Americans for Forfeiture Reform

On Tuesday, February 10, 2015, DOJ Asset Forfeiture and Money Laundering Section Acting Chief M. Kenndall Day issued a memo guiding agency participants in the DOJ's Asset Forfeiture Fund on the implementation of US Attorney General Eric Holder's January 16, 2015 order (effective March 1, 2015) governing use of the adoptive forfeiture process through the DOJ's Equitable Sharing program. 

When it was released, Holder's order was widely misunderstood; some commentators went to far as to claim the order ended civil forfeiture. However, the Holder order is extremely limited, and the Kenndall Day memo provides some clarity as to the scope of behavior implicated: 

I've noted in previous commentary that the Holder order will incentivize a proliferation of federal partnerships with state and local law enforcement, as agencies seek to retain their federal asset forfeiture revenues. The Day memo only clarifies the process and best practices for the operation of those partnerships.

While M. Kenndall Day's guidance on the implementation of the Holder memo resolves some fundamental questions about the implementation of the Holder order, it is to be noted that it does not represent statutory law, nor does it offer additional protections to property owners facing asset forfeiture. Any US Attorney who does not strictly adhere to the policy would only face the discretionary sanction of the President (practically speaking, this never happens). 

I recently had the chance to meet Christine Shuck, a woman who was raided by a drug task force in Cass County, Missouri, over the marijuana grow that she and her husband operated. Unusually, Christine documented her family's legal ordeals in a book "The War on Drugs: An Old Wives Tale". I excerpt this selection from the chapter "The War on Drugs in America":

Make no mistake, the War on Drugs means the opportunity for law enforcement, lawyers, and the industrial prison complex to make bigtime money. It is a siren call, corrupting officials and encouraging the acceptability of what can only be described as legal theft.

First and foremost, there is asset forfeiture. I described this earlier, but I really want to reinforce the lesson that we learned. Essentially, if you are accused of a crime then your assets can be seized and sold, even without any conviction in a court of law. Countless travelers have fallen victim to this. Traveling with cash, anything from a few hundred dollars to thousands is often considered an ‘indicator of criminal behavior’ and cash and vehicles are confiscated without any due process.

In our case, all of the lights, the ionizer that helped cut down the smell of the plants, and anything of any value that was directly related to marijuana production was confiscated and sold – long before our day in court. What is interesting though is the fact that while 13 plants were confiscated, only ten were reported as seized. We had ten almost dead harvested plants and we had three healthy ready-to-be-cloned plants. I’ll leave it to you to figure out what happened to those remaining three.

When you give any individual or group of people the power to confiscate an individual’s assets – cold hard cash, expensive equipment, et cetera – you open the door for graft, corruption, and greed. That’s a fact. We can point to the individuals on the police force, or the judge who accepts bribes, or the county commissioner, or a host of others as being the “bad apples” – or we can recognize that the system of asset forfeiture is endemically flawed.

The Coeur d'Alene Press recently published a three-part series on civil forfeiture in Idaho. The first part "Taking the profit out of crime" describes how law enforcement can force criminal defendants to defend themselves in both criminal and civil court through the use of civil forfeiture:

"The laws are set up that we can hurt those people two ways: you take them to jail and seize their drugs, which takes them out of business, or you can seize their assets," Wolfinger said. "We've done both fairly successfully and we continue to do that."

Under Idaho statute, law enforcement agencies have the ability to seize assets potentially used in drug trafficking or manufacture. These assets range from cash and vehicles to equipment used to cultivate and create the drugs themselves.

Once assets are seized, the case is forwarded to the civil division of the county prosecutor's office.

"We (then) file a civil complaint and get the interested parties served to give them an opportunity to contest the case if they want to," Kootenai County Prosecutor Barry McHugh said.

If the civil case is successful, both the investigating agency and the prosecutor's office receive portions of the assets seized.

Law enforcement agencies are able to use these funds for, according to Wolfinger, anything in the "drug enforcement nexus." This includes training, new equipment, banquets and contributions to organizations such as the Idaho Meth Foundation.

The prosecutor's office receives 15 percent of the proceeds in the event that funds are obtained as a result of the case.

"This is for, in some regard, the time and the work that went into the effort in the forfeiture action as a way to reimburse the county for the time spent by employees," McHugh said.

In the second part, "Drug seizure funds to purchase vehicle", reporter Keith Cousins notes the use of forfeiture proceeds to fund K-9 enforcement squads and purchases of military weaponry:

"There's no way we could spend over $300,000 for a SWAT vehicle; the budget certainly couldn't handle that," Wolfinger said. "But here's the opportunity to keep our team safe and the taxpayer doesn't deal with a nickel of it."

The sheriff's office is currently awaiting delivery of its own $335,000 BearCat, purchased with money from the county's drug forfeiture fund. The transaction was approved in March by the county's board of commissioners.

The armored truck is expected to arrive at the end of this month.

Since 2009, the Kootenai County Sheriff's Office has taken in nearly $2 million in drug forfeiture proceeds.

In 2013, the sheriff's office took in $271,230 in illegal drug proceeds. According to Lt. Stu Miller, the office has been awarded $39,136.55 of those proceeds. The rest of the funds are either part of pending court decisions, have been returned to defendants or given to the prosecutor's office.

"We use it (the funds) to send officers to schools to learn about how to find these drugs and take them off the street," Wolfinger said. "We buy equipment for the SWAT team and for the patrol guys. We've done some weapon enhancements for the patrol guys because they're dealing with these people every day, so there's certainly a drug nexus there."

This total does not include three vehicles that were seized and then used by sheriff's office detectives in the course of their work.

"That's a great opportunity for us to get a vehicle with no taxpayer dollars involved," Wolfinger said.

Smaller items, such as replacement siren speakers for sheriff's office vehicles and parts for weapons, have also been purchased using forfeiture funds.

Post Falls Police Chief Scot Haug said that, while his department has a much smaller drug forfeiture account when compared to the sheriff's office, the funds are all used "to reduce illegal drug activities in the community."

"So there is a variety of things that we've done with the money in the past such as provided training for our officers, drug reduction type programs and body armor for our SWAT officers," Haug said. "It's all one-time purchases, typically capital purchases."

Haug added that the department's K9 program was created using a significant amount of seizure money and the majority of the program is still funded with it.

The third part, "Burden of proof", features a defense of civil forfeiture by law enforcement:

Kootenai County Prosecutor Barry McHugh argues that it's in fact the prosecution that bears the burden of proof.

"In some cases, the claimants don't present any evidence but ultimately the court decides in their favor," McHugh said.

To support his argument, McHugh referenced a recent appellate court decision that could return property seized under the state's civil forfeiture law to its owner. The ruling states "the plaintiff must prove by preponderance of the evidence that the vehicle was used or intended to use ... " indicating, McHugh said, that his office bears the burden of proof.

According to Salzman, forfeiture can also create a "course of least resistance" for law enforcement agencies because "you just have to suspect the property of being involved in a crime" in order to seize it.

"I think it breeds a culture of seizure where it's easy for the law enforcement agencies to do it compared to the alternative which is charging people for a crime and making a case," Salzman said.

However, those in charge of local law enforcement agencies say they disagree with Salzman's assessment.

Kootenai County Sheriff Ben Wolfinger said the motivation behind any civil forfeitures his office makes is not the proceeds, but taking drugs off the street.

"We haven't really gone after the cash, we are going after the dope," Wolfinger said. "We're not making money taking dope off the street, but we are taking dope off the street."

Wolfinger added that individual officers do not get bonuses and do not have any additional incentive when it comes to drug cases that include forfeitures.

"We've been able to send some officers to training we wouldn't have been able to and that's good. We've been able to buy some equipment we wouldn't normally have been able to buy and that's good," Wolfinger said. "But we're taking a lot of dope dealers off of the street."

Post Falls Police Chief Scot Haug said he sees civil forfeiture as a mechanism that makes criminals pay for their crimes while taking the burden of funding law enforcement activities off taxpayers.

"What a better way to be able to help train some officers and help get them some equipment, to help start a K9 program, then to have the drug dealers pay for it," Haug said. "If we didn't have that drug seizure money, you and I would be paying for that. It's about time that the criminal chips in and pays for some of the equipment and training to fight this problem that we have."

Last month, the US Embassy in Pretoria, South Africa, announced that the Department of Justice was conducting a workshop to teach South African law enforcement the practice of civil forfeiture:

First, a word of congratulations is in order to Lee McGrath at the Institute for Justice, who has spearheaded the effort to reform asset forfeiture in Minnesota. As Bob Adelmann reports in the New American:

On August 1, citizens in Minnesota will rejoice that the police can no longer steal their property without their being convicted — or even charged with — a crime. Until then, Minnesota remains an upside-down world, as do many other states, where police can seize cash and property if they think that somehow that cash or property was involved in a crime. Until August 1, citizens who have had their property seized will still have to prove a negative: that their property was neither the “instrument” nor the “proceeds” of the charged crime.

Lee McGrath, executive director of Minnesota’s chapter of the Institute for Justice (IJ), which was instrumental in successfully pushing for passage of the bill, noted:

"No one acquitted in criminal court should lose his property in civil court. This change makes Minnesota’s law consistent with the great American presumption that a person and his property are innocent until proven guilty."

This was originally posted August 6, 2013 and is reproduced in its entirety.

Yesterday, the National Association of Criminal Defense Lawyers slammed the expanding use of NSA intelligence by domestic law enforcement agencies, particularly noting the use of this intelligence to prosecute violations of the Foreign Corrupt Practices Act:

Washington, DC (August 5, 2013) – Today, Reuters news service reported that “A secretive U.S. Drug Enforcement Administration unit is funneling information from intelligence intercepts, wiretaps, informants and a massive database of telephone records to authorities across the nation to help them launch criminal investigations of Americans.” Reuters further reports that it has undated documents that “show that federal agents are trained to ‘recreate’ the investigative trail to effectively cover up where the information originated, a practice that some experts say violates a defendant’s Constitutional right to a fair trial. If defendants don’t know how an investigation began, they cannot know to ask to review potential sources of exculpatory evidence – information that could reveal entrapment, mistakes or biased witnesses.” And late yesterday, The Houston Chronicle reported that “The National Security Agency is handing the Justice Department information, derived from its secret electronic eavesdropping programs, about suspected criminal activity unrelated to terrorism[,]” including in cases alleging conduct including sex offenses and corporate criminal activity under the Foreign Corrupt Practices Act. The information sharing programs reported by Reuters and The Houston Chronicle over the last 24 hours are yet further examples of the national security state seeping into the traditional justice system.

National Association of Criminal Defense Lawyers (NACDL) President Jerry J. Cox said: “NACDL has long feared that overbroad national security policies would become the norm for all criminal prosecutions and today we know our concerns were not unfounded. Two months after Edward Snowden’s initial disclosures about various U.S. government surveillance activities, we know very little more about the parameters of the NSA surveillance programs. These latest reports are particularly troubling for accused persons who cannot vindicate fundamental constitutional rights without access to accurate and complete information. This puts liberty at risk of being lost without due process of law, which is an affront to the Constitution.”

Indeed, there are further, significant Constitutional implications to these reports. In the American criminal justice system, prosecutors are required to disclose all information in the government’s possession that is favorable to the accused, pertaining to either the determination of guilt or imposition of sentencing. These reports suggest that prosecuting government agencies are provided data collected via seemingly limitless NSA surveillance programs that the American people have been repeatedly told have stringent safeguards and exist only for the purpose of gathering information about international terrorists. Additionally, the Reuters report indicates that programs of intentional non-disclosure of the actual sources of information in connection with non-terror-related activity may be in place. Yet, those accused of criminal activity have no access to any exculpatory information collected by these NSA programs. (Ivan J. Dominguez, Nation’s Criminal Defense Bar Alarmed by Reports of NSA Surveillance Data Use and Intentional, Systematic Non-Disclosure in Domestic, Non-Terror-Related Criminal Cases, NACDL Press Release, 5 Aug. 2013)

The implications of using the NSA intercepts to leverage enforcement of the Foreign Corrupt Practices Act are enormous given the history of the law:

Yet paying foreign officials to secure contracts abroad was simply a part of doing business in the 1970s. Hundreds of U.S. companies paid bribes out of perceived necessity. Counting on its influence as the most world’s powerful economic force, the United States decided to eliminate the practice and passed the Foreign Corrupt Practices Act (FCPA) of 1977. The FCPA outlawed bribery and imposed financial accounting requirements on all U.S. persons and certain foreign issuers of securities. Thirty-five years later, FCPA enforcement is contentious. Corruption is an extraordinarily fact-specific crime, so the government can’t foresee and enumerate all of the activities that are prohibited. At the same time, businesses require clear lines and definitions to comply with the Act.

The U.S. Department of Justice (DOJ) and U.S. Securities and Exchange Commission (SEC) rarely enforced the law until about a decade ago. Since then, the government has accelerated enforcement, broadened its reading of the Act, tried new prosecutorial strategies, and even experimented with sting operations. Today, the SEC and DOJ investigate between 70 and 80 potential FCPA violations at any given time—this is more than at any other time in the Act’s history.  Since 2009, the DOJ has entered into more than 40 corporate resolutions of FCPA investigations, resulting in nine of the top 10 monetary settlements in FCPA history, including more than $2 billion in fines recovered. In 2012 alone, the government collected $260,571,467 in financial penalties from corporations violating the FCPA. (Institute for National Security and Counterterrorism, The FCPA Landscape, Spring 2013)

The intentional non-disclosure of NSA intercepts used to start investigations into FPCA violations implies that the Department of Justice has managed to leverage illegal surveillance practices into a massively profitable extortion system that denies corporate and individual targets access to fundamental rights. Moreover, US companies doing business abroad are presented with a host of liability risks from conducting what might be otherwise ordinary, routine business practices:

The DOJ’s more aggressive enforcement has included focusing on individuals, not just companies. Indeed, US Attorney General Eric Holder has said that “prosecuting individuals is a cornerstone of [the DOJ’s] enforcement strategy.” This statement, made in spring 2010, came shortly after a person was sentenced to over seven years in prison upon pleading guilty to, among other things, conspiring to violate the FCPA.

With the DOJ’s focus on individual accountability, corporate executives are now at risk for business procedures that, until recently, they might have considered routine rubberstamping, such as securing government permits, processing customs papers, and procuring sales licenses.

“The same holds true of various routine interactions with business associates,” says Shah. “Take, for instance, a US medical-device company’s sales manager who sponsors the attendance of an industry conference by a healthcare provider in China. If the healthcare provider is employed by a state-owned hospital, he or she could be considered a government official, consequently increasing the potential risk of FCPA violation.” (PriceWaterCoopers, Foreign Corrupt Practices Act, Growing Your Business, 2011)

It’s time for Congress to review the Department of Justice’s practices regarding both the secret sharing of NSA intelligence with the DOJ and the use of civil forfeiture to enforce the FPCA. At the very least, the DOJ should not be able to use civil forfeiture as an enforcement tool; the revenue created for the DOJ through FPCA civil forfeiture represents a structural incentive for the federal government to violate the rights of companies and individuals engaged in international trade for profit.

Note: A version of this post was originally published August 5, 2013. 

The revelations that the DEA has a secret Special Operations Division (SOD) that uses NSA and CIA intelligence to spy on Americans suspected of drug crimes should be in taken in context of the DEA’s use of federal civil forfeiture to profit from drug prohibition. Reuters reports:

A secretive U.S. Drug Enforcement Administration unit is funneling information from intelligence intercepts, wiretaps, informants and a massive database of telephone records to authorities across the nation to help them launch criminal investigations of Americans.

Although these cases rarely involve national security issues, documents reviewed by Reuters show that law enforcement agents have been directed to conceal how such investigations truly begin – not only from defense lawyers but also sometimes from prosecutors and judges.

The undated documents show that federal agents are trained to “recreate” the investigative trail to effectively cover up where the information originated, a practice that some experts say violates a defendant’s Constitutional right to a fair trial. If defendants don’t know how an investigation began, they cannot know to ask to review potential sources of exculpatory evidence – information that could reveal entrapment, mistakes or biased witnesses. (John Shiffman and Kristina Cooke, U.S. directs agents to cover up program used to investigate Americans, Reuters, 5 Aug. 2013)

AFR Research Director Scott Meiner notes that:

“While the techniques described are universally bad, they carry special concern in forfeiture cases–where intelligence tips of a driver carrying cash (for legitimate or illegitimate reasons) compels officers to create parallel constructions to obfuscate from the courts and the public the real reasons why drivers are pulled over: so the department can score forfeiture proceeds.”, said AFR Research Director Scott Meiner.  “Informed police departments can use SOD tips to pull over cars that they know have cash (whether it is legitimate or illegitimate) and then apply a K9 sniff (with seeming random innocuity) and find the cash that they knew existed. A positive sniff (which is an inevitably positive sniff given what we know of cuing errors) validates the purported connection to drugs and thus justifies the forfeiture to the courts.”

This is particularly problematic in civil asset forfeiture, as federal law allows the seizure and forfeiture of property in a civil, not criminal process, and there is no federal requirement that criminal charges be filed when the government is interested in a civil forfeiture.

More broadly, the use of SOD to spy on Americans by the DEA calls into question not just the use of asset forfeiture in highway stops, but also in other aggressive forfeiture-related tactics such as the use of confidential informants and forfeiture “specialists” who hunt for property to seize. Two recent cases are instructive in this regard:

• The 2008 “reactivation” of DEA informant Anthony Chambers, who was caught lying under oath in court at least 16 times and was fired by the agency in 2000. Chambers is known as the “highest-paid snitch” in DEA history and is responsible for over 445 drug arrests, as well as millions of dollars seized by the DEA and other agencies.
• The attempted forfeiture of Russ Caswell’s motel property in Tewksbury, MA. The DEA attempted to seize the Motel Caswell after Vincent T. Kelly, a DEA forfeiture specialist, claimed he had found reports of drug crimes happening at the Motel Caswell in newspapers going back over a decade. It seems more than a little odd that DEA forfeiture specialists read decades-old newspaper articles looking for property to seize; is it possible that this justification for the Motel Caswell forfeiture is a “parallel construction”?

Indeed, asset forfeiture is now a major revenue stream for federal law enforcement. Sarah Stillman reports in the New Yorker:

Forfeiture in its modern form began with federal statutes enacted in the nineteen-seventies and aimed not at waitresses and janitors but at organized-crime bosses and drug lords. Law-enforcement officers were empowered to seize money and goods tied to the production of illegal drugs. Later amendments allowed the seizure of anything thought to have been purchased with tainted funds, whether or not it was connected to the commission of a crime. Even then, forfeiture remained an infrequent resort until 1984, when Congress passed the Comprehensive Crime Control Act. It established a special fund that turned over proceeds from forfeitures to the law-enforcement agencies responsible for them. Local police who provided federal assistance were rewarded with a large percentage of the proceeds, through a program called Equitable Sharing. Soon states were crafting their own forfeiture laws.

Revenue gains were staggering. At the Justice Department, proceeds from forfeiture soared from twenty-seven million dollars in 1985 to five hundred and fifty-six million in 1993. (Last year, the department took in nearly $4.2 billion in forfeitures, a record.) The strategy helped reconcile President Reagan’s call for government action in fighting crime with his call to reduce public spending. In 1989, Attorney General Richard Thornburgh boasted, “It’s 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.” (Sarah Stillman, “Taken“, The New Yorker, 12 Aug. 2013)

Ethan Nadelmann, executive director of the Drug Policy Alliance, called for Congress to act, saying “It’s remarkable how little scrutiny the DEA faces from Congress or other federal overseers. With an annual budget of over $2 billion as well as significant discretionary powers, DEA certainly merits a top-to-bottom review of its operations, expenditures and discretionary actions.” We might add that it’s time for Congress to specifically review the DEA’s discretionary asset forfeiture authority and access to unappropriated forfeiture revenues. Prior to 1984, the US was able to fund its federal and state law enforcement through direct legislative appropriations. It’s time for Congress to reassert its power of the purse and end the ability of federal law enforcement to chase profits without accountability.

Waco News Channel 25 (KXXV) reports:

The McLennan County district attorney's office has reached a big milestone.

They've collected over $1 million worth of forfeited assets in less than four years under DA Abel Reyna.

Reyna released the numbers exclusively to News Channel 25 on Tuesday.

He says the contraband collected is from criminal activity like drug sales, gambling and money laundering.  

Reyna says, "Asset forfeiture is essentially attacking the fruit of criminal behavior. It's one thing to go after conduct, it's another to go after the property that's a result of that conduct. And you have to be firm on both ends to combat and fight crime."The forfeited assets are either auctioned off, sold or destroyed.

Reyna says the proceeds are distributed between law enforcement, DA and clerk's offices.

The history of how the states adopted civil asset forfeiture is an obscure and under appreciated part of the War on Drugs (emphasis mine):

Four years ago, the U.S. Congress amended the federal Uniform Controlled Substances Act to permit the civil forfeiture of property of virtually any kind, including money, when the property could be directly linked to illegal drug transactions. As a result of that amendment, federal agents in fiscal year 1980-1981 were responsible for the forfeiture of over five million dollars in assets from Michigan drug busts in which local law enforcement agencies often played a major role. These assets benefitted the federal treasury, but had Michigan's laws contained similar forfeiture provisions those funds could have been retained by state and local law enforcement agencies for use in the state in the fight against drug trafficking. However, state officials have no authority under current state law to forfeit assets related to drug violations using the civil law's lower standard of proof. The federal Drug Enforcement Administration has made available a model law for states to use in making their laws parallel to the federal act.... [T]he legislature ought to act to adopt some form of that model law so that law enforcement agencies and substance abuse programs in the state could make use of forfeited assets that otherwise would go to the federal government. [Michigan State House Legislative Analysis, SB 645, September 21, 1982.]