Americans for Forfeiture Reform

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.