 
bill amends the Federal Tort Claims Act to allow for tort 
claims against the United States government based on the 
destruction, injury, or loss of goods, merchandise, or other 
property while in the possession of any law enforcement officer 
if the property had been seized for the purpose of forfeiture. 
Of course, if seized property is successfully forfeited, no 
claim would be allowed.

                      6. Elimination of Cost Bond

    Under current law, a property owner wanting to contest a 
seizure of property under a civil forfeiture statute must give 
the court a bond of the lessor of $5,000 or ten percent of the 
value of the property seized (but not less than $250).\72\
---------------------------------------------------------------------------
    \72\ See 19 U.S.C. Sec.  1608.
---------------------------------------------------------------------------
    The bond is unconstitutional in cases involving indigents, 
because it would deprive such claimants of hearings simply 
because of their inability to pay.\73\ Even in cases not 
involving indigents, the bond should not be required. It ``is 
simply an additional financial burden on the claimant and an 
added deterrent to contesting the forfeiture.'' \74\ H.R. 1658 
eliminates the requirement.
---------------------------------------------------------------------------
    \73\ See Wiren v. Eide, 542 F.2d 757, 763 (9th Cir. 1976).
    \74\ Letter from David Smith to Kathleen Clark, Senate Judiciary 
Committee, at 5 (Aug. 19, 1992).
---------------------------------------------------------------------------

                 7. Adequate Time to Contest Forfeiture

    Currently, a property owner has 20 days (from the date of 
the first publication of the notice of seizure) to file a claim 
with the seizing agency challenging the government's 
administrative forfeiture of property.\75\ To challenge a 
judicial forfeiture, the property owner has an exceedingly 
short 10 days (after process has been executed): \76\
---------------------------------------------------------------------------
    \75\ 19 U.S.C. Sec.  1608.
    \76\ Fed. R. Civ. P. C(6)(Supplemental Rules for Certain Admiralty 
and Maritime Claims)(This is the date when a U.S. court takes 
possession of the property through ``arrest'' by a federal marshal. It 
is not the date when it is initially seized by a law enforcement 
officer).

          Even assuming that notice is published the next day 
        after process is executed, the reader of the notice 
        will have a mere nine days to file a timely claim. Most 
        local rules require that notice be published for three 
        successive weeks, on the assumption that interested 
        parties will not necessarily see the first published 
        notice. But by the time the second notice is published, 
        more than ten days will have elapsed from the date 
        process is executed. Thus anyone who misses the first 
        published notice will be unable to comply with the 
        exceedingly short time limitation for filing a claim. . 
        . .\77\
---------------------------------------------------------------------------
    \77\ David Smith, Prosecution and Defense of Forfeiture Cases, 
Sec.  9.03[1], at 9-45 (1998).

    Even though these time limits sometimes are ignored in the 
interests of justice, failure to file a timely claim often 
results in judgment in favor of the government.\78\
---------------------------------------------------------------------------
    \78\ See, e.g., United States v. Beechcraft Queen Airplane, 789 
F.2d 627, 630 (8th Cir. 1986).
---------------------------------------------------------------------------
    The bill provides a property owner 30 days to file a claim 
following both administrative and judicial forfeiture actions.

                              8. Interest

    Under current law, even if a property owner prevails in a 
forfeiture action, he may receive no interest for the time 
period in which he lost use of his property.\79\ In cases where 
money or other negotiable instruments were seized, or money is 
awarded a property owner, this is manifestly unfair.
---------------------------------------------------------------------------
    \79\ The courts are divided on whether the government must pay 
interest to a successful claimant. Compare United States v. $515,060.42 
in U.S. Currency, 152 F.3d 491, 504-06 (6th Cir. 1998)(awarding 
interest) with United States v. $7,990 in U.S. Currency, 170 F.3d 843 
(8th Cir. 1999)(sovereign immunity bars awarding of interest).
---------------------------------------------------------------------------
    H.R. 1658 provides that upon entry of judgment for the 
owner in a forfeiture proceeding, the United States shall be 
liable for post-judgment interest on any money judgement. The 
United States shall generally not be liable for pre-judgment 
interest. However, in cases involving currency, proceeds of an 
interlocutory sale, or other negotiable instruments, the 
government must disgorge any funds representing interest 
actually paid to the United States that resulted from the 
investment of the property or an imputed amount that would have 
been earned had it been invested.

                                Hearings

    While no hearings were held in the 106th Congress, the 
Committee held one day of hearings on civil asset forfeiture 
reform legislation on June 11, 1997. Testimony was received 
from Billy Munnerlyn, E.E. (Bo) Edwards III, F. Lee Bailey, 
Susan Davis, Gerald B. Lefcourt, Stefan D. Cassella, Deputy 
Chief, Asset Forfeiture and Money Laundering Section, Criminal 
Division, U.S. Department of Justice, Jan P. Blanton, Director, 
Executive Office for Asset Forfeiture, Department of the 
Treasury, Bobby Moody, Chief of Police, Marietta, Georgia, and 
1st Vice President, International Association of Chiefs of 
Police, and David Smith. Additional material was submitted by 
Nadine Strossen, President, American Civil Liberties 
Organization, and Roger Pilon, Director, Center for 
Constitutional Studies, CATO Institute.

                        Committee Consideration

    On June 15, 1999, the Committee met in open session and 
ordered reported favorably the bill H.R. 1658 without amendment 
by a recorded vote of 27-3, a quorum being present.

                         Vote of the Committee

    Vote on final passage: Adopted 27 to 3.

        AYES                          NAYS
Mr. Sensenbrenner                   Mr. Bryant
Mr. Gekas                           Mr. Hutchinson
Mr. Coble                           Mr. Weiner
Mr. Smith (TX)
Mr. Gallegly
Mr. Canady
Mr. Goodlatte
Mr. Chabot
Mr. Barr
Mr. Jenkins
Mr. Cannon
Mr. Rogan
Mr. Graham
Mr. Scarborough
Mr. Conyers
Mr. Frank
Mr. Berman
Mr. Nadler
Mr. Scott
Mr. Watt
Ms. Lofgren
Ms. Jackson Lee
Mr. Delahunt
Mr. Wexler
Mr. Rothman
Ms. Baldwin
Mr. Hyde

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of Rule XIII of the Rules 
of the House of Representatives, the Committee reports that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of Rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

                Committee on Government Reform Findings

    No findings or recommendations of the Committee on 
Government Reform were received as referred to in clause 
3(c)(4) of Rule XIII of the Rules of the House of 
Representatives.

               New Budget Authority and Tax Expenditures

    Clause 3(c)(2) of House Rule XIII is inapplicable because 
this legislation does not provide new budgetary authority or 
increased tax expenditures.

                        Committee Cost Estimate

    In compliance with clause 3(d)(2) of Rule XIII of the Rules 
of the House of Representatives, the Committee believes that 
the bill will have no cost for the current fiscal year, and 
that the cost incurred in carrying out H.R.1658 would be $52 
million for the next five fiscal years.
    The Congressional Budget Office did not have an independent 
cost estimate prepared by the time of filing of this report. 
However, CBO did prepare a cost estimate in 1997 of H.R. 1965, 
another bill reforming federal forfeiture laws. While the two 
bills have significant differences, H.R. 1965 did contain 
versions of the eight fundamental reforms of civil forfeiture 
laws contained in H.R. 1658. The CBO estimated that over the 
period 1998-2002, implementation of H.R. 1965 would cost $52 
million and that any changes to direct spending and 
governmental receipts would be less than $500,000 a year.\80\
---------------------------------------------------------------------------
    \80\ H.R. Rep. No. 105-358, pt. 1, at 38-41 (1997).
---------------------------------------------------------------------------

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of Rule XIII of the Rules of the 
House of Representatives, the Committee finds the authority for 
this legislation in Article I, section 8 of the Constitution.

               Section-by-Section Analysis and Discussion

Section 1. Short title.
    Section 1 contains the Short Title of the bill.
Section 2. Creation of general rules relating to civil forfeiture 
        proceedings.
    Section 2 creates new subsections (j) and (k) of section 
981 of title 18 of the United States Code (and redesignates 
subsection (j) as subsection (l)) that contain revised 
procedures which are to govern all administrative and judicial 
civil forfeiture actions brought pursuant to federal law 
(except as specified in subsection (j)(8)). To the extent these 
procedures are inconsistent with any preexisting federal law, 
these procedures apply and supercede preexisting law.
    Subparagraph (A) of paragraph (1) of subsection (j) 
provides that in any nonjudicial civil forfeiture proceeding 
under a civil forfeiture statute, with respect to which the 
agency conducting a seizure of property must give written 
notice to interested parties, such notice shall be given as 
soon as practicable and in no case more than 60 days after the 
later of the date of the seizure or the date the identity of 
the interested party is first known or discovered by the 
agency, except that the court may extend the period for filing 
a notice for good cause shown.
    Subparagraph (B) of paragraph (1) provides that a person 
entitled to written notice in such proceeding to whom written 
notice is not given may on motion void the forfeiture with 
respect to that person's interest in the property, unless the 
agency show either good cause for the failure to give notice to 
that person or that the person otherwise had actual notice of 
the seizure.
    Subparagraph (C) of paragraph (1) provides that if the 
government does not provide notice of a seizure of property in 
accordance with subparagraph (A), it shall return the property 
and may not take any further action to effect the forfeiture of 
such property. If the government has made a mistake or 
administrative error in providing notice, a court may consider 
good cause to have been shown pursuant to subparagraph (A). In 
such case, the government may take further action to effect the 
forfeiture.
    Subparagraph (A) of paragraph (2) provides that any person 
claiming property seized in a nonjudicial forfeiture proceeding 
may file a claim with the appropriate official after the 
seizure.
    Subparagraph (B) of paragraph (2) provides that a claim 
under subparagraph (A) may not be filed later than 30 days 
after either the date of final publication of notice of seizure 
or, in the case of a person entitled to written notice, the 
date that notice was received.
    Subparagraph (C) of paragraph (2) provides that the claim 
shall state the claimant's interest in the property.
    Subparagraph (D) of paragraph (2) provides that not later 
than 90 days after a claim has been filed, the Attorney General 
shall file a complaint for forfeiture in the appropriate court 
or return the property, except that a court in the district in 
which the complaint will be filed may extend the period for 
filing a complaint for good cause shown or upon agreement of 
the parties.
    Subparagraph (E) of paragraph (2) provides that if the 
government does not file a complaint for forfeiture of property 
in accordance with subparagraph (D), it shall return the 
property and may not take any further action to effect the 
forfeiture of such property.
    Subparagraph (F) of paragraph (2) provides that any person 
may bring a claim under subparagraph (A) without posting bond 
with respect to the property which is the subject of the claim.
    Subparagraph (A) of paragraph (3) provides that in any case 
where the government files in the appropriate United States 
district court a complaint for forfeiture of property, any 
person claiming an interest in the seized property may file a 
claim asserting such person's interest in the property within 
30 days of service of the government's complaint or, where 
applicable, within 30 days of alternative publication notice.
    Subparagraph (B) of paragraph (3) provides that a person 
asserting an interest in seized property in accordance with 
subparagraph (A) shall file an answer to the government's 
complaint for forfeiture within 20 days of the filing of the 
claim.
    Subparagraph (A) of paragraph (4) provides that if the 
person filing a claim is financially unable to obtain 
representation by counsel, the court may appoint counsel to 
represent that person with respect to the claim.
    Subparagraph (B) of paragraph (4) provides that in 
determining whether to appoint counsel to represent the person 
filing the claim, the court shall take into account such 
factors as the claimant's standing to contest the forfeiture 
and whether the claim appears to be made in good faith or to be 
frivolous.
    Subparagraph (C) of paragraph (4) provides that the court 
shall set the compensation for that representation, which shall 
be equivalent to that provided for court-appointed 
representation under section 3006A of title 18 of the United 
States Code (for federal criminal defendants), and to pay such 
cost there are authorized to be appropriated such sums as are 
necessary as an addition to the funds otherwise appropriated 
for the appointment of counsel under that section.
    Paragraph (5) provides that in all suits or actions brought 
under any civil forfeiture statute for the civil forfeiture of 
any property, the burden of proof is on the United States 
government to establish, by clear and convincing evidence, that 
the property is subject to forfeiture.
    Subparagraph (A) of paragraph (6) provides that an innocent 
owner's interest in property shall not be forfeited under any 
civil forfeiture statute.
    Subparagraph (B) of paragraph (6) provides that with 
respect to a property interest in existence at the time the 
illegal conduct giving rise to forfeiture took place, the term 
``innocent owner'' means an owner who either did not know of 
the conduct giving rise to the forfeiture or, upon learning of 
the conduct giving rise to the forfeiture, did all that 
reasonably could be expected under the circumstances to 
terminate such use of the property. To meet the requirements of 
the last clause of the preceding sentence, the property owner 
is not required to take every conceivable action which could be 
considered reasonable, but only to take actions which are in 
total a reasonable response to the conduct giving rise to the 
forfeiture. In determining what is a reasonable response, the 
economic situation of the property owner (and his business, if 
applicable) should be taken into account.
    Subparagraph (C) of paragraph (6) provides that with 
respect to a property interest acquired after the conduct 
giving rise to the forfeiture has taken place, the term 
``innocent owner'' means a person who, at the time that person 
acquired the interest in the property, was reasonably without 
cause to believe that the property was subject to forfeiture 
and was either a bona fide purchaser or seller for value 
(including a purchaser or seller of goods or services for 
value) or a person who acquired an interest in property through 
probate or inheritance.
    A property owner is considered to have acquired an interest 
in property through probate or inheritance at the time of the 
death of the previous property owner, not at the time of final, 
permanent, distribution of the property.
    The use of the term inheritance recognizes that property 
interests often pass at the death of previous owners outside of 
formal probate proceedings. For instance, property interests 
are routinely inherited in community property states (such as 
California and Texas) without a testamentary device. Likewise, 
standard property law in many states recognizes transfers of 
interests through mechanisms such as remainder interests, and 
``tenancy-in-entireties'' (which cause property interests in 
the whole res to pass virtually automatically upon the death of 
one ``tenant''/owner to the surviving ``tenant''/owner). This 
is often true of partnership property, including family 
business partnerships. In short, the use of the term recognizes 
that non-probate assets might be acquired by truly innocent 
owners through all manner of standard, legitimate state and 
commercial law mechanisms, for fundamental tax and estate 
planning reasons. For example, assets commonly inherited but 
not subject to probate administration in many states include 
the following: joint bank accounts with right of survivorship, 
property held in joint tenancy, property subject to a community 
property agreement (in community property states), property 
held in an inter vivos (living) trust, life insurance (unless 
all beneficiaries are dead or proceeds are payable to the 
estate), and assets governed by dispositive provisions in an 
insurance policy, employment contract, bond, mortgage, 
promissory note, deposit agreement, pension plan, conveyance, 
or other non-testamentary written instrument effective as a 
contract, gift, conveyance or trust.
    Subparagraph (D) of paragraph (6) provides that where the 
property subject to forfeiture is real property, and the 
claimant uses the property as the claimant's primary residence 
(i.e., homestead) and is the spouse or minor child of the 
person who committed the offense giving rise to the forfeiture, 
an otherwise valid innocent owner claim shall not be denied on 
the ground that the claimant acquired the interest in the 
property not through a purchase but through dissolution of 
marriage or by operation of law (in the case of a spouse) or as 
an inheritance upon the death of a parent (in the case of a 
minor child \81\). The claimant must establish that at the time 
of the acquisition of the property interest, the claimant was 
reasonably without cause to believe that the property was 
subject to forfeiture.
---------------------------------------------------------------------------
    \81\ The time of acquisition of a minor child's interest is at the 
time of the parent's death.
---------------------------------------------------------------------------
    This provision recognizes that one spouse might acquire an 
innocent, legitimate ownership interest in a residence through 
formal ``dissolution'' of marriage (divorce)--without any 
reasonable cause to believe that the property is tainted by the 
other spouse's conduct. Some states recognize separate property 
interests between spouses after a certain period of separation, 
even without formal marriage ``dissolution'' proceedings. An 
annulment, too, may not be regarded as a ``dissolution'' of 
marriage, per se, but rather, an official pronouncement that no 
legitimate marriage ever existed between the ``spouses.'' A 
community property agreement between spouses, in community 
property states like California and Texas, is another common 
example of how one spouse could innocently acquire an interest 
in his or her primary residence by operation of (state) law, 
other than dissolution of marriage. Such standard agreements 
exist during the life of a marriage, after marriage, and 
indeed, serve as a non-probate asset after death of a spouse. 
The provision for acquisition by an innocent spouse ``by 
operation of law'', as well as ``dissolution of marriage'', is 
intended to cover all of the similarly innocent situations 
regarding spousal acquisition of a primary residence under 
various, legitimate operations of state and commercial laws.
    Paragraph (7) provides that (for purposes of paragraph (6)) 
one way in which a person may show that he did all that 
reasonably could be expected would be to demonstrate that he, 
to the extent permitted by law, gave timely notice to an 
appropriate law enforcement agency of information that led him 
to know the conduct giving rise to a forfeiture would occur or 
has occurred while in a timely fashion revoking or attempting 
to revoke permission for those engaging in such conduct to use 
the property or taking reasonable actions in consultation with 
a law enforcement agency to discourage or prevent the illegal 
use of the property. To meet the requirements of the last 
clause of the preceding sentence, the person is not required to 
take every conceivable action which could be considered 
reasonable, but only to take actions which are in total a 
reasonable response to the conduct giving rise to the 
forfeiture. In determining what is a reasonable response, the 
economic situation of the property owner (and his business, if 
applicable) should be taken into account. Paragraph (7) also 
provides that in order to do all that could reasonably be 
expected (for purposes of paragraph (6)), a person is not 
required to take steps that the person reasonably believes 
would be likely to subject any person (other than the person 
whose conduct gave rise to the forfeiture) to physical danger.
    Paragraph (8) provides definitions of terms for purposes of 
subsection (j). The term ``civil forfeiture statute'' means any 
provision of federal law (other than the Tariff Act of 1930 or 
the Internal Revenue Code of 1986) providing for the forfeiture 
of property other than as a sentence imposed upon conviction of 
a criminal offense. The term ``owner'' means a person with an 
ownership interest in the specific property sought to be 
forfeited, including a leasehold, lien, mortgage, recorded 
security device, or valid assignment of an ownership interest; 
it does not include a person with only a general unsecured 
interest in (or claim against) the property or estate of 
another, a bailee (unless the bailor is identified and the 
bailee shows a colorable legitimate interest in the property 
seized), or a nominee who exercises no dominion or control over 
the property.
    Paragraph (1) of subsection (k) provides that a claimant 
under subsection (j) is entitled to immediate release of seized 
property if the court determines that (1) the claimant has a 
possessory interest in the property, (2) the continued 
possession by the United States government pending the final 
disposition of forfeiture proceedings will cause substantial 
hardship to the claimant (such as preventing the functioning of 
a business, preventing an individual from working, or leaving 
an individual homeless), and (3) the claimant's likely hardship 
from the continued possession by the United States government 
of the seized property outweighs the risk that the property 
will be destroyed, damaged, lost, concealed, or transferred if 
it is returned to the claimant during the pendency of the 
proceeding.
    Paragraph (2) provides that a claimant seeking release of 
property under subsection (k) must request possession of the 
property from the appropriate official, and the request must 
set forth the basis on which the requirements of paragraph (1) 
are met.
    Paragraph (3) provides that if within 10 days after the 
date of the request the property has not been released, the 
claimant may file a motion or complaint in any district court 
that would have jurisdiction of forfeiture proceedings relating 
to the property setting forth the basis on which the 
requirements of paragraph (1) are met and the steps the 
claimant has taken to secure release of the property from the 
appropriate official.
    Paragraph (4) provides that if a motion or complaint is 
filed under paragraph (3), the district court shall order that 
the property be returned to the claimant, pending completion of 
proceedings by the United States government to obtain 
forfeiture of the property, if the claimant shows that the 
requirements of paragraph (1) have been met. The court may 
place such conditions on release of the property as it finds 
are appropriate to preserve the availability of the property or 
its equivalent for forfeiture.
    Paragraph (5) provides that the district court shall render 
a decision on a motion or complaint filed under paragraph (3) 
no later than 30 days after the date of the filing, unless such 
30 day limitation is extended by consent of the parties or by 
the court for good cause shown.
Section 3. Conforming amendment to the Controlled Substances Act.
    Section 3 repeals section 518 of the Controlled Substances 
Act (21 U.S.C. Sec.  888). Section 518 provides for expedited 
forfeiture procedures in the cases of seized conveyances.
Section 4. Compensation for damage to seized property.
    Subsection (a) of section 4 amends the Federal Tort Claims 
Act, which currently does not allow a claim for damages to be 
brought against the United States in respect of the assessment 
or collection of any tax or customs duty, or the detention of 
any goods or merchandise by any officer of customs or excise or 
any other law enforcement officer (see 28 U.S.C. Sec.  
2680(c)). The subsection provides that claims can be brought 
that are based on the destruction, injury, or loss of goods, 
merchandise, or other property, while in the possession of any 
officer of customs or excise or any other law enforcement 
officer, if the property was seized for the purpose of 
forfeiture but the interest of the claimant is not forfeited.
    Subsection (b) of section 4 provides that with respect to a 
claim that cannot be settled under the Tort Claims Act, the 
Attorney General may settle, for not more than $50,000 in any 
case, a claim for damage to, or loss of, privately owned 
property caused by an investigative or law enforcement officer 
who is employed by the Department of Justice and acting within 
the scope of his or her employment. However, the Attorney 
General may not pay a claim that is presented more than 1 year 
after it occurs or is presented by an officer or employee of 
the United States government and arose within the scope of 
employment.
Section 5. Prejudgment and postjudgment interest.
    Section 5 amends section 2465 of title 28 of the United 
States Code to provide that upon entry of judgment for the 
claimant in any proceeding to condemn or forfeit property 
seized or arrested under any Act of Congress, the United States 
shall be liable for post-judgment interest as set forth in 
section 1961 of title 28 of the United States Code. The United 
States shall not be liable for prejudgment interest, except 
that in cases involving currency, other negotiable instruments, 
or the proceeds of an interlocutory sale, the United States 
shall disgorge to the claimant any funds representing interest 
actually paid to the United States from the date of seizure or 
arrest of the property that resulted from the investment of the 
property in an interest- bearing account or instrument, and for 
any period during which no interest is actually paid, an 
imputed amount of interest that such currency, instruments, or 
proceeds would have earned at the rate described in section 
1961. The United States shall not be required to disgorge the 
value of any intangible benefits nor make any other payments to 
the claimant not specifically authorized by this subsection.
Section 6. Applicability.
    Section 6 provides that unless otherwise specified in this 
Act, the amendments made by this Act apply with respect to 
claims, suits, and action filed on or after the date of the 
enactment of this Act. However, the standard for the required 
burden of proof shall apply in cases pending on the date of the 
enactment of this Act and the amendment made by section 5 shall 
apply to any judgment entered after the date of enactment of 
this Act.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, existing law in which no change 
is proposed is shown in roman):

              SECTION 981 OF TITLE 18, UNITED STATES CODE

Sec. 981. Civil forfeiture

    (a)  * * *

           *       *       *       *       *       *       *

    (j)(1)(A) In any nonjudicial civil forfeiture proceeding 
under a civil forfeiture statute, with respect to which the 
agency conducting a seizure of property must give written 
notice to interested parties, such notice shall be given as 
soon as practicable and in no case more than 60 days after the 
later of the date of the seizure or the date the identity of 
the interested party is first known or discovered by the 
agency, except that the court may extend the period for filing 
a notice for good cause shown.
    (B) A person entitled to written notice in such proceeding 
to whom written notice is not given may on motion void the 
forfeiture with respect to that person's interest in the 
property, unless the agency shows--
            (i) good cause for the failure to give notice to 
        that person; or
            (ii) that the person otherwise had actual notice of 
        the seizure.
    (C) If the government does not provide notice of a seizure 
of property in accordance with subparagraph (A), it shall 
return the property and may not take any further action to 
effect the forfeiture of such property.
    (2)(A) Any person claiming property seized in a nonjudicial 
forfeiture proceeding may file a claim with the appropriate 
official after the seizure.
    (B) A claim under subparagraph (A) may not be filed later 
than 30 days after--
            (i) the date of final publication of notice of 
        seizure; or
            (ii) in the case of a person entitled to written 
        notice, the date that notice is received.
    (C) The claim shall state the claimant's interest in the 
property.
    (D) Not later than 90 days after a claim has been filed, 
the Attorney General shall file a complaint for forfeiture in 
the appropriate court or return the property, except that a 
court in the district in which the complaint will be filed may 
extend the period for filing a complaint for good cause shown 
or upon agreement of the parties.
    (E) If the government does not file a complaint for 
forfeiture of property in accordance with subparagraph (D), it 
shall return the property and may not take any further action 
to effect the forfeiture of such property.
    (F) Any person may bring a claim under subparagraph (A) 
without posting bond with respect to the property which is the 
subject of the claim.
    (3)(A) In any case where the Government files in the 
appropriate United States district court a complaint for 
forfeiture of property, any person claiming an interest in the 
seized property may file a claim asserting such person's 
interest in the property within 30 days of service of the 
Government's complaint or, where applicable, within 30 days of 
alternative publication notice.
    (B) A person asserting an interest in seized property in 
accordance with subparagraph (A) shall file an answer to the 
Government's complaint for forfeiture within 20 days of the 
filing of the claim.
    (4)(A) If the person filing a claim is financially unable 
to obtain representation by counsel, the court may appoint 
counsel to represent that person with respect to the claim.
    (B) In determining whether to appoint counsel to represent 
the person filing the claim, the court shall take into account 
such factors as--
            (i) the claimant's standing to contest the 
        forfeiture; and
            (ii) whether the claim appears to be made in good 
        faith or to be frivolous.
    (C) The court shall set the compensation for that 
representation, which shall be equivalent to that provided for 
court-appointed representation under section 3006A of this 
title, and to pay such cost there are authorized to be 
appropriated such sums as are necessary as an addition to the 
funds otherwise appropriated for the appointment of counsel 
under such section.
    (5) In all suits or actions brought under any civil 
forfeiture statute for the civil forfeiture of any property, 
the burden of proof is on the United States Government to 
establish, by clear and convincing evidence, that the property 
is subject to forfeiture.
    (6)(A) An innocent owner's interest in property shall not 
be forfeited under any civil forfeiture statute.
    (B) With respect to a property interest in existence at the 
time the illegal conduct giving rise to forfeiture took place, 
the term ``innocent owner'' means an owner who--
            (i) did not know of the conduct giving rise to 
        forfeiture; or
            (ii) upon learning of the conduct giving rise to 
        the forfeiture, did all that reasonably could be 
        expected under the circumstances to terminate such use 
        of the property.
    (C) With respect to a property interest acquired after the 
conduct giving rise to the forfeiture has taken place, the term 
``innocent owner'' means a person who, at the time that person 
acquired the interest in the property, was--
            (i)(I) a bona fide purchaser or seller for value 
        (including a purchaser or seller of goods or services 
        for value); or
            (II) a person who acquired an interest in property 
        through probate or inheritance; and
            (ii) at the time of the purchase or acquisition 
        reasonably without cause to believe that the property 
        was subject to forfeiture.
    (D) Where the property subject to forfeiture is real 
property, and the claimant uses the property as the claimant's 
primary residence and is the spouse or minor child of the 
person who committed the offense giving rise to the forfeiture, 
an otherwise valid innocent owner claim shall not be denied on 
the ground that the claimant acquired the interest in the 
property--
            (i) in the case of a spouse, through dissolution of 
        marriage or by operation of law, or
            (ii) in the case of a minor child, as an 
        inheritance upon the death of a parent, and not through 
        a purchase. However, the claimant must establish, in 
        accordance with subparagraph (C), that at the time of 
        the acquisition of the property interest, the claimant 
        was reasonably without cause to believe that the 
        property was subject to forfeiture.
    (7) For the purposes of paragraph (6)--
            (A) ways in which a person may show that such 
        person did all that reasonably can be expected may 
        include demonstrating that such person, to the extent 
        permitted by law--
                    (i) gave timely notice to an appropriate 
                law enforcement agency of information that led 
                the person to know the conduct giving rise to a 
                forfeiture would occur or has occurred; and
                    (ii) in a timely fashion revoked or 
                attempted to revoke permission for those 
                engaging in such conduct to use the property or 
                took reasonable actions in consultation with a 
                law enforcement agency to discourage or prevent 
                the illegal use of the property; and
            (B) in order to do all that can reasonably be 
        expected, a person is not required to take steps that 
        the person reasonably believes would be likely to 
        subject any person (other than the person whose conduct 
        gave rise to the forfeiture) to physical danger.
    (8) As used in this subsection:
            (1) The term ``civil forfeiture statute'' means any 
        provision of Federal law (other than the Tariff Act of 
        1930 or the Internal Revenue Code of 1986) providing 
        for the forfeiture of property other than as a sentence 
        imposed upon conviction of a criminal offense.
            (2) The term ``owner'' means a person with an 
        ownership interest in the specific property sought to 
        be forfeited, including a leasehold, lien, mortgage, 
        recorded security device, or valid assignment of an 
        ownership interest. Such term does not include--
                    (i) a person with only a general unsecured 
                interest in, or claim against, the property or 
                estate of another;
                    (ii) a bailee unless the bailor is 
                identified and the bailee shows a colorable 
                legitimate interest in the property seized; or
                    (iii) a nominee who exercises no dominion 
                or control over the property.
    (k)(1) A claimant under subsection (j) is entitled to 
immediate release of seized property if--
            (A) the claimant has a possessory interest in the 
        property;
            (B) the continued possession by the United States 
        Government pending the final disposition of forfeiture 
        proceedings will cause substantial hardship to the 
        claimant, such as preventing the functioning of a 
        business, preventing an individual from working, or 
        leaving an individual homeless; and
            (C) the claimant's likely hardship from the 
        continued possession by the United States Government of 
        the seized property outweighs the risk that the 
        property will be destroyed, damaged, lost, concealed, 
        or transferred if it is returned to the claimant during 
        the pendency of the proceeding.
    (2) A claimant seeking release of property under this 
subsection must request possession of the property from the 
appropriate official, and the request must set forth the basis 
on which the requirements of paragraph (1) are met.
    (3) If within 10 days after the date of the request the 
property has not been released, the claimant may file a motion 
or complaint in any district court that would have jurisdiction 
of forfeiture proceedings relating to the property setting 
forth--
            (A) the basis on which the requirements of 
        paragraph (1) are met; and
            (B) the steps the claimant has taken to secure 
        release of the property from the appropriate official.
    (4) If a motion or complaint is filed under paragraph (3), 
the district court shall order that the property be returned to 
the claimant, pending completion of proceedings by the United 
States Government to obtain forfeiture of the property, if the 
claimant shows that the requirements of paragraph (1) have been 
met. The court may place such conditions on release of the 
property as it finds are appropriate to preserve the 
availability of the property or its equivalent for forfeiture.
    (5) The district court shall render a decision on a motion 
or complaint filed under paragraph (3) no later than 30 days 
after the date of the filing, unless such 30-day limitation is 
extended by consent of the parties or by the court for good 
cause shown.
    [(j)] (l) For purposes of this section--
            (1) the term ``Attorney General'' means the 
        Attorney General or his delegate; and
            (2) the term ``Secretary of the Treasury'' means 
        the Secretary of the Treasury or his delegate.

              SECTION 518 OF THE CONTROLLED SUBSTANCES ACT

              [expedited procedures for seized conveyances

    [Sec. 518. (a)(1) The owner of a conveyance may petition 
the Attorney General for an expedited decision with respect to 
the conveyance, if the conveyance is seized for a drug-related 
offense and the owner has filed the requisite claim and cost 
bond in the manner provided in section 608 of the Tariff Act of 
1930. The Attorney General shall make a determination on a 
petition under this section expeditiously, including a 
determination of any rights or defenses available to the 
petitioner. If the Attorney General does not grant or deny a 
petition under this section within 20 days after the date on 
which the petition is filed, the conveyance shall be returned 
to the owner pending further forfeiture proceedings.
    [(2) With respect to a petition under this section, the 
Attorney General may--
            [(A) deny the petition and retain possession of the 
        conveyance;
            [(B) grant the petition, move to dismiss the 
        forfeiture action, if filed, and promptly release the 
        conveyance to the owner; or
            [(C) advise the petitioner that there is not 
        adequate information available to determine the 
        petition and promptly release the conveyance to the 
        owner.
    [(3) Release of a conveyance under subsection (a)(1) or 
(a)(2)(C) does not affect any forfeiture action with respect to 
the conveyance.
    [(4) The Attorney General shall prescribe regulations to 
carry out this section.
    [(b) At the time of seizure, the officer making the seizure 
shall furnish to any person in possession of the conveyance a 
written notice specifying the procedures under this section. At 
the earliest practicable opportunity after determining 
ownership of the seized conveyance, the head of the department 
or agency that seizes the conveyance shall furnish a written 
notice to the owner and other interested parties (including 
lienholders) of the legal and factual basis of the seizure.
    [(c) Not later than 60 days after a claim and cost bond 
have been filed under section 608 of the Tariff Act of 1930 
regarding a conveyance seized for a drug-related offense, the 
Attorney General shall file a complaint for forfeiture in the 
appropriate district court, except that the court may extend 
the period for filing for good cause shown or on agreement of 
the parties. If the Attorney General does not file a complaint 
as specified in the preceding sentence, the court shall order 
the return of the conveyance to the owner and the forfeiture 
may not take place.
    [(d) Any owner of a conveyance seized for a drug-related 
offense may obtain release of the conveyance by providing 
security in the form of a bond to the Attorney General in an 
amount equal to the value of the conveyance unless the Attorney 
General determines the conveyance should be retained (1) as 
contraband, (2) as evidence of a violation of law, or (3) 
because, by reason of design or other characteristic, the 
conveyance is particularly suited for use in illegal 
activities.]
                              ----------                              


TITLE 28, UNITED STATES CODE

           *       *       *       *       *       *       *


PART VI--PARTICULAR PROCEEDINGS

           *       *       *       *       *       *       *


CHAPTER 163--FINES, PENALTIES AND FORFEITURES

           *       *       *       *       *       *       *


Sec. 2465. Return of property to claimant; certificate of reasonable 
                    cause; liability for wrongful seizure

    (a) Upon the entry of judgment for the claimant in any 
proceeding to condemn or forfeit property seized under any Act 
of Congress, such property shall be returned forthwith to the 
claimant or his agent; but if it appears that there was 
reasonable cause for the seizure, the court shall cause a 
proper certificate thereof to be entered and the claimant shall 
not, in such case, be entitled to costs, nor shall the person 
who made the seizure, nor the prosecutor, be liable to suit or 
judgment on account of such suit or prosecution.
    (b) Interest.--
            (1) Post-judgment.--Upon entry of judgment for the 
        claimant in any proceeding to condemn or forfeit 
        property seized or arrested under any Act of Congress, 
        the United States shall be liable for post-judgment 
        interest as set forth in section 1961 of this title.
            (2) Pre-judgment.--The United States shall not be 
        liable for prejudgment interest, except that in cases 
        involving currency, other negotiable instruments, or 
        the proceeds of an interlocutory sale, the United 
        States shall disgorge to the claimant any funds 
        representing--
                    (A) interest actually paid to the United 
                States from the date of seizure or arrest of 
                the property that resulted from the investment 
                of the property in an interest-bearing account 
                or instrument; and
                    (B) for any period during which no interest 
                is actually paid, an imputed amount of interest 
                that such currency, instruments, or proceeds 
                would have earned at the rate described in 
                section 1961.
            (3) Limitation on other payments.--The United 
        States shall not be required to disgorge the value of 
        any intangible benefits nor make any other payments to 
        the claimant not specifically authorized by this 
        subsection.

           *       *       *       *       *       *       *


CHAPTER 171--TORT CLAIMS PROCEDURE

           *       *       *       *       *       *       *


Sec. 2680. Exceptions

The provisions of this chapter and section 1346(b) of this 
title shall not apply to--
    (a)  * * *

           *       *       *       *       *       *       *

    (c) Any claim arising in respect of the assessment or 
collection of any tax or customs duty, or the detention of any 
goods or merchandise by any officer of customs or excise or any 
other [law-enforcement] law enforcement officer, except that 
the provisions of this chapter and section 1346(b) of this 
title do apply to any claim based on the destruction, injury, 
or loss of goods, merchandise, or other property, while in the 
possession of any officer of customs or excise or any other law 
enforcement officer, if the property was seized for the purpose 
of forfeiture but the interest of the claimant is not 
forfeited.

           *       *       *       *       *       *       *

                            Dissenting Views

    While we support the general concept of reforming our asset 
forfeiture laws and believe it is important to ensure that 
innocent citizens do not have their property taken away by an 
over-zealous government, we oppose this particular legislation 
as it tilts the balance too far in favor of the alleged 
criminal.
    During the 105th Congress, this Committee overwhelmingly 
approved compromise legislation accomplishing the desired end 
of reforming our asset forfeiture laws so that individuals are 
not deprived of their rights, but doing so in a way that 
ensures that drug dealers, money launderers and organized crime 
syndicates are not able to exploit loopholes in the system. 
Unfortunately, the House did not have the opportunity to debate 
that bill and we find ourselves here today in a situation where 
that balanced approach has been discarded.
    While our specific concerns regarding H.R. 1658 vary, we 
agree that in six fundamental ways, the bill denies law 
enforcement the tools they need to make sure that criminals are 
not able to enjoy the proceeds of their illegal activity.

                            Burden of Proof

    Current law requires that the government only have probable 
cause to seize property, but requires citizens to prove by a 
preponderance of the evidence that the property or proceeds 
were not used in illegal activity. H.R. 1658 shifts the burden 
of proof to the government and requires that the government 
prove by clear and convincing evidence that the property was 
used in an illegal manner. While we support shifting the burden 
of proof to the government, the clear and convincing standard 
is too high. The standard of proof in these cases should be the 
same as in all civil cases--that of preponderance of the 
evidence.

                         Appointment of Counsel

    H.R. 1658 allows the court to appoint counsel for ``any 
person claiming an interest in the seized property'' who is 
``financially unable to obtain representation.'' The only 
factors that the court must consider in determining this are 
(1) the claimant's standing to contest the forfeiture and (2) 
whether the claim appears to be made in good faith.
    The Department of Justice undertakes 30,000 seizures a 
year, most of them in drug and alien smuggling cases. H.R. 1658 
authorizes the appointment of free counsel in all of those 
cases for anyone who asserts an interest in the seized 
property. The potential for abuse is great and there are no 
safeguards in the bill to prevent it. It is also important to 
note that those who successfully challenge civil forfeiture 
decisions already are able to recover attorneys fees under the 
Equal Access to Justice Act.

                         Innocent Owner Defense

    H.R. 1658 provides that certain individuals are de facto 
innocent owners, including those who receive property through 
probate. In these cases, the property would forever be 
protected against forfeiture.
    We fully support the notion of protecting innocent owners 
who legitimately may not be aware that someone else has used 
the property illegally. But we do not think that the wives, 
family members and friends of criminals should be able to claim 
that they are ``innocent'' owners of the proceeds of crimes. In 
particular, the ``probate'' provision of H.R. 1658 allows a 
drug dealer to amass a large fortune in drug proceeds and pass 
it on to his girlfriend, wife or children should he be killed 
in a shoot-out with police or rival narcotraffickers.

                    Return of Property for Hardship

    H.R. 1658 allows a claimant to recover his property pending 
trial if he can show that the forfeiture will cause substantial 
hardship, such as preventing the functioning of a business, 
preventing an individual from working or leaving an individual 
homeless. The only burden that must be met to allow the 
transfer is a determination that the hardship outweighs any 
risk that the property will be destroyed, damaged, lost, 
concealed or transferred. The bill does not even ask judges to 
consider the likelihood of whether the property will be 
maintained and used in the continued commission of crime. No 
provisions are included to ensure that the government can 
recover the property once a judicial determination is made that 
the property is subject to forfeiture. Certain instruments of 
alleged illegal activity are not appropriate to be returned 
while the forfeiture is pending, but the bill makes no 
distinction between legitimate business assets and contraband, 
currency and other property that is likely to be used to commit 
additional crime if returned.

                        Notification to Claimant

    H.R. 1658 requires that actual notice be given to a 
potential claimant within 60 days or the forfeiture action is 
nullified and may never be activated against that property 
again. The bill includes no exceptions for administrative 
errors, such as a misaddressed letter to a jail or prison.
    So, under the bill, if the government arrests a drug 
dealer, puts him in jail, and sends him notice of the 
forfeiture of his drug proceeds, but misdirects the notice to 
the wrong jail, the Attorney General would have to return the 
money to the prisoner. Morever, based on case law, prisoners 
would have eleven years in which to raise such claims. The 
proper remedy for such administrative errors is to give the 
prisoner proper notice and allow him the normal period of time 
in which to file a claim contesting the forfeiture.

                             Effective Date

    H.R. 1658 applies its new standard of proof (that of clear 
and convincing evidence) to cases pending at the time of the 
bill's enactment. This provision has the potential for reeking 
havoc on on-going cases and cases on appeal. We believe that 
any change in the standard of proof should apply prospectively.
    For these and other reasons, we opposed H.R. 1658 when it 
was considered by the Committee. We urge the Committee and 
Members of the full House to consider these issues as the bill 
moves through the legislative process.

                                   Asa Hutchinson.
                                   Ed Bryant.
                                   Anthony Weiver.

                                

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