News Roundup

• U.S. Attorney Preet Bharara warns that sequestration cuts will affect his office's ability to prosecute forfeiture cases.
• The Detroit News editorial board lays out its case in favor of efforts to reform Michigan's forfeiture laws. House Bill 5801, introduced in October by Rep. Tom McMillin, would increase transparency by requiring law enforcement agencies to track and report how they use asset forfeiture, including the alleged crime, whether the forfeiture was part of a plea deal or conviction, and final disposition of the property.
• The Sheriff's Department of Harford County Maryland has received a helicopter via the Department of Defense's 1033 program. The department plans to use forfeiture money to fund its operation.
• Rebecca Furdek at Townhall.com suggests the spread of asset forfeiture has undermined the credibility of law enforcement.
• The Florida Sun Sentinel details the use of reverse drug stings by police in Sunrise, FL for the purpose of seizing assets.

Research Update

I've fully compiled the available data on equitable sharing payments from the Department of Justice's website. The dataset includes more than 34,000 payments made to state and local law enforcement agencies between 2000 and 2012. I've begun cleaning up and verifying the data, making sure it was all copied correctly. Due to differences in rounding, some of the totals in the data set are different than the totals listed on the DOJ site, so I've begun the process of double checking the totals to make sure nothing was copied incorrectly. I've also begun coding agency locations, cleaning up typos from the source data, and consolidating cases where the same agency appears under multiple names. Here are a few quick takeaways from first glances at the data.

• The DOJ made more than $4 billion in equitable sharing payments between 2000 and 2012.
• California has by far been the largest recipient of equitable sharing revenue, recording more than $600 million dollars in the time period covered, nearly 15% of the total. Over that time period payments exploded from $29 million in fiscal year 2000 to over $82 million in 2012, an increase of more than 181%.
• The top 10 recipient states are California, New York, Florida, Texas, Georgia, Illinois, North Carolina, Missouri, Ohio, and Michigan, raking in a combined $2.6 billion.
• The largest payments to individual departments were paid out to the agencies in Virginia and West Virginia, which was revenue from a federal settlement with Purdue Pharmaceuticals regarding their marketing and sale of oxycontin. 
• There are a number of puzzlingly small amounts paid out, which are particularly confusing given the stated requirements for a case to be federally adoped. For exampe, Marion Police Department in Indiana received a payment of $4 from sales proceeds. In fact, there were 151 equitable sharing payments made that totaled less than $100 dollars, begging the questions how and what kind of seizures and forfeitures taken on by federal agencies would result in such small pay outs.

All told, I have barely scratched the surface of this massive pile of data and will be periodically updating the site with observations as I make my way through the correction and clean up process. Stay tuned for some big news coming up as I seek to expand the scope of my research and build a proper website and develop a real online presence. 

News Roundup

• Federal prosecutors are attempting to seize $25 million in assets from notorious mobster and FBI informant Whitey Bulger. This is in addition to the $822,000 already seized from Bulger's Santa Monica residence, with the feds contending that all proceeds of his illicit activities must be forfeit, not just his profits.
• A US District Judge has ordered the forfeiture of a building in New York City estimated to be worth between $500 and $700 million. The value of the property has soared since the government moved to seize it in 2008 and it is being billed as the “the largest real property forfeiture” in United States history. - Link to the Judge's Order
• Law enforcement agencies in Rhode Island are deciding what to do with an expected $230 million payday. The payments stem from Google's forfeiture of $500 million to the federal government in 2011. The award to the North Providence Police Department is 10 times its annual budget and the payment to Rhode Island's Attorney General is double its yearly budget. 
• Business Week details how federal agencies auction seized property.
• The Jacksonville, NC police department and the Duplin County Sheriff's Office received a combined $366,000 through the equitable sharing program.
• Agencies in the Philippines are seeking the forfeiture of money connected to the 'pork barrel' graft probe that lead to protests throughout the country.
• Two departments in Texas received a combined $699,000 in forfeiture proceeds connected to a case involving a web-based pill mill.
• The Mendocino county DA and Auditor-Controller are battling over the use of $315,000 in asset forfeiture funds. The Auditor's office is disputing DA Eyster's planned use of the revenue to "pay for basically all of his office expenses", which would be a violation of forfeiture spending guidelines.

Asset Forfeiture in America: The Federal Equitable Sharing Program

The Equitable Sharing Program was created in 1986 under President Ronald Reagan and was designed as a way to foster cooperation between state and local law enforcement and the federal government in the battle against illicit drugs. Participating agencies receive a portion of forfeiture proceeds and may use the money to supplement their budgets. The money is often used to purchase new equipment and to cover costs associated with narcotics investigations, such as overtime pay for investigating officers.

The program was welcomed by state and local law enforcement. A survey conducted by the Department of Justice in 1987 found that 96% of participating agencies believed the program enhanced cooperation with the federal government and 99% reported a willingness to contribute to joint investigations to receive more money. Payments increased from $17.1 million in the first year to $279 million just five years later and, most recently, more than $447 million in equitable sharing payments in 2012.

Participation in the Equitable Sharing Program comes in two primary forms. One is the joint investigation, where federal law enforcement agencies collaborate with state and local agencies on an investigation. The forfeiture is processed in federal court and the federal agency receives 20% of the forfeiture. Any state or local agencies involved in the investigation receive a portion of the proceeds based on their contribution to the case and can receive a maximum of 80%. The money must be spent for law enforcement purposes and is made directly to the agency.

The other way state and local police participate is referred to as federal adoption. Local law enforcement can request for a federal agency to take a forfeiture case from them and prosecute the case in federal court. The property must meet certain thresholds to be adopted however the agency taking the case needs not to have contributed to the investigation. Proceeds are distributed similar to joint investigations; the federal agency keeps 20% and the local agency receives a portion based on their contribution, up to 80% of the total.

In both instances legal proceedings are moved from state to federal court. Though many states based their statutes on the federal law, there are a litany of differences between federal law and many state statutes, including how much money law enforcement may receive and different rules for court. North Carolina does not have a civil in rem forfeiture statute and forfeiture can only occur after the conclusion of a criminal trial, Hawaii only allows its law enforcement agencies to keep 45% of forfeiture proceeds, and several states require prosecutors to meet a higher standard of proof. Moving a case to federal court may allow an agency to receive more money than they would if they forfeit the property themselves. It also may make forfeiting the property easier due to a lower standard of proof or the lack of a conviction requirement.

There are other reasons that a local agency may hand a forfeiture case to the federal government. A local prosecutor may decline to take the case and the only way the property can be forfeit is if it is adopted by a federal agency. Additionally, certain types of property require certain types of infrastructure or expertise to house and maintain. A small department simply may not have the ability to house or maintain a yacht or a plane while they battle the property owner in court. There is the risk that by the time the case comes to a close the property would be rendered worthless by damage or age.

The Equitable Sharing Program continues to be a boon for both federal and state officials after 27 years. Payments to the states increased more than $244 million in the past decade, but this explosive growth has not come without a price or without controversy. Legal and constitutional questions remain about the processes used in civil in rem forfeiture and how financial incentives may be corrupting and distorting law enforcement's priorities.

Part Three: Controversy

Asset Forfeiture in America: A Brief History

From imperial England to the colonies of the United States it was used to combat piracy, tax evasion, and smuggling. It was used during Prohibition to seize the cars of bootleggers transporting illicit liquor and was brought in to wider usage by Nixon at the birth of the War on Drugs. It was once considered a legal backwater, but now it generates hundreds of millions of dollars in revenue for state, local, and federal law enforcement. It is the practice of asset forfeiture.

Simply stated, asset forfeiture allows law enforcement to seize contraband, ill gotten property, and the fruits and tools of financial crime. Possession of contraband is illegal by definition; one cannot make a claim of ownership on something that cannot legally be owned. The same is true of money and property earned through selling drugs or defrauding a company. Buy a house with money made by running a Ponzi scheme? The house and your bank account are the product of crime and as such can be seized and forfeit to law enforcement. 

There’s nothing particularly controversial about denying criminals their illicit gains. However, the issue becomes thorny when you get in to the legal mechanisms used in forfeiture proceedings. Criminal proceedings are traditionally conducted in personam, meaning against a person, and it is the guilt or innocence of the individual that is being decided. Under British admiralty law however, the seizure and forfeiture of boats and smuggled goods was based on the legal concept of in rem. In rem, meaning against the thing, is a jurisdictional concept that enables a court to take action against a piece of property, allowing them to take legal action when the property owner can’t be found or is located outside of the court’s jurisdiction. 

An example of this is the English Navigation Act of 1660, which required goods to be shipped in English vessels. Violation of the act meant forfeiture of the vessel and the goods on it. The offense was attached to the property for obvious reasons. An English court would have a difficult time prosecuting the Danish owners of a smuggling ship sailing out of France, so they simply took action against the ship. The owner could file a claim to contest the forfeiture, but the ultimately the guilt or innocence of the owner was inconsequential because the proceedings were conducted against the property. It was the property that was in violation of the law, which meant that a whole shipping vessel could be forfeit due to the criminal actions of a single crew member.

The use of in rem jurisdiction followed the colonists to America and the distinction between criminal proceedings and the forfeiture of property was set in a series of state and federal statutes and court cases. The forfeiture of a privateer’s vessel was upheld despite a lack of criminal charges in The Palmyra decision issued in 1827 and the distinction between in rem and in personam legal actions held throughout Prohibition. In rem statutes were used after the passage of the Volstead act to affect the seizure and forfeiture of cars and other property involved in the sale and transportation of alcohol regardless of criminal charges against the owner. These in rem proceedings taken against property were conducted in civil court and were not tied to any criminal charges filed against a defendant.

Forfeiture faded with the death of Prohibition until Nixon’s War on Drugs and the passage of the Comprehensive Drug Abuse Prevention and Control Act in 1970 revived civil in rem forfeiture. Forfeiture entered the modern era as a weapon against drug traffickers. Forfeitures were initially limited to contraband, raw materials and equipment used to manufacture narcotics, and vehicles used to transport them, and the government only had to show probable cause in order to forfeit property. Once the prosecutor’s burden was met it was on the property owner to show by a preponderance of the evidence that his property was not subject to forfeiture. This is effectively a reversal of the well established legal standard of “innocent until proven guilty”, made irrelevant by the use of civil courts. 

The law was amended in 1978 and 1984 to widen the scope of property subject to forfeiture. These amendments made profits from the sale of drugs, assets purchased with drug money, items intended to be traded for drugs, and any real property used to facilitate narcotics offences eligible for forfeiture. Additional amendments allowed forfeiture proceeds to be kept by federal agencies and created the federal equitable sharing program to foster cooperation between federal law enforcement and state and local police. The program allows participating state and local law enforcement agencies to receive a portion of forfeiture revenue as a way to offset the costs of drug enforcement operations.

It has been nearly three decades since these changes were made and asset forfeiture has taken on a life of its own. Forty-seven states and the District of Columbia passed civil asset forfeiture laws, with most of them modeled after the federal statute. As it has spread it has become a serious revenue generator for state and federal law enforcement. Use of asset forfeiture by federal agencies exploded after the reforms in 1984, increasing from $27.2 million in 1985 to $644 million in 1991. The Department of Justice’s Asset Forfeiture Fund went on to break $500 million in net deposits in fiscal year 2000, while the most recent accounting figures for fiscal year 2012 showed more than $4 billion in net deposits and more than $447 million in equitable sharing payments to state and local law enforcement.

Part Two: Equitable Sharing