It appears that the government is mishandling even legitimate forfeitures (i.e. those that take money and property from convicted criminals and return it to their victims). The New York Times reports:
The unit of the United States Marshals Service that manages complex assets seized in criminal cases, including that of Bernard L. Madoff, kept such shoddy records that it could not say who bought assets or how much was paid for them in 8 of the 55 sales it handled from 2005 to 2010, according to an audit released on Tuesday.
Federal prosecutors in Mr. Madoff’s case were so concerned by the lack of transparency and oversight in the unit, the complex asset team, that they lost confidence in it, according to the audit, by the Justice Department’s inspector general.
You know a forfeiture program has become totally corrupt when even the prosecutors turn against it. The story continues:
“This audit identified numerous deficiencies in the procedures the complex asset team implemented to track, safeguard, value and dispose of complicated and valuable assets,” the report said. The report added that the team’s overseer, the Asset Forfeiture Division, did not “vigorously oversee” the team.
The audit was a result of a criminal investigation that began when an employee of a contractor hired to help the Marshals Service manage its assets made a number of allegations in 2010 about the team and its leader, Leonard Briskman. The agency oversees an estimated $3.8 billion in assets.
Among the allegations was that the unit undervalued what could have amounted to millions of dollars in assets. A lawsuit suggested that, as a result, crime victims may have been deprived of millions in restitution.
The lack of basic records, including final sale data, made it impossible to determine whether the Marshals Service properly valued or sold the assets, which sold for $1 million to $49 million, according to the report.
A Reuters story adds more specifics:
The assets involved more than one million shares of PetCare Rx, an online pet prescription firm, and a 5 percent share of the Delta Fund, an investment portfolio of foreign technology companies.
In preparing to dispose of these assets, the Marshals Service did not publicly announce the sales and instead attempted to sell them to existing partners.
The prosecutor objected because the methods for valuing the assets, locating buyers and negotiating sales were not transparent, the report said. The federal government then hired external contractors to start the process all over again.
In general, the audit found numerous instances when a team member valued and sold the same asset by himself, without sufficient supervisory oversight or review.
Clearly, the Marshals Service should implement a far more stringent and transparent policy of bookkeeping, but that will not completely solve the problem. Whenever government agents handle extremely valuable assets, they will be tempted to setup sweetheart deals for their friends and allies, or to make sales that are more convenient but don’t raise the maximum amount of money for the victims being compensated. The victims might be better off if the government just divvied up the booty among them based upon appraisals and let them dispose of it as they see fit. The less the government is involved with the process, the lower the chances of corruption.
Eapen Thampy first blogged about the problems with the Marshals Service forfeiture program when the lawsuit was filed back in January.