SPEAKERS CONTENTS INSERTS Tables
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CIVIL ASSET FORFEITURE REFORM ACT
WEDNESDAY, JUNE 11, 1997
House of Representatives,
Committee on the Judiciary,
Washington, DC.
The committee met, pursuant to notice, at 10:20 a.m., in room 2141, Rayburn House Office Building, Hon. Henry J. Hyde (chairman of the committee) presiding.
Present: Representatives Henry J. Hyde, Bill McCollum, George W. Gekas, Howard Coble, Lamar Smith, Elton Gallegly, Charles T. Canady, Bob Inglis, Bob Goodlatte, Stephen Buyer, Sonny Bono, Ed Bryant, Steve Chabot, Bob Barr, William L. Jenkins, Asa Hutchinson, Edward A. Pease, John Conyers, Jr., Jerrold Nadler, Robert C. Scott, Melvin L. Watt, Zoe Lofgren, Sheila Jackson Lee, Martin T. Meehan, William D. Delahunt, and Steven R. Rothman.
Also present: Thomas E. Mooney, chief of staff/general counsel; Rick Filkins, counsel; Daniel M. Freeman, counsel/parliamentarian; Samuel F. Stratman, press secretary; Michelle H. Pelletier, executive assistant to staff director/counsel; George Fishman, counsel; and Cindy Blackston, clerk.
OPENING STATEMENT OF CHAIRMAN HYDE
Mr. HYDE. The committee will come to order. Good morning, everyone. I appreciate your coming to this very important hearing.
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Our musty civil asset forfeiture laws enacted at the dawn of our Republic to protect the Nation's customs revenues from the depredations of smugglers, have been recruited in the war against drugs. This I find wholly proper. The Federal Government is taking in hundreds of millions of dollars a year in cash intended for drug buys from the sale of cars and boats and homes used by drug traffickers in their business dealings and in the proceedings of drug sales. This money is being plowed back into law enforcement. It is a delicious irony that as former Attorney General Dick Thornburgh said, ''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.''
Unfortunately, I think I can say that our civil asset seizure laws are being used in terribly unjust ways, and are depriving innocent citizens of their property with nothing that can be called due process. This is wrong and it must be changed.
Please enter with me the Kafkaesque world of civil asset forfeiture. I advise you never to buy an airplane ticket at an airport with cash. This behavior may cause the ticket agent to alert police that you are a possible drug dealer. You will be searched. If you are carrying large amounts of cash, it will be confiscated. Unfortunately for you, you fit a drug profile.
But say you are not carrying drugs. The money was to be used at an auction of antique cars, where business is done in cash only. It doesn't matter. Agents can seize your money based on probable cause that it is intended to be used in a drug transaction. Don't worry, you probably won't be arrested. You will likely be courteously sent on your way, but sans your cash. If you want to get it back, your troubles have just begun.
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Civil asset forfeiture is a relic of a medieval English practice whereby an object responsible for an accidental death was forfeited to the king, who would provide the proceeds for masses to be said for the good of the dead man's soul. It is the inanimate object itself that is guilty of wrongdoing. Thus, you never have to be convicted of a crime to lose your property. You never had to be charged with any crime. In fact, even if you are acquitted by a jury of criminal charges, your property can be forfeited.
In attempting to get your property back, you have available few of the procedural safeguards of the criminal law. All the Government need show to justify a seizure is probable cause that the property is subject to forfeiture. Then you must prove the property is innocent. What are some of the other roadblocks you will face in getting your property back? You are not entitled to an attorney if you are indigent. You must provide a 10-percent bond for the privilege of contesting the Government seizure. You have quite a short period of time to file a claim. Unlike some forfeiture statutes, property can be forfeited even if the property owner is completely innocent and either did not know of others' illegal use of his property or call the police to try to put a stop to it. Even if you somehow prevail, the Government is not liable for any damage caused by its negligent storage of your property. If your property is your livelihood, you might be bankrupt by the time you get it back.
This is terribly unjust. In a democracy, means can be as important as ends. If more money is needed for the war on drugs, Congress should appropriate it. I am certainly prepared to. However, we can't continue to unjustly take assets from property owners unlucky enough to be caught up in civil forfeiture proceedings. Nothing less than the sanctity of private property is at stake here. The current situation is unjust. It's abusive, and it must be addressed.
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The Civil Asset Forfeiture Reform Act proposes seven changes in current asset seizure laws. It puts the burden of proof where it belongs, with the Government. It allows for the appointment of counsel for indigents. It makes clear that property owners who take reasonable steps to prevent others from using their property for illegal purposes can't lose their property. It eliminates the cost bond requirement. It gives a property owner a reasonable time period to file a claim contesting the forfeiture. It allows property owners to sue the Federal Government for negligence in its handling or storage of the property, and it allows the property to be returned to the owner, pending final disposition of a case if substantial hardship would otherwise result.
I look forward to today's hearings and to the compelling stories of forfeiture abuse we will hear.
[The bill, H.R. 1835, follows:]
INSERT OFFSET RING FOLIOS 1 TO 15 HERE
Mr. HYDE. I am now pleased to recognize the ranking minority member, Mr. Conyers, for an opening statement.
Mr. CONYERS. Good morning, Chairman Hyde and members. This is one of the kinds of hearings where we have so much cooperation it's staggering. I just want to caution F. Lee Bailey, it doesn't always go down like this. We can't agree on how to handle disaster relief. We've got a tax bill that goodness knows where it could take us. We are still trying to resolve the budget, which is several months overdue. But on civil asset forfeiture, there is a remarkable joining of minds in the Judiciary Committee on this subject.
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I am not quite sure where the Department of Justice is yet, so we would invite all of you witnesses in the first panel to stay behind and hear it for yourself. It's an important subject. It is not the most earth-shaking. But again, it's an example of what justice is all about. I mean how we operate, those words found on the walls of justice, carved in granite out there. The great statements that tell us what America represents. Those words do not support the way we take people's property and then force them to prove that they are innocent, particularly if they cannot get a lawyer or if they don't happen to have the money, or if a lot of other things. We're happy to have you all here to inform our discretion.
I want to associate myself with Chairman Hyde's statement. This is about the third year we have been working on this together. We hope that we can have a meeting of the minds to get this law changed in the year 1997.
I want to make welcome F. Lee Bailey. Nobody knows how long he has been practicing law, it's that long. I just want to say that we are happy and privileged to have one of the most distinguished members of this Nation's bar with us this morning.
Thank you, Mr. Chairman. I will ask that my statement be put in the record.
Mr. HYDE. Without objection, so ordered.
[The prepared statement of Mr. Conyers follows:]
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PREPARED STATEMENT OF HON. JOHN CONYERS, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN
I'm afraid the government's principal concern when it comes to seizing money and assets is best summed up in an expression from a recent popular movie: ''Show Me the Money.''
When Chairman Hyde and I complained that it should matter that the government is taking money from innocent persons, the government answered us, in part, that they were concerned about losing money—if they provided these safeguards. Is that the only line they know: ''Show Me the Money.''
When we told the government we wanted them to pay for counsel for the innocent owner who couldn't afford counsel, and to pay this out of their asset forfeiture funds, the government didn't want to hear it because, it appears, all the government can think of is: ''Show Me the Money.''
Well that's wrong and for years I have been speaking out about——
how wrong it is to seize property from innocent owners,
how wrong it is to force individuals to prove their innocence, and
how wrong it is for innocent persons to have to go through this to recover their own property.
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Chairman Hyde and I have agreed and made our views known to the public and, more importantly, to the Department of Justice. But the Department doesn't seem to hear us. After all, you know what's on their mind.
So the abuses persist. We'll hear testimony about some of the abuses today. We introduced a Bill yesterday with 29 co-sponsors and whatever form the Bill takes from this point on, it must provide:
(1) reasonable notice to the property owners,
(2) an end to the government delays,
(3) appointment of counsel for those who can't afford it,
(4) a shift to and an increase in the burden of proof the government must shoulder,
(5) a definition of what it means for a property owner to be innocent of the misconduct that prompted seizure,
(6) a release of seized property pending civil asset forfeiture proceedings when, to do otherwise, would cause the claimant a ''substantial hardship,'' and
(7) an award of damages and interest to claimants entitled to recover their seized property.
We want to give innocent owners a chance to get their property back. Despite what Justice may want, we want to show the innocent owners their money.
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We feel this legislative reform is necessary because the Department of Justice hasn't done this on its own.
Let me say in conclusion, we are prepared to discuss revisions and modifications to this Bill with the Department of Justice and with anyone else. But we are not going to dress the Bill up with additional provisions the Justice Department wants that make matters worse.
Mr. HYDE. Are there any further opening statements? Mr. Coble.
Mr. COBLE. Mr. Chairman, I just want to extend a cordial welcome to our panelists today. I have no formal opening statement.
Mr. HYDE. I thank the gentleman. Ms. Lofgren. Mr. Meehan. Mr. Delahunt.
Mr. DELAHUNT. I just simply want to extend a very warm welcome to that preeminent defense attorney, and, I should add, a supporter of my candidacy for district attorney, as well as Congress, Lee Bailey. Lee, it's great to have you here.
Mr. HYDE. Thank you. Mr. Canady. Mr. Bryant.
Mr. BRYANT. Just very quickly, Mr. Chairman. I want to welcome my friend from Nashville, Mr. Bo Edwards, and all the other very distinguished members of this panel, but it's certainly good to have Bo up here, and I look forward to hearing his testimony. Thank you.
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Mr. HYDE. Mr. Barr.
Mr. BARR. Thank you, Mr. Chairman. Mr. Chairman, I will be sort of in and out of the hearing this morning. We have some other matters in government reform. I will spend as much time as I can here, certainly. This is very important legislation for which I am a proud cosponsor on your bill, Mr. Chairman.
I do want to acknowledge the presence of Chief Moody from Marietta, which is in the Seventh District of Georgia with the International Association of Chiefs of Police. I certainly hope to be here to hear his testimony.
I commend you, Mr. Chairman, for putting together a bill as well as these hearings today to ensure that those deficiencies in our civil asset forfeiture laws, with which I am very familiar having been a former U.S. attorney, are rectified, but yet not at the expense of maintaining very strong asset forfeiture laws that are such an important tool for law enforcement at all levels of government. I look forward to these hearings and hopefully to enactment and signing into law this important legislation that I think does strike the proper balance between civil liberties and the needs of our law enforcement.
Mr. HYDE. Thank you very much, Mr. Barr. Mr. Hutchinson.
Mr. HUTCHINSON. Mr. Chairman, I want to greet the panel. I look forward to their testimony. In order to hear them, I will waive any further statement at this time.
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Mr. HYDE. Thank you. Mr. Gekas, do you have an opening statement as you approach your place?
Mr. GEKAS. I join the chairman in welcoming the witnesses and look forward to a productive hearing.
Mr. HYDE. Thank you. That is one of your better statements. [Laughter.]
We begin our testimony with individuals who have had first hand experience with civil asset forfeiture. First, Billy Munnerlynn, the owner of a once successful air charter service, will talk about his struggle to recover one of his airplanes seized by the Drug Enforcement Administration. Next we will hear from E.E. ''Bo'' Edwards III, who represented Richard T. Lowe, M.D., in his suit to recover more than $2.8 million of his life savings that had been improperly, though innocently deposited in a bank account he had established to benefit a private academy in his hometown. We will then hear from F. Lee Bailey, who needs no introduction, who will testify about his representation of a Florida couple whose business has been effectively shut down by a civil asset forfeiture action.
Susan Davis, a certified public accountant from Fort Lauderdale, will next tell the committee how she as the administrator of the estate of George Gerhardt successfully sued the Government to beat the forfeiture of his house seized on the flimsiest of evidence.
Finally, we will hear from Gerald Lefcourt, president-elect of the National Association of Criminal Defense Lawyers, who represented a group of Hasidic Jews in a forfeiture action in New York. Mr. Lefcourt will be arriving later in the morning. I anticipate he will testify with the last panel.
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Ladies and gentlemen, I request that you try and contain your oral presentations to 5 minutes. We won't be draconian in cutting you off, but we have several witnesses we would like to hear from. I assure you, the totality of your written statements will be inserted in the record in its entirety.
Mr. Munnerlynn.
STATEMENT OF WILLIAM MUNNERLYNN
Mr. MUNNERLYNN. Thank you, Chairman Hyde.
Mr. HYDE. Would you pull that mike a little closer to you?
Mr. MUNNERLYNN. Thank you, Chairman Hyde and members of the committee. Thanks for allowing me to tell my story here today. I operated my company's Lear jet operation for approximately 13 years in Las Vegas. My wife and I owned it. I was a pilot, airline transport pilot for over 25 years. We lived in Las Vegas 27 years. My wife and I were very active in our community activities. My wife earned a 5,000-hour certificate for volunteer work at the hospital. I have a lifetime membership with Angel Plane. I always made my airplanes, my jets, available to all the charities in Las Vegas. These facts are well known.
We worked very hard for what we had. It was devastating when they took my charter service and my way of life. We had many people come to Las Vegas. There were gamblers from foreign countries. A lot of times I couldn't even pronounce their names.
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In this particular incident, my wife agreed to the charter. The charter was from Little Rock, AR, to California. I was ecstatic about the charter. Normally I wouldn't have been on that particular charter, but because it came from Little Rock, where my family lives, I handled it. The Lear jet was so expensive to operate, I never could fly it down and show it to my brothers and relatives. So I took this charter, not knowing this passenger from Adam.
When I got to the airport, I had to find someone to show me who the person was. I picked this person up, flew him to Ontario, CA, and dropped him off. Apparently, the DEA had been chasing this fellow for several weeks, I didn't know that. I am told the DEA waited until he got on my jet and before they would arrest him. I dropped him off and was ready to depart back to Las Vegas. I was unable to fuel the aircraft for about 45 minutes. I later found out the DEA had delayed the plane so it could not leave.
Anyway, I was arrested, taken to the Cucamonga Prison. This was the first time I had ever been in jail in my life, first time I had ever been arrested. After 71 1/2 hours, I was released. They charged me under the RICO law, held me on $1 million bail, which I did not have the money. When I was released, I returned to Las Vegas to get my jet.
As I approached the airport, I saw the DEA agent in charge, and asked him what he was doing at the jet. I told him I had been released and this was all over. He told me, when I tried to recover my jet that I was trying to steal Government property, that the property belonged to the Government. With that, I called an attorney. That started 2 1/2 years of litigation trying to get my Lear jet back.
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While this Lear jet was in their possession, and I have documents to prove this, to add insult to injury because I hadn't broken any law, the DEA used my Lear jet. They flew it out of California to someplace in Texas. That is where I finally retrieved it at. The jet was quite noisy. I received citations because my jet broke the noise abatement laws while the DEA had the jet.
When I received the aircraft, the jet was trash. The maintenance was let go. The prosecuting attorney had tried to sell my jet before my first day in court, told the bank from the outset that the plane was wasting away. Yet I have heard statements before your committee, by the Government, that they maintained these aircrafts. That is simply not true. They said for $140,000 in repairs I could fly this Lear jet again. Not so.
I felt pretty confident that when I got to the civil trial this fellow, whoever he was, would testify on my behalf that he didn't know me. The truth was I didn't know him. We had no business affiliation whatsoever. I charged him the normal fee of $8,500 which is standard for that distance. I was appalled to find out from the district attorney that the person that was on my jet that day, was a known narcotic trafficker that was on parole, or probation, that he had broken all the laws in our land, was released for no reason, and that he had met with three associates while he was in Los Angeles.
After going to a civil trial, which is pretty tough, I used up most of my savings, I had to hire a criminal attorney in the early aspect. Once it went to civil, this first attorney couldn't handle it so I had to hire another attorney. It was a constant thing fighting them to keep my Lear jet and my property. I went to a jury trial, eight of my peers. They ruled in my favor twice, said I should get all my money back. The Government had taken all my money and my Lear jet. The judge reversed this favorable verdict, and ordered me to another trial. I was afraid that I could not retrieve this witness, the passenger who I thought was going to be held incarcerated for the crimes he had committed. I believed I needed his help to get my Lear jet back.
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After being convinced that I could not get this Lear jet back, at the last minute I settled with the Government in order to get the jet back. I can tell you that in Las Vegas, we fly many movie stars. I flew for the U.S. marshals. Back during the time the terrorists were active in this country, moving terrorists from one prison to another, very confidential flights. I can assure you that I was investigated more by them than I was by the DEA.
The DEA was bent on getting my Lear jet. It's one of the fastest Lear jets made in this country.
Mr. HYDE. Let me understand you. They let you go. They let the bad guys go, the drug dealers. The only thing they kept was your Lear jet?
Mr. MUNNERLYNN. No, sir. They kept the $3 million that I know nothing about.
Mr. HYDE. Well that wasn't yours?
Mr. MUNNERLYNN. No, sir.
Mr. HYDE. All right.
Mr. MUNNERLYNN. Anyway, I was forced to settle the thing. To even make it worse, later on I don't know why this all happened. You have to understand that in the years that I have been flying this airline, working as a transport pilot flying jets out of Salt Lake City, I flew for Majestic Airlines, for many airlines. All of a sudden I could not even get a job with these airlines. These airlines haul mail that's Federal. I was put on a list. I can't think of the name of it, but the DEA uses it to identify possible drug runners and gun runners and money launderers. I couldn't work anywhere. Basically, I was forced to sell the other prop airplanes that I had flying into the Grand Canyon. I had four prop planes, a Malibu a 210, and a training plane. I was forced to sell all these aircrafts to pay my attorney bills.
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Now that all these things are gone, all the money is gone. I filed for bankruptcy. We lost our home. We lost all our aircraft. I lost my airline certificate. The Federal Government told me they would wait to see the outcome of the forfeiture hearings. It wouldn't be right for them to destroy my certificate, I spent over $200,000 getting that certificate. My pilot license and Mr. Bailey, I believe, can confirm this, cost well over $80,000. The Lear jet cost $500,000.
I can assure this committee I have never ever given thought to ever breaking the law, much less flying money launderers, drug people. I am far removed from that. I would never ever risk what I had for that.
Mr. HYDE. Thank you very much, Mr. Munnerlynn. We have a vote on, so we are going to have to temporarily recess. We'll run over and vote and come right back. So if you will stay in place, we'll be back.
[Recess.]
Mr. HYDE. The committee will come to order. We have a missing person case here. Mr. Edwards. Well, absent Mr. Edwards, Mr. Bailey, would you proceed?
STATEMENT OF F. LEE BAILEY, ESQ.
Mr. BAILEY. Thank you, Mr. Chairman. Thank you, members of the committee. The talk so far has been about remedies that were fashioned to try to stifle the drug trade and its progeny. I have a case where that unfortunately has lapped over into another much less critical area. I would like to relate what happened.
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On May 9, of this year at 7:20 in the morning, a young couple aged 30 who were on a telemarketing business selling courses on how to find, buy, and sell at a profit distressed real estate, were awakened by a knock at the door. They saw more than 30 agents of various agencies with guns drawn and a battering ram at the ready, and were told that if the door didn't open immediately, it would be broken down.
The agents came in, they cleaned out the house of personal possessions, even taking the wedding ring of the wife which was 8 years old, while the business is 2 years old. They then went and closed down the operating company, all of this in greater Orlando. Put 380 employees on the street, many of them minorities. I arrived on the scene that day and tried to find out what was wrong. We had been working with the attorney general of Florida for 9 months, and it wasn't sufficient evidence to cause any restraint. I was told there was a sealed affidavit which obviously was hearsay, since the man involved had no personal knowledge, that we could not have access to it and that there wasn't any remedy.
We brought a motion for a hearing. The magistrate who issued these warrants, which seized every bank account, including bank accounts not subject to lawful seizure, trust funds that were due to be paid to those demanding refunds, those who had acquired the right to have financing provided for their real estate deals. The magistrate who signed the warrant decided to hear whether or not he had properly signed the warrant. For two days, we were forced to put on evidence without ever having seen what charges we were trying to meet.
The second day was yesterday. At the end of the 2 days, the magistrate says I'll give you another half day a month from now, but you haven't used your time productively. After promising us at least parts of the warrant, we have never seen it.
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At the same time, the Government went to the Cayman Islands and restrained certain funds by filing a petition under a treaty. That treaty requires that within 7 days a lawsuit be filed, a forfeiture lawsuit in the United States. They have filed a lawsuit. They have placed it under seal. We don't know what's in it and we can't counter it. I don't think that that's what the treaty contemplated, was a sealed lawsuit which the party is not allowed to meet or to rebut.
Now, I was taught in law school, as were all of us here who went to law school, that this country is grounded upon two very important rights. One is notice, and the other is a right to a hearing. If you are charged with something that is going to cause you loss, whether it's civil or criminal, you are entitled to know what you are accused of and have counsel if you can afford it and to be heard.
The Federal authorities are using this procedure to circumvent perfectly legitimate procedures such as bringing a restraining order. They are claiming that mail fraud and wire fraud was committed without letting us know how. Thus invoking 1956 and 1957, the money laundering statutes, and taking everything and closing the business.
When we'll get a notice and a hearing, they have suggested maybe within 2 years. These employees have no jobs. These people have no money. Their indebtedness will pile up. Their credit will go bad. They are ruined, and why? Because the United States of America sought successfully to attack people who have no involvement whatsoever with drugs, have never been involved with drugs, would be appalled at the thought of drugs, secretly with no notice and no hearing, they have won the case without ever going to bat.
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Mr. Chairman, I suggest several things are fundamentally wrong. No. 1, I don't think a magistrate ought to sign a warrant in a nondrug case. I think it should be a district judge. I think the rule should be very stringent and the emergency apparent.
Second, I don't think the person who signs an ex parte warrant ought to be the person adjudicating whether or not he was correct in doing so. I think there needs to be some revision here. I think it needs to be made clear that whereas there may be emergencies that justify this kind of procedure in organized crime, it has nothing to do with combating disputes about the way a business is run. The Government takes it all without having to prove a single thing, and then says we'll get to you someday, and by their delay defeat due process as effectively as if they simply said you don't get a trial at all. Changes certainly are needed here.
Mr. HYDE. Thank you very much, Mr. Bailey.
Now, Mr. Edwards.
STATEMENT OF E.E. (BO) EDWARDS III, ESQ., ON BEHALF OF THE NATIONAL ASSOCIATION OF CRIMINAL DEFENSE LAWYERS
Mr. EDWARDS. Chairman Hyde, Mr. Conyers, and members of the committee. It is gratifying to appear before this committee again. Perhaps the entire city should take notice of the bipartisan effort that has been made in the cause of civil forfeiture reform, and apply it in other areas. But it is wonderful to see that there are 30 sponsors on H.R. 1835 already. I hope that number will continue to grow.
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I am here to tell you a little about the real world of civil forfeiture, an area in which I have practiced extensively for several years, and how things really work. Except for the amount involved in the case I am about to tell you about, there is much that is typical about the case of Dr. Richard Lowe.
Dr. Lowe is something of a throwback. He is a country doctor, a family physician in the small northwestern town of Haleyville, AL. When this began, this ordeal began, he was in his late 60's. He is now 72. He still practices medicine. He charges $5 for a routine office visit in 1997. He drives a used car, lives in a very modest home. There are not too many doctors in America today that still work the way he does.
He can tell you to the penny when he was a child in the Depression, he lost $4.52 in savings when the local bank failed in his home town in rural Alabama. His parents lost all their savings when that bank collapsed. Because of that, I suppose, he has always hoarded cash. As long as he has practiced medicine, when he gets home in the evening, if he's got some cash in his pocket, he puts some of it in a box. When the box gets full, he puts it in the back of the closet and starts another box.
Well, this story began in 1988 when he consolidated his life savings in the First Bank of Roanoke, AL. The bank president of that bank was a long-time friend of his. Earlier in his life he had been a neighbor, when he practiced medicine near Roanoke. He had something in the neighborhood of $2.5 or $2.75 million, his life savings essentially, in First Bank. He had done that, Mr. Chairman, and this sort of lets the cat out of the bag—I was going to wait to tell you this last—but the reason he did that is because a small private school, kindergarten through 12th grade school, in his hometown was about to fail. Friends of his were on the board of the school. Two of his children had been educated there. In case you are curious, I'm sure the school was not multiracial when it was originally organized, but by the late 1980's, it was multiracial.
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But at any rate, he created this account in 1988, put all his savings in it, and had all the interest off of this money go to the school. By the time this case began in June 1991, he had given the school $908,000 in change, and was still contributing to the school. He saved it from collapse.
Well, his wife in the fall of 1990 was nagging him to do something about those boxes in the back of their closet. So he said OK, you count it and we'll put it in the school's account. So his wife counted it and it was $316,911 in 1's, 5's, 10's, and 20's. Some of the bills were as much as 20 years old, a few 50's. He took this money, gave it to the bank president to put in, to add to his account. Now this is the first cash that had ever gone in this account. All the other money had been transferred by check from other banks when CD's mature.
The bank president knew that the doctor was obsessive about anonymity; he didn't want to be known as a rich doctor. He was afraid that people would sue him if they thought he was a rich doctor. So, the bank president, instead of depositing the money to the account, he just put the money in the bank vault. He gave the doctor a written receipt for the deposit, but he just put the money in the vault. Then with some of the money over a period of 6 weeks, the bank president went to neighboring banks in the vicinity of Roanoke AL, and bought $6,000, $7,000, $8,000 cashier checks, and then credited it to the doctor's account. That, as you all know can be termed ''structuring.'' If you and I did that with even any amount over $10,000 in cash, that would be structuring.
Well, as you might guess, after a few weeks, some banks thought it was peculiar that the bank president from Roanoke was doing this and made a report. Some FBI agents came to call on the bank president. He told them exactly what he had done. He told them that it was his idea, not the doctor's idea and that as he understood the law, he had done nothing wrong.
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Well, the FBI and the local U.S. attorney didn't think so. So what did they do? Did they seize the $316,000 cash deposit? No. They seized the entire account, over $2.5 million. The bank president and his son, who was a vice president of the bank, were both indicted. The vice president had gotten one of these cashiers checks. The bank president later made a deal with the Government to plead guilty if they would drop the charge against his son.
Two years later, and the Government has all this money tied up now. I get in the case, and in 2 years after the June 1991 seizure, the doctor is indicted. I began researching the structuring laws and discovered, low and behold, it is not a crime for a bank to send cash to another domestic financial institution. That is outside the legal definition of structuring. In short, there was no structuring offense here. So I began to point out to the Government that not only did the doctor not know what the bank president had done, but there was no structuring violation, even though the bank president had pleaded guilty.
The Government should have withdrawn the criminal charge against the doctor. But instead, what they did, a week before trial, was to offer the doctor ''pretrial diversion.'' So essentially the doctor had to do nothing except stay out of trouble for a year and the case was dismissed with prejudice, which is what happened.
Thinking that our problems are over, I called the assistant U.S. attorney in Montgomery handling the forfeiture case. The criminal charges had been in Birmingham. But no, the assistant U.S. attorney said the burden of proof is on you in the civil forfeiture case. We're going to proceed against the money, even though the criminal charges have effectively been dropped. But the Government suddenly had to come up with a new theory because it was plain, as I had pointed out to them, there was no structuring violation.
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So they checked and found out that there had been no currency transaction report filed by the bank, a CTR, which was a violation by the bank, not by the doctor. But their theory became that the money should be forfeited because no CTR was filed. In 1994, the U.S. district judge in Montgomery entered a partial summary judgment ruling that there was nothing wrong whatsoever with the money that was in the account prior to this cash deposit being made, and ordered it returned to the doctor 3 years after its seizure. However, he denied the motion with respect to the cash deposit. We had a bench trial, a nonjury trial. The judge ruled against us. He ruled that the doctor must have exhorted the bank president, his words, not to file a CTR even though the government had not even noticed that a CTR hadn't been filed when the case was filed.
Well, we appealed to the 11th circuit. Last year, the 11th circuit reversed, holding that the proof from the record was clear above preponderance. The doctor did not know what the bank president was doing, something the bank president had said from the first day he was interviewed by the FBI. They reversed and as you probably know, it's very unusual for a court of appeals to reverse a case on the facts, but that's what they did in a nonpublished opinion, and ordered the money returned to the doctor. In the meantime, the stress on this got to the doctor so seriously, that he had to be hospitalized for stress and high blood pressure.
Obviously, when Congress passed the currency reporting laws, you did not have in mind a doctor that was trying to save a small private school in his hometown. You had someone with some more notorious intent in mind. But nevertheless, I think you can see that when the laws are on the books that allow government officers to make seizures like this and they find money, they want it and they take it. That's what happens.
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I think it is a valuable lesson to demonstrate the need for the burden of proof that is contained in the bill that has been introduced. If the burden of proof had been by clear and convincing evidence on the Government, I believe the district judge would have held in the doctor's favor a long time ago. The definition of innocent owner in the bill that is before you, is also very well thought out and well done. I noticed in the Government's response that they attacked that, especially with respect to allowing innocent owners who receive money by donation rather than by a bone fide commercial transaction. But that is in present law. The Government 2 years ago forfeited almost half a billion dollars using the provisions that this bill would not change. So I hope that you will resist the Justice Department's efforts to water that down.
Now if a transfer is a sham, if the person who receives the property can be shown to be a mere nominee, the Government can forfeit the property anyway. I have seen cases where that has happened. So I would submit that you don't need to water down the language in the bill in that respect.
There is such a strong tendency in the way that law enforcement agencies use civil forfeiture today, and the way they have been using it for a decade, to seize property when they find it and justify it later. That is especially true in cases where no criminal charges are brought against the owner of the property. Because of that, it is so important that you not follow suggestions from the Justice Department to water down this bill with respect to the requirement that the Government should still be required, as 19 U.S.C., section 1615 now requires, that the Government have probable cause at the initiation of the case.
In other words, in the doctor's example, when they began their lawsuit, they were claiming there had been a structuring. That was why the money was forfeitable. They decided that wouldn't work, that was not legally viable, so they changed their theories in midstream and began the theory of causing the bank to fail to file a CTR. Well, what the Government seeks is to seize money and then use the costly discovery provisions, the deposition provisions of civil procedure, to get evidence after the seizure to win their case, evidence that they didn't have or even know about when it began. I hope you will hold the line and not allow those provisions to be watered down.
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H.R. 1835 is a wonderful bill. I urge you to pass it as it's written. I thank you for allowing me to be here.
[The prepared statement of Mr. Edwards follows:]
PREPARED STATEMENT OF E.E. (Bo), Edwards III, on Behalf of the National Association of Criminal Defense Lawyers
Mr. Chairman, Mr. Conyers, Other Distinguished Members of the Committee, I am pleased to speak to you again on behalf of all the innocent property owners of our nation in urging favorable action of this important bi-partisan Civil Forfeiture Reform Act. I am here to urge you to hold the line and resist attempts by the Department of Justice ant the Department of Treasury to render the significant and much-needed reform provisions in this bill a mirage, an illusion promising protection to owners of private property, but not delivering. And I submit to you that all of truly meaningful reforms contained in this bill are sorely needed not just to afford a proper measure of protection to the concept of private ownership of property, which has contributed so much to the growth and strength of our nation throughout history, but also to help restore faith and respect in the government itself, and in its law enforcement institutions. To be sure, long-time abuse of innocent citizens and their rights to private property ownership through the forfeiture laws has engendered grave mistrust and disrespect for our system of justice. This should be of vital concern to us all.
At your hearing last July, you also heard from innocent victims of the broad-sweeping and unjust forfeiture statutes, including Willie Jones, a former client of mine, who was a victim of a so-called ''interdiction'' program at the Nashville International Airport. He simply fit the government's ''profile.'' That case is an example of the abusive application of forfeiture laws to citizens traveling through our airports and highways.
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Today, I want to tell you of another prime example of asset forfeiture injustice, this time involving the abuse of Treasury's ''currency transaction violation-forfeiture statute.'' 18 U.S.C. sec. 981. The victim is an elderly family doctor in a small town in Northwest Alabama, who almost lost his life savings due to the pressure placed on later enforcement to seize and forfeit property, and because current law affords too little protection to innocent property owners.
THE CASE OF UNITED STATES V. ACCOUNT NO. 50–2830–2, LOCATED AT FIRST BANK, ROANOKE, ALABAMA (857 F. SUPP. 1534 (M.D. Ala 1994)) (unpublished opinion, No. 95–6262 (11th Cir. 1996))
1. Events Preceding Filing of Complaint
Richard Lowe is an elderly medical doctor (now age 70) who graduated from medical school in 1955 and has mostly practiced medicine in rural Alabama towns since then. For almost 20 years he has maintained a family practice in the remote Northwest Alabama town of Haleyville. His dedication to his medical practice for the sake of healing is underscored by his office rates. In 1994 he still charged $5.00 for a routine office visit. The administrator of the small hospital in Haleyville described Dr. Lowe's practice this way: ''[He] typically works seven days a week and tends to see a very high volume of patients at his clinic. He has many elderly and indigent patients. In fact, many of his patients would undoubtedly not receive regular physician services but Dr. Lowe.... [F]or many years he delivered many babies, probably more during that time than any other doctor in the county, and many of those deliveries were without compensation. Overall, I would estimate that Dr. Lowe has performed at least three or four million dollars' worth of charity medical services since he came to Haleyville.''
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As his wife describes it, about fifteen years ago Dr. Lowe contracted cancer and was given less than one year to live. After several surgeries, be survived. His response was to return to work ''seven days a week, virtually fifty-two weeks a year.'' A second response was to examine ways in which he could do something for his hometown, Lafayette, Alabama.
In late 1987 Dr. Lowe settled on a plan. He learned from his lifelong friend in Lafayette, Alexander Walton, that Chambers Academy, a kindergarten through twelfth grade private school in Lafayette, was in serious financial trouble. Dr. Lowe had long been interested in education. His mother had been a teacher, and two of his stepchildren had attended Chambers Academy before he moved to Haleyville. He decided to do what he could to save the school.
In February 1988 he contacted Joseph Lett, an old friend and former neighbor who was, in 1988, president of First Bank, a bank with offices in Roanoke and Wadley, Alabama, both towns only a short distance from Lafayette. Dr. Lowe had Mr. Lett create an account in the Name of CCEF (Chambers County Educational Foundation, the non-profit organization which owned and operated the school), and he placed the proceeds of several certificates of deposit (CD's) in it. His initial deposit was roughly $1.3 million, but by 1990 Dr. Lowe had placed approximately $2.5 million on deposit in the CCEF account at First Bank. From the start, he had all interest earned by the account paid monthly to Chambers Academy. And from the start, Dr. Lowe expressed his wish that his name not be placed on the account in any way because he wished to remain anonymous.
From the account's inception to its seizure in June 1991, Dr. Lowe was responsible for $452,500 in interest being paid to Chambers Academy. In addition, in late 1990 and early 1991, Dr. Lowe began an effort to help the school retire its debt and, so the doctor hoped, become self-sustaining. With that aim in mind, Dr. Lowe contributed $456,000 of the principal from the account to the school in 1991. Thus, from February 1988 until June 1991, the school received a total of $908,539 in principal and interest. School officials agree that the school would not have survived without Dr. Lowe's benevolence.
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Dr. Lowe claimed no charitable contribution deductions on his income tax returns from 1988 through 1991. Tax benefits had nothing to do with his motivation. His purpose is clearly revealed in a letter which Dr. Lowe wrote to the CCEF Board in April 1990, many months before the events central to this case:
Without Chambers Academy being in the county, I fear that the future would look very bleak for Lafayette and the surrounding area. The children are the most important commodity that the community has, and it is so important that we do all we can to help them get off to a good start in life....
* * * * *
Most everyone I think would like to do something in life to help others, and I would like to be a part of what you are doing to help our children and our people.
2. The Currency Transaction
When Dr. Lowe was a child during the Greet Depression, a bank in Lafayette failed, and his parents lost their life savings. As a result, Dr. Lowe always harbored a mistrust of banks. From his very first job and throughout his years of medical practice, he regularly saved cash, keeping currency in boxes in his home. In 1992, Mrs. Lowe became concerned about the accumulation of cash in their home, due to the possibility of theft or fire. Although she did not know how much cash was stored in the boxes, she knew it was substantial. She began to urge her husband to move it to a safe place. Her prodding coincided with Dr. Lowe's efforts to extinguish the school's debt. So Dr. Lowe decided to deposit the cash in the CCEF account at First Bank.
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At her husbands request, Mrs. Lowe counted the money over a period of several days. Counting was a slow process because most of the currency was in denominations of $1, $5, and $10. Eventually, Mrs. Lowe came up with a total of $315,291. Meanwhile, Dr. Lowe called Joseph Lett and told him he had some cash to add to the account, first estimating the amount to be about $60,000. In a later call Dr. Lowe told Mr. Lett it was a hundred thousand or more. After the counting, the Lowes realized it was actually over $300,000.
Dr. Lowe invited Joseph Lett and his wife to visit them in Haleyville and pick up the cash deposit, but Mr. Lett's schedule prevented the trip. Finally, Dr. Lowe called Mr. Lett to say that he (Dr. Lowe) and his wife were going to be driving to Lafayette and they would bring the money to First Bank. On November 14, 1990, Dr. Lowe, his wife and daughter loaded the trunk of their car with the boxes of money and started out for Lafayette and Roanoke (about 20 miles further down the road). They developed car trouble and were after dark getting to Roanoke. Since the bank was closed, they obtained directions and drove to Joseph Letts home, arriving about 8:00 p.m. As the district court found, Dr. Lowe transferred the cash to Mr. Lett for deposit to the CCEF account, and Mr. Lett issued Dr. Lowe a typewritten receipt for the deposit. The receipt stated: November 14, 1990. Received of R.T. Lowe $315,291.00 for deposit for the benefit of Chambers County Education Foundation. /s/ Joseph C. Lett, First Bank.
The Lowes then borrowed a car from the Letts and drove back to Haleyville that night.
3. First Bank's Handling of the Funds
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This cash transaction was the only time Dr. Lowe ever deposited currency in any First Bank amount. All other deposits were by bank or cashier's check. When he transferred the currency to First Bank president Joseph Lett on November 14, 1990, he fully ''expected that it would be deposited in the CCEF account.''
Joseph Lett sat up with the money for most of the night after the Lowes departed. He considered that the currency was the property of First Bank once he received it and issued the deposit receipt, and he was responsible for it. The next morning when the time lock opened the vault, he put the currency in the bank vault.
Over the ensuing six weeks or so, Mr. Lett took $205,300 of the total $316,911, went to area banks, and purchased various bank and cashier's checks payable to CCEF in amounts of less than $10,000. He then credited the checks to the CCEF account. The balance of the cash deposit was credited to the CCEF account through internal First Bank transactions and one $40,000 transaction when another bank was running short of currency.
Before this forfeiture action was commenced and throughout its history. Joseph Lett repeatedly and consistently insisted that he decided, independently ant without Richard Lowe's counsel or even his knowledge, to undertake the piecemeal internal and interbank transactions rather than crediting the CCEF account with the entire deposit at once. His first statement was to federal agents on March 6, 1991, roughly three months before the complaint was filed. Mr. Lett told the agents that Dr. Lowe ''never directed him to purchase cashiers checks with the cash he gave him.'' Mr. Lett also told the agents that ''he [Lett] made the decision to try to buy cashiers checks in order to retain Lowe's anonymity.''
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In his deposition, Mr. Lett explained when he decided to buy cashiers checks:
Q. Did you say anything to Richard Lowe about what you planned to do with the money in terms of ... going any place and ... changing money into cashiers checks?
A. No.
Q. When did you decide to do that?
A. Either sometime during the night when I was babysitting the money or the next day.
Q. Did you tell Dr. Lowe what you were doing during the ensuing weeks while you were doing it?
A. No. I didn't talk to him during those weeks.
Mr. Lett explained that he was trying to maintain Dr. Lowe's confidentiality. In a supplemental affidavit he elaborated:
7. After I received the currency and the Lowes had returned to Haleyville, I decided that I would credit the funds to the CCEF account piecemeal, through a series of small transactions within First Bank and with other banks and that First Bank would not file a CTR on the full amount of currency received. In determining to use this procedure, I thought at the time that no statute or regulation would be violated and no CTR would be required. I did not discuss this decision with Dr. Lowe or anyone else. I was not pressured, threatened, or coerced to follow this procedure and not file a CTR by Dr. Lowe or anyone. I decided on this procedure voluntarily and independently.
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8. At the time I determined that the bank would follow this procedure of crediting the CCEF account in small increments through a intra-bank and inter-bank transactions, and thereby not be required to file a CTR, I considered Dr. Lowe's desire to remain anonymous. He had emphasized that desire to me from the time in late 1987 or early 1988 when he first discussed establishing a fund to aid the school. I believe then and still believe that Dr. Lowe was sincere in his wish for anonymity and that he had no ulterior motive other than a desire for privacy. I had asked him about any tax problem relating to the money. He had said there was none, and I believed him. I had known Dr. Lowe for many years, and he had been a good customer at whatever bank I was with for years. I simply wanted to do what I could to maintain his anonymity. At the time I convinced myself that I could handled the money as I did and in so doing, there would be no requirement of filing a CTR. I recognize now that a CTR should have been filed for the initial transaction when I received the currency for deposit on November 14, 1990. At the time, however no one else caused First Bank not to file a CTR. The procedure I used simply resulted in my belief that a CTR was not necessary.
Mr. Lett explained that his concern was that several employees in the bank would have seen the documents relating to the transaction, and despite cautioning employees about confidentiality, in a small town, someone would have discussed it. ''[C]ertainly a transaction of that size, yes, sir, it would have gotten out at the beauty shop or somewhere else.''
4. The Government's Charge of Structuring
On June 20, 1991, the government filed its complaint for forfeiture in rem, and on the next day, armed with a Warrant of Seizure, seized the entire CCEF account, then containing $2,381,356.92. The complaint alleged a theory of forfeiture based upon the structuring of currency transactions in violation of 31 U.S.C. 5324(a)(3). It alleged that ''at least $308,300.00'' in currency was given by Dr. Lowe to Joseph Lett for deposit into the CCEF account. And it alleged that Joseph Lett, as First Bank President, and his son, Michael Lett, as First Bank Vice President, purchased 38 checks of less than $10,000 from various banks using the funds from Dr. Lowe's deposit. This, the government contended, constituted structuring.
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The government further pursued a theory that there was ''probable cause to believe that all monies in [the defendant] Account were 'structured' to avoid financial reporting requirements'' because over $300,000 in ''structured'' cash had been placed is the account. Thus, the government sought forfeiture of the entire $2.38 million account In granting partial summary judgment, the district court rejected this latter theory.
3. Criminal Charges
In August 1991 a stay was orderer by the district court. A year and a half later, in December 1992, Joseph Lett and his son Michael were indicted on structuring charges. Mr. Lett entered a guilty plea and was placed on two years probation.
In August 1993 Dr. Lowe was also indicted but the government opted not to go to trial, and in November 1993 notified the court that it had entered into a Pre-Trial diversion Agreement with Dr. Lowe. One year later, the indictment was dismissed with prejudice on the government's motion. (Order of Dismissal. United States v. Lowe, No. 93–H–217-J (N.D. Ala, Nov. 21, 1994).)
6. Partial Summary Judgment
Dr. Lowe moved for judgment on the pleadings and for summary judgment in April 1994. He contended (1) that the facts alleged in the complaint did not state a basis for any forfeiture because, by definition, transactions between banks such as described in the complaint are exempt front the Currency Transaction Report [CTR] requirement, 31 C.F.R. 103.22(b)(1)(ii), and Dr. Lowe's one-time transfer of his cash to a bank official for deposit was perfectly legal and gave rise to a reporting duty on the bank, not the depositor. 31 C.F.R. 103.22; (2) that no structuring occurred as a matter of law, and, therefore, no forfeiture would lie under 18 U.S.C. 981; and (3) that the funds in the defendant account not related to a cash transaction were not forfeitable under any legal theory.
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On June 23, 1994, the district court granted summary judgment as to all funds in the CCEF account with the exception of $316,911 plus accrued interest (United States v. Account No. 50–2830–2, 857 F.Supp. 1534 (M.D. Ala. 1994). The court found that ''there is no evidence in the present case that the money was obtained through illegal means,'' Id. at 1540, and ''because structuring is the only legal violation upon which forfeiture of the entire account was sought,'' the bulk of the account, which was not part of any alleged structuring, could not be forfeited. Id.
The court denied summary judgment as to the $316,911 not based on any conclusion that the actions of Joseph Lett in buying cashier checks constituted illegal structuring as alleged in the complaint, but based on a new theory raised by the court. The court reasoned that Dr. Lowe's concern about anonymity and his queries to Mr. Lett about the bank's reporting requirements constituted ''sufficient facts from which a jury could find that because of his desire to remain anonymous, Dr. Lowe influenced Mr. Lett not to file a CTR on the $316,911 cash deposit and in doing so, possibly violated 5324(a)(1) ....'' Id. at 1539.
The district court acknowledged, but never directly addressed Dr. Lowe's contention that Mr. Lett's purchasing cashier's checks were interbank transactions not required CTR's. Id. at 1538. The court did recognize, however, that Dr. Lowe's transfer of the $316,911 in cash was a deposit ''trigger[ing] a duty for the bank to file a CTR.'' Id. Implicitly, therefore, the court necessarily concluded that the subsequent handling of the currency was a combination of internal First Bank transactions and interbank transactions, neither of which gave rise to a duty to file a CTR. 31 C.F.R. 103.22(b)(1)(ii). Had the court's reasoning been otherwise, for example, it would have granted summary judgment with respect to an additional $65,000 because two transaction using the cash from Dr. Lowe involved $40,000 and $25,000 respectively, and thus by definition do not constitute structuring.
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7. The Bench Trial
The case visas tried without a jury on September 19, 1994. The evidence generally consisted of relevant documents plus depositions and affidavits of Dr. Lowe, Mr. Lett, school officials, ant other witnesses. The court suggested, and the government agreed, that the government was contending that the cash deposit ''was actually a contraband.''
The Court: What you are saying in effect is the currency is the contraband itself.
AUSA Harmon: It's the contraband per se at this point
The government also contended at trial that Dr. Lowe had an ''ulterior motive'' in regard to the currency transaction, namely to evade the payment of taxes. Dr. Lowe contented that his motivation regarding the First Bank account in all respects, including his cash deposit, was purely eleemosynary—i.e., to benefit Chambers Academy and its students.
To establish that the tax issue was entirely fallacious, Dr. Lowe called Grant McDonald, a Birmingham C.P.A., who represented Dr. Lowe when the I.R.S. audited his tax returns for the period 1987 through 1991. McDonald explained that a closing agreement had been reached between Dr. Lowe and the I.R.S. for that period, and the I.R.S. had agreed that there was a net over-reporting of his professional income by Dr. Lowe for that five years of ''about 23 thousand dollars.'' Thus, there was no ''valid claim that Dr. Lowe owed any tax on the $316,911 for the years '87 through '91.'' I.R.S. group manager David Warren also conceded in his testimony that the I.R.S. does not contend that any tax was owed on the $316,911 for '87 through '91.
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Mr. McDonald described Dr. Lowe's tax circumstances at the time he made the cash deposit in November 1990. In 1989 the I.R.S. had completed an audit of Dr. Lowe's returns for 1983 through 1986. Dr. Lowe had met with I.R.S. officials without any professional assistance, either legal or accounting. According to I.R.S. work papers, the I.R.S. found that Dr. Lowe was not knowledgeable on tax matter and kept poor records. Using its own estimation, the I.R.S. determined that Dr. Lowe owed an additional $57,000 in taxes for the four years. In addition, the I.R.S. assessed $59,000 in penalties and interest. Dr. Lowe paid the full amount immediately without question. Mr. McDonald expressed the opinion that much of the penalty could have been avoided with proper professional assistance. For example, in the 1987 through 1991 audit with Mr. McDonald, no penalty was assessed for 1988, 1989, 1990 or 1991.
In 1989 an accountant, Alexander Walton, Jr. of Lafayette, prepared both Dr. Lowe's tax return and that for Chambers Academy (or CCEF). The accountant reported all interest paid on the defendant account by First Bank as income to the school and included it on the school's return. He did not include the income on Dr. Lowe's return or claim any charitable contribution deduction. The 1989 tax return was the last one filed prior to the cash deposit at First Bank. Thus, with the accountant's treatment of the interest and the I.R.S. paid in full for its audit a year earlier, there was no reason in November 1990 for Dr. Lowe to believe the I.R.S. would ever claim that any tax was due on the $316,911 which Dr. Lowe deposited.
To further discredit the government's effort to find some tax motive, Mr. McDonald explained that, in early 1991 when Dr. Lowe was making contributions to Chambers Academy of $296,000 in principal from the First Bank account (plus the interest payments) in order to retire the school's debt, the school asked for an additional contribution to be used to pay the income tax which the school anticipated owing. Dr. Lowe responded by sending the school an additional $160,000. The school then paid $125,000 of that to the I.R.S. as an estimated tax payment. Later, the I.R.S. notified the school that it did not owe the tax, the $125,000 was refunded, but the school then used it internally. Dr. Lowe never received any of it back.
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The claimant contended that the government could not properly rely on any tax-related issue to establish probable cause that the defendant account was subject to forfeiture. In this respect, Mr. McDonald testified that, from his review of I.R.S. work papers and statements to him by I.R.S. agents, the U.S. Attorney's Office in Montgomery had no information regarding Dr. Lowe's tax states until July 1991 (a month or so after this case was commenced), and the I.R.S. knew nothing of tile pending forfeiture case until then. Counsel for the government conceded that evidence concerning tax matter ''has no effect at all on the probable cause question.''
8. The District Court's Opinion
On February 28, 1995, the district court issued a memorandum opinion and order holding that (1) The government had probable cause to seize ''the defendant currency'' because the ''claimant requested to remain anonymous and First Bank failed to file the requisite CTR,''; (2) the innocent owner defense of 18 U.S.C. 981 (a)(2) was not applicable to the claimant because ''Dr. Lowe was cognizant of the CTR requirement'' and by inference, ''the failure to file the required CTR was induced by Claimant's exhortation,''; and (3) the Excessive Fines Clause of the Eighth Amendment does not apply to a forfeiture under 981 when a CTR is not filed ''so long as the amount forfeited is no more than the defendant currency.'' According, the court held $316,911, plus accrued interest thereon, forfeit.
9. Where The District Court Went Wrong
The government did not establish probable cause for to forfeiture. The record is insufficient in three significant ways. First, the government's complaint alleged but one basis for forfeiture under 981, i.e., that the defendant property was involved in structuring violations by First Bank president Joseph Lett and his son, bank vice president Michael Lett. But the defendant $316,911 was deposited in a single, lump sum deposit which did not violate federal law, and the Treasury regulations applicable here expressly exempt transactions between domestic banks from reporting requirements. Thus, no CTR was required for the several less than $10,000 cashier's checks obtained by the Letts, and no structuring occurred.
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Second, the district court did not find probable cause based on structuring, but on the bank's failure to file a CTR, a basis for forfeiture not alleged by the government in its complaint. Additionally, the government was not aware of the evidence relating to the bank's failure to file until after the case had been instituted. 19 U.S.C. 1615 requires probable cause to be shown for the institution of the action which many courts, including district courts in this circuit, have held to limit probable cause to facts known as of the filing of the complaint. Thus, the district court's finding of probable cause does not satisfy the standard of 1615.
Third, the district court based its finding of probable cause upon the claimant's having requested anonymity in establishing the defendant account to aide Chambers Academy, a small private school in his hometown. The court found that the banker was influenced by that request. But the duty to file a CTR is on the bank, not the depositor. The cash deposit is not contraband, and the offense is the withholding of the information by the institution bearing the duty to report, not the possession of currency or legally depositing it. Claimant's desire for anonymity was made long before the cash deposit in reference to his eleemosynary activities. There is nothing actionable about such a request. A request for anonymity, or an inquiry about requirements, cannot be said to ''cause'' a bank to fail a CTR. Causation includes an element of foreseeability, and Dr. Lowe could not reasonably foresee that Mr. Lett would decide, after the cash deposit, not to file a CTR.
The forfeiture should also have been dismissed because the innocent owner defense of 981(a)(2) is applicable. Dr. Lowe did not know that the bank would not file a CTR. The record is clear that Mr. Lett did not tell him what the bank was doing—or omitting. Indeed, Lett did not decide to omit the CTR until after the deposit was made. And the district court did not find that Dr. Lowe knew, but instead used a factual basis for rejecting the defense not provided in 981.
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The Excessive Fines Clause of the Eighth Amendment also bars a forfeiture in this case. Although the district court did not apply this court's holding in United States v. One Single Family Residence Located at 18755 North Bay Road, 13 F.3d 1493 (11th Cir. 1994), that case is controlling. It requires a proportionality analysis which strongly favors the claimants position. The claimant did nothing illegal. He used untainted funds for a highly laudatory purpose, saving a small school from financial ruin. Although the claimant was indicted, the government placed him on pretrial diversion, and the charge has now been dismissed. Cash was deposited only once, and although the bank did not file a CTR, the purpose of 31 U.S.C. 5313 and 5324 is to identify money laundering activities of organized crime and drug lords, not rural doctors using life savings to save a small school. The cash itself was involved only indirectly, in that it triggered a reporting duty on the bank.
10. The Court of Appeals' Opinion
On July 31, 1996, in an unpublished opinion, the United States Court of Appeals for the Eleventh Circuit reversed to forfeiture judgment and remanded the case for the entry of judgment in favor of Dr. Richard Lowe. The court held that the proof in the case had not demonstrated ''any substantial connection between anything [Dr.] Lowe knew and the bank's failure to file a CTR on the cash deposit.'' In what is an excellent example of how a standard of proof higher than a preponderance affords a needed additional layer of protection to innocent property owners, the Court of Appeals stated: ''[W]e are left with the definite and firm conviction that a mistake was committed when the district court found that a preponderance of the evidence did not support the conclusion that Lowe lacked knowledge that [bank president] Lett would break up the cash deposit in an attempt to avoid federal currency reporting requirements.'' The court concluded that the proof established that Dr. Lowe did not have actual knowledge that the bank would not file a CTR, and therefore, Dr. Lowe was an ''innocent owner'' under 18 U.S.C. 981(a)(2).
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In the end, Dr. Lowe regained all of his savings, but the battle for the restoration of his assets ran from June 1991 until the last of the funds were returned earlier this year (February 1997). This case offers many valuable lessons regarding the reform of forfeiture laws.
TEACHINGS FROM THE LOWE CASE
1. The Burden of Proof
From the standpoint of a private citizen undertaking a project which is not only innocent in itself, but is worthy of considerable praise, it is shocking to learn that the government has the authority and the desire to seize and forfeit your assets. But it is more than shocking—it is contemptible—that such a citizen stands to lose the case on the merit's once all the facts are revealed. The district court was able to find a basis in these laudable facts to grant judgment, albeit erroneously, for the government. The citizen then suffers great expense and untold anxiety (at one point in the pendency of his case, Dr. Lowe was hospitalized due to the stress of the litigation) in having to further endure an appeal.
Almost certainly, with the facts as they were in this case, Dr. Lowe would have prevailed in district court had the government the burden of proof by clear and convincing evidence. Any less burden will inevitably result in factually close cases being decided against the property owner.
Ultimately the choice must be made between affording meaningful protection to the innocent property owner against wrongful takings by the government and the possibility that the government will not succeed in some cases it has heretofore won. It is submitted that such a price is small indeed in a free society which should strive to foster a belief among its people that their government will be fair and just. The present forfeiture laws are sending a powerful message to the contrary to all who look and listen.
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2. Seize Now, Justify Later
Current law allows—indeed, promotes—law enforcement agencies to seize property without cause, and then undertake an investigation, including the use of discovery and depositions from claimants, to locate evidence which can be used to forfeit the property. So long as the burden of proof remains on the property owner, such a greedy, strong-armed approach is encouraged. A sizable portion of civil forfeitures occur against property owners who are never charged with any criminal offense. In Dr. Lowe's case, he was charged, but then the charge was effectively withdrawn.
Revising the burden of proof is critically important in this reform bill, but it alone will not cure the problem of seizures without probable cause, essentially because law enforcement officers want the property. Institutional greed is inevitable when the law allows the initial seizure with so few safeguards.
19 U.S.C. 1615, which applies to all drug ( 881) and currency violation ( 981) forfeitures, provides that ''probable cause shall be first shown for the institution of such suit or action....'' Some courts have read this language to mean what it says. That is, the government must demonstrate on the day the forfeiture case is filed in district court that it possessed proof establishing probable cause to believe the property in question is subject to forfeiture. (See, e.g., United States v. $91,960.00, 897 F.2d 1457, 1462 (8th Cir. 1990); United States v. Monkey, 725 F.2d 1007, 1011 (5th Cir. 1984)). The government should not be allowed to use depositions and discovery to make a case when it had no case at the outset.
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In Dr. Lowe's case, the investigating agents and the prosecuting attorney did not learn that no CTR had been filed until months after the case was began. When they became convinced that their theory of ''structuring'' violations was legally without merit, they simply changed theories in mid-stream.
In addition, some courts have correctly asserted that the Federal Rules of Evidence is applicable to the governments effort to establish probable cause for the case to go forward (and therefore, in cases of personal property, for the government to maintain possession of the property). I urge you to resist any attempt to weaken this bill by adding an exemption from the Rules of Evidence. No exemption is now in the law. That should not change.
It is reasonable to require the government to have an actual case based on competent evidence showing probable cause before it is justified in holding private property under its control while it undertakes to forfeit it. To allow otherwise is to encourage seizure-spawned witch hunts such as both the Willie Jones case and the case of Dr. Richard Lowe are shameful examples.
3. The Definition of Innocent Owner
The provisions of the reform bill contain a carefully crafted definition of ''innocent owner'' which has been long needed to resolve the disparate interpretations of innocent owner among courts across the country. The proposed definition is well thought out and simple to apply. We urge the committee to hold firm to this definition and resist any efforts either to weaken it or to load it down with complexity.
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One of the serious problems with present forfeiture is that its procedures are so complex and arcane that many lawyers are intimidated by them. It might even be suggested that some courts are uneasy with its unique process. The reform bill makes significant strides at providing procedures and legal standards which are simpler to apply and have more in common with standard civil cases. This goal should be kept in mind throughout the making up of the bill.
Thank you, Mr. Chairman, for hearing me. And thank you to all the members from both sides of the aisle who have joined in this effort to bring fairness and justice to forfeiture.
Mr. HYDE. Thank you very much, Mr. Edwards.
Ms. Davis.
STATEMENT OF SUSAN DAVIS, C.P.A., McMILLAN, UNRUH & DAVIS, P.A., FORT LAUDERDALE, FL
Ms. DAVIS. Chairman Hyde, Ranking Member Conyers, and other distinguished members of the committee, my name is Susan Davis. I am a partner in a small C.P.A. firm in Fort Lauderdale, FL. I thank you for inviting me to testify today. I have never done this before and I am not an attorney or used to public speaking, but I appreciate being invited here to tell you about my experience with these unfair asset forfeiture laws.
I am here because in June 1990, I was named personal representative for the estate of one of our clients who had died of cancer. The estate had a value of approximately $900,000, with the main assets being securities and two pieces of real estate, a house in New York State, and a house in Fort Lauderdale.
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Several months later, in the fall of 1990, I received a call from one of the beneficiaries who had been staying at the house. He had returned home to find that the house had been seized by Federal marshals. Upon inquiry, we were informed that some confidential informant who was in prison, had stated that the decedent had told him that he had received $10,000 for allowing a boat to unload drugs at the Fort Lauderdale property in 1988. In short, an unnamed person in prison told an unnamed government agent that an unnamed vessel used by unnamed persons to offload cocaine at the home of the decedent, George Gerhardt, on an unspecified date in December 1988. It was also claimed he had received $10,000 from an unnamed person for the use of his property. Based on these facts alone, the house had been seized.
We were at that time referred to Marc Gold, a local attorney who is now a judge, who had prior experience with this type of case. He explained to us that we could choose to forfeit the house or to file and pursue a case against the Government. But he explained that under the unusual laws in this area of asset forfeiture, the cards had always been stacked in favor of the Government, no matter how innocent the claimant. Accordingly, he counseled that if we chose to file and pursue a case, we and not the Government, would have to prove that the Government's charge was wrong. He warned that our chances of doing this would be slim.
Since none of us could see just abandoning a $300,000 house, when we felt the Government had no good grounds whatsoever for taking it, we proceeded with the case. We found ourselves being required to prove a negative. That the now deceased Mr. Gerhardt had not known anything about drugs being offloaded at his property. The Government on the other hand, did not have to prove anything. Not that their unnamed informant had in fact been told what he said he had been told, nor that any drugs had ever been off-loaded on the property.
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The case took close to 3 years before it went to court. During this time, the Government possessed the property and collected rent on the property. When the case finally went to court, after a 1-day nonjury trial, U.S. District Court Judge James C. Paine agreed that there was no reason to think that Mr. Gerhardt knew of any crime being committed on his property.
More specifically, as discovery went forward, we found the Government refusing to provide any relevant information to us until they were finally placed under threat of judicial sanctions by the court. It did not matter to the Government that Mr. Gerhardt was dead and obviously could not defend himself. It did not matter that he was out of the country on vacation during a time when an acquaintance, unbeknownst to him, illegally used the property. It did not matter that every testifying witness listed by the Government said that Mr. Gerhardt in fact had no knowledge of the incident. In fact, that any information regarding it was specifically and deliberately kept from him. Finally, it did not matter that all of his heirs were indisputably innocent and without any knowledge of the wrongdoing.
All this wrongful havoc wreaked by the Government was on what basis? At the trial, the Government did not present one speck of hard evidence in support of the allegations contained in the complaint. Yet as the judge said on the record after our long awaited 1-day nonjury trial, the law is slanted very heavy in favor of the Government in forfeiture cases. It seems to me that the people against whom their property is being forfeited are at a tremendous disadvantage.
I wonder about the constitutionality of these laws. They have been held to be constitutional by appellate courts. I must say I find it very hard to find for the Government in this case on the character of the evidence that has been put before us here. On the other hand, the statute is so strong for the Government, it is hard not to find for them as well.
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Fortunately, Judge Paine found the Government seized the property of the estate on such a lack of cause that he could rule in our favor, even under the current law as so tremendously disadvantaging to the property owner and of doubtful constitutionality.
Had Mr. Gerhardt been alive, he would have been evicted from his house, as his beneficiary later was. He would have been forced to face costs of new housing and litigation just in order to fight the battle against the Government to get his home back unless he simply gave up and gave the house to the Government. Few people can afford to do this. I have discovered that very few actually have done it.
In this case, we were lucky enough to have the cash available backed by the estate to engage in the necessary long unfair fight against the Government's unsubstantiated claim. This fight eventually cost the estate more than $40,000 in legal fees and costs. In addition, we had to hold back distributions from the beneficiaries to pay other costs associated with the trial, pay several years back real estate taxes plus penalties and interest, as the Government had not paid any of these. In addition, we had to pay insurance for the time the Government held the house as the Government would not insure it.
Finally, when we won our case in court and the house was returned to the estate, the person to whom the Government had rented the house for $2,000 a month refused to leave and refused to pay us any rent. We then had to hire another attorney and use additional time and money to have the Government's wrongful worthless tenant evicted.
I feel we were very fortunate to get the property back in this case and fortunate to have the means to withstand the fight to get it back. But it does not seem right to me that the Government should have the right to confiscate an innocent person's property based on nothing more than the hearsay claim of an unnamed person in prison on criminal charges. Sure in the knowledge that laws, time and money advantages are almost always so in the Government's favor, that most people will be unable to even start contesting the taking, let alone do it successfully.
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I am not a lawyer, but after reading this bill, I can see that the reform bill would make several important improvements to these laws. It would put the burden of proof on the Government, where I think it should be. It would make the Government prove its burden by a clear and convincing legal standard. The bill says it would ensure an innocent owner's interest in property can not be forfeited by the Government under any forfeiture law. It also states there would be important court supervision of the property during a contest with the Government. That a property owner could not be left homeless or rendered unable to make a living with his or her business during the time the Government has seized the property.
Mr. HYDE. Ms. Davis, your time has expired. Could you wind it up by any chance?
Ms. DAVIS. Yes. I think that's basically it.
[The prepared statement of Ms. Davis follows:]
PREPARED STATEMENT OF SUSAN DAVIS, C.P.A., MCMILLAN, UNRUH & Davis, P.A., Fort Lauderdale, FL
Chairman Hyde, Ranking Member Conyers, other distinguished members of the committee, my name is Susan Davis. I'm a partner in a small CPA firm in Fort Lauderdale, Florida.
Thank you for inviting me to testify today. I have never done this before. I am not a lawyer, or used to public speaking. But I very much appreciate being invited here today to tell you about my unexpected experience with these unfair asset forfeiture laws you do need to reform.
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I. WHY ME?
In June of 1990, I was named personal representative for the estate of one of our clients who had died of cancer. The estate had a value of approximately $900,000, the main assets being securities and two pieces of real estate—a house in New York state and one in Fort Lauderdale.
In the Fall of 1990, I received a call from one of the beneficiaries who was staying at the house in Florida. He said he had returned home to find that the house had been seized by Federal Marshals.
Upon inquiry, we were informed that some ''confidential informant'' who was in prison, had stated that the decedent had told him that he had received $10,000 for allowing a boat to unload drugs at the Fort Lauderdale property in 1988. In short, an unnamed person in prison told an unnamed government agent that an unnamed vessel was used by unnamed persons to offload cocaine at the home of the decedent, George Gerhardt, on an unspecified date in December 1988. It was also claimed that he had received $10,000 from an unnamed person for the use of his property. On these vaguest of ''facts'' alone the house had been ''seized.''
II. MEETING ASSET FORFEITURE
We were referred to Marc Gold, a local attorney (now a judge) who had prior experience with this type of case. He explained to me and the beneficiaries that we could choose to forfeit the house or to file and pursue a case against the government. But he explained that under the unusual laws in this area known as ''asset forfeiture'': ''the cards have always been stacked in favor of the government, no matter how innocent the claimant.'' Accordingly he counseled us that if we chose to file and pursue a case, we—not the government—would have to prove that the government's charge was wrong. And our chances of doing so would be slim.
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But none of us could see just abandoning a $300,000 house when we knew the government had no good grounds whatsoever for taking it. Indeed, George Gerhardt was very much anti-drugs. He hated drugs. So, we decided to try to get the house back.
III. WILL AND ABILITY TO FIGHT BACK?
We found ourselves being required to prove the negative, that the now-dead Mr. Gerhardt had not known anything about drugs being off-loaded at his property. The government, on the other hand, did not have to prove anything: not that their unnamed informant had in fact been told what he said he had been told; not that any drugs had ever been off-loaded at the property.
It took close to three years—during which the government possesses and collected rent on the property it had taken—before the case went to court. When it finally did, after a one-day non-jury trial, U.S. District Court Judge James C. Paine agreed that there was no reason to think that Mr. Gerhardt knew of any crime being committed on his property.
IV. THROUGH THE LOOKING GLASS
More specific, as discovery went forward, we found the government refusing to provide any relevant information until they were finally placed under threat judicial sanctions by the court. It did not matter to the government that Mr. Gerhardt was dead and, obviously, could not defend himself. It did not matter that he was out of the country on vacation during a time when an acquaintance, unbeknownst to him, illegally used the property. It did not matter that every testifying witness listed by the government said that Mr. Gerhardt in fact had no knowledge of the incident; indeed, that any information regarding it was specifically and deliberately kept from him. Finally, it did not matter that all of his heirs were indisputably innocent and without knowledge of any wrongdoing.
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It is impossible for me to adequately describe the full magnitude of government arrogance in this matter. But I want to at least note some of the low-lights of out three year travail with the government, left so unrestrained under existing laws:
Our case was filed in September 1990 and was finally resolved in a court in August 1993. During this time, in addition to the costs and energies expended in waging the uphill, unfair legal fight against the government, a beneficiary of Mr. Gerhardt's will had been thrown out of the house by the Marshal Service Seizors, and the government collected thousands upon thousands of dollars in rent from various tenants obtained by the government.
Even after the entry of the Final Judgment by U.S. District Court Judge Paine, the conduct of the government remained abusive. It took us an unreasonably long time to actually get the house back from the government. Indeed, the Court had to take the unusual step of imposing sanctions against the government in the amount of $5,690,000.
V. WHY AND WHAT FOR?
All of this wrongful havoc wreaked by the government, and on what basis? At trial, the government did not present one speck of hard evidence in support of the allegations contained in the complaint. And yet, as the Judge said on the record after our long-awaited one-day, non-jury trial:
The law is slanted very heavy in favor of the Government [in forfeiture cases], ant it seems to me that the people against whom their property is being forfeited are at a tremendous disadvantage. I wonder about the constitutionality of these laws. They have been held to be constitutional by appellate Courts. I must say that I find it very hard to find for the Government in this case on the character of the evidence that has been put before us here. On the other hand, the statute is so strong for the Government, it is hard not to find for them as well.(see footnote 1)
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Fortunately, Judge Paine found the government seizes the property of the Estate on such a lack of cause that he could rule in our favor, even under the current laws so ''tremendously disadvantaging'' the proper owner, and of doubtful constitutionality.
VI. ... BUT FOR THE GRACE OF GOD....
Had Mr. Gerhardt been alive, he would have been evicted from his home, as his beneficiary later was. He would have been forced to face the costs of new housing and litigation just in order to fight the disadvantaged battle against the government to get his home back (that is, unless he simply bent to the arbitrary will and power of the government). Few people can afford to do this. And I have since discovered very few actually have done it.
In this case, we were lucky enough to have the cash available, backed by the Estate, to engage in the necessary long, unfair fight against the government's unsubstantiated claim. This protracted fight eventually cost the Estate more than $40,000 in legal fees. In addition, we had to: hold back distributions from the beneficiaries; pay other costs associated with the trial; pay several years back real estate taxes—left unpaid for three years by the government seizors—once we did get the house back; as well as pay insurance for the time that the government held the house, as the government had not insured it. Further, when we finally won our case in court and the house was resumed to the Estate, the person to whom the government had rented the house for $2,000 per month refused to leave and refused to pay rent. We had to hire still another attorney and use additional time and money to have the government's wrongful, worthless tenant evicted.
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VII. CONCLUSION: VERY IMPORTANT REFORM BILL
I feel that we were very fortunate to get the property back in this case and fortunate to have the means and the intestinal fortitude to withstand the long hard fight to get it back But it does not seem right to me that the government should have the right to confiscate an innocent person's property based on nothing more than the hearsay claim of some unnamed person in prison on criminal charges, sure in the knowledge that the laws, time and money advantages are almost always so in the government's favor that most people will be unable to even start contesting the taking, let alone do so successfully.
I am not a lawyer. But I got a quick education in the abuses of these current laws as an unsuspecting CPA entrusted by a deceased client to take care of his Estate.
With that experience and with a CPA's training in reading the technical, I can see that the reform bill before this Committee would make several important improvements to the laws:
It would put the burden of proof on the government, where I think Americans rightly expect it to be, and where it should be.
It would make the government prove its burden by a ''clear and convincing'' legal standard—a standard that certainly strikes me as appropriately commensurate with the gravity of the government's action, the taking of a citizen's property, even one's home or life savings.
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The bill says it would ensure that an innocent owner's interest in property cannot be forfeited by the government under any forfeiture law. This is important, so that in all cases (no matter which specific forfeiture law is invoked by the government), as in our case, a property owner who did not know of alleged conduct that would make a property subject to forfeiture will be protected under the law.
This bill states that there would be important court supervision of the property during a contest with the government, so that a property owner would not be left homeless or rendered unable to make a living with his or her business, during the time tile government has seized the property for whatever period of time before a final decision may be rendered by a court. Had Mr. Gerhardt been alive at the time of the government's actions in our case, he would have been left without his home (as his beneficiary actually was), for three years.
The time it took for our battle raises another point. I understand this bill would ensure that courts make the government adhere to a reasonable timetable for commencing its litigation over seized property. That way, the government would no longer be allowed to drag these cases out for many months, or years—all the while holding the house or other critical property of the individual so as to cripple the person's ability to live, let alone contest the government's perhaps wrongful actions.
Finally—and I think this is extremely important—I understand the bill to provide for the appointment of an attorney for those who would otherwise not have the financial ability to hire one to help them in the complex fight against the government in one of these cases. We were extremely fortunate to have had the cash available to fight the long, unfair legal fight against the government in our case.
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Thank you again Mr. Chairman for allowing me to speak to you and the Committee today. And I thank you and the other co-sponsors of this import bill. I do hope you get it passed into law as soon an possible.
Mr. HYDE. If I may suggest, your difficulty is that you have never lived in the Soviet Union. You would be used to these things if you lived over there. [Laughter.]
All right. Thank you, Ms. Davis. Now we will have questions.
The Chair recognizes Mr. Conyers, the ranking Democrat.
Mr. CONYERS. Thank you, Chairman Hyde. I thank the witnesses.
We have got a couple of problems here that we would like to get comments from everybody on. One is the problem about the need of the Government to subpoena documents and witnesses before there is a case. There is a procedure in here, Mr. Bailey and Mr. Edwards, that blows my mind, this so-called civil investigative demand. Then we have the fugitive provision, I think you lose all your property rights, under ''fugitive disentitlement.''
We have got to be nice to the Department of Justice today. We are trying to work this thing out. So no beating up on them, guys. The negotiations, and this have been going on for some time. I had hearings in Government Operations, what, 3 or 4 years ago on this. This is taking an awfully long time. We can't go to the Attorney General every time we stub our toe in Judiciary. But these two provisions seem to be the hangup. What I am trying to do is get the bill through this year, you know, 1997. This has gone on long enough. I don't even want to call for a review of all the asset forfeiture cases that have gone on in the Government if we can get this through. In other words, I am being nice. This is real nice nice stuff here.
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So tell me, if you will, gentlemen, how we may be able to work out these provisions? Mr. Edwards, why don't you start it off?
Mr. EDWARDS. I'll be very pleased to, Mr. Conyers. However, you have sort of pushed one of my buttons with respect to civil investigative demands. It is hard to talk about that and not beat up on the Justice Department. It's my feeling that the Justice Department should be ashamed of itself for even asking the Congress to consider what they propose for civil investigative demands, much less fighting to get it.
What they would propose to do is to make every U.S. attorney's office in this country a star chamber, and make every assistant U.S. attorney in this country a grand inquisitor. Sure, there will be many assistant U.S. attorneys who find that kind of power alarming and even scary and wouldn't use it. But there will be many who, if it's on the books, they will see that they should use whatever power Congress gives them. The idea that a Federal prosecutor in our Nation can demand the appearance of any citizen of our country in their office to answer their questions and to produce papers and documents at their request when there is no pending litigation between the Government and the target of their demand is—I mean, that reminds me of people in the 1930's and 1940's in another continent. It does not remind me of American traditions, and it's scary. I mean it's scary just because Justice would ask for it.
On page 33 of the Justice Department's submission, I was reading last night, they don't mention the phrase ''civil investigative demand,'' but they say they want to allow their attorneys to issue subpoenas for evidence in civil forfeiture cases in the same way that they are issued in health care cases, antitrust cases. But wait a minute. We're not talking about commercial regulation. This is not the FTC and it's not the SEC regulating securities. We are talking about allowing the U.S. attorney to get any person in this country into his office to question him without any judicial supervision. I mean it makes my skin crawl. I'm sorry I have run on about that.
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Now the disentitlement doctrine is really not that big a matter. The Supreme Court ruled I believe a year ago in a case that when a person is a fugitive from justice, you can't automatically forfeit their property just because they are gone. Now that doesn't mean—just let me give you an example.
Suppose somebody is indicted for a crime today and tomorrow some of his property is seized in a civil forfeiture case. The Government still has all the rights that they have always had to take depositions, to get discovery, to prepare that civil forfeiture case for trial. If it's set for trial and the person has absconded from the criminal case, then he can't be there to offer testimony. He is going to lose that case. So it's no great blow to the Government that just the fact that he has become AWOL the criminal charge shouldn't be a default in the civil case. The Government can continue to prosecute the civil case and ultimately win if he doesn't come back and defend his property. So I just don't think that should be a serious problem at all.
I would mention one other thing. The Government is proposing to water down the time limits that are proposed in this bill: the 60 days to file a notice, to send the property owner a notice; and the 90 days after a claim has been filed to get the case into court. Well, let me suggest as every trial lawyer in this room knows, if you have got a deadline, you are going to get the job done a lot faster than if you don't have a deadline. The proposed bill allows for a government attorney to go to court and get an extension. Any time my back gets to the wall and I can't get something done on time, I ask for an extension and I invariably get one because most of the judges who have seen me know that I am conscientious and I wouldn't ask for it if I didn't need it.
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This bill allows for justice or for local Federal prosecutors to get extensions. There is no need to water down the bill as the Justice Department wants to. Basically what they want to do is say well, if we don't meet our deadlines, we'll give the property back without prejudice. Then we can go ahead and do what we want to do and reseize it. In other words, we can give you the property back this morning and reseize it this afternoon and the clock starts running again. That's no requirement at all.
So I would urge you to keep it the way you have it written, because you got it right the first time.
Mr. HYDE. Mr. Coble.
Mr. COBLE. Thank you, Mr. Chairman. Mr. Chairman, until today I have not cosponsored your bill, but I will sign on. This legislation just evaded me. I have heard some of these stories today. If I had any questions about this bill, I think they have been answered. I believe your bill addresses the innocent owner and inserts some sort of fairness of equity into this process. The shifting of the burden of proof is a good idea.
My friend from Michigan said let's not beat up too badly on the Justice Department. I don't intend to do that. Mr. Edwards, I can see that you felt very strongly about your testimony, as did my friend from Nevada. I am not bashing law enforcement, folks, but I get fed up when I hear about the FBI, DEA, OSHA, and EPA. They come onto your property, they heavyhandedly throw their weight around, and it annoys the devil out of me. I suspect it annoys you all.
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I don't mean for these agencies to not do their jobs. If they are out there arresting a no-good thug, that would be one thing. But when you are out here talking to someone who is not a known thug, I think he deserves a little better standard of care.
Having said all that, Mr. Munnerlynn, I take it from the tenor of your testimony that the DEA may well have been heavyhanded. Were they in the handling of your Lear jet?
Mr. MUNNERLYNN. Well, sir, I have never been arrested before but I have a brother that's been on a sheriff's department for many years. Several of my relatives are in police work. I explained to him what had happened and he couldn't believe it. The first thing I knew was I am sitting in the waiting room trying to get my fuel to go back home and the next thing I know, I am laying on the ground with a number nine boot on top of my head.
Mr. COBLE. You did nothing to provoke this response?
Mr. MUNNERLYNN. No, sir. Absolutely not. I am not that big of a fellow.
Mr. COBLE. Mr. Chairman and Mr. Conyers, this is the sort of thing that bothers me. I think that maybe we can direct attention to that sort of conduct through your bill, Mr. Chairman. I am happy to be a cosponsor.
Good to have you all with us today, folks.
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Mr. HYDE. Thank you, Mr. Coble. The gentleman from New York, Mr. Nadler.
Mr. NADLER. Thank you. I'm not sure I have a question for the panel. Let me say I want to commend the chairman and the ranking member. I have long been wondering about the constitutionality—never mind the constitutionality—the civilized aspect of civil forfeiture law. The fact that we turn everything on its head, that the burden of proof is on the person in the dock instead of on the Government, that you are presumed guilty, that you have to prove nonguilt. You have to prove a negative, which I was always taught in logic courses was an impossibility. That the Government can seize your assets and prevent your use of your assets to hire the lawyer to defend yourself, that except for in the most rudimentary way that the courts have imposed, there's no proportionality requirement. That the victim can be victimized if someone misused his property, even upon specific instructions not to and he had no way of stopping that. And the total lack of due process in this whole thing.
Frankly, I think this is a fine example of the way, in the name of the war on drugs especially, we have been surrendering our civil liberties wholesale. So I hope that this bill will go someway toward remedying that.
The civil investigative demand being in a sense an extrajudicial way for a prosecutor to take the roll of a judge in issuing subpoenas is—the fact that we can even talk about it as part of a quid pro quo for remedying some of these obviously improper, I won't say unconstitutional because they haven't been ruled unconstitutional, though I would think them unconstitutional. But certainly improper practices that have been used to victimize our citizens the fact that that can be advanced to quid pro quo is a symptom of how far we have come from a proper understanding of civil liberties. The Justice Department, whose main job should be to protect citizens both from criminals and from unconstitutional actions infringing their liberties, should do some rethinking. They should not ask for such powers.
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Mr. HYDE. I thank the gentleman.
The gentleman from Virginia, Mr. Goodlatte. The gentleman from Virginia, Mr. Scott.
Mr. SCOTT. Thank you, Mr. Chairman. I want to thank the witnesses for their testimony and just ask a couple of questions kind of more procedural kind of questions. I guess this is for Mr. Edwards and Mr. Bailey.
If someone were to come into your office and say that their assets had been seized, how do you charge to handle the case? Is it like any other normal criminal case, that they would have to come up with some money to be able to get their own property back?
Mr. BAILEY. If it were not a longstanding client, most lawyers would require some money to be paid before they got involved. In my case, I had represented the people for some time, so I didn't have to go looking for a retainer before flying to the scene. But the average person is left out in the cold.
The very purpose that the Government has in seizing assets in these cases is to disable the target from being able to hire adequate legal counsel, and then if he does, to disable that counsel from getting due process, a word for which many of us went out and fought.
Mr. SCOTT. Are you suggesting that often they will seize the cash assets to totally or essentially make the target insolvent so that they can not hire attorneys?
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Mr. BAILEY. In my case, they did exactly that, and restrained accounts that would have otherwise been available for the payment of legal fees, and warned the attorneys that if they took any fees they would come and get it back, which would discourage many otherwise able attorneys from taking the risk.
Mr. SCOTT. The retainer would be an asset that could be seized?
Mr. BAILEY. The Government handed me a certificate of probable cause saying that a magistrate based on a secret warrant and secret evidence had determined that the property might be forfeitable and I would take it at my risk. Many lawyers, not this one, wouldn't take that risk.
Mr. EDWARDS. Mr. Scott, where a property owner is also a criminal defendant, that is, has been charged with a crime rather than just having property seized only, then I would probably handle the case much as any routine criminal case and I would require a fee paid in advance, or at least part of the fee paid in advance.
However, in many civil forfeiture cases I have handled, there were no criminal charges. Very often the amount involved, the value of the property involved, unlike Dr. Lowe or Mr. Bailey's case, is not millions of dollars. In fact, one DEA study indicated that in only 17 percent of all forfeiture cases was the property valued at more than $50,000. So what very often happens, if the client is able to pay a small retainer up front, I ask for it, but most often I take forfeiture cases on a contingency, a percentage of the property, the value of the property we get back.
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Mr. SCOTT. After the Government takes their property and it's ascertained that it was wrongfully taken, are the attorney's fees collectable from the Government?
Mr. EDWARDS. No. If you will remember the Willie Jones case, the former client of mine from Nashville, the African–American landscaper who had $9,000 seized from him at the National Airport and testified before this committee last year, 2 years later we were successful in getting the money returned, but that's all he got back. And, for some legal quirks, the Justice Department wouldn't waive the cost bond, so we had to wind up suing the Justice Department to get into court.
Effectively, I would have been working pro bono because he couldn't afford to pay me. That was all right because Willie Jones is a good person and shouldn't have had his money taken. I was willing to do that. But as it turned out, the court awarded attorney's fees. The court could not have done that in the normal civil forfeiture case. In any civil forfeiture case under present law, the property owner has to pay his own counsel fees unless the court can find that there is ''no substantial justification'' for the seizure. Most courts interpret that to mean if there was no probable cause, and they almost never find that.
Mr. SCOTT. Is there any interest? Did he get any interest on his money?
Mr. EDWARDS. No, sir.
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Mr. HYDE. The gentleman's time is about to expire.
Mr. SCOTT. Let me get in another real quick question, if I could.
Mr. HYDE. All right.
Mr. SCOTT. If an innocent person has his property taken and does not have an alibi and can't prove his innocence and the Government can't prove his guilt either, does the Government get to keep his property?
Mr. EDWARDS. Under present law, he loses.
Mr. SCOTT. Thank you, Mr. Chairman.
Mr. HYDE. Thank you. The gentleman from Tennessee, Mr. Bryant.
Mr. BRYANT. Thank you, Mr. Chairman. I very much appreciate your stepping forward to bring this issue to the forefront.
While I agree with Mr. Conyers this is not earth-shaking in the big picture, it is very important to those involved in the process. As Mr. Conyers very well points out, it's very significant when we talk about the rights of people that we discuss this situation.
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A moment ago, we had Mr. Barr here and Mr. Hutchinson. The three of us are former U.S. attorneys and we have had, while not direct dealings, some discussions about the Jones case, and certainly we have different perspectives on that. I have found that many of the examples, and there are examples out there, of bad cases come from the State system, not the Federal system. But certainly each of you point out difficult situations from the Federal jurisdiction also, things that I think can be addressed.
I do again commend the chairman for this bill. But in reviewing the Department of Justice's comments on this, I can't say that I don't disagree with them. I think while this bill does make efforts to bring this system maybe into a little better balance, I am concerned that perhaps it does go too far in terms of just the realities of the forfeiture law.
I don't think there is any question that the forfeiture law is in theory a good law. We need that. We need to take the contraband, the profits out of crime. We can convert these over to help catch more criminals and to use them for good projects. I know the Department of Justice is here today and will talk about a number or at least certainly site a number of examples in their report of the good things that they have done with these converted funds. It serves as an effective deterrent to people.
Again, I very strongly support the concept of forfeiture of assets. At this point, I agree with what the Department of Justice says in terms of these efforts to change the law, and I feel like we can reach a compromise at some point on these issues. But I think again, they point out the realities of having to deal with people, innocent owners, when they give their property to their children or their family and so forth. To me that's just skirting the law.
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On the other issue of returning property to people, if you start returning cash to drug dealers, you are never going to see that again. I agree that perhaps the burden of proof can be shifted, but to hold the Government to a higher standard, I mean it's a civil case and civil cases are generally preponderance of the evidence. To make them go beyond that to clear and convincing proof I would not like to see. But again, these are issues that I think we can work on together and come to a resolution.
I certainly have sympathy for the victims of these matters and certainly for Mr. Edwards, who is a long-time friend of mine, who is out there working and leading the charge. Again, there are times when we disagree on things, but I am honored to be a part of this committee, and again thank the chairman for moving this bill along so that we can begin to resolve these kinds of issues.
With that, I will yield back my time.
Mr. HYDE. I thank the gentleman. I am trying to not intrude into the questioning, but I just want to say to my friend, Mr. Bryant, who is one of the most valuable members of this committee, and I say that not pro forma, that I earnestly—I am going to have some earnest talks with you.
I think the burden of proof on the victim who is not charged, not convicted, does not belong in our jurisprudence. It just doesn't. To have to prove a negative with respect to property the Government has seized—for you to prove you're innocent and it's innocent—is just turning justice—fundamental justice—on its head. I think you need notice. I think you need an adequate time to file a claim. I don't think you should have to post a bond if it works a hardship. I think the Government ought to take care of your property when it's in its custody. These are elementary. I absolutely believe in the forfeiture laws. I believe that the ill-gotten gains should not go to drug dealers. But we are not talking about drug dealers. We are talking about people who mistakenly meet a profile. People who have been released, people who have not been charged, people who have not been found guilty. They have this enormous burden to protect and preserve their own property. It just violates my sense of justice. I should think we could work with the people in the Justice Department—they are decent people. Nobody is a more decent person then you are, Mr. Bryant, but I hope we can come to some understanding on this because I just think, I am embarrassed for my country that this process exists on the books. Yes, it won't shake the world, but it will be one little battle for justice and due process which I think is important.
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Mr. NADLER. Will the gentleman yield?
Mr. HYDE. Yes.
Mr. NADLER. Thank you, Mr. Chairman. Let me simply say that I agree whole-heartedly with everything you have just said. I want to ask you a question. I don't know if this is the appropriate time to ask it. Maybe you will ask or someone will ask the members of the panel. Do you think that anything should be done in remedial legislation of this type to change or to increase the threshold requirement, not the burden of proof to keep the property, but the threshold requirement of what the Government must show in order to seize property in the first place?
Mr. HYDE. I have no problem with a probable cause standard, provided it's vigorously adhered to. If the Government illegally seizes property—that is, if it lacks probable cause—it should be sanctioned. I wouldn't want to hold my breath for that to happen.
Mr. NADLER. Do you think, Mr. Chairman, we have heard testimony that probable cause has been established in some of these cases by an anonymous informant in jail telling a second anonymous informant who tells the Government that on an unspecified date, an unspecified party landed an unspecified amount of drugs at a property. Do you think that kind of probable cause is sufficient?
Mr. HYDE. Well that's the standard to arrest somebody. We have to rely on the sagacity and the integrity of judges to scrutinize seizure warrants before they are issued—to try and identify deficient or fraudulent evidence in support of the warrants. But sometimes, defective warrants will issue.
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But one step at a time. I just want the burden of proof to be on the Government, not on the victim. I want an attorney assigned to that person if he doesn't have funds. I want a decent notice and a decent time to file your claim. I want the Government to take care of the property when it has custody of it. I don't want horror stories that ruin people's lives when they are innocent. That shouldn't happen in America.
Mr. Munnerlynn's life has been ruined. He forgot to tell you a divorce came out of this too. I don't know what more they could do—they could demand a quart of blood every night I suppose, and you've done nothing wrong—you're innocent. Well, anyway this has turned into an informal seminar, and I didn't want to do that.
Mr. Watt, the gentleman from North Carolina.
Mr. WATT. Thank you, Mr. Chairman. I don't have any questions of the witnesses, but I do want to thank the chairman for having this hearing and for being the mover, one of the movers on the bill which I am a cosponsor of.
I think we underestimate quite often the value of the public's perception of fairness in our criminal justice system to the rule of law. It has always been my perception that if there are people who do not perceive that what is being done is fair, regardless of how many there are or how few there are, we have to some extent diminished the public's confidence in the process and diminished the rule of law.
This is one of those areas, this probably is the biggest area where people just simply feel like the Government is out of control. Conspiracy is another one of those areas, but I won't go there. But clearly, this is an area where I mean if people don't understand it they kind of shrug their shoulders and say well I'm never going to get involved in it. But if nobody is ever involved in it at any stage of the process, it undermines public confidence in the rule of law.
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So I am just happy that we are having the hearing. I hope that we are able to satisfy people like Mr. Bryant, who I agree with the chairman, is an important member of this committee because he brings that perspective of real life experiences. But this is not about whether you support forfeitures or not. It's about process and fairness and equity and at the very basis about people's confidence in the rule of law of our country. I hope we can move this bill this year and try to snatch the balance back more toward some public perception of fairness. Thank you, Mr. Chairman.
Mr. HYDE. Thank you, Mr. Watt.
The distinguished gentleman from Tennessee, Mr. Jenkins.
Mr. JENKINS. Thank you, Mr. Chairman. I am sorry I missed the testimony. I was in an Agriculture Committee hearing, but I certainly would like to extend a welcome to Mr. Edwards, whom I have known for many years. I know him well. He is a very capable, able member of the National Bar Association. Of course we all know Mr. Bailey by reputation. I would like to welcome all the members of this panel.
I think it's significant that this legislation and this discussion brings people with very divergent viewpoints together. You only need to look at H.R. 1835 and look at the sponsors there, people who often have different points of view, people who often have opposing points of view. I think you only have to look at the list of those sponsors and listen to this testimony to understand that some adjustments are needed.
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When you get people on the right side of the spectrum and people on the left side of the spectrum who come together in a fashion that they have come together in support of this legislation, then it means that I think that there is a consensus. It deals with a very basic constitutional provision. I think we ought to look long and hard at taking action to see that that consensus is upheld.
I agree, Mr. Bryant, with the chairman. Certainly in those cases where there is a judicial determination, that's one thing. But often times you are dealing with people who are not guilty and have not been found to be guilty. I would submit we need to take a long, hard look, listen to these witnesses who have been out there on the front lines.
Mr. Chairman, thank you for bringing this matter to our attention.
Mr. HYDE. Thank you, Mr. Jenkins.
And the distinguished gentlelady from Houston, Ms. Jackson Lee.
Ms. JACKSON LEE. Mr. Chairman, I thank you very much, and to the ranking member, Mr. Conyers, let me join both in the vision of this legislation, but the recognition that maybe this term in Congress we can move this quickly along.
Mr. Chairman, I would ask unanimous consent to submit my opening statement into the record in its entirety.
Mr. HYDE. Without objection, so ordered.
[The prepared statement of Ms. Jackson Lee follows:]
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PREPARED STATEMENT OF HON. SHEILA JACKSON LEE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
Mr. Chairman, I am in full support of H.R. 1835, the Hyde-Conyers-Barr-Frank Civil Asset Forfeiture Reform Act. H.R. 1835 addresses current problems rising out of the present Civil Asset Act by requiring reasonable notice to interested individuals who may be subject to having their property seized by the government; it reduces government delays in resolving conflicts between the government and individuals who are attempting to get their property returned to them; it permits the appointment of counsel for indigent claimants in civil matters; it shifts and increases the burden of proof the government must shoulder to seize property; it defines what it means for a property owner to be innocent of the misconduct that prompts seizure; it provides a release of seized property pending civil asset forfeiture proceedings when, to do otherwise, would cause the claimant a ''substantial hardship,'' and it awards damages an interest to claimants who are entitled to recover their seized property.
Mr. Chairman, property seizure by the government was a tool used by the British in the mid to late 1700's, before the American revolution. Because of the government abuses by the British in seizing property from Americans, the revolutionary war ensued. My fellow colleagues, this nation fought the British government to protect itself from the tyrannical abuses of government against its citizens. In fact, the founders of this great nation, made sure that its citizens would never fall victim to the abusive powers of government by the enactment of the United States Constitution and similar laws. We must not regress back to the time when individual rights and liberty were seen as expendable. My colleagues we must honor the spirit of our founding founder. The Hyde-Conyers-Barr-Frank Civil Asset Forfeiture Reform Act will ensure that our citizens rights are protected and that the spirit of our forefathers lives on.
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Mr. Chairman, reform of the civil forfeiture laws is long overdue. One of the most important provisions of this bill is the establishment of a ''Burden of Proof'' clause, for the government before it can confiscate someone's property.
Stefan D. Cassella, the Assistant Chief of the Asset Forfeiture and Money Laundering Section, Criminal Division, Justice Department, in his written statement to the Judiciary Committee for the purposes of this hearing cites a number of cases where seizure of property under the current act has worked in combating crime. However, these cases are minimum when viewed against the majority of cases, where innocent individual citizens rights are abused under the present asset forfeiture standard. Furthermore, a number of courts have gone on record as criticizing the current standard.
In United States v. Leasehold Interest in 121 Nostrand Ave., 760 F. Supp. 1015, 1032 (E.D.N.Y. l991) (the government should be required to prove case under 881 (a)(7) by clear and convincing evidence); United States v. $191,910.00 U.S. Currency, 16 F.3d 1051, 1069 (9th Cir. 1994) (disparity between the government's and claimant's burdens ''involves a serious risk that an innocent person will be deprived of his property'';
Department of Law Enforcement v. Real Property, 588 So.2d 957 (Fla. l991) (landmark decision striking down Florida's forfeiture law and holding that due process requires the state to prove its civil forfeiture case by clear and convincing evidence); Wohlstrom v. Buchanan, 884 P.2d 687, 692 (Ariz. 1994) (''Forfeiture statutes have increasingly been criticized for threatening due process rights by allowing the government to establish probable cause under a lesser standard of proof, and thereafter shifting the ultimate burden to claimants.''); and State v. Spooner, 520 So.2d 336 (La. 1988) (state constitutional guarantee of due process requires that the government prove its forfeiture case by at least a preponderance of evidence as the property owner is entitled to a presumption of innocence similar to that in a criminal case; some members of the Court would require clear and convincing evidence or proof beyond a reasonable doubt).
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H.R. 1835 also addresses innocent owners who are caught up in the web of the present asset forfeiture laws. While the Department of Justice is in favor in providing a uniform innocent owner defense to individuals, they have articulated that they want a defense that is much narrower than the one currently provided under the two main federal civil forfeiture statutes. This is hypocritical double talk in its rarest form. Innocent owners must be afforded adequate protections under the law. Recently, in Justice Thomas's concurring opinion in the unfortunate 5–4 Supreme Court decision in Bennis v. Michigan, 5516 U.S., 116 S.Ct. 994 (1996), Justice Thomas actually urged Congress to take the responsibility he did not think the Courts could properly take (without being unduly activist), for protecting innocent property owners. My fellow colleagues, Justice Thomas was right, Congress must not send the message to the police that it is alright to prey and plunder on innocent victims.
Another important provision in this bill is the ''Enforcement Time Limitations for Notice and Commencement of Forfeiture Suit.'' This measure is important to provide individuals with the opportunity to seek other modes of housing or transportation if their home are transportation vehicle is to be seized or to allow the individual legal recourse to fight the seizure. Under the present act, police can swoop down like storm troopers and seize a persons home, leaving a person and his or her family homeless, with no where to go.
Mr. Chairman, Ranking Member Conyers, fellow colleagues, the time of abusive government actions against American citizens, in seizing their property under the color of law ended with the close of the Revolutionary War. This country was founded and gained its independence because it would not tolerate such abusive government actions. Our founding fathers sought to ensure that such actions would never be revisited in this country through the United States Constitution. Let us not discard this country's heritage. I support H.R. 1835 and urge my colleagues to support this bill as well.
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Ms. JACKSON LEE. I thank you. Just allow me to offer a few brief remarks. Let me thank the panelists, some who have suffered clearly in light of this legislation, Mr. Edwards, for your persistence. And since this is the first time that I can say this to Mr. Bailey, let me thank him for his unending courage in the courtroom. Many of us watched you bring out the details of which many would like to deny. A lesser attorney might have tried to be more appropriate. I thank you for your inappropriateness. And I think that is sometimes extremely necessary.
Let me offer two broad questions in the context of my background. Even though as a lawyer I served as a member of the city council, and I'm sure testimony, Mr. Hyde and Mr. Conyers, will come to haunt me, as I clamored after civil forfeiture dollars for my parks and my neighborhood, because they came by way of different dollars, even though I know the criminal dollars are a different format. And that's why I'd like to make the distinguishing feature. Criminal forfeiture dollars come from a convicted criminal who has been convicted by a jury, a court. Then those assets are then subject to an accommodation. In this civil instance, I think we are now at a point where we must confront the question. And I raise two points for you. I'm attempting to find some language that I'd like to read from and bring to your attention.
First of all, obviously, the Justice Department raises the valid point—and if all of you all would just take your hand at it, because maybe we can encourage some of our colleagues to support this legislation unanimously. And that is the Justice Department's perspective, or the law enforcement's perspective, of the fact that this is a deterrent and that you take this opportunity away from the perspective of reducing government delays or shifting and increasing burden of proof; then you let criminals run free. I know, Mr. Munnerlynn, you had to file bankruptcy and you may want to comment on that.
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And then this point that I think should raise its head and make us all very frightened: because the property itself is the defendant, guilt or innocence of the property owner is said to be irrelevant and ordinarily treated as irrelevant. It is hard for me to go up against property. It sits there; it's idle; it's either cash, it's cars, it's a house, and I have the innocent or the alleged person standing over on this side of the table, but I'm fighting the property. It can't speak, but yet I'm fighting it and I'm taking it.
And so I'd like to get your response. Does the civil forfeiture process unfairly separate the person from the property and therefore puts the person at a disadvantage? And does anyone think that we have deterred mass amounts of crime?
Let me conclude by simply saying that where you have a viable, vicious, alleged, known drug dealer, I know our criminal laws will certainly find their way to that person's front door or back door. I'd like to separate out those kinds of culprits from who is attacked with the civil assets. So I have a two-pronged—the question on philosophy, deterring crime, and the other question about where we're dealing with the property which is the defendant. I thank all of the—and we can start with whoever will start first, but, Mr. Chairman, I'd like to hear from all four of the witnesses. Thank you.
Mr. HYDE. I would just remind the gentlelady that her time is up, but we will accommodate her.
Ms. JACKSON LEE. Thank you very much, Mr. Chairman. Mr. Bailey.
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Mr. BAILEY. Some years ago, Chief Justice Paul Liacos of the Massachusetts Supreme Court, just-retired, was then my evidence professor; in 1960, after a moot court debate, asked Dean Roscoe Pound, is it a rule of the common law that for every wrong there must be a remedy? And Dean Pound responded, ''It's not a rule of the common law, but it's a principle of the common law.''
Ms. Lee, we have drifted so far to the right of that, that we have adopted the philosophy of the Queen of Hearts, ''punishment now, trial later.'' We'll take what you have and if you can get us into court, you might or might not get a hearing. The pendulum has simply swung too far. This is not what due process means and I think that your perspective is very astute. Please, we're sitting here with four people, two of whom were wrongly suspected of affiliation with drugs and two of whom who had nothing to do with drugs. And this drug law, which was given strong teeth to combat a villainous substance, is now lapping over the people that it was never intended to target and they are being deprived of due process.
And I'm sorry to say, because I respect, for 30 years, my friend Congressman Conyers, and therefore I will not beat up on the Justice Department or its gentle and kind head. But I must say in 43 years of trying cases, I have seen no improvement in attitudes among the many that are insensitive, sometimes arrogant, and always conscious of the fact that there is no punishment, should they step over the line. That, I think, is a fundamental defect.
Ms. JACKSON LEE. Mr. Edwards.
Mr. EDWARDS. With respect to the excuse, legal fiction, that it's the property that has done some wrong, I think it is worthwhile to look at the historical derivation of that notion. That really came from Renaissance Europe, Renaissance England, when it was necessary for the King of England to seize a ship or to seize its contents because the owner of the shop was a Dutchman or a Spanishman, or what have you. And they couldn't get the owner of the property into court. This was the only way they could effectively enforce the navigation acts that essentially said that English commerce is a monopoly of English people and we don't want any foreign vessels in our ports, unless they jump through our hoops—that's where that legal fiction came from.
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When our Republic was an infant, it was necessary for us to use that legal fiction because most of the income that the foundling Federal Government in the late 18th century and early 19th century had came from customs duties. And the America of 1800 couldn't force a European businessman, shipowner, to come into an American court. So the legal fiction was necessary in order to enforce American laws. But that's no longer true. We ought to recognize that we're punishing people by civil forfeiture and abolish the notion of in rem actions.
Mr. HYDE. The gentlelady's time has expired.
Ms. JACKSON LEE. Mr. Chairman, would you indulge me so that Ms. Davis and Mr. Munnerlynn can answer the question briefly?
Mr. HYDE. Well, we have one, two other gentlemen, three other gentlemen. It is 12:15 p.m. I'm being entreated to have a lunch break.
Ms. JACKSON LEE. If you——
Mr. HYDE. It is an imposition, but why should we shatter precedent? Go ahead. [Laughter.]
Ms. JACKSON LEE. Thank you for your kindness.
Mr. Munnerlynn.
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Mr. MUNNERLYNN. Ms. Lee, I don't understand a lot of the laws in our country and I was very surprised when I got the paperwork that my aircraft had been arrested. To me that was so absurd that I just couldn't understand it. You have to keep in mind, before it ever gets to a civil matter, and what the DOJ doesn't tell you is that the criminal aspect of this thing has run its course. It did in my case. I was investigated, and told I was investigated by 15 officers. I told them I didn't care; they could send 20. The problem was that after they saw that there is no criminal aspect whatsoever, then they arrest the aircraft.
Now, if that aircraft doesn't have someone to step forward and fight for it, then basically it's the same as criminal because if in the civil situation there is any criminal aspect that is found, then it goes by to the criminal aspect. How a piece of property can be charged like that, I don't know. I can say this: in the course of the action in Los Angeles, I never did know for sure if there ever were $3 million on my jet. I was naive. I really don't care. I fly a lot of movie stars, people that win a lot of money in Las Vegas. I don't ask them what's in their bags. My only primary object is to know what the weight of that aircraft is, so I can fly him safely from A to B.
So it was never proven if the money was ever on my aircraft. The problem arose because, in the Justice Department's anxiety to get this Lear jet, they asked if we would stipulate the fact that this money was on the airplane. Well, I really didn't care. Again, I was naive. I don't know if it was on the plane or not. Ask the passenger. Of course, the passenger had already been released. He was gone. So I think it's really unfair.
Ms. JACKSON LEE. Ms. Davis.
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Ms. DAVIS. I can understand criminal forfeiture, but I don't understand the idea of civil forfeiture in a situation like this, especially where, in my case, these unknown people in prison had supposedly given this information to the Government while the decedent was alive and yet they wait until 3 months after he's dead and can't testify before doing anything about it.
Ms. JACKSON LEE. Thank you.
Mr. HYDE. Thank you.
Mr. Hutchinson.
Mr. HUTCHINSON. Thank you, Mr. Chairman.
I appreciate the testimony of the panelists and I certainly identify with those who see a need to reform the asset forfeiture laws, but I do hope that we can put this in perspective. I've been a Federal prosecutor, but I've also been a defense attorney, so I've been on both sides of that and I wanted to ask Mr. Edwards a question.
You've shared your own, and there's been some terrible stories that have been told today of abuses. I join in that cry, but I think we ought to put in perspective the fact that seizure of assets in serious drug importation cases, drug cartels and drug offenders, is a useful tool of law enforcement. Do you agree, Mr. Edwards, that we need to reform and improve and correct the system, but not destroy the system and destroy this tool of law enforcement in fighting a serious war against drugs?
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Mr. EDWARDS. I certainly do, sir. I recall a conversation I had with an assistant U.S. attorney in Little Rock a few years back. I was talking to him about a plane that had been seized by Customs, and I won't go into the details, but I thought it was rather frivolous, and after he looked into it he agreed. And he said, ''You know, though, if we don't use these laws more reasonably, we're going to lose them.''
And there are certainly cases where the Government can prove that the property or money that's being seized is connected with illegal drug activity, especially with the cartel-type activity; it ought to be forfeited. And I——
Mr. HUTCHINSON. Would you agree that——
Mr. EDWARDS [continuing]. And a lot of money's been forfeited that way.
Mr. HUTCHINSON [continuing]. The innocent victims are in the extreme minority in seizure cases?
Mr. EDWARDS. No, sir. I really could not agree with that because such a—the Justice Department doesn't even know in truth. We're looking at the same picture and seeing two different things. They say, well, there are so many cases where no claim is ever filed, and that's proof that all these people that didn't file claims were guilty. I see that same picture and I say that's proof that they either couldn't afford a lawyer or they were afraid of the Government. I don't know how many times people have called me and said ''What do I do? I don't want to get the Government down on my back. I didn't do anything.''
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Mr. HUTCHINSON. Mr. Edwards, I need to ask a question of Mr. Bailey here before my time expires. I want to tell everyone in Arkansas——
Mr. HYDE. Oh, you'll have all the time you want. And Mr. Pease won't get to ask any questions, and Mr. Delahunt, who was here through all the testimony, won't get to ask any questions. I'm not picking on you, but you just take your time because I'm not going to cut you off. [Laugher.]
Mr. HUTCHINSON. Mr. Chairman, my time is not expired. I don't——
Mr. HYDE. No. I thought you said your time was running out, and you were trying to shortcircuit an answer. I wanted to reassure the gentleman that you will be treated as Ms. Jackson Lee was. You will have indefinite time.
Mr. HUTCHINSON. Thank you, Mr. Chairman.
Mr. Bailey, and I'm concerned about the ''preponderance of evidence'' standard versus ''clear and convincing evidence'' standard that the Government would have to meet. If a private citizen filed a lawsuit against someone else for the wrongful taking of property, they would have to prove their case by the preponderance of the evidence?
Mr. BAILEY. Correct, in most jurisdictions.
Mr. HUTCHINSON. And so we'd be setting a higher standard for the Government in the civil case, and maybe there's some rational basis for that, but it would be a higher standard we're giving the Government in this civil case by making it a clear and convincing standard?
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Mr. BAILEY. Respectfully, it would not. The standard for seizing property before you prove your case on an ex parte basis is usually a much higher standard than a mere preponderance. I can't get a judge to seize your bank account unless I've really got the goods.
Mr. HUTCHINSON. That's true. Of course, we're looking at the final case in the proposed bill——
Mr. BAILEY. I'm looking at the initial grab. There ought to be some limits on that. It's far too easy now.
Mr. HUTCHINSON. What should initially be in order for the Government to take possession?
Mr. BAILEY. The Government ought to convince a Federal judge of the need to grab the property before any litigation notice is so great, because the evidence is so strong that nothing less will do. And then he can issue an injunction and take it all and give the fellow a chance to get it back. That's not what you're doing now.
Mr. HUTCHINSON. Thank you very much, Mr. Bailey. Thank you, Mr. Chairman.
Mr. HYDE. The gentleman from Massachusetts. We did get around to you, Mr. Delahunt.
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Mr. DELAHUNT. Well, I want to ask a brief question, so my colleague from Indiana, Mr. Pease, will have a chance. And I'll be very brief, Mr. Chairman.
I would direct this to Mr. Edwards. Do you have data—and I know there are members of, representatives of the Department of Justice here—on those cases that are filed in terms of a civil proceeding that have no concomitant criminal prosecution, do you know what percentage those might be?
Mr. EDWARDS. No, sir, I really don't and I don't—other than through the Justice Department, I don't know how you would obtain that kind of information. I know it happens a lot, from my own experience and from going around the country speaking to legal groups.
Mr. DELAHUNT. But you've never heard a breakdown?
Mr. EDWARDS. No, sir.
Mr. DELAHUNT. Because at the State level my experience was that most civil forfeiture proceedings are brought in conjunction and contemporaneously with criminal prosecution. And very rarely—I can't even think of a case that my office instituted without a criminal prosecution.
Mr. EDWARDS. Well, I can assure you that in many States in all parts of the country that is not true. In Florida, in Louisiana, and also in Oregon——
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Mr. DELAHUNT. Well it's good to be from Massachusetts. Is that true, Mr. Bailey?
Mr. EDWARDS. There is an enormous volume of civil seizures where no drugs are found and no criminal charge ever brought. It happens a great deal.
Mr. HYDE. Can I impose on you, Mr. Delahunt, to terminate and let Mr. Pease ask some questions. Thank you. We appreciate your courtesy.
Mr. Pease.
Mr. PEASE. Thank you, Mr. Chairman. I am sensitive to the vote coming up—more sensitive to the fact that I'm all that stands between us and lunch. What I'd like to do is just make an observation. I'll waive my questions because most of them have been asked. And that is that the work that is being done here today, I cannot state more strongly, I believe it is so important, not just because of what we are going to be doing, I hope, at the Federal level, but because of the fact that most of the States take their guidance in this area from what the Federal Government does. As one who chaired a State senate judiciary committee, there is incredible pressure on State legislatures, sometimes for the wrong reasons, usually because law enforcement needs more money, and secondly, because there's the perception that if you don't do it at least as much as the Federal Government, you're soft on crime—that what we do here today, I hope do here today, or shortly, will not only make this a more fair law, but will provide the guidance to the State legislatures, or if you will, some cover to State legislatures to do what many of them would like to do as well.
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Thank you , Mr. Chairman.
Mr. HYDE. I thank the gentleman.
The Chair announces that at 1:30 p.m. I would like the Members to be here for a markup of a very important private bill having to do with immigration. And we will stand in recess until—I hate to impose on our second panel, but we have to go vote, get lunch, and then get back here. So we'll stand in recess until 1:30 p.m. This panel may be dismissed and with our deepest thanks for a very instructive testimony. And happy birthday, Mr. Bailey, to you, as of yesterday.
And the committee is in recess until 1:30 p.m.
[Whereupon, at 12:28 p.m., the committee recessed to reconvene at 1:30 p.m. the same day.]
[AFTERNOON SESSION]
Mr. HYDE. The committee will come to order, and I express my profound apologies for the disaster today. I won't explain what happened, but disaster is an understatement. We had 8.322 million votes, all of them recorded. We were voting so frequently the machine broke down at one point. So you are marvelous for staying, you really are. You're great government witnesses. You incline me to be kinder toward you than my instincts permit. [Laughter.]
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Mr. WATT. Mr. Chairman.
Mr. HYDE. Who's seeking recognition—yes, Mr. Watt?
Mr. WATT. I have to take offense at the chairman calling democracy a disaster. It was just democracy at work.
Mr. HYDE. Oh, today?
Mr. WATT. Yes.
Mr. HYDE. No, you've heard of obstruction. You've heard of motions that are designed to delay proceedings.
Mr. WATT. It was democracy, Mr. Chairman.
Mr. HYDE. No, it was an abuse of democracy, in my judgment. Dilatory tactics are frowned upon by Robert's Rules of Order and I believe they're incorporated in our rules, but—onward and upward. [Laughter.]
It was democracy, but it was obstructionism, too, in my judgment. We have a difference of opinion. When the shoe is on your foot, it's democracy, and when it's on my foot, it's obstructionism. And never the twain shall meet.
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In any event, Stefan Cassella, Deputy Chief, Asset Forfeiture and Money Laundering Division of the Criminal Division of the U.S. Department of Justice; Mr. Cassella. Jan P. Blanton, Director of the Executive Office for Asset Forfeiture, Department of the Treasury, Washington, DC; Bobby Moody, chief of police and first vice president of the International Association of Chiefs of Police, Marietta, GA; and Mr. Lefcourt, Esq., New York, NY. Who is Mr. Lefcourt?
Mr. LEFCOURT. I am.
Mr. HYDE. All right. Mr. Moody will be more formally introduced by Congressman Barr of Marietta, GA, and then we will start out off with Mr. Lefcourt because he has a plane to catch.
The Chair is pleased to recognize Mr. Barr, the gentleman from Georgia for an introduction.
Mr. BARR. Thank you, Mr. Chairman. I appreciate the Chair's indulgence, and I certainly want to welcome all members of this panel, as well as the other panels that we've had today, but I want to extend a very special and warm welcome to Chief Moody who I've known for many years and worked with very closely in law enforcement matters, particularly during the time that I had the honor of serving as the U.S. attorney for the Northern District of Georgia. Mr. Moody, in the last several months, has moved over into the Seventh District where he is chief of police for Marietta, GA, which is right in the heart of the Seventh District of Georgia, and I'm very happy to have him here today.
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He has a very distinguished career in law enforcement, both within the State of Georgia and now at the national level as the first vice chair of the International Association of Chiefs of Police, and I have every confidence will continue to distinguish himself as one of the top law enforcement officials in our country. And I look forward to his testimony today. We've already discussed this. He's been very helpful on this and other matters and I look forward to working with him throughout our work on this and other important legislation.
Chief Moody, we're very happy to have you here today.
Mr. HYDE. Thank you, Mr. Barr. And the Chair is pleased to recognize, for whatever he wishes to tell us, Mr. Gerald Lefcourt, Esq., of New York.
STATEMENT OF GERALD B. LEFCOURT, ESQ., PRESIDENT-ELECT, NATIONAL ASSOCIATION OF CRIMINAL DEFENSE LAWYERS
Mr. LEFCOURT. Thank you, very much. I guess the record should also reflect that I am also president-elect of the National Association of Criminal Defense Lawyers and appear here in support of their position which has been submitted. But I am also here to bring to the attention of the Judiciary Committee an interesting case from New York, actually in Congressman Schumer's district, involving a religious member of the Hasidic community in Brooklyn who was approached pursuant to a sting operation by an undercover agent and introduced to the undercover agent by somebody who was laundering money with the undercover agent. And because the Jewish community in the Williamsburg section of Brooklyn deals a great deal in cash, as is true in other communities, such as Latin communities and Asian communities, for cultural reasons, they were easy prey to a request by the agent to exchange a check for cash. And this was done on three occasions. And all of the contact between this member of the religious community and the undercover agent was tape-recorded. So, fortunately, all of it was preserved and at each contact this Orthodox Jewish man asked the undercover agent, ''Is this OK? Is this kosher?''—words to that effect, and in each instance the undercover agent said it was until after the third transaction.
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And, most importantly, the money, the checks provided to the undercover agent for the cash, were from the religious institution that this particular Orthodox Jew was from in the Williamsburg section of Brooklyn. And after the third transaction, $40, $50, and $60,000 transactions, the agent, after it was over, said, ''You know, George''—his name was George Kaufman, the United States v. Kaufman—''you asked the source of the money. Well, we're not always sure. It could be gambling; it could be drug money; it could be anything.''
And when the fourth transaction was arranged, George Kaufman was arrested, the religious institution's bank account was seized pursuant to a civil forfeiture complaint, and we're in a situation where these draconian laws put the entire community, this religious community, in a situation that if they did not settle, their religious institution was at stake and going under.
And Mr. Kaufman, who was facing money laundering charges, was facing not only forfeiture, but also a substantial jail sentence under the Federal sentencing guidelines. So we made a motion to Chief Judge Jack Weinstein of the Eastern District of New York to dismiss the case as a matter of law because of the egregious and outrageous conduct of the undercover sting operation, and while he didn't do that, he said on the record if this is all that is shown in the trial—and again, everything that occurred was tape-recorded, so this was the entirety of the contacts—then he would consider dismissing the case on a motion at the end of the Government's case.
But this illustrates the problem of civil forfeiture laws which have the effect of forcing a defendant in that type of situation to seek a settlement, which he did, because then the prosecution offered, essentially, a ''sweetheart'' deal which allowed probation for Mr. Kaufman and ''only'' forfeiture of some of the religious institution's assets.
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And in reviewing the submission by the Department of Justice, I couldn't help but note their objections to the innocent owner problems which they claim would end up with transfers to children rather than to widows. As we all know, under the civil forfeiture statutes, the money goes to local law enforcement, that is, shared with local law enforcement. And their were hearings some time ago on the little town of Compton, RI, wherein it was learned, because of their involvement in a forfeiture, they received so much money that could only be used for law enforcement—it doesn't go to widows; it goes to law enforcement—that they built a new police station, had all new police cars, et cetera.
And also in the Government's submission, they said that there's been a drop in forfeitures and that somehow militates against a better forfeiture situation. But in reality, the drop, the committee should know, is caused by the uncertainty that there would be double-jeopardy if there was civil forfeiture following a criminal case, or civil forfeiture first and then a criminal case. That is the reason for the drop in the amount of forfeitures and not what I think the Department of Justice has submitted.
The ordinary case—and it's the final thing I want to say—is of the average person, not the big fancy Rolls Royce dealer. Those people are subject to a search where agents of a search warrant go through the house. The agents take everything of value, as goes on in the Southern and Eastern District of New York, where I've practiced for 30 years, and they administratively try to forfeit watches, silver, anything they find. And because of the poor notice provisions, because of the requirement of the claim-and-cost bond, and because of the inability to obtain counsel to fight the seizure of the wedding band, watch, or the silver in the home, the average case results in uncontested administrative forfeitures. I think in the Department of Justice submission they say 80 to 85 percent are administratively forfeited and perhaps all of forfeitures are civil in nature, approximately 80 percent. So 80 percent is civil and 80 or 85 percent of that is ''administrative forfeitures'' where the average person is totally unable, because of lack of counsel and resources, to contest it and also problems caused by the notice provisions.
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[The prepared statement of Mr. Lefcourt follows:]
PREPARED STATEMENT OF GERALD B. LEFCOURT, PRESIDENT-ELECT, NATIONAL ASSOCIATION OF CRIMINAL DEFENSE LAWYERS
Mr. Chairman, Mr. Conyers, Other Distinguished Members of the Committee, thank you for providing me this opportunity to speak about a case of mine which exemplifies especially well the great need for this bi-partisan bill.
I. CANE STUDY: KAUFMAN
The specific case I want to tell you about is especially egregious in terms of the target victims, but quite typical in terms of the operation. The case is United States v. Kaufman. Cr. 92–134 (S–1) (JBW), Eastern District of New York. In this case, the government filed forfeiture actions against bank accounts and real property of the religious institutions allegedly involved in a ''money laundering'' transaction. The illicit activity, however, was actually created and implemented by the government, as a ''sting'' operation run amok. This travesty was compounded by the government's separate, parallel forfeiture action in which it seized the religious institution's bank account. The substantial assets of several religious institutions were in fact threatened as direct and innocent victims of the government-generated crimes asserted by the government.
In short, the government's thirst for high-profile ''sting'' operations and forfeited assets was so extreme in this case that it motivated the government to entrap unsuspecting religious persons—in this case, Orthodox Jewish persons in the Williamsburg section of Brooklyn, New York.
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Without any indication that my client George Kaufman was involved, or intended to become involved, in any money laundering or other illegal activity, the government lured him into its ''sting'' operation by affirmatively misleading him into believing that the money an undercover agent and the agent's target-contact brought him for transactions was from legitimate sources.(see footnote 2) This ''sting operation'' was in clear violation of the Attorney General's Guidelines.
My client was in fact so unduly disadvantaged that he was left with no real choice but to accept the government's coercion of him into a plea for a crime he did not commit—in order to free the bank account of his religious institution and go on with his life.
Mr. Kaufman's case points up the dangers of the current asset forfeitures laws, capable of being used as a crippling tool with which to coerce a person into a plea—even in the most innocent circumstances. Let me explain specifically.
II. LESSONS FROM KAUFMAN
A. In Rem Forfeiture Is Oppressive
In 1992, Judge George Pratt of the United States Court of Appeals for the Second Circuit well-expressed the rightful concern about the seemingly ever-expanding use of federal forfeiture statutes;
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We continue to be enormously troubled by the governments increasing and virtually unchecked use of the civil forfeiture statutes and the disregard for due process that is buried in those statutes.
United Stages v. All Assets of Statewide Auto Parts, 971 F.2d 896 (2d Cir. 1992). Subsequently, Judge Pratt equally well-articulated the fundamental problems with the civil forfeiture laws.
The machinery of our civil forfeiture laws permits the government to seize property without probable cause, institute a civil forfeiture proceeding, and then use civil discovery as a means of accessing information necessary to effect a forfeiture. Because the final probable-cause determination rests on information presented in the forfeiture action, the risk to claimants of being deprived of their property is extremely high. Despite this apparent unfairness, the precedents of this court and the Supreme Court, as well as the relevant statutes and rules, seem to require this result.
United States v. Daccarett, 6 F.3d 37 (Ed Cir. 1993). I could not say it better. But I might add that it is high-time for the statutes and rules to be changed by Congress.
B. In Rem Forfeiture Turns Cherished American Principles of Due Process on Their Head
Consider this: as Americans, we are inbred with the notion that before we may be deprived by the government of our life, liberty or property, we are entitled to our fair day in court—to confront witnesses against us; to remain silent or testify in our own behalf if we choose; and to hold the government to a burden of proof beyond a reasonable doubt.
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But under in rem federal forfeiture law, many of these protections do not apply. It is a citizen's nightmare. where warrants of seizure are issued by the clerks of the Court; the property owner has the burden of proof; the innocence of the owner alone is often not a defense;(see footnote 3) rank hearsay is admissible in favor of the government (contrary to the rules of evidence), but is not admissible from the property owner; and the governments right to forfeit property vests at the time it is simply alleged to have been used illegally, rather than at the time of an actual Judgment. In fact, the government can allege alternative, inconsistent theories of forfeiture in its complaint and still prevail.
C. In Rem Forfeiture has Exploded and Become a Seizing Agency Cash Cow that Victimizes Innocent People
There are now more than 100 forfeiture statutes in place on the state and federal level. Since 1985, the total value of federal asset seizures has increased approximately 1,500 percent—to over $2.4 billion, including over $643 million for the Department of Justice in fiscal year 1991 alone. Of the $1.5 billion that was forfeited between 1986 and 1990, for example, $474 million in cash and $70 million in property was shared with state and local law enforcement agencies.(see footnote 4) In just four years, this sharing with State and local law enforcement rose from $22.5 million in cash and property, in 1986, to over $200 million by 1990.
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These figures are often cited by prosecutors as evidence that forfeiture is one of the single greatest weapons in the war on crime. High-profile cases where organized crime figures have been prosecuted and their assets seized are splashed across the newspapers to further make the point. But such selective case-cites ignore the cold facts. All across this country, people who have not been charged with a crime, and who are in fact innocent of any wrongdoing, have had their cars, boats, money and homes unfairly taken away by the government.
In fact, a study done by the Pittsburgh Press has revealed that as many as 80% of the people who lost property to the federal government through forfeiture were never charged with any crime. And most of the forfeited items were not the luxurious playthings of drug barons, but modest homes, simple cars and hard-earned savings of ordinary people The Drug Enforcement Administration's own database shows that big-ticket items—those valued at more than $50,000—made up just 17% of the 25,297 items seized in one sample 18 month period.
D. Applicable Procedural Rules are Patently Unfair: Bi-Partisan Bill Would Bring Fairness and Uniformity to Law
Congress has never before enacted procedural rules specifically designed to govern forfeiture actions under 21 U.S.C. 881 or 18 U.S.C. 981(a)(1)(A). Instead, it ''borrowed'' the forfeiture rules codified in the Customs Laws, 19 U.S.C. secs. 1602, et seq., and the Supplemental Rules for Certain Admiralty and Maritime Claims (the ''Supplemental Rules''), as the rules to govern judicial forfeiture proceedings and pleading requirements. See 21 U.S.C. sec. 881(d); 18 U.S.C. sec. 981(d); 28 U.S.C. sec. 2461(b); 7A J. Moore & A. Pelaez, Moore's Federal Practice and Procedure, C.11 at 669 (2d ed. 1983). The Supplemental Rules are part of the Federal Rules of Civil Procedure, see Fed.R.Civ.P. A–F, which apply to actions in rem (see Fed.R.Civ.P. A(2)), such as civil forfeitures.
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But these rules and administrative agency regulations provide a complex maze of procedures governing the forfeiture action, almost all of which are stacked against the property owner. For instance, under DEA regulations, property valued at less than $500,000 can be forfeited ''administratively;'' that is, summarily and without effective court oversight. It is estimated that 80% of all forfeitures proceed in this fashion. There is no right to judicial review of an administrative forfeiture absent a showing that the agency failed to undertake any review at all. See e.g., United States v. One 1987 Jeep Wrangler Automobile, 972 F.2d 472 (2d Cir. 1992).
This very good bill would go a long way toward finally providing uniformity and fairness to the forfeiture rules. Following are some key aspects of the bill's reforms.
1 . Regarding Claim and Cost Bond
For forfeitures under $500,000, a Claim and Cost Bond is the mechanism for transferring jurisdiction over the matter from the agency to the federal district court. The procedure for filing a claim and cost bond is authorized by Title 19 U.S.C. sec. 1608. That statute provides that a claimant must file a claim and cost bond within 20 days after the first date of publication of the notice of seizure in a newspaper of general circulation. The bond required is 10% of the value of the property seized or $5,000.00, whichever is less. This access-to-justice-tax would rightly be eliminated by this bill.
2. Regarding Burden of Proof (Now On the Claimant)
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Currently, the burden of proof is perversely placed upon the claimant, to demonstrate by a preponderance of the evidence that the factual predicates necessary to show probable cause for forfeiture have not been met, or to show the claimant's lack of knowledge or consent to illegal activities.
This is a remarkable requirement considering it is the government that has instituted the lawsuit. It also presents a constitutional anomaly, in view of the quasi-criminal nature and important private interests at stake in forfeiture proceedings.
This bill puts the burden where it belongs, on the government, and by a standard appropriate to the gravity of the interests at stake, ''clear and convincing evidence.''
3. Regarding Innocent Owner Defense—Achieving Uniform Fairness
Both 21 U.S.C. sec. 881(a)(4) & (6), and 18 U.S.C. sec. 981(a)(2) provide an ''innocent owner'' defense. Under Section 881, ''no property shall be forfeited ... to the extent of an interest of the owner, by reason of any act or commission established by that owner to have been committed or omitted without the knowledge or consent of that owner.'' Id. at- 881(a)(6), (7). See also Section 881(a)(4)(C) (''no conveyance shall be forfeited under this paragraph to the extent of an interest of an owner, 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''). Section 981's innocent owner defense is nearly identical but unduly stricter: the claimant must prove he did not have knowledge of the illegal use of the property; consent is irrelevant. Under both sections, the burden is on the claimant to establish the defense.
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But myriad other forfeiture statutes do not even contain an innocent owner defense provision. The bill would make the innocent owner defense uniform, applicable to all civil forfeiture cases; and fair, according to the guidelines provided in Section 881. This too is a crucial reform.
III. CONCLUSION
Thank you again for affording me this opportunity to comment on this highly commendable reform measure. Each and every one of its provisions is very much needed. I am especially pleased to see that it already enjoys much strong bi-partisan support, and hope this is a harbinger of prompt passage.
Mr. HYDE. Thank you, Mr. Lefcourt. I gather from what you're saying that the person is not able to even go to the pawn shop because they have nothing to pawn; it's been confiscated.
Mr. LEFCOURT. Absolutely. In order to litigate—I mean, just think about litigating a forfeiture matter, as complicated as it is to us, to some lay person, perhaps high school-educated, to figure out (a) the notice, (b) to somehow file a claim-and-cost bond on their own if they don't have the money for counsel. I think it is impossible for the average Joe, so to speak, to deal with a civil forfeiture——
Mr. HYDE. How widespread is this? Is this a rare occasion or does this happen more frequently?
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Mr. LEFCOURT. Congressman Hyde, this is day-to-day standard practice. The Department of Justice brings 30,000 of these a year; this is common. It is rounding up whatever they see of value and sending out notices for administrative forfeiture, and, as you know, that could be up to $500,000 worth of materials. So if the son of the family deals drugs from the house, in theory the house could be taken administratively, the car that was used to go to a sale, and everything involved. And anything they find in the house they claim could be administratively forfeited.
Mr. HYDE. All right. Thank you. I'm going to have to interrupt this hearing for a very quick markup of a bill that we have to pass today. This will not take long. Be patient. You've been patient. You're already candidates for sainthood.
[Whereupon, at 5:34 p.m., the committee proceeded to other business.]
[Whereupon, at 5:37 p.m., the committee resumed.]
Mr. HYDE. Now, we will proceed. Mr. Cassella.
STATEMENT OF STEFAN D. CASSELLA, ASSISTANT CHIEF, ASSET FORFEITURE AND MONEY LAUNDERING SECTION, CRIMINAL DIVISION, U.S. DEPARTMENT OF JUSTICE
Mr. CASSELLA. Thank you, Mr. Chairman. Mr. Chairman, last year when I appeared before the committee, I talked about how forfeiture lets us take the profit out of crime, provide funding for the police, and restore property to crime victims. In our written testimony today we list several pages of cases where we've used forfeiture to do good things for good people—cases where we've turned a drug dealer's property into a shelter for battered women or a retreat for kids in drug rehabilitation, or recovered property in a telemarketing scam and returned it to the elderly victims. We're proud of what we've accomplished in these and thousands of other cases. I say most emphatically this is a program that works.
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It's true that forfeiture has been controversial. When you take laws that were designed centuries ago to forfeit pirate ships and you use them to forfeit houses, cars, businesses, and bank accounts, there are a lot of things to sort out. How do we protect innocent owners? What due process must be afforded? When does forfeiture go too far or take too much?
The Federal courts have begun to answer those questions. There have been ten forfeiture cases in the Supreme Court in the last 5 years—an extraordinary amount of attention to be paid by the High Court to one subject. But we have done our part, too, by tightening the regulations and guidelines, training prosecutors and agents.
Today half of all contested forfeitures are criminal forfeitures. Eighty percent of all forfeitures, including the administrative forfeitures, involve a related criminal prosecution or arrest. Indeed, some would say that the courts have gone too far in limiting what we can do with the forfeiture program. There has been a 40-percent drop in forfeiture activity since 1994 and there was a $53 million decrease—that's 25 percent—in the amount distributed to local police last year. We need to remember this as we consider what changes to make in the forfeiture laws. Which brings me to your bill, Mr. Chairman, H.R. 1835.
I said last year that no matter how effective asset forfeiture may be as a law enforcement tool—and this is a very effective law enforcement program—that no program, no tool of law enforcement, however effective at fighting crime, can survive long if the public thinks that it violates the basic principles of fairness and due process that lie at the core of the American system of justice. And so we have supported, and we continue to support, reasonable changes to the forfeiture laws to guarantee that the laws are fair, and that they are perceived as fair.
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I said before and I say again that the burden of proof in forfeiture cases should be on the Government, that there should be a uniform innocent owner defense, that the time limits for filing claims should be extended to ensure that everyone has his day in court, and that there should be relief for those whose property is damaged while in government custody.
Both H.R. 1835 and H.R. 1745, the bill that law enforcement drafted and that Congressman Schumer introduced, address these issues. In fact, Mr. Chairman, if I may, I would like our section analysis of the Schumer bill to be included in the record.
Mr. HYDE. Without objection, so ordered.
[The information follows:]
INSERT OFFSET RING FOLIOS 16 TO 61 HERE
Mr. HYDE. And, forgive me, Mr. Cassella, did you say something about the burden of proof?
Mr. CASSELLA. Yes, we agree that the burden of proof should be on the Government.
Mr. HYDE. Thank you.
Mr. CASSELLA. We think the standard should be the preponderance of the evidence, and we discussed that in our testimony, and I believe, Mr. Chairman, you agreed with us on that point last year. But the burden of proof should be on the Government; there should be an innocent owner defense; there should be adequate time so everyone gets his day in court, and there should be a remedy for people whose property is damaged in government custody. We have a lot of common ground on those issues.
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Mr. HYDE. I believe that my staff and you and your people are negotiating in good faith, but there are serious problems here. I know the program is a good program. I do not agree with the ACLU and others that the whole thing should be abandoned, but the stories you heard this morning are really horrible, and a process that permits that to happen has to be fixed.
I think we're moving in that direction and I compliment you for that, and I hope we can, at the end of the proceedings, have a bill that you all can support and that doesn't impair appropriate forfeiture actions, but by the same token provides due process to people who get caught up in somebody's idea of probable cause that doesn't work out.
Mr. CASSELLA. Mr. Chairman, we have a great deal of common ground. We agree that there's a need for due process in the program, because without the perception by the public that there is due process, the program will not have the support that it needs. We agree that a lot of the proposals in your bill go a long way in that direction. They are the same proposals that we have in H.R. 1745, including the burden of proof and the innocent owner defense and the rest. We have worked with your staff to try to work out a compromise. It's here; we're very close. There are probably three or four sentences in this package that we've been discussing for the last 3 or 4 weeks that have yet to be resolved, that addresses your concerns, Mr. Chairman, and our concerns. And we want to continue to move in that direction.
Perhaps after everyone's had a chance to speak, if you have questions about this morning's testimony, there are some things I'd like to correct in the record, because, unfortunately, the committee didn't get the full story on some of those issues.
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Mr. CONYERS. Well, we want to do that now. I can tell you, he and everybody else here has questions.
Mr. CASSELLA. If I could finish my statement then, Mr. Conyers, I'd be happy to answer those questions and we'll continue.
Mr. CONYERS. Well, you know what they are, don't you?
Mr. CASSELLA. No, I don't.
Mr. CONYERS. You didn't hear us questioning——
Mr. CASSELLA. Oh, I know what those questions were. I can answer those questions. I'd be happy to and I want to, if I could just finish this, some comments, and then we'll proceed.
Mr. CONYERS. Sure, proceed.
Mr. CASSELLA. There are some things, Mr. Chairman, in H.R. 1835 that we believe cross the line between guaranteeing due process and giving unintended relief to drug dealers and other criminals. And let me give a few examples.
H.R. 1835 contains an innocent owner defense. That's good. A person who does not know that her property is being used illegally or becomes aware of the illegal use but takes all reasonable steps to try to stop it should be protected. But the bill also would allow criminals to protect their property from forfeiture by giving it to their wives, children, and girlfriends. A drug dealer could take the money he made from selling cocaine and use it to set up a college fund for his children. A telemarketer could use the life savings he stole from an elderly widow to buy jewelry for his girlfriend. And if those people were innocent, they'd be allowed to keep the property and the victims would get nothing.
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We understand that criminals have families. As someone said one time, even pornographers have kids to feed. But a drug dealer should not be allowed to send his kids to Harvard with the money he raised selling cocaine on the schoolyard. A con artist should not be allowed to shower his girlfriend with gifts purchased with the victims' money. The victims of crime should have priority in the recovery of property, not the family and friends of the criminals.
We have many other problems with the bill, but let me name two. The bill would allow seized property to be returned to the criminals pending trial to avoid a hardship. There are instances, of course, when a truly innocent person's property is held pending trial, undoubtedly to the inconvenience of the claimant. But in thousands of cases every year, property like cars, airplanes, and cash is seized from drug dealers, gamblers, and money launderers. You can't give a pile of cash back to a drug courier just because he claims some hardship.
Mr. HYDE. That's up to the court, though, is it not? In other words, it isn't an automatic return of the asset to the accused. But in a situation where there is real hardship—a business, a livelihood—all we provide is flexibility to the court to alleviate these difficult situations. Do you object to that?
Mr. CASSELLA. In the compromise we've discussed, Mr. Chairman, we have included a lot of criteria which address our concerns. But they are not in the bill as introduced today. The criteria which concern us, for example, would include not returning property that is the evidence of crime, not returning property that is going to be used to commit another crime tomorrow. We don't want to give the airplane——
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Mr. HYDE. Well, I don't either. I don't want to jeopardize a legitimate criminal case, but there are circumstances where you drive somebody over the edge if they can't use their property.
Mr. CASSELLA. I was saying, Mr. Chairman, that our concern is with the kind of property that can disappear if you give it back to the person from whom it was seized, such as the pile of cash that you've seized from the drug courier. That will just disappear. And the same is true for his car, his boat, or his airplane. And think about the impact of this provision on the Southwest border. The INS seizes 19,000 vehicles a year in alien-smuggling cases. If the Service has to return those vehicles to avoid a hardship pending trial, there will be little left of the enforcement program.
We also oppose the provision for allowing judges to appoint counsel for claimants in civil cases. However well-intended, this provision will surely encourage attorneys in search of a fee to file frivolous claims. What's more, the bill would pay for those fees out of the funds earmarked for local law enforcement. In our view, we might as well stick a siphon hose into the forfeiture fund and pump the money that Chief Moody would use to buy bullet-proof vests for his officers into the pockets of defense lawyers. And as a policy choice, we think that's a mistake.
There are other things in the bill we disagree with, but let me conclude by pointing out some things that are missing. The most important element of any asset forfeiture legislation must be a sense of balance. But this bill fails to contain any provision that addresses the concerns of law enforcement. For example, it is right to put the burden of proof on the Government, but it is wrong to deny the Government the tools it needs to gather evidence to meet its burden.
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There's also the problem with claims filed by fugitives that Mr. Conyers mentioned this morning. It is a sorry spectacle that today, because of a recent court decision, a fugitive can hide out overseas beyond the reach of the criminal courts, and yet file papers in civil forfeiture cases and expect to have them honored. The most serious omission, in our view, in the bill, Mr. Chairman, is that it does nothing to enhance criminal forfeiture. Nothing would do more to decrease our reliance on civil forfeiture than to make the criminal forfeiture laws as effective as their civil counterparts.
Finally, once due process issues have been addressed—and we believe they should be addressed—there is no reason not to expand forfeiture into new areas. From terrorism, to counterfeiting, to violations of the food and drug laws, the remedy of asset forfeiture should be applied. In fact, unless someone can name a crime for which the criminal should be allowed to keep the proceeds, we think the proceeds of all Federal crimes should be subject to forfeiture.
Mr. Chairman, at the conclusion of my testimony a year ago, I said that a balanced forfeiture bill would ensure that the forfeiture laws of the United States were tough, but fair. Tough, but fair—which is what the American people have the right to expect. I still believe that. Working together, we can craft a balanced set of forfeiture laws that combine fairness and effective law enforcement. In conversations with your staff over the past weeks, we've made a start. We should continue. We have a way to go. But a balanced bill that law enforcement can support is within our grasp.
[The prepared statement of Mr. Cassella follows:]
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PREPARED STATEMENT OF STEFAN D. CASSELLA, ASSISTANT CHIEF, ASSET FORFEITURE AND MONEY LAUNDERING SECTION, CRIMINAL DIVISION, U.S. DEPARTMENT OF JUSTICE
Mr. Chairman and Members of the Committee, I appreciate the opportunity to appear before you today on behalf of the Department of Justice to comment on H.R. 1835, the ''Civil Asset Forfeiture Reform Act'' (''the Act''), a bill to revise the asset forfeiture laws.
The Department of Justice supports revisions to the asset forfeiture laws to ensure that they provide due process to property owners. We also think that the current laws can be enhanced to provide law enforcement with a more effective crime-fighting tool. A comprehensive forfeiture bill can do both.
In this regard, we have had a number of constructive meetings with the Committee staff over the last few weeks in which we discussed the provisions of the Act as well as the provisions of H.R. 1745, the forfeiture reform bill that was drafted by the Department of Justice and introduced by Rep. Schumer. We hope these talks continue, and we look forward to working with you in the effort to produce a bill that addresses both the concerns of citizens and property owners and the needs of our law enforcement agencies. But the Department of Justice is strongly opposed to H.R. 1835 in its present form.
THE ASSET FORFEITURE PROGRAM
Before commenting on the specific provisions of H.R. 1835, I would like to provide the Committee with some background on the asset forfeiture program.
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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. Derived from the ancient practice of forfeiting vessels and contraband in Customs and Admiralty cases, forfeiture statutes are now found throughout the federal criminal code.
WHY DO FORFEITURE?
Federal law enforcement agencies use the forfeiture laws for a variety of reasons, both time-honored and new. Like the statutes the First Congress enacted in 1789, the modern laws 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.
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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 lose of their vacation homes, fancy cars, businesses and bloated bank accounts far more than the prospect of a jail sentence. In fact, in many cases, prosecution and incarceration are not needed to achieve the ends of justice. Not every criminal act must be answered with the slam of the jail cell door. Sometimes, return of the property to the victim and forfeiture of the mean by which the crime was committed will suffice to ensure that the community is compensated and protected and the criminal is punished.
RECENT EXAMPLES OF EFFECTIVE USE OF ASSET FORFEITURE
This Committee plans to hear today from witnesses who are critical of the asset forfeiture program. But there are two sides to the story. In the vast majority of cases, the asset forfeiture laws are applied fairly, effectively and for the benefit of both law enforcement and the public at large. The following are some recent examples of ways in which the forfeiture laws have been used for the benefit of victims and communities.
MARIJUANA GROWER'S LAND BECOMES RETREAT FOR KIDS ESCAPING DRUGS
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(Western District of New York).—Carmen Farbo used 24 acres of forested land near Chautauqua Lake in Western New York to grow marijuana. Farbo was convicted by State authorities and the property was civilly forfeited to the United States. In April 1997, the property were transferred to Kids Escaping Drugs, an organization that treats children addicted to drugs and alcohol in the City of Buffalo. The rural property provides a setting to be used as both a retreat for children who are successful in the first phase of their treatment and as a location to conduct parent/child workshops. An open house and a public ceremony are being planned for June for the grand opening of the facility.
CRACK HOUSE TRANSFERRED TO GOSPEL RESCUE MINISTRIES
(District of Columbia).—The Fulton Hotel in Northwest Washington, D.C. was being operated as a crack house by a secretive and ruthless network of drug dealers. In 1994, the hotel was civilly forfeited to the United States, and on March 7, 1997, it was transferred to Gospel Rescue Ministries, a nonprofit organization, to use as a no-cost residence for women undergoing drug treatment at a nearby drug treatment center. The converted hotel will provide housing for 16 women at a time.
RESTITUTION TO VICTIMS OF $318 MILLION BANK FRAUD
(Eastern District of Virginia).—Edward Reiners perpetrated a $318 million bank fraud against a number of banks in Richmond, Virginia and around the world. Reiners, posing as an employee of Philip Morris Companies, obtained loans from the banks to conduct ''secret research'' on cigarettes. In reality, he used most of the money to play the stock market and spent some of it to acquire expensive properties including a condominium at the Trump Tower in New York. When the scheme came to light in 1996, the government used the asset forfeiture laws to freeze the assets before Reiners could transfer them overseas. The $225 million that was recovered will be turned over to the victim banks within the next few weeks.
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WALLS OF A DRUG HOUSE COME TUMBLING DOWN
(Western District of New York).—The United States Marshals Service recently completed the demolition of a forfeited drug house in the City of Buffalo under the Weed and Seed Initiative. The demolition rid the community of property that was the site of numerous kilo-weight cocaine sales and had become a dangerous menace. The entire neighborhood looked on as the National Guard bulldozers crashed into the home, and broke into cheers and applause as the walls came tumbling down. The vacant land will be transferred to the city.
LAND ANNEXED TO FEDERAL WILDLIFE REFUGE
(Eastern District of Michigan).—The children of wealthy parents inherited a mansion and land that was across the Saginaw River from a federal wildlife refuge. When they used the land to grow marijuana and distribute cocaine, it was forfeited to the United States The refuge then bought the land and annexed it to the pre-existing refuge, resulting in a significant increase in the total acreage of the preserve and a significant enhancement in the habitat value of the refuge.
TELEMARKETER'S MONEY USED TO PAY RESTITUTION TO ELDERLY VICTIMS
(Western District of New York).—Rocco Guadagna was the owner and operator of one of the largest fraudulent telemarketing companies in the country. Using the civil forfeiture laws, the government seized the bank accounts that were used to defraud the elderly victims, and held the money until Guadagna was convicted and the money was criminally forfeited. When the case is complete, nearly $256,000 will be available to the victims as restitution. If it were not for the civil forfeiture provisions at the early stages of the investigations, the monies would not have been available for restitution by the time the defendant was indicted and convicted.
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DRUG DEALER'S PROPERTY BECOMES ''SAFE HOUSE'' FOR VICTIMS OF DOMESTIC VIOLENCE
(Eastern District of California).—In the hamlet of Volcano, California, the United States forfeited a 3-bedroom house and forested acreage that was the center of a large marijuana cultivation operation. The property was transferred to the Amador County Sheriffs to use as a ''safe house'' for victims of domestic violence.
LAND PRESERVED AS OPEN SPACE ON THE HOUSATONIC RIVER
(District of Connecticut).—Parcel of land in Sherman, Connecticut was slated for a multi-million development by the corrupt Bank of Credit and Commerce International (BCCI). When BCCI was convicted of racketeering, the land was forfeited to the United States. After paying the back taxes on the land to the Town of Sherman, the U.S. Marshals are negotiating a sale of the property to a land preservation group that has pledged to preserve it as open space along the scenic Housatonic River.
FORFEITED RADIO STATION WILL BECOME DRUG TREATMENT CENTER IN TUCSON
(District of Arizona).—The U.S. Attorney in Tucson, Arizona convicted a father and son of laundering drug money through a radio station that they owned. The radio station was forfeited in October, 1996, and transferred to the Gateway Foundation, a private non-profit organization that provides alcoholism and drug treatment services to indigent adult and adolescent men and women. Gateway will use the forfeited radio station facility to house their administrative offices and provide out-patient, counseling and training services. Gateway handles about 2000 individuals a year in their detoxification and short term residential services and moves successful clients to independent productivity in the Tucson community.
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''THE CHAMPAGNE LADY'' IS FORFEITED BY A CORRUPT GOVERNMENT EMPLOYEE
(District of South Carolina).—A corrupt federal employee stole hundreds of thousands of dollars from a Treasury agency in North Carolina and laundered the money by buying a yacht called ''The Champagne Lady'' for his girlfriend in Myrtle Beach. Using the civil forfeiture laws, the government forfeited the yacht from the girlfriend and will sell it to reimburse the taxpayers for the loss.
$600,000 TAKEN FROM IRANIAN ARMS DEALER THWARTS CHEMICAL WARFARE SCHEME
(District of Oregon).—Manfred Felber, an Iranian arms dealer, traveled to the United States to purchase equipment to be used in chemical warfare. The scheme was quashed when the government used the asset forfeiture laws to seize $605,000 that Felber transferred from banks in Germany, Austria and Switzerland to the United States to buy chemical agent monitors.
FRAUD PROCEEDS USED TO REIMBURSE VICTIMS IN DENVER
(District of Colorado).—Geoffrey Chris Clement ran a fraud scheme in which he convinced victims that for a ''advance fee'' he could obtain financing for large loans and could make high yield, low risk investments on behalf of his customers. He then used the money taken from the victims to buy property in the Denver area. When Clement was convicted of wire fraud in February, 1997, the property—worth approximately $340,000—was forfeited and sold, with the proceeds used to reimburse the victims.
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THE U.S. AND FOREIGN GOVERNMENTS USE CIVIL FORFEITURE TO FIGHT INTERNATIONAL MONEY LAUNDERING
(Eastern District of Texas).—Two and a half million dollars in drug proceeds were laundered for members of the Cali Cartel by converting the proceeds of cocaine street sales into money orders that were shipped to banks in the Cayman Islands. The money was then wire transferred to Panama, Mexico, Colombia, Germany and England. When the money in England was frozen by the British government, the United States filed a civil forfeiture action to forfeit it under U.S. law. No criminal forfeiture wan possible because the defendant who owned the drug proceeds resides in Cali, Colombia and could not be extradited to face trial. The money will be shared with the United Kingdom and the Cayman Islands to foster future cooperation in the fight against international drug trafficking and money laundering.
GOLD BARS UNEARTHED IN MOTHER'S BACKYARD
(District of Rhode Island).—In 1993, international money launderer Stephen Saccoccia was sentenced to a 660-year prison term and ordered to forfeit $136.3 million in drug money, but only a fraction of the money was recovered. Four years later, in 1997, federal agents using the discovery powers in the asset forfeiture laws found 83 gold bars buried in Saccoccia's mother's backyard and seized them.
FORFEITURE OF MONEY CONCEALED FROM BANKRUPTCY COURT LEADS TO REIMBURSEMENT OF VICTIMS
(District of Oregon).—Eric Randolph concealed at least $1 million of assets from a bankruptcy court by transferring the assets to overseas accounts in Switzerland. When the scheme was discovered, the government used the forfeiture laws to force Randolph to repatriate $225,000, which will be turned over to a bankruptcy trustee and restored to the victims of the bankruptcy fraud.
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CIVIL FORFEITURE RIDS MOTEL OF DRUG DEALERS AND PROSTITUTES IN WICHITA
(District of Kansas).—Motel owners in Wichita rented their rooms to hookers and drug dealers, charging a fee based on the amount of traffic in and out of each room. For an additional charge, the owners would call the rooms and warn the occupants when the police came into the parking lot, making it impossible for the police to enforce the law despite being called to the scene 600 times in a two-year period. Finally, the case was referred to the U.S. Attorney who filed a civil forfeiture action that put an end to the illegal activity.
$170,000 RETURNED TO ELDERLY VICTIMS OF TELEMARKETING FRAUD
(Northern District of New York).—More than $170,000 has been seized and forfeited and is in the process of being returned to two hundred victims, mostly elderly, of a telemarketing fraud scheme. The victims were told that they had won a large cash prize, but that in order to collect, they had first to pay a fee (usually described as a tax). Some victims were convinced to dip into their retirement savings, while others were induced to take cash advances on high interest rate credit cards. No one received any ''prize money.'' The money was recovered under the civil forfeiture laws because the perpetrator of the fraud resides in Canada and has not yet been extradited.
NEIGHBORHOOD ''BLOCK WATCH'' LEADS TO FORFEITURE OF CRACK HOUSE
(Eastern District of Washington).—Neighbors involved in a Block Watch Program in Spokane, Washington, observed that a residence in a high crime area was being used for the sale of crack cocaine. One neighbor expressed her reluctance to let her children out of the house because of gun fire coming from the property. In October 1996, the information provided by the neighbors was used by the U.S. Attorney to obtain a civil forfeiture order shutting down the drug operation and taking control of the property.
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TAVERN USED FOR DRUG TRAFFICKING ON INDIAN LAND BECOMES A YOUTH CENTER
(Eastern District of Washington).—The government initiated civil forfeiture proceedings against a tavern located on the Colville Tribal Reservation in Washington State. The tavern had long been known as a location for drug transactions, with the knowledge and consent of the owner. The tavern was forfeited in April 1997 and is in the process of being transferred to the Colville Confederated Tribes for use as a youth center, pursuant to the Weed and Seed Initiative.
RESTRAINT OF FORFEITABLE ASSETS LEADS TO CAPTURE OF FUGITIVE
(Northern District of Ohio).—Perry Kiraly was the leader of a ring that burglarized large discount stores, such as Home Depot, Lowes, Sam's Club and many others in six states, with losses in excess of $1.5 million. After the FBI discovered his identity and involvement in the crimes, Kiraly became a fugitive, but his bank accounts were restrained under the forfeiture laws. When Kiraly attempted to obtain access to his money while remaining a fugitive, he gave away his location and was captured. Kiraly's funds were eventually forfeited in his criminal case and the money was used to compensate the victims of his crimes.
FORFEITURE USED TO RECOVER PROCEEDS OF MEDICAID FRAUD SCHEME
(District of New Jersey).—A New Jersey pharmacist, Festus Nwankwo, defrauded the Medicaid program by fraudulently obtaining Medicaid numbers and prescription slips and then falsely billing federal and state medical assistance programs for prescription items that were never dispensed. Using the forfeiture procedures available in money laundering cases, the government has recovered $4.5 million in fraud proceeds that Nwankwo laundered through various bank and investment accounts.
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CIVIL FORFEITURE USED TO RECOVER PROCEEDS OF MEDICAID FRAUD FROM FUGITIVE DOCTOR
(Western District of Louisiana).—Dr. Camran Adly was a psychiatrist in Lafayette, Louisiana, whose practice consisted almost entirely of Medicaid patients. When he was charged with Medicaid fraud, he wire transferred over $900,000 in fraud proceeds to a bank account in Amsterdam and fled to Iran, his native country. Dr. Adly remains a fugitive, but using the civil forfeiture laws, the government recovered the fraud proceeds, including the funds in the Amsterdam account.
RESPONEE TO CRITICISMS OF THE FORFEITURE LAWS
Last year, when I testified before this Committee, I acknowledged that the proliferation of forfeiture into new areas has been controversial. When laws that were designed to seize pirate ships from privateers are applied to the seizure of homes, cars, businesses and bank accounts, there are a lot of issues to sort out. How do we protect innocent property owners? What procedures afford due process? When does forfeiture go too far, in violation of the Excessive Fines Clause of the Eighth Amendment?
The Executive and Judicial Branches of government have been very active in this sorting out process. First, the Department of Justice has issued detailed policy guidelines governing the use of the administrative, civil judicial, and criminal forfeiture laws by all agencies of the Department, See Department of Justice Asset Forfeiture Policy Manual (1996). The Treasury Department has issued similar guidelines. Together, these guidelines insure that the forfeiture laws are administered fairly and effectively, with all appropriate consideration given to the rights of property owners. Moreover, we have conducted an intensive series of training sessions for law enforcement agents and federal prosecutors, including detailed instruction on how to incorporate forfeiture into criminal cases instead of relying exclusively on the civil forfeiture laws.
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The courts have been extraordinarily active in this area as well. Ten forfeiture cases have been decided by the Supreme Court in the last five years, and hundreds of cases dealing with all aspects of forfeiture procedure have been decided by the lower courts. These cases have given much needed clarity and definition to the forfeiture laws and the rights of property owners, but they have also left loopholes and ambiguities that only Congress can resolve through legislation.
The cumulative effect of these efforts is evident. Criticisms of the forfeiture program have dropped dramatically. Procedures are better defined; guidelines are rigorously enforced. More than 80 percent of all forfeitures take place in conjunction with a related arrest or prosecution. And as a result of the emphasis on criminal forfeiture since 1994, more than half of all contested forfeiture actions are now undertaken as part of criminal cases.
DROP IN RECEIPTS INTO THE FORFEITURE FUND
Reform of the forfeiture laws—both through policy initiatives and case law—has not been without cost. The statistics kept by the Department of Justice regarding the receipts deposited into the Assets Forfeiture Fund show that adverse court decisions and other factors have resulted in a dramatic decline in the amount of property confiscated from criminals since 1993. See chart appended as Exhibit 1.
The following statistics show the change in receipts and the corresponding drop in the amount of money available to fund law enforcement programs at the state and local level.
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1 First quarter.
It is important to keep these facts in mind when considering what additional legislative reform of the forfeiture laws is needed. Legislation to protect the rights of property owners must be balanced with legislation that restores and enhances law enforcement the ability to use asset forfeiture to fight crime and restore property to victims. In short, we must not cross the line that separates legislation designed to insure fairness—a goal we all share—from legislation that provides relief to criminals; and we must not miss this opportunity to resolve ambiguities and close loopholes in the law that present an unnecessary impediment to effective law enforcement.
GUARANTEEING DUE PROCESS
In our testimony last year we said that asset forfeiture was an effective law enforcement tool, and the examples I have given of recent cases illustrate that point. But we recognized that ''no system, no program, no tool of law enforcement, however effective at fighting crime, can survive for long if the public thinks that it violates the basic principles of fairness and due process that lie at the core of the American system of justice.'' It is for that reason that we have supported efforts to revise the forfeiture laws to ensure fairness and procedural due process.
We said before and we say again that the burden of proof in civil forfeiture cases should be on the government. If the government is trying to forfeit a person's house, it should have to prove that a crime was committed and that the property was involved in that crime; the property owner should not have to prove the negative. We said before and we say again that there should be a uniform innocent owner defense available to claimants in all civil forfeiture cases. The Supreme Court may have held in Bennis v. Michigan that an innocent owner defense is not mandated by the Due Process Clause of the Fifth Amendment, but that does not mean Congress cannot enact such protection by statute. We think it should.
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In addition, we have said before and we say again that the time limits for filing claims should be extended to insure that everyone has an adequate opportunity to obtain his or her day in court, that there should be relief for Citizens whose property is damaged while in government custody; and that the government should disgorge any interest it earns on money that it seizes and later has to return.
All of these protections for the rights of citizens and property owners are included in H.R. 1745, the forfeiture bill introduced by Rep. Schumer. We fully support them and think that they should be included in whatever legislation this Committee produces on the forfeiture issue. A section-by-section analysis of H.R. 1745 is appended to this testimony, and we ask that it be made a part of the hearing record.
SPECIFICS OF THE CIVIL ASSET FORFEITURE REFORM ACT
H.R. 1835 also contains provisions that address these issues, and we applaud the efforts of Chairman Hyde to focus the attention of Congress on this important subject. But the bill, as currently drafted, crosses the line between providing due process and giving unintended relief to drug dealers, money launderers, and other criminals who prey on the elderly and the vulnerable in our society. Let me give a few examples.
INNOCENT OWNER DEFENSE
As I said, we support the enactment of a uniform innocent owner defense. A person who does not know that her property is being used illegally, or who becomes aware of the illegal use but takes all reasonable steps to try to stop it, should not suffer the lose of the property through forfeiture. But H.R. 1835 goes beyond that. In its attempt to protect the rights of innocent third parties, it inadvertently allows criminals to insulate their property from forfeiture by transferring it to their spouses, minor children and other friends and associates.
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Section 2 of the bill defines an innocent owner as, among other things, a person who acquires an interest in property after the commission of the underlying crime without knowing that the property was involved in any illegal conduct. It does not matter how the person acquires the property: it could be a gift, transfer, inheritance, divorce settlement, or many other things. As long as the new owner is ''innocent,'' he would get to keep the property.
That, however, is precisely the problem. A drug dealer could transfer his drug proceeds to his children's college fund and the children would get to keep it, because they would be ''innocent owners.'' A con artist could buy his girlfriend a yacht with the money he stole from an elderly widow in a telemarketing scheme, and the girlfriend would get to keep it, while the elderly victim gets nothing. This problem has already arisen in the Third Circuit under current law, where the court held that the head of the Philadelphia organized crime syndicate could transfer his Rolls Royce to his lawyer, and the lawyer could keep it, because he was an innocent owner. See United States v. One 1973 Rolls Royce, 43 F.3d 794 (3d Cir. 1994).
In that case, the court said that if its decision left the innocent owner statute in ''a mess,'' the problem ''originated in Congress when it failed to draft a statute that takes into account the substantial differences between those owners who own the property during the improper use and some of those who acquire it afterwards.'' The court concluded, ''Congress should redraft the statute if it desires a different result.'' But instead of rectifying this problem, the Act would codify it.
We understand that criminals have families—children to feed and educate, spouses who need clothing and shelter. We do not think, however, that the families of criminals deserve priority over the victims of crime. We do not think that drug dealers should be allowed to use drug money to send their sons and daughters to Harvard, while the children of honest hardworking Americans must struggle to find the resources for higher education. Money stolen from elderly citizens should be returned to the victims, not used to build a mansion in Malibu for some fraud artist's friend or associate.
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The solution to this problem is to provide, as the criminal forfeiture statute has provided since 1984, that persons who acquire property derived from, or used to commit, a criminal act are protected only if they are bona fide purchasers for value. See 21 U.S.C. 853(n)(6)(B); United States v. Sokolow, 1996 WL 32113 (E.D. Pa. 1996) (wife and daughter have no right to defendant's fraud proceeds because they are not purchasers; money forfeited by the government will be restored to the victims). That is, if someone, in good faith, buys property from a criminal without knowing that it is subject to forfeiture, he should be protected, but if the criminal tries to insulate the property from forfeiture by transferring it to his wife, children, girlfriend or other third party who gives nothing in return, the law should say ''no!'' The innocent owner defense in section 202 of H.R. 1745 is the appropriate way to address this concern.
RETURNING PROPERTY TO CRIMINALS
H.R. 1835 also contains a provision that would require the government to return seized property to criminals pending trial in the forfeiture case in order to avoid a ''hardship.'' We understand that there may be instances where a truly innocent person's property is seized from a wrongdoer and held pending trial—undoubtedly to the inconvenience of the innocent claimant. But in thousands of cases every year, property—such as cars, airplanes, cash and other easily disposable items—is seized from drug dealers, gamblers, pornographers and money launderers. It makes no sense to write into law a provision that allows such people to retain possession of the seized property pending trial. You cannot give a pile of cash back to a drug courier just because he claims some ''hardship'' will befall him. No matter what guidelines are written into the statute, the property will simply disappear.
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When we seize a flashy car from a notorious drug dealer, we send a strong message to the community that crime will not pay. If that same car is back on the street a week later because the owner claimed some hardship, we would send the opposite message—that law enforcement is a paper tiger, and criminals can flaunt the spoils of their trade without fear of consequences.
When we seize vessels, vehicles and aircraft used in drug trafficking and other smuggling offenses, we prevent the criminal from using the property again to commit new crimes while the forfeiture case goes to trial. But if a person who uses his truck three days a week to transport illegal aliens, and four days a week to transport vegetables, can recover the truck pending trial because the seizure results in a ''hardship'' to the vegetable business, we will lose the most effective tool we have of depriving criminals of the instrumentalities of crime.
As this last example illustrates, the release-of-property provision will cause enormous problems for the Immigration and Naturalization Service, which seizes 9,000 automobiles a year, mostly along the Southwest Border, as part of its enforcement program against the transportation and smuggling of illegal aliens. To say the least, illegal aliens and smugglers have a poor track record when it comes to appearing for trial with their property ready for forfeiture. If the cars, trucks, vessels and other conveyances seized by the INS have to be returned to the smugglers to avoid a ''hardship,'' there will be little left of the anti-smuggling program.
Yet, in any case in which INS refused to release the vehicle, section 2 of the Act would permit the claimant to apply immediately to federal court for an order forcing the agency to do so, and the court would have to rule on the request within 30 days! The courts along the Southwest Border are already overwhelmed with civil and criminal cases related to border interdiction. See Washington Port, May 15, 1997 page A1. To add 19,000 more cases, each of which would have to be resolved within 30 days, to the dockets of those courts would overwhelm the judiciary and threaten to bring justice to a standstill.
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As long as H.R. 1835 contains a provision that requires the government to give a seized airplane back to a drug dealer, or seized photocopy equipment back to a counterfeiter—supposedly to avoid a ''hardship'' pending trial—it crosses the line between a measure designed to ensure fairness, and a measure that simply provides a windfall for criminals. We think this provision should be dropped from the bill.
CLEAR AND CONVINCING EVIDENCE
In addition to shifting the burden of proof to the government, H.R. 1835 would elevate the standard of proof from ''preponderance of the evidence'' to ''clear and convincing evidence.'' Placing the burden on the government is appropriate, but elevating the standard is uncalled for. Indeed, at last years hearing, Chairman Hyde agreed with us on that point. See, Transcript of hearing before the Committee on the Judiciary on H.R. 1916, the ''Civil Asset Forfeiture Reform Act,'' 104th Cong., 2d Sess., July 22, 1996, at 243.
If the standard of proof is ''clear and convincing evidence,'' there will be cases where the government is able to establish by the weight of the evidence that the property constitutes criminal proceeds, yet the criminal will be able to keep it. That makes no sense. If we establish by the weight of the evidence that money in a bank account was obtained in a Medicare fraud scheme, the money should go back to the taxpayers, not left in the pockets of the dishonest health care provider. If we prove by the weight of the evidence that a gold chain was purchased with the money stolen in a telemarketing scheme, the gold should be forfeited and sold so that the victims can be reimbursed. But the Act would let the doctor who defrauded Medicare keep the money, and it would let the telemarketer keep the gold chain, if the evidence merely met the ''preponderance'' standard and not the higher standard of ''clear and convincing evidence.''
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The greatest adverse impact of the clear and convincing standard is certain to be felt in cases involving sophisticated international money laundering on behalf of the South American drug cartels. Such schemes invariably involve shadowy transactions through bank secrecy jurisdictions conducted by shell corporations claiming to be in the travel, import/export or money remitting business. In such cases, the evidence linking the money to drug trafficking may be entirely circumstantial: it will be difficult enough to continue to prosecute such cases successfully with the burden of proof on the government. Under a ''clear and convincing'' standard, however, such cases would become close to impossible to win. The American people certainly want fairness in the forfeiture laws, but they do not want to grant immunity to the financial henchmen of the drug lords. If anything, the law should preserve our ability to combat international money laundering by giving law enforcement new tools to gather evidence from overseas, and by giving the government the benefit of presumptions based on certain conduct typical of these schemes that will enable the prosecutor to satisfy his burden of proof.
Statutes requiring the government to meet a ''clear and convincing'' standard are extremely rare. See e.g. 18 U.S.C. 3524(e)(1) (stripping non-custodial parent of visitation rights with child when custodial parent is relocated as a protected witness). In civil cases, such as those filed under the False Claims Act, 31 U.S.C. 3729, and the bank fraud statutes, 12 U.S.C. 1833a, to give just two examples, the ''preponderance'' standard is routinely applied. If that standard is adequate to protect the rights of defense contractors, health care providers and bankers, it is hard to understand why a higher standard is needed to protect the rights of drug dealers, money launderers, pornographers, gamblers and others subject to the asset forfeiture laws.
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REMEDY FOR FAILURE TO GIVE NOTICE OF ADMINISTRATIVE FORFEITURE
The vast majority of forfeiture cases are uncontested. These are cases in which the government seizes property and sends notice of the forfeiture to the property owner, but no one files a claim. Such cases, which account for 80 to 85 percent of all Justice Department forfeitures, are called administrative forfeitures.
Under current law, the seizing agency, pursuant to Justice Department internal guidelines, must send notice of the forfeiture action to potential claimants within 60 days of the seizure, unless the time limit is waived for good cause by a supervising official. Also under current law, if the government fails to make a reasonable effort to give notice of the forfeiture to potential claimants, and a person who did not receive notice later claims an interest in the property, a federal judge may order that the forfeiture action be started over again. United States v. Woodall, 12 F.3d 791, 793 (8th Cir. 1993). Such claims are almost invariably filed by federal prisoners who assert that they did not receive the forfeiture notice because the seizing agency sent it to the wrong place of incarceration as the prisoner was moved throughout the corrections system. See e.g. United States v. Clark, 84 F.3d 378 (10th Cir. 1996); United States v. Franklin, 897 F. Supp. 1301, 1303 (D. Or. 1995); Hong v. United States, 920 F. Supp. 811 (E.D.N.Y. 1996); Concepcion v. United States, 938 F. Supp. 134 (E.D.N.Y. 1996); Scott v. United States, 1996 WL 748428 (D.D.C. 1996).
H.R. 1835 would change this process in two significant ways. First, it would codify the 60-day guideline and require the seizing agency to go to court to get a waiver instead of getting it from a supervising official within the Department—another process certain to burden the judiciary unnecessarily, given the 30,000 seizures per year made by Justice Department agencies. Second, it would change the remedy for the failure to provide notice by allowing the claimant simply to ''void the forfeiture,'' and bar the government ever from re-initiating the forfeiture action.
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Again, this issue is one that arises almost always in the context of a federal prisoner who did not receive notice through the prison system. It is laudable to recognize that prisoners, like everyone else, have due process rights. But it makes no sense to give prisoners a windfall by allowing them to ''void a forfeiture.'' anytime the Bureau of Prisons is unable to deliver notice of administrative forfeiture of property to the current prison address. If H.R. 1835 were enacted, instead of having judges order that forfeiture proceedings start again by returning to the status quo ante in such cases, we would be subjected to the spectacle of check presentation ceremonies in which prisoners serving long terms of incarceration for drug dealing, money laundering and other crimes are presented with reimbursement checks for seized funds to spend while enjoying the comforts of the federal penitentiary.
If current law needs to be changed at all, it should be in the other direction—to require that any claims filed by persons asserting lack of notice be filed within two years of the seizure of the property. That would cut off claims by persons, such as federal prisoners, with lots of time on their hands who are inclined to file claims as much as five and six years after the date when they were arrested and the property was seized. Section 103 of H.R. 1745 addresses this problem.
APPOINTMENT OF COUNSEL
One other provision of H.R. 1835 that deserves special note is the one providing for court-appointed counsel in civil forfeiture cases. The principle that no person should be denied the means to seek redress in the courts against unreasonable government action is recognized in the Equal Access to Justice Act (''EAJA''). That statute provides that any person who prevails against the government in a case in which the government action was not ''substantially justified'' is entitled to recover attorneys fees. See Creative Electric v. United States, 1997 WL 151779 (N.D.N.Y. 1997) (if claimant, after filing claim and cost bond, has to go to court to force government either to file complaint or return property, claimant is entitled to EAJA fees).
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Given the availability of KAJA fees, there is no need to authorize the court to appoint counsel in civil forfeiture cases. Such authority is only going to encourage attorneys looking for court appointments to file frivolous claims. Indeed, with tens of thousands of forfeiture seizures taking place every year, the burden on the courts just to hear the motions for appointment of counsel is likely to be enormous. Moreover, this provision is likely to be enormously expensive. The Act would pay for the costs of court-appointed counsel out of the Assets Forfeiture Fund. In other words, money that now is ear-marked for use by state and local law enforcement agencies would instead be used to line the pockets of criminal defense attorneys. As mentioned previously, the Assets Forfeiture Fund has already been reduced by over $200 million since 1994, and money available for local police departments dropped by $65 million in the last year alone. H.R. 1835 would reduce the remaining money available to state and local law enforcement to nothing. In our view, such a result would be contrary to the important principle that, although taxpayers generally do bear the costs of law enforcement, such costs should, where possible, be borne by the criminals who are responsible for creating them. Enactment of this provision of H.R. 1835 would be akin to sticking a siphon into the Fund and draining the remaining money into the coffers of the defense lawyers' guild. As a policy choice, we think that would be wrong.
PROVISIONS THAT SHOULD BE ADDED TO THE CIVIL ASSET FORFEITURE REFORM ACT
Equally important, we are concerned that H.R. 1835 fails to include provisions that are needed to make the asset forfeiture laws more effective as law enforcement tools. The most important element of any asset forfeiture reform legislation must be a sense of balance, but the Act fails to contain any provision that addresses the concerns of law enforcement.
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For example, it is right to put the burden of proof on the government in civil forfeiture cases, but it is wrong to omit provisions that allow the government to gather the evidence needed to meet its evidentiary burden. H.R. 1835 should contain provisions allowing attorneys for the government to issue subpoenas for evidence in civil forfeiture cases in the same way that they are issued in federal health care cases, anti-trust cases, bank fraud cases and civil RICO cases. And it should let the government civil attorneys have access to the grand jury material already in the possession of its criminal prosecutors.
Also, if we are revising the civil forfeiture laws, we should address the problem that arises when claims are filed by fugitives. Before 1996, the federal courts employed a rule, known as the fugitive disentitlement doctrine, that barred a fugitive from justice from attempting to hide behind his fugitive status while contesting a civil forfeiture action against his property. See United States v. Eng, 951 F.2d 461, 464 (2d Cir. 1991) (''a person who is a fugitive from justice may not use the resources of the civil legal system while disregarding its lawful orders in a related criminal action'').
But last year, the Supreme Court held in Degen v. United States, 116 S. Ct. 1777 (1996), that as a judge-made rule, the sanction of absolute disentitlement goes too far. Instead, it is up to Congress to enact a statute that, as the Court described it, avoids ''the spectacle of a criminal defendant reposing in Switzerland, beyond the reach of our criminal courts, while at the same time mailing papers to the court in a related civil action and expecting them to be honored.'' Degen, 116 S. Ct. at 1778. We think that the codification of the fugitive disentitlement doctrine should be part of the Act.
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The most serious omission is that H.R. 1835 does not contain any of the provisions needed to enhance the criminal forfeiture laws. The recent shift to criminal forfeiture in the federal courts has revealed numerous deficiencies in the criminal laws that have hampered our ability to make full use of those statutes. Nothing would do more to encourage the use of criminal forfeiture and to decrease the government's reliance on civil forfeiture than to enact comprehensive reform of the criminal forfeiture laws
In particular, the law should allow the government to pursue criminal forfeiture any time a statute authorizes civil forfeiture; and it should allow the government to restrain property subject to forfeiture pre-trial, so that the property doesn't disappear while the criminal case is pending. Title V of H.R. 1745 contains these and a comprehensive set of other proposals that would make the criminal forfeiture statutes the equal of their civil counterparts as effective crime-fighting tools. Those provisions should be made a part of the Act.
Finally, and most importantly, once the perceived procedural deficiencies of the civil forfeiture laws are addressed, there is no reason not to expand forfeiture into new areas where it can be used to combat sophisticated and serious criminal activity. From telemarketing to terrorism to counterfeiting to violations of the food and drug laws, the remedy of asset forfeiture should be applied. Indeed, unless someone can name a crime for which the offender should be allowed to retain the proceeds, the forfeiture laws should be extended to reach the proceeds of all crimes in the federal criminal code Title III of H.R. 1745 contains numerous provisions designed to achieve this goal.
CONCLUSION
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At the conclusion of my testimony a year ago, I said that a balanced forfeiture bill would ensure that ''the forfeiture laws of the U.S. will be tough but fair—tough but fair—which is exactly what the American people have a right to expect.'' I still very much believe that. Working together, we can craft a balanced set of forfeiture laws that combine fairness with effective law enforcement. In our conversations over the past weeks, we have made a start. We should continue. We have a long way to go, but a balanced bill that law enforcement can support is within our grasp.
Mr. HYDE. Well, I thank you very much for that, Mr. Cassella. I just want to tell you, as a matter of tactics, I do not want to confuse civil asset forfeiture with criminal asset forfeiture. I know you want to do some things with criminal asset forfeiture, and they may well be meritorious. But I am very interested in the stories we heard this morning, plus many others we know about. I wrote about some of them in a book. I met these people. We had hearings. You were here, I'm sure, last time, and I don't want to weigh a bill down with other considerations that—they're germane, but they will frustrate what I'm trying to do. But I will tell you this: if Mr. Schumer wants to introduce a bill on criminal asset forfeiture, it will receive full hearing, full consideration. I might or might not support it. I want to support it. I'm for forfeiture. But I am against the abuses, vigorously against the abuses we heard about this morning and I want to correct them. And once we do that, I'm happy to confront criminal asset forfeiture.
Mr. CASSELLA. Mr. Chairman, if there are things about criminal asset forfeiture which require study and review, a separate bill might be the way to go. If there are things about criminal asset forfeiture which are noncontroversial, it seems to us there would be no reason not to be them on this bill. For example——
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Mr. HYDE. What do you have in mind? I do not want to get into gun legislation——
Mr. CASSELLA. Well, I don't either.
Mr. HYDE. And that is a problem when you start talking about criminal asset forfeiture. You get into guns, this whole thing goes down the drain. And that's my problem—this is too important.
Mr. CASSELLA. I appreciate that, Mr. Chairman. I would just make this observation: for example, I think we all share the view that where we can do a criminal forfeiture case, we should do a criminal forfeiture case. That is our practice. Now there are some statutes for which there simply is no criminal forfeiture statute. Gambling, smuggling—you have to do the forfeiture civilly, and many others. There are some—over 100 civil forfeiture and some six or ten criminal forfeiture statutes. If we simply had a law that said ''where forfeiture is otherwise authorized, the U.S. attorney may do it criminally,'' that would do a great deal to allow us to continue the trend that we've started since 1994 in switching over to criminal asset forfeiture. In the compromise that we've been talking about, there are, in the back, in the noncontroversial title of the bill we hope will be added, some things which do—some very noncontroversial things to improve the criminal forfeiture program.
There are some other things about criminal forfeiture which I can see need to be debated and maybe they can move separately. That's what we have in mind about trying to address criminal forfeiture here. We have the attention of the committee on this important subject. If we can get these other things done at the same time as part of a global compromise, all the better. It's good government to do it.
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Mr. HYDE. John, if you don't mind, if we could hear—and I've been impolite in interceding, but we have another vote and that will be the last vote of the evening, and I'm afraid once that vote occurs, we may lose our enthusiasm for coming back. So I want to give everyone a chance.
So, Ms. Blanton, are you next?
STATEMENT OF JAN P. BLANTON, DIRECTOR, EXECUTIVE OFFICE FOR ASSET FORFEITURE, DEPARTMENT OF THE TREASURY
Ms. BLANTON. Mr. Chairman and other committee members, I'm Director at the Department of the Treasury's Executive Office for Asset Forfeiture. I would just like to introduce Bill Bradley, sitting to my right, who is counsel for my office.
When I last appeared before your committee about a year ago to speak to the merits of a bill aimed at reforming civil forfeiture, I took as my theme the reasoned progress that the Congress and law enforcement together have made over the years in crafting and applying the forfeiture authorities that we have today. That cooperative effort has put Federal law enforcement in a position where it can go after the proceeds and instrumentalities of crime.
It has empowered us to be able to strike at the very core of criminal organizations and it has become a pivotal element in our overall enforcement strategy. And it has even benefited the often-forgotten victims of criminal activity. In fiscal year 1996, our Treasury Forfeiture Fund alone oversaw the return of over $50 million to the victims of financial fraud. In the current fiscal year, we expect to return over 30 million taxpayer dollars recovered from the Medicare fraud scheme, financial fraud and health care fraud—just two of the areas in which Federal forfeiture helps the victimized.
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We are neither unaware of nor insensitive to concerns that forfeiture law can and should be further refined. The citizens of the United States will be comfortable with Federal forfeiture authorities as long as they have faith in the integrity of the program. That faith is best secured by the legislature's enactment of needed statutory changes and by the executive's development of program policies and guidance that reflect America's sense of fair play.
We have taken important measures in a number of areas to ensure that we fulfill our end of this responsibility. In the last 5 years since the establishment of the Treasury Forfeiture Fund, we have listened attentively to the criticisms of forfeiture programs. While some of this has been directed to programs at the State and local level, we have heeded those valid complaints and we have tightened up our program. We have stressed comprehensive training for all Treasury forfeiture personnel, from our special agents and their supervisors to our seized property managers. We have underscored the importance of considered and responsible seizures and the need for preseizure planning that makes these possible. We have emphasized quality in seized property management so that value, whether it be forfeited or returned, is never carelessly diminished. And recognizing that justice delayed is often justice denied, we have directed all Treasury law enforcement to keep on top of their forfeiture caseloads, especially with regard to the adjudication of administrative forfeitures.
We are doing whatever it takes to ensure that Treasury's forfeiture program always affords due process, that it strives to notify all affected parties, that it invites arguments against the intention to forfeit, that it accommodates the indigent and that it offers opportunities to achieve just resolutions short of forfeiture in appropriate cases. In short, we are striving not for advantage, but for fairness.
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How best to fulfill the other end of that responsibility for the public's faith in Federal forfeiture authority is what we are here today talking about. Forfeiture law should ensure its recognition of basic protections afforded property rights. For instance, we share your support of the concept of a uniform innocent owner provision and of shifting the burden of proof in certain cases, but we must register our reservations about H.R. 1835. These reservations center first upon how this bill would amend several sections of the Tariff Act of 1930, codified in 19 U.S.C., by raising the standard of proof from probable cause to clear and convincing evidence and by eliminating cost bonds to pursue a civil judicial proceeding.
We also have other reservations about how this bill would affect forfeiture authorities beyond title 19 by paying for the appointment of counsel in civil forfeiture actions where the claimant is not successful, providing for the release of seized property prior to forfeiture if the seizure causes substantial hardship on a claimant, and providing for a cause of action to release property pending the completion of the forfeiture proceeding.
With regard to title 19 civil forfeiture authorities, it is important to keep in mind that these involve statutes concerning national self-protection. The Customs forfeiture laws served as a template for much of the expanded criminal forfeiture authorities enacted during the last two decades. If the application——
Mr. HYDE. Thank you, Mr. Lefcourt. Thanks very much. Sorry to impose. Thank you, Ms. Blanton.
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Ms. BLANTON. If the application of the title 19 forfeiture model to other titles of the code has left some of these more recent Federal laws in need of changes, it is not because of inadequacies in the title 19 model. Let's reform what needs to be fixed and not weaken the ability of the Treasury Department to protect the American public and hamstring Federal law enforcement in its fight against drug trafficking, fraud, and illegal arms trafficking at the border. Amending title 19 is not the way to implement civil forfeiture reform. We submit that reform is best accomplished through our cooperative, measured efforts to implement changes in the appropriate body of Federal statutes.
While we can appreciate the overall reform intentions of H.R. 1835, we fear that its changes to title 19 authorities will have an adverse impact on Treasury forfeiture authorities. Customs laws codified in title 19 are designed to prohibit the introduction of contraband items into the United States, protect intellectual property rights along with the public health and safety, facilitate trade, and expedite the collection of import duties. In addition, at the border, our Customs Service stands in the place of numerous other Federal agencies, enforcing hundreds of provisions of law protecting the well-being of America's citizens.
It must be recognized that at the border Customs officers routinely detect goods being imported or exported in violation of law. Many of these violations make the goods subject to seizure and forfeiture. In such cases, Customs generally is not aware of all the facts and circumstances surrounding the importation or exportation, though it does have probable cause for the seizure and forfeiture. The Customs laws are designed around the fact that in this border environment owners of the goods are in the best position to come forward with an explanation of the transaction giving rise to the seizure. Accordingly, these laws require that in a judicial proceeding the Government must establish probable cause for the forfeiture. Only then does the claimant, who, again, is in the best position to explain the facts surrounding the importation or exportation, have the burden of proving that the goods are not subject to forfeiture.
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Given that the time between seizure and forfeiture in these cases is very short, it is all the more important for the owners to come forward with exculpatory information, as any other rule places the Government at a tremendous disadvantage in border enforcement. The changes proposed by H.R. 1835 would compromise the ability of the U.S. Customs Service to fulfill its vital responsibilities, many of which include key support of our foreign policy and national security. Not only will this bill make it more difficult for the United States to deprive criminal violators of their ill-gotten proceeds, but it will also directly diminish the ability of the Customs Service to enforce restrictions and prohibitions at the border.
We believe any bill must retain probable cause as the standard of proof under the Customs laws when they are applied to traditional Customs cases. Without that standard, Customs will have been unable to accomplish the following seizures: rocket fuel destined for Iran; vehicles carrying tungsten stolen from a bonded and sealed freight car from Canada; 20,000 pairs of knock-off jeans illegally bearing a registered U.S. trademark; dangerous food products; adulterated or unlicensed drugs; images of sexually-exploited children; illegal firearms; unsafe consumer products; products of convict and slave labor; hazardous substances, and pirated intellectual properties.
Without this standard, we believe Customs would not have been able to have made these types of seizures. All of these items threaten the safety, security, and prosperity of the American people. International trafficking in them undermines the benefits to be realized from an increasingly open world economy. With free market economies proliferating and free trade agreements expanding, this is not the time to disarm critical law enforcement authorities at the borders. Should such an unintended consequence of H.R. 1835 be permitted to occur, the green light to fair and honest progress in international trade would be a green light also to the unscrupulous and the corrupt.
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Needed refinements today should not be allowed to obstruct the longstanding record of effectiveness in serving the best interests of American citizens. We are available to work with the committee to help it strike a well-balanced reform that continues to ensure the faith of Americans in the fairness of our Federal forfeiture program.
This concludes my opening statement and I thank the committee for allowing me the time to address H.R. 1835.
[The prepared statement of Ms. Blanton follows:]
PREPARED STATEMENT OF JAN P. BLANTON, DIRECTOR, EXECUTIVE OFFICE FOR ASSET FORFEITURE, DEPARTMENT OF THE TREASURY
Mr. Chairman, and to all the members of the Committee, good morning. My name is Jan Blanton and I am the Director of the Department of the Treasury's Executive Office for Asset Forfeiture. I am pleased to appear before you today to offer our views on H.R. 1835 and the changes it would bring about in federal forfeiture. With your permission, I would like to make a brief opening statement after which I would be glad to answer any questions you or the other members may have.
When I was last privileged to appear before your committee almost a year ago to speak to the merits of a bill aimed at reforming civil asset forfeiture, I took as my theme the reasoned progress that the Congress and law enforcement together have made over the years in crafting and applying the forfeiture authorities we have today. That cooperative effort has put federal law enforcement in a position where it can go after the proceeds and instrumentalities of crime.
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It has empowered us to be able to strike at the very core of criminal organizations. It has become a pivotal element in our overall enforcement strategy. And it has even benefited the too often forgotten victims of criminal activity. In FY 1996, our Treasury Forfeiture Fund alone oversaw the return of over $50 million to the victims of financial fraud. In the current fiscal year, we likewise expect to return over 30 million taxpayer dollars recovered from a Medicare fraud scheme. Financial fraud and health care fraud—just two of the areas in which federal forfeiture helps the victimized.
We are neither unaware of nor insensitive to concerns that forfeiture law can and should be further refined. The citizens of the United States will be comfortable with federal forfeiture authorities as long as they have faith in the integrity of the program. That faith is best secured by the legislature's enactment of needed statutory changes and by the executive's development of program policies and guidance that reflect America's sense of fair play.
We have taken important measures in a number of areas to ensure that we fulfill our end of this responsibility. In the last five years since the establishment of the Treasury Forfeiture Fund, we have listened attentively to the criticisms of forfeiture programs. While some of this has been directed to programs at the state and local level, we have heeded the valid complaints and we have tightened up our program. We have stressed comprehensive training for all Treasury forfeiture personnel—from our special agents and their supervisors to our seized property managers. We have underscored the importance of considered and responsible seizures and the need for pre-seizure planning that makes these possible. We have emphasized quality in seized property management so that value, whether it be forfeited or returned, is never carelessly diminished. And recognizing that justice delayed is often justice denied, we have directed Treasury law enforcement to keep on top of their forfeiture caseloads, especially with regard to the adjudication of administrative forfeitures.
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We are doing whatever it takes to ensure that Treasury's forfeiture program always affords due process—that it strives to notify all affected parties, that it invites arguments against the intention to forfeit, that it accommodates the indigent and that it offers opportunities to achieve just resolutions short of forfeiture in appropriate cases. In short, we are striving not for advantage but for fairness.
How best to fulfill the other end of that responsibility for the public's faith in federal forfeiture authority is what we are here today to consider. Forfeiture law should ensure its recognition of basic protections afforded property rights. For instance, we share your support of the concept of a uniform innocent owner provision and of shifting the burden of proof in certain cases. But we must register our reservations about H.R. 1835.
These reservations center first upon how this bill would amend several sections of the Tariff Act of 1930, codified in Title 19 U.S.C., by raising the standard of proof from probable cause to clear and convincing evidence; and by, eliminating cost bonds to pursue a civil judicial proceeding.
We also have other reservations about how this bill would affect forfeiture authorities beyond Title 19 by providing for appointment of counsel in any and all civil forfeiture actions; providing for the release of seized property prior to forfeiture if the seizure causes substantial hardship on a claimant; and providing for a cause of action to release property pending the completion of the forfeiture proceeding.
With regard to Title 19 civil forfeiture authorities, it is important to keep in mind that these involve statutes concerning national self-protection. The Customs forfeiture laws served as a template for much of the expanded criminal forfeiture authorities enacted during the last two decades. If the application of the Title 19 forfeiture model to other titles of the code has left some of these more recent forfeiture laws in need of changes, it is not because of inadequacies in the Title 19 model. Let's reform what needs to be fixed and not weaken the ability of the Treasury Department to protect the American public and hamstring federal law enforcement in its fight against drug trafficking, fraud and illegal arms trafficking at the border. Amending Title 19 is not the way to implement civil forfeiture reform. We submit that reform is best accomplished through our cooperative, measured efforts to implement changes in the appropriate body of statutes.
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While we can appreciate the overall reform intentions of H.R. 1835, we fear that its changes to Title 19 authorities will have a significant adverse impact on Treasury forfeiture activities. Customs laws codified in Title 19 are designed to prohibit the introduction of contraband items into the United States, protect intellectual property rights along with the public health and safety, facilitate trade and expedite the collection of import duties. In addition, at the border, our Customs Service stands in the place of numerous other federal agencies, enforcing hundreds of provisions of law protecting the well being of America's citizens.
It must be recognized that at the border Customs officers routinely detect goods being imported or exported in violation of law. Many of these violations make the goods subject to seizure and forfeiture. In such cases, Customs generally is not aware of all the facts and circumstances surrounding the importation or exportation, though it does have probable cause for the seizure and forfeiture. The Customs laws are designed around the fact that in this border environment owners of the goods are in the best position to come forward with an explanation of the transaction giving rise to the seizure. Accordingly, these laws require that in a judicial proceeding the government must establish probable cause for the forfeiture; only then does the claimant (who, again is in the best position to explain the facts surrounding the importation or exportation) have the burden of proving that the goods are not subject to forfeiture. Given that the time frame between seizure and forfeiture in these cases is very short, it is all the more important for the owners to come forward with exculpatory information as any other rule places the government at a tremendous disadvantage in border enforcement. The changes proposed by H.R. 1835 would compromise the ability of the United States Customs Service to fulfill its vital responsibilities, many of which include key support of our foreign policy and national security. Not only will this bill make it more difficult for the United States to deprive criminal violators of their ill-gotten proceeds but it will also directly diminish the ability of the Customs Service to enforce restrictions and prohibitions at the border.
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We believe any bill must retain probable cause as the standard of proof under the Customs laws when they are applied to traditional Customs cases. Without that standard, Customs will be unable to accomplish the following seizures: rocket fuel from going to Iran, vehicles carrying tungsten stolen from a bonded and sealed freight car from Canada, 20,000 pairs of knock-off blue jeans illegally bearing a registered U.S. trademark, dangerous food products, adulterated or unlicensed drugs, images of sexually exploited children, illegal firearms, unsafe consumer products, the products of convict and slave labor, hazardous substances, and pirated intellectual properties.
All of these items threaten the safety, security and prosperity of the American people. International trafficking in them undermines the benefits to be realized from an increasingly open world economy. With free market economies proliferating and free trade agreements expanding, this is not the time to disarm critical law enforcement authorities at the border. Should such an unintended consequence of H.R. 1835 be permitted to occur, the green light to fair and honest progress in international trade would be a green light also to the unscrupulous and the corrupt.
Needed refinements today should not be allowed to obstruct the longstanding record of effectiveness in serving the best interests of American citizens. We are available to work with the Committee to help it strike a well-balanced reform that continues to ensure the faith of Americans in the fairness of our federal forfeiture program.
Mr. Chairman, this concludes my opening statement. I will be pleased to answer any questions you or the other members of the committee may have at this time. Thank you.
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Mr. HYDE. Thank you, Ms. Blanton. And we're going to avail ourselves of your invitation and continue to work something out with you. You have different problems than the Justice Department does. We understand that. We don't want to hamper border protection or other situations like that, but we're going to get at the heart of the injustices and lack of due process that we heard about and we need your help.
Chief Moody.
STATEMENT OF BOBBY D. MOODY, CHIEF OF POLICE, MARIETTA, GA, POLICE DEPARTMENT, AND FIRST VICE PRESIDENT, INTERNATIONAL ASSOCIATION OF CHIEFS OF POLICE
Mr. MOODY. Thank you, Mr. Chairman, for the opportunity of being with you today and I will respect the lateness of the hour, and as I learned a long time ago when I was running for office within the International Association of Chiefs of Police, be brief, be brilliant, be seated. So I figure one—two out of three is not bad. I'll be seated and be brief. [Laughter.]
Mr. HYDE. You're already brilliant.
Mr. MOODY. I don't know about that. But I do appreciate the opportunity of being with you today. And I must make mention that our president, as you well know, is from Frankfurt, IL, the president of the IACP, Darryl Sanders.
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I do not condone the actions that deprive people of their property without proper procedural due process that may be evidenced in the actions of some over zealous police officers. But I make no apology for the fact of wanting to put the bad guys in jail and to take their illegal-gotten gains away from them. But I firmly believe that those who have been wronged or believe that they have been wronged already have redress in current law. Suffice it to say that police departments should do the right thing in enforcing any law. And in regards to some of the cases that have been discussed today, and even before today, I think we need to put it in proper perspective that civil asset forfeiture, along with criminal asset forfeiture, I understand measures in terms of about 80,000 cases a year. And 80 percent of those are disposed before courts; 20 percent are tried in court, and some of those, by virtue of the court process, lose their value in the weighted testimony and those items are returned.
And I agree with you, Mr. Chairman, the things that we heard today, I don't think that's the norm out there and it needs to be addressed. And we at the IACP want to work with you, as we have with Justice, to see that those—and with Treasury—to see that we address those issues.
I come to you from the trenches of the battle, though, Mr. Chairman, against illegal drugs, from an agency that has used Federal asset forfeiture provision to reclaim neighborhoods and give them back to the community. I'm going to cite a couple of examples from two cities in which I have worked. First, in Covington, GA, which is located 40 miles east of Atlanta, and the other, my current city, Marietta, GA, which is located about 15 miles from downtown Atlanta.
In Covington, we had some illegal trafficking that was occurring in an area that was adjacent to a pool hall—at the pool hall location. We had lots of calls for service to this area. We had many attempts to go to the owner and ask for his assistance in trying to help us clean up his property—all to the event where he said, ''That's not my problem; that's your problem.'' Eventually, a homicide occurred at this location. We had the neighborhood homeowners calling us, asking for our help in helping them to rid themselves of this nuisance in their neighborhood. We again asked the owner for help. He made no bones about it. He said, ''that's not my problem; that's your problem.''
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We, eventually, through the Federal asset forfeiture provisions arrested the property and through a court agreement he agreed to pay $10,000 and put into an awardship that he would not have a pool hall in this location again. The neighborhood literally had a reunion, thanking us and thinking that we were really the good guys when we just helped them to clean up a place where they could allow their children to enjoy and grow up and become strong adults.
Later that property was sold. It did not carry on that governance that required it not to have a pool hall and the new owners wanted to put in a new hall—a new pool hall there. Working through our community outreach network, we were able to go to the new owners and encourage them, giving them the story, and encourage them not to do something that was going to bring down the neighborhood. I'm very pleased to report they decided not to do that because of what had happened before.
We had another situation in Covington, GA, where a trailer park was adjacent to a school. The trailer park was common for those who sold drugs, who brought drugs to the community, who entice children to come on their property to buy drugs. The owner of this particular trailer park lived in Florida. The trailer park was located in Covington. Now, today, working with the owner, even though we had to go through the civil process route, there are new homes. The trailer park was done away with. There are homes that are now owned by people who live there and the drug trafficking that was going on, enticing children to get involved in drugs, is no longer there.
We had another situation of a property owner that owned low-rent housing. We, too, encouraged him to work with us to rid his property of the illegal gang activity that was going on. He, too, told us, ''I'm sorry, that's not my problem. That's your problem.'' Refreshing his memory of what happened at the pool hall and also what happened in the trailer park, we involved the property owner, after he heard those stories, and now that area is cleaned up.
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The second area that I would like to talk about is what has happened in Marietta, GA, that borders the city of Atlanta. When I first arrived there last July, there was not a day that went by that I did not get five or six telephone calls talking about illegal drug activity in the neighborhood—prostitution, and assorted other crimes that go along with illegal drugs. In the last 6 months, we have worked with our local multijurisdictional task force and the DEA MET team in a major effort to take back the neighborhoods where these drug pockets were working in Marietta.
Today I am pleased to tell you that I don't get those calls anymore. Not only have we affected the amount of drugs coming into the city—as one street-level drug dealer said, ''You just can't find drugs in Marietta today''—we are now going through the process of dismantling the organizations by taking the assets of those who profited by selling drugs to our kids.
Finally, I want to put into perspective my feelings about the lone drug dealer who stands on the corners of many American cities today. He will do more damage to our country than one person can do walking into a house and killing an entire family. As tragic as it may be for any community, and any family, or any city, the fact that, except for the family and the immediate community, the killing would be forgotten in a matter of weeks, but the lone drug dealer standing on a corner and selling young people in this country in the course of a day will maim and destroy the minds of our future leaders. He must be stopped and we must be able to dismantle the greed-for-money motive that asset forfeiture does. We must never give up our efforts to make our communities safe for our children to grow up, so that they can become all that they can be.
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In closing, I'll leave you with one thought, asking that you give us asset forfeiture reform that is fair and that will enable us to continue to do our job that most police departments are doing in interrupting domestic drug trafficking in this country—an asset forfeiture provision that will enable us to continue strong highway, airport drug interdictions by cutting off the supply.
Mr. Chairman, it's not for me, in fact it's not for you, but it's important to the kids of this country. And in closing, the quote I would like to leave is something that was shared with me a while back and I would like to share it with you. ''If you don't do it, who? If you don't do it now, when? If you don't do it here, where?'' And if you don't do it for the kids of America, why not? Thank you.
[The prepared statement of Mr. Moody follows:]
PREPARED STATEMENT OF BOBBY D. MOODY, CHIEF OF POLICE, MARIETTA, GA, POLICE DEPARTMENT, AND FIRST VICE PRESIDENT, INTERNATIONAL ASSOCIATION OF CHIEFS OF POLICE
Chairman Hyde and members of the Committee. My name is Bobby Moody, Chief of Police in Marietta, Georgia. First, I would like to thank you for inviting me here today to testify on proposed reforms to the Federal Asset Forfeiture Statutes. I intentionally will be quite brief and believe that I will be most effective answering your questions.
To give you a little of my background, I have been a sworn police officer in the State of Georgia for over 23 years, serving as Chief in two cities, Covington and now Marietta, for over 20 years.
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Last year you extended a similar invitation to James McMahon, Superintendent of the New York State Police. On July 22, 1996, Jim indicated how valuable asset forfeiture was to law enforcement agencies by saying:
We have been able to remove from criminals, the proceeds of their illegal activities, as well as the instrumentality they have used to commit their crimes. Most forfeiture cases in which the New York State Police are involved, are drug cases. In these cases, simply taking the drugs is not sufficient. The illegal drugs themselves have no use other than to be sold to users on the streets. The drugs are impure and contaminated, and they can easily be replaced by the distribution chain. To disrupt the organization, law enforcement needs to remove the cash generated by drug dealing, as well as vehicles and real property used in trafficking.
What Jim said about state police agencies applies equally well to local law enforcement agencies like the ones I have been responsible for. The federal asset forfeiture laws, as I will describe in a minute, have been an invaluable tool to me personally in my agency's attempts to control illicit drug trafficking in our communities.
Last year Jim went through the various sections of your proposed legislation, H.R. 1916, and discussed each individually. I will not do that this year because our position remains the same and has adequately been stated by Mr. Cassella of the Department of Justice. We stated last year, and maintain this year that the legislation under consideration today would effectively make the asset forfeiture laws of little value. Criminals would soon realize that through a series of procedural moves they could shield their ill-gotten property from forfeiture. The legislation being considered today, if enacted as is, would clearly work to the detriment of victims, prosecutors and law enforcement.
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I am not saying that law enforcement is not willing to address those elements of the forfeiture laws that may lead to abuse and rectify those situations. You should know that representatives of the IACP, including both Superintendent McMahon and me have met with members the Department of Justice staff over the past three years in an attempt to work out acceptable reforms. We believe that we have reached acceptable compromises and have had discussions with your staff about our proposals. We believe that those discussions should continue.
As we have been developing our asset forfeiture reform package, as Mr. Cassella points out, there have been a number of cases concerning asset forfeiture considered by the Supreme Court, and the Department of Justice has instituted new procedures to comply with those rulings. The status of asset forfeiture proceedings is not the same today as it was five years ago. When considering incidents of alleged abuse, it is important to consider when they occurred.
I will close with two examples of how my departments have been able to use the asset forfeiture laws to rid our community of drug trafficking situations, even though property was never actually forfeited.
In the first instance, an individual residing outside the community owned a building which had been leased to another individual who was operating a pool hall on the premises. Drug dealing at this establishment was common. We had made several undercover drug buys at the establishment, and had a good handle on what was occurring at the location. While several arrests were made, new dealers quickly replaced those who were arrested. The person operating the pool hall was of no help and had little interest in removing the drug dealers. We informed the absentee owner-landlord that the premises were being used to distribute drugs and that he should inform his tenant to ensure that these activities were discontinued. At first, the absentee landlord responded that all this was our problem and not his. We then informed him that his property could be subject to forfeiture. After conversations with his attorney, the landlord agreed to terminate the lease and not allow the property to be used for a similar use. The drug nuisance abated and no property was forfeited.
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In the second instance, a similar situation was ongoing. An absentee landlord was leasing a piece of land to an individual who was running a trailer park. The land was located directly across a highway from a school. The proprietor of the park was also dealing drugs from the premises and using at least a portion of the proceeds to pay the landlord the monthly rent for the land. After repeated assistance requests to the landlord to remove this illegal activity, our city attorneys again indicated that the land could be subject to forfeiture. Again, after discussions with his attorney, the landlord terminated the lease, the trailers were removed, and the land was used for other purposes.
I mention these two examples simply to illustrate how valuable a tool these laws can be. In neither instance was there any lost cash or property; the only benefit to the police department was in the elimination of criminal activity. The people who benefited the most were the residents who now had a more drug-free environment in which to raise their children.
I would be happy to answer any questions.
Mr. HYDE. Well, I thank you, Chief Moody.
Mr. David Smith, Esq., of English & Smith, Alexandria, VA, is with us and if you would take the last seat, you're going to testify on behalf of the National Association of Criminal Defense Lawyers, and thank you for your legendary patience and waiting all day. Thank you. Mr. Smith.
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STATEMENT OF DAVID B. SMITH, ESQ., ON BEHALF OF THE NATIONAL ASSOCIATION OF CRIMINAL DEFENSE LAWYERS
Mr. DAVID SMITH. Thank you, Mr. Chairman. I thought I might not get a chance to speak today and I didn't consider it a great loss because I feel like I've already had quite a lot of opportunities to give you my views.
But I am glad that I did get a chance to speak, particularly after hearing some of the things that the panel said. I'd like to thank you especially, sincerely, for all of your efforts to promote forfeiture reform over the years. It's been a long haul, as you know, and as I know, and we feel, finally, this is the year where forfeiture reform may happen. And we urge that the committee continue to pursue it full tilt, and really we urge that you hold the line on compromises until later, later in the whole process, when we know—when we have a sense of what we can accomplish.
The Government talked about a couple of provisions that they said they needed, and, in particular, this civil investigative demand or some other mechanism to make their cases. We feel very strongly that they have ample investigative tools already. And not only that, but they have other provisions in mind which we have not opposed, which would give them even more investigative tools than they have today.
But we think this so-called civil investigative demand provision is really unprecedented in American history. We know that recently Congress has enacted subpoena provisions in very narrow areas like health care fraud, where documents can be subpoenaed, but that's a totally different animal than what the Government is seeking here, which is the authority to dragoon any citizen into a U.S. attorney's office with or without counsel, and force them to answer whatever questions the prosecutor cares to pose to them, without any level of suspicion—just on the mere fact that the prosecutor suspects that the person may have forfeitable assets, or may have information about forfeitable assets. There is not such a provision in American law. There never has been, and we hope there never will be.
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The other provision that the Government has been campaigning for which we find completely unacceptable is this fugitive disentitlement provision. They want an absolute rule that no fugitive can contest a forfeiture case civilly. They presented their arguments to the Supreme Court last term and they lost in a unanimous decision, 9-zip. If they couldn't persuade a single Justice on this conservative Supreme Court of the merits of their argument, why should Congress be persuaded that the same idea ought to be enacted into law? It just doesn't comport with elementary notions of fairness. Just because a person chooses to thumb his nose at a court doesn't make that person an outlaw in the eyes of the law, whose property can be seized at will by the Government without any basis. And, unfortunately, that's exactly what the Government has done in a few cases prior to the Supreme Court's 9–0 decision in Degen. They have used the fugitive disentitlement doctrine as a weapon to go after the property of the fugitive, even without any basis to believe that it's subject to forfeiture. That just isn't fair and it's beneath our courts and our society, and it shouldn't be made law.
I think that there are basically four positive pillars of the bill that you've introduced, the bipartisan bill, which particularly merit emphasis. Obviously, placing the burden of proof on the Government where it belongs—finally.
The second key provision is providing a mechanism for the appointment of counsel—also long overdue. No matter how fair the provisions of the law may be, if there's no counsel to enforce them, the process can never really be fair.
The third key pillar of the bill is establishing a uniform innocent owner defense for all civil forfeiture statutes. We already have innocent owner defenses in section 881 of title 21 and in the money-laundering statute, but there are literally dozens of civil forfeiture statutes which have not innocent owner provision at all. And it's high time that there be an innocent owner defense. It should be a broad defense, similar to what we currently have in section 881 and in section 981, the two most frequently-used civil forfeiture statutes. It should not be a narrow defense which excludes nonbona fide purchasers from any consideration. Some of those people are innocent spouses who have given years of domestic labor in a marriage, and to treat those persons as if they've given nothing for their own home is really unrealistic and unfair.
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The fourth key provision is the establishment of time limits for providing notice to claimants and also for initiating the civil forfeiture action in court. And that is also a provision that finds an echo in current law because we already have a provision in section 888(c) which requires the Government to initiate a civil forfeiture action within 60 days of seizure, but, ironically, only in the case of conveyances seized for drug-related offenses. That provision was enacted, I believe, in 1988 in reaction to the Government's zero-tolerance policy and the excesses of that policy. But it was limited to that category of cases. There's really no reason why all property owners shouldn't have similar protections. And the bill that you've introduced actually gives the Government an additional 30 days, a total of 90 days, to file a civil forfeiture complaint. And that 90-day period doesn't even start to run until a claim is filed with the seizing agency. So the Government would get 60 days to begin with, and 90 days on top of that, at a minimum, for a total of 150 days. Plus, the provision that you've introduced provides for an extension of time for the Government for good cause shown, both for the giving of notice and for the filing of the forfeiture action. So the Government is amply protected.
The bill gives the Government much, much more time than you typically have in the State forfeiture statutes, some of which require the Government to file an action in as little as 10 days after the date of seizure.
There's really nothing radical in any of these provisions and that's generally the point of the written statement that I've submitted. All of them have precedent in State practice or in Federal practice already, or are suggested by court decisions under the due process clause. For example, the appointment of counsel may be necessary in some forfeiture cases based on due process considerations alone.
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So we don't feel like this bill that you've introduced is a radical bill that needs to be watered down. We think the bill is fine as it is. There may be additional provisions that ought to be added. There may be room to compromise. But this is not the point at which to discuss compromise on this bill.
There's a lot else I could say, but I think, given the lateness of the hour, I appreciate the opportunity to say that much.
[The prepared statement of Mr. David Smith follows:]
PREPARED STATEMENT OF DAVID B. SMITH, ESQ., ON BEHALF OF THE NATIONAL ASSOCIATION OF CRIMINAL DEFENSE LAWYERS
Chairman Hyde, Mr. Conyers, Other Distinguished Co-Sponsors of this bill and Members of the Committee, on behalf of the National Association of Criminal Defense Lawyers (NACDL), I thank you for inviting me to speak at this hearing. Also appearing before this Committee today, and at its hearing last July is my fellow co-chair of our Forfeiture Abuse Task Force, E.E. (Bo) Edwards. And appearing beside me too is our President-Elect, also an asset forfeiture expert, Gerald B. Lefcourt.
NACDL is the preeminent organization in the United States advancing the mission at ensuring justice and due process for persons accused of crime. A non-profit, nonpartisan, professional bar association formed in 1958, among our 9,000 direct members and 22,000 state and local affiliate members are private criminal defense lawyers, public defenders, judges and law professors committed to preserving fairness within the American justice system.
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It would be difficult to imagine a more egregious deviation from the American commitment to the rule of law, or one more dangerous to citizen rights and liberties, than the civil asset forfeiture statutes. I want to emphasize our deep appreciation to you, Chairman Hyde, Mr. Conyers, and the other members of the Committee who have taken the lead on forfeiture reform.
I. INTRODUCTION
I am the author of the leading treatise on forfeiture law, Prosecution and Defense of Forfeiture Cases. I was the deputy chief of the Asset Forfeiture Office of the Criminal Division when it was first set up in 1983. I helped draft the forfeiture provisions of Comprehensive Crime Control Act of 1984, which did so much to make forfeiture a powerful weapon in the fight against crime. Back then it was hard to get agents and prosecutors to use forfeiture. It was something most of them weren't familiar with. Certainly, no one then anticipated the widespread use, and frequent abuse, of forfeiture powers we see today.
Reform of the civil forfeiture laws is long overdue. Even most prosecutors and agents I speak with recognize that—privately, anyway.
For your convenience, I have attached our thorough statement from the hearing of July 22, 1996, with its attachments A and B: section by section critiques of the DOJ's proposal (introduced at the urging of DOJ just a couple weeks ago by Congressman Schumer) There is much more in the DOJ and Treasury proposals and our criticism of them can be addressed in this hearing. But believe me, their proposals are deeply troubling. I hope you will analyze them, and our critiques of them, very carefully.
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As our prepared statement from last July's hearing continues to state our position on forfeiture reform, I will make this statement brief. I'll simply update our previous statement and re-emphasize the importance of what I see as four especially key provisions of this praiseworthy bipartisan bill:
placing the burden of proof on the government, where it belongs, and by an appropriate standard—clear and convincing evidence;
providing a mechanism for the court to appoint counsel for indigent claimants;
establishing a uniform ''innocent owner'' defense for all civil forfeitures.
establishing time limits for providing notice of a seizure and for filing a civil forfeiture complaint in court.
II. FOUR KEY PROVISIONS OF THE BILL—SPECIFICALLY
A. Burden of Proof
I'll never forget a speech I heard Judge Stephen Trott give to a large group of prosecutors at the DOJ in the mid-1980s. Judge Trott was the Assistant Attorney General in charge of the Criminal Division at the time. (He is now a federal judge on the Ninth Circuit, appointed in 1988 by President Reagan.) He had served for many years as a deputy district attorney in Los Angeles. When he became U.S. Attorney for the Central District of California, Judge Trott discovered federal civil forfeiture. He was simply amazed, he told us, that you could confiscate someone's property merely by showing probable cause for forfeiture. It seemed unbelievable to him coming from the California state system.
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And indeed it is amazing that a statutory burden of proof so out of line with current notions of due process could have survived this long. Yet, it has. But with your reform efforts, finally, we hope we are on the verge of correcting this abusive anomaly in American law.
Thanks to years of efforts, congressional, litigation, and journalistic, now even the DOJ concedes that the burden of proof must be raised. The Treasury Department still demurs, at least with respect to the specific forfeiture statutes it administers. But its position is increasingly untenable. See e.g. United States v. One Parcel of Property at 194 Quaker Farms Road, 85 F.3d 985, 989 (2d Cir. 1996) (''after [the U.S. Supreme Courts decision in] Austin, it is now an open question whether 21 U.S.C. 881(a)(7) warrants civil or criminal due process protections, or possibly some hybrid of the two''; suggesting that burden of proof may be unconstitutional); United States v. Leasehold Interest in 121 Nostrand Ave., 760 F. Supp. 1015, 1032 (E.D.N.Y. 1991) (government should be required to prove case under 881(a)(7) by clear and convincing evidence); United States v. $12,390.00. 956 F.2d 801, 807–12 (8th Cir. 1992) (Beam, J., dissenting) (questioning constitutionality of burden of proof under 19 U.S.C. 1615); United States v. $191,910.00 U.S. Currency. 16 F.3d 1051, 1069 (9th Cir. 1994) (disparity between government's and claimant's burdens ''involves a serious risk that an innocent person will be deprived of his property''); Department of Law Enforcement v. Real Property, 588 So.2d 957 (Fla. 1991) (landmark decision striking down Florida's forfeiture law and holding that due process requires state to prove its civil forfeiture case by clear and convincing evidence); Wohlstrom v. Buchanan. 884 P.2d 687, 692 (Ariz. 1994) (''Forfeiture statutes have increasingly been criticized for threatening due process rights by allowing the government to establish probable cause under a lesser standard of proof, and thereafter shifting the ultimate burden to claimants''); State v. Spooner, 520 So. 2d 336 (La. 1988) (state constitutional guarantee of due process requires that government prove its forfeiture case by at least a preponderance of evidence as proper owner is entitled to a presumption of innocence similar to that in a criminal case; some members of Court would require clear and convincing evidence or proof beyond a reasonable doubt).
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The bill's proposal to raise the bar to clear and convincing evidence is supported not only by due process considerations, but also by state law precedent. Some of our nation's largest states—including California, New York and Florida—rightly require clear and convincing evidence by the State to support a civil forfeiture of a citizen's property.
B. Appointed Counsel
Nor is the bill's proposal to give the district judge discretion to appoint counsel for indigent claimants a radical departure from current law. But it is an important improvement to the current law. Once again, fundamental due process considerations strongly support the provision. In the U.S. Supreme Court case, Lassiter v. Department of Social Services, 452 U.S. 18 (1981), for example, concerning a parental termination proceeding, the Court held that where the government seeks to deprive a citizen of an unimportant non-liberty (e.g., property) interest, due process may very well require appointment of counsel for an indigent defendant. In fact, courts have already held that, under Lassiter, there is a due process right to appointed counsel in a civil forfeiture case, at least in some circumstances. See e.g. United States v. Forfeitlre Property, All Appurtenances, 803 F. Supp. 1194 (N.D.Tex. 1992); Commonwealth v. $9,847.00 U.S. Currency, 637 A.2d 736 (Pa. Cmwlth. 1994).
District judges currently have authority to appoint pro bono counsel for an indigent prisoner claimants, under 28 U.S.C. 1915(d). See e.g., Onwubiko v. United States, 969 F.2d 1392, 1399 (2d Cir. 1992). However, they rarely do so. See 1 David B. Smith, Prosecution and Defense of Forfeiture Cases, 11.02, 11–12 (1996). This suggests that they will not make inappropriate appointments of counsel under the similar appointment provision in this bill. On the other hand, the explicit provision in the bill for reasonable attorney compensation should result in a much-needed increase in the number of appointments for civil asset forfeiture cases as compared with the experience under 1915(d).
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It is important in this respect to remember that counsel appointed under the Criminal Justice Act (CJA), to represent a criminal defendant may also represent that defendant in a related civil forfeiture proceeding under current law. 18 U.S.C. 3006A(c) states that once counsel is appointed under CJA, he is to represent his client ''at every stage of the proceedings ..., including ancillary matters appropriate to the proceedings'' See e.g. the Guide to Judiciary Policies and Procedure, Vol. VII, Chapter 2, specifically indicating that representation in a civil forfeiture proceeding or on a motion for return of property pursuant to Rule 41(e) is appropriate under section 3006A(c).(see footnote 5)
All this bill would do is extend the same authority to appoint counsel for indigent civil forfeiture claimants who do not face related criminal charges. Representation should not depend on the ''fortuity'' of whether one faces a related criminal case.
No matter how fair the formal civil forfeiture procedures are, the process can never really be fair if a claimant is forced to represent herself. This is a critical provision that must be in the final bill.
The Government's primary objection to this provision is that the cost of providing counsel would be paid from the DOJ and Treasury Asset Forfeiture Funds—that is the funds that are derived from forfeited property from which the agencies seizing the property now derive a direct pecuniary benefit. But the question of where the money comes from is an issue that should remain entirely separate from the merits of this provision. NACDL is not necessarily opposed to a different funding mechanism if that is what it takes to get this badly needed provision enacted. However, we have concerns about deploying the much less certain annual CJA appropriations. At the very least, if that mechanism is to be used, the Administration must commit itself to using its ample influence to help ensure an adequate increase in the annual CJA appropriations. I must stress, though, that NACDL's position is that the current CJA appropriations are, and have been for several years, quite inadequate to cover current demands. And rather than placing a new tax burden on Americans, it would seem much more economical and fair, and certain, to have the appointment dollars come the Asset Forfeiture Fund now the essentially exclusive till of the government seizors.
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C. Innocent Owner Provision
The third key pillar of the bill in my opinion is the uniform provision for an innocent property owner defense to forfeiture. You might well ask: Who could argue with that, especially when the defense provided merely tracks current law under 21 U.S.C. 881 and 18 U.S.C. 981? But somehow, the Government nonetheless opposes even this modest provision.
The DOJ says it favors a uniform innocent owner defense, but then says it wants a defense that is much narrower than the one currently provided under the two main federal civil forfeiture statutes! That is not civil asset forfeiture reform. Clearly, the purpose of the worthy reform effort reflected in the bill is to make it harder for the Government to confiscate the property of innocent persons, not easier.
Meanwhile, the Treasury Department is opposed to adding any kind of innocent owner defense to the many statutes it enforces—even a defense as unreasonably narrow as the one the DOJ supports. This is an especially outrageous position.
In his concurring opinion in the unfortunate 5–4 Supreme Court decision in Bennis v. Michigan 516 U.S.———, 116 S.Ct. 994 (1996), Justice Thomas actually urged Congress to take the responsibility he did not think the courts could properly take (i.e., without being unduly activist), for protecting innocent property owners. See Bennis, 116 S.Ct. at 1002. And his call to Congress has been echoed by every editorial writer and commentator writing about Dennis. See e.g. Nation's Founders Would Gasp at Court's Stance, USA Today, March 5, 1996 (in ''an appallingly unfair decision'' Court has ''given police the go-ahead to prey on and plunder innocents''); George F. Will, Mrs. Bennis' Car,. Washington Post, March 10, 1996 at C7 (''So it is time for the political branches of state governments and the federal government to act on the clear signals from [Justice] Thomas and others concerning the need to protect innocent persons who cannot reasonably be considered negligent concerning the misuse of their property'').
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Treasury simply has its head stuck in the sand. Its adamant opposition to any innocent owner defense with respect to ''its'' forfeiture statutes, certainly speaks volumes about the unreasonableness of Treasury's views on the whole subject of forfeiture.
D. Enforceable Time Limitations for Notice and Commencement of Forfeiture Suit
The final critical pillar of the bi-partisan bill is its establishment of enforceable time limits for the government to provide notice and commence a forfeiture suit. First, the measure establishes a much-needed, 60 day time limit for the government to provide notice of the seizure and its intent to forfeit the property. Second, if a person files a claim letter with the seizing agency, the U.S. Attorney would then have to file a civil forfeiture claim within 90 days of the receipt of the claim letter.
These time limits give the government ample time to initiate the forfeiture action In fact, they provide much more time than most state forfeiture statutes allow. Moreover, the time limits are flyable. The government may ask a court to extend them for good cause.
Although the time limits in the bill are flexible, they do have necessary teeth. If the government fails to comply with the time limits and fails to obtain an extension of time for good cause shown it may not proceed with the forfeiture action. The same remedy is found in most state forfeiture statutes. And it is found in the federal code, at 21 U.S.C. sec. 888(c). However, Section 888 covers only conveyances seized for drug-related offenses.(see footnote 6) The same protection against government foot-dragging should be afforded to all property owners, and not just alleged drug dealers.
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III. CONCLUSION
I would like those members of the Committee who may still be reluctant to get behind this bi-partisan forfeiture reform bill to know that NACDL and this Committee's staff counsel have made every effort to accommodate the Administration's concerns and objections and to craft a bill that the law enforcement agencies can support. But we simply cannot accede to demands to support a ''compromise'' bill that fails to ensure that the procedures by which property gets forfeited are fundamentally fair. We cannot endorse any bill that ''compromises'' away American liberties.
We are greatly concerned that while leaders of this Committee have been working to reform the civil asset forfeiture laws, DOJ has been vigorously lobbying Congress and the U.S. Judicial Conference Committee on Rules of Practice and Procedure for extreme changes to our nation's criminal forfeiture laws. These criminal forfeiture laws are also in need of reform, though not as critically as the civil forfeiture laws. But the DOJ's proposals in this area are not those of reform. The DOJ's proposals include for example a radical diminution of the historic American right to trial by jury. Indeed, they would do away with the right to any trial at all on the issue of forfeiture.(see footnote 7)
We would hate to see this Committee's worthy civil forfeiture reform efforts negated by another bill turning criminal forfeiture into just another, even worse insurgent of oppression.
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The DOJ's criminal forfeiture efforts, including its encouragement of the power-wishlist recently introduced by Representative Schumer, strike me as completely inconsistent with the DOJ's claim that it favors forfeiture reform.
I urge the DOJ to reconsider these proposals. And I respectfully urge Mr. Schumer, and every member of the Committee, to review NACDL's very detailed critiques of the DOJ and Treasury civil and criminal forfeiture proposals, in the Statement of July 22, 1996 before the Committee, attached to this Statement, at Attachments A and B.(see footnote 8) If the DOJ succeeds in turning this bill into a law enforcement Christmas Tree, it will be worse than no reform.
NACDL's legislative director, Leslie Hagin, is available at any time in our Washington, D.C. office. And my office is right across the river in Alexandria, Virginia. We would be happy to meet with any Member or their staff at any time to discuss this bill or the larger subject of forfeiture reform at greater length than we can do here.
Once again, Mr. Chairman, thank you for the opportunity to testify on this important matter, and for your leadership in bringing forward this vital reform bill. I am pleased to see it already enjoys such strong bi-partisan support.
INSERT OFFSET RING FOLIOS 62 TO 107 HERE
Mr. HYDE. Well, Mr. Smith, I want to thank you again. You have been real helpful to us, not just today, but in the past. And I would hope—and again, this may be utopian—that you and the Government would be willing to sit down with us and give us a give-and-take across the table to try and come to closure on some of these things. We want to do something. We want to do the best we can. We don't want to harm criminal asset forfeiture and let drug dealers escape. We know how useful forfeiture laws can be as a source of punishment for the wrongdoers and assistance to law enforcement.
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But we're talking about something different. We're talking about due process that has been denied. And there may be things that Mr. Cassella disagrees with, and I understand that, and I understand the awkwardness of Mr. Bailey being here with a pending matter that you're not permitted to talk about. I didn't know about that until this morning, and it was too late to do anything about. But we still wanted to hear what he had to say. But we understand the burden that you're laboring under.
Mr. CASSELLA. I appreciate your understanding of that, Mr. Chairman, because I can't comment on a case with a pending investigation.
Mr. HYDE. I understand, and had I known that, other arrangements would have been made. But, nonetheless, I think we're close on this; I really do. And I don't want the door slammed by the Government, and at the same time I know the defense bar doesn't want to give away the store, and I don't blame you.
Mr. DAVID SMITH. Particularly at the outset of the process.
Mr. HYDE. I understand. I understand. But I don't even like hinting that we'd give away anything at any part of the process. But we want to do the right thing. And we want to find out what the right thing is. And we need to pick your brains and exploit your good will to have this work, and we will.
So, we expect a vote within 5 minutes or so, so we don't have much time, but Mr. Conyers has been most accommodating and I want to yield what time he needs.
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Mr. CONYERS. Thank you, Mr. Chairman. I'll yield to anybody here. I just have eight forfeiture cases that I'd like to put before Mr. Cassella for comment: Mr. Bradley, Ms. Blanton, Mr. Moody even—since you talked a little bit about law—the William Munnerlynn case, the Dr. Richard Lowe case, the McCorkel seizure, the George Gephard case, Gerald Lefcourt's case, the Willie Jones case, the Harlan Van Der Zee case, and the Don Carlson case.
None of these cases were drug dealers. And that's the chairman's point. This reform isn't about what we do with drug dealers that are poisoning our children. It's not about how well the forfeiture money is being spent. It may not even be abuse of process. Do you know how many hundreds of millions of dollars of police abuse in police violence cases occur every year? These laws weren't ineffective; they were abused and misapplied. Some of what I'm hearing here reminds me of that. But, I'm not sure that's what we have here.
So we need to deal with this. I think we're going to need a meeting. I think much of this can be done in a meeting setting, rather than a formal hearing.
But you're talking to us about drug dealers. We're talking to you about citizens. The guy who buys a plane is not a drug dealer. The family doctor whose cash is seized isn't dealing drugs, and so forth, right down the list.
Now, finally, before I yield to anybody that needs time, we've all been in negotiations, lots of negotiations. We can't come forward and say we're willing to negotiate and then say off the record that these negotiations are not moving. We don't see any need for any change or accepting any of the revisions to this measure. I mean, we're all veterans at negotiation. So the one thing I want to do, and I have urged comity all during this hearing, but the one thing I can't permit myself to do is be deceived that we're working at two levels: one level that we all assert we're negotiating, and then the other level is that ''You ain't getting nothing here, buddy.''
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So we have to—I mean, the state of the hearings seem to be a little touch-and-go now. I have not been a party to any of the negotiations. So everything that's been told to me is hearsay. But negotiations in good faith are negotiations in good faith. So I urge you to keep these comments in mind.
I yield back the balance of my time. I thank you for your staying here so long today. It was inavoidable.
Mr. HYDE. Thank you very much, Mr. Conyers.
Mr. Bryant, another saintly person who's spent a lot of time here.
Mr. BRYANT. Thank you, and I, too, want to add my appreciation to the panel for testifying today. Chief Moody and certainly the folks from Justice and Treasury have given a balance to this panel, but I would also, coming from a prosecutorial background, suggest that there is a great deal of information involved in all of these cases and I get a sense that we haven't heard from all sides of these cases.
My good friend, Bo Edwards, and I had a chance to speak—he had a 7 o'clock flight and had to leave, but, I hate to do this, since he's gone and cannot defend his client, but I didn't realize that this was going to come up. The Willie Jones case that Mr. Conyers, the ranking member, has asked about, I do have some information about that case and I don't have about these other cases. Although I was particularly concerned about Mr. Lefcourt's case where, after this gentleman was apprised that this could be drug money, could be tainted money, he went ahead and participated in a fourth transaction, which almost to me ratified the first three.
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Also, in Bo Edwards' case of the doctor and the banker and the failure to file the CTR's and the whole scheme that was gone through there, just seems to be a lack of clean hands—I know that's an equitable doctrine, but certainly I have some concerns about that case. But the Willie Jones case was in the middle district of Tennessee and I was the U.S. attorney in the Western District and not directly involved in the case, but I do know that that had every piece of evidence as being a drug case, as being a courier. Mr. Jones was caught in the airport in Nashville, as I understand, and the money was found on him. He did not know how much money he was carrying, which is very unusual for a person carrying money, that you don't know how much money you've got when it, I think, turned out to be $11,000.
And he was carrying that money, he said, to Houston, TX, which we all know is a drug source city, to purchase shrubbery, plants. He had a nursery there in Nashville, and when questioned about where he was going to purchase those plants, he didn't know. He was going to go down there, and get a phone book, and look up somebody in the phone book to buy these plants from. And when asked, ''Well, how are you going to transport those plants back?'', he said, ''Well, I'm going to fly back to Nashville; get my truck; drive to Houston; pick up the plants, and drive back.''
And the amazing thing about this, in addition to purchasing his ticket, I believe with cash, was that he was going to do all this negotiation within a period of about an hour, as I recall. His turnaround flight back after landing in Houston was within an hour, as I recall, and certainly—people say, ''Well, they didn't find any drugs on him,'' and of course, you know, couriers, the mules, you don't find both at the same time. You either have the drugs or you have the money. And I told Bo, if I ever get in trouble, I'm going to hire him as my lawyer, because I still can't understand how he won that case later on an appeal. I lost track of the case, but I do know those as the underlying facts and——
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Mr. HYDE. Mr. Bryant, would you yield to me for just a question?
Mr. BRYANT. Yes, sir.
Mr. HYDE. We had Mr. Jones testify here a year ago, and my recollection of that case is that he wasn't charged with anything, but they kept his money. I have a problem with that arrangement where they fine you by confiscating thousands of dollars, and you walk away. That might happen in Guinea Bissau or somewhere, but in America—doesn't that trouble you?
Mr. BRYANT. It does, but that does happen. I think Mr. Cassella has indicated now that maybe 80 percent——
Mr. CASSELLA. Eighty percent of cases involve an arrest.
Mr. BRYANT. Yes, involve an arrest. So while I don't argue with the chairman and the bill that——
Mr. HYDE. Well, I'm troubled by the fact that they grabbed Mr. Jones at the airport because he fit a profile—God help you if you fit a profile—and they confiscated his money. And they let him go, and that's the end of story except he had a hell of fight to get his money back. Doesn't that look topsy-turvy to you? Shouldn't they convict you of something first—and then have a fine levied by a court, and then you pay it? But to confiscate your money, and let you go and have you go scratch for your own money, I have a problem with that.
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Mr. BRYANT. Well, I hesitate to reclaim my time from the chairman——
Mr. HYDE. Oh, no, no; please forgive me.
Mr. BRYANT. I think our prosecutors have to enforce the law, and the law does allow a civil forfeiture independent of the criminal forfeiture, and if that is truly our problem, then perhaps we ought to consider doing away completely with the civil forfeiture aspects, and that way we would mandate our prosecutors to follow the criminal procedure and the prosecution. I don't advocate that, but I would just add as a note that, as I rushed out of Washington about 2 months ago, I apparently was thought to be a courier, because they were questioning me about where I was going—a southern city, in Memphis; I had only one bag; I had bought my ticket that day, and I showed them my congressional ID, and I hoped that would stop them from searching me; it did not. What saved me in the end was the fact that I was a frequent flyer; I had frequent flyer mileage and——
Mr. HYDE. But you look so unsuspicious that it's suspicious. [Laughter.]
Mr. BRYANT. I apparently did fit the courier profile that day, but, with that, I will yield back my time.
Mr. HYDE. Thank you very much.
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Mr. Scott, the gentleman from Virginia.
Mr. SCOTT. Thank you, Mr. Chairman. I just had one question for Mr. Cassella.
Did I understand you to say that 20 percent of the people from whom you get property there's no arrest?
Mr. CASSELLA. Twenty percent of the forfeitures do not involve a parallel arrest or prosecution. Most of those are cases where we find abandoned property; we might find cash in a locker in a bus station or a train station, and we don't know who to prosecute; there's no one connected with the property—maybe in an automobile; maybe we seize a container coming in at a port of entry, and we find drugs and money or other property. In those cases there is no one to prosecute. We haven't identified a particular defendant; nevertheless, the property is seized. If anyone comes forward and files a claim, they may of course, and in the overwhelming number of cases no one would file a claim in such a case, because who wants to associate himself with that property and then expose himself to prosecution?
Mr. SCOTT. In what portion of the cases do you return the property?
Mr. CASSELLA. Do you mean after an adverse judgment by a court? I know that in 1995, for example, of the 33,000 seizures by the Justice Department and however many actually resulted in a case, only 48 cases were adverse judgments against the Government, so a minuscule percentage. We can never guarantee we're going to win every case, but the number of cases where we have adverse judgments is very, very small.
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Mr. SCOTT. Do you return property other than because of an adverse judgment?
Mr. CASSELLA. Sure. Settlements, sometimes we will make a seizure; the claimant will come in and explain that he's an innocent owner. If the explanation is reasonable, the property goes right back. I mean, we only——
Mr. SCOTT. How many are those?
Mr. CASSELLA. I don't have any numbers on those.
Mr. SCOTT. Ms. Blanton, do you have those comparable numbers for the customs agencies? How many of the seized assets are returned?
Ms. BLANTON. No, I don't have any exact numbers. I'm sure that I could probably get them if you would like?
Mr. SCOTT. Do you have any general numbers? I mean, do you return a lot of things?
Ms. BLANTON. When you're talking about seizures made at the border, yes, a large percentage of those seizures are remitted to the property owner in lieu of some fine or penalty.
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Mr. SCOTT. And what process do they have to go through to get the property back?
Ms. BLANTON. I think I'd like Mr. Bradley, if he could, to help me out there.
Mr. BRADLEY. If I could, understanding particularly with the Customs Service there's a different class of seizure, many of those are public welfare or embargo concerns, and they enforce maybe 1,000 laws at the border for other agencies. Ninety percent of those seizures, I'm informed by Customs counsel, 90 percent of the property that's seized in those cases is ultimately returned to the violator in one form or another.
Mr. SCOTT. To the violator? You mean the alleged violator?
Mr. BRADLEY. To the alleged—well, there still may be a violation. In fact, there may be a violation in many cases that there may be a penalty imposed. There may be some corrective action taken; the duty—the correct duty may be levied against the property; the property is ultimately returned, so the person still may be a violator, but the property is still returned.
Mr. SCOTT. And what do the people have to do to get the property back?
Mr. BRADLEY. Well, ordinarily the Customs—the process under title 19 in the Customs laws is primarily administrative, and more often than not the Customs Service will accept a handwritten letter asserting that you are the owner of the property and you have some interest, and they will proceed administratively to adjudicate those interests in the types of cases that they seize at the border.
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Mr. SCOTT. But of the 90 percent that you eventually return, how long are the people without their property?
Mr. BRADLEY. Well, that could vary depending on the type of property. If it's embargoed goods going to a country where they may not be allowed to be exported, they may never get them back, but certainly after that, if they can show that those goods are not destined for that country, they will get the goods back, but that could take longer than detaining trademark violation goods or something like that. So it will vary depending on the types of goods seized and the law enforced.
Mr. SCOTT. Thank you, Mr. Chairman.
Mr. HYDE. Thank you very much. I would like to take great pleasure in announcing that the vote was done by a voice vote, so we are saved from that hasty journey. The House has adjourned, and so with that information, I am sure expedition will be the rule of the day. Mr. Barr is recognized.
Mr. BARR. Thank you, Mr. Chairman. We have extensive testimony and written materials from last year, and now we have some very, very good material that we've gained today, both through oral testimony as well as the written record here, and I intend to go through that, particularly Chief Moody. If there are any things in particular—because I know you have a lot of experience out there in the real world working these cases—if I could ask you to take, you and your colleagues, take another very careful look at this legislation—and I know that you've looked carefully at it already and at the legislation from last year, and let me know very frankly if there are—if you could sort of prioritize to some extent, if there are some things in this legislation that would create more serious roadblocks than others.
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Because, again, I certainly speak for myself, but I think I share the chairman's view also and many of the other cosponsors of this legislation. We all have a very clear appreciation for how important asset forfeiture is as a tool for law enforcement and for prosecutors at both the State level and the Federal level, and we don't want to unduly hamper the use of the tool, but by the same token there are some changes, some that the Department has already seen fit to implement, and we appreciate that. We appreciate the Department's indication, again, here today, that they're willing to work with us to continue to try and address these problems, but we do have a concern that there are—that there do remain some areas as reflected in this legislation that are worthy of our attention: the burdens and the innocent owner defense, and so forth.
But I would very much appreciate all of the witnesses, but particularly Chief Moody, since we're in the same jurisdiction down there, if there are some specific cases that you can point out to us where there would be very serious problems, and it would hamper your ability to legitimately conduct bona fide asset forfeiture actions, so that we could take those into account and any final adjustments that might need to be made to this, I would very much appreciate it.
And, again, thank all of the members of the panel and Mr. Chairman for bringing this important legislation forward.
Mr. HYDE. Thank you very much, Congressman Barr.
I would ask Mr. Cassella if the Justice Department could provide for the record a document describing the percentage of civil forfeiture cases that are accompanied by criminal prosecution.
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Mr. CASSELLA. Eighty percent, Mr. Chairman.
Mr. HYDE. Eighty percent are criminally-prosecuted, and 20 percent are not?
Mr. CASSELLA. Oh, no, I'm sorry. I thought you meant in what percentage of civil cases is there a parallel criminal prosecution; that's 80 percent.
Mr. HYDE. Well, we have it for the record; we don't need it in writing.
All right, well, again, thank you so much for your testimony. Mr. Cassella.
Mr. CASSELLA. Mr. Chairman, if I could, I just wanted to make a comment in response to what Congressman Conyers said and, Mr. Chairman, what you've said about the need for a compromise here. We have been working with your staff, and we very much want to produce a bill that we all can agree on. We had a starting point, and you had a starting point, and we have worked together these last few weeks. We think we've put together a bill which addresses your concerns and addresses our concerns and that we can work together to advance. I hope that that's still on track. It is our view that when we met with your staff the last time—it was last week—that the draft we had was something that we were within a sentence or two of being able to nail down and say, ''This is something that we all can go forward and support.''
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We had to address—what remained were such issues as Ms. Blanton's concern with the application of these statutes to the Customs laws. We agree with them that these things ought not to apply in the same way to the Customs laws, for the reasons that you heard, but as to the due process concerns and also as to the things that law enforcement needs, we think we're in this compromise, and we've just about got it nailed down.
Mr. HYDE. Well, the civil investigative demands, I had hoped that issue was put to rest.
Mr. CASSELLA. That's not in this package, Mr. Chairman. We withdrew that the last time we met with your staff.
Mr. HYDE. I understood that. I just thought I heard—my memory could be faulty—that it was raised today as still viable, and I thought that's something we've put to rest. Good. Well, we really want to work together with you. We want your support, and we want your support to persist over in the other body as well as here. We want a bill the President will sign, but we want a bill that's worthwhile, that accomplishes something, and that's where Mr. Smith comes in. It won't satisfy Mr. Smith's constituency; you won't be happy with it; you'd just as soon leave it alone and toughen up criminal; I understand that, but we have some changes that I want to make to provide due process——
Mr. DELAHUNT. Mr. Chairman.
Mr. HYDE [continuing]. And if we can do that, that's great, and we can cooperate on other things, too.
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Mr. Delahunt.
Mr. DELAHUNT. Yes. I just want to pick up on comments that you and the ranking member made. I think everybody agrees that reform is needed and that it has to occur, and I understand that Mr. Cassella has been dealing with your staff. I think it's important that this committee put out a bill that everybody agrees with, including the constituencies represented by Mr. Smith and other panelists who have testified here today. I think it can be done here. I don't think it should be deferred to a later stage in the process. I would hope that we could secure language that everybody could agree with: the administration, representatives from NACDL, representatives from victims' groups, and representatives of the National District Attorneys' Association, so that we don't continue negotiations after it leaves this particular committee, given the time and the effort that the chairman and other sponsors have spent on this. I'd like to see that happen.
Mr. Smith.
Mr. DAVID SMITH. If I might respond to that, Mr. Chairman—one of the problems, sir, is that the Government is telling us over and over again that any deal they cut here is a deal for this chamber only and will not bind them, and they will not give us any consideration whatsoever in the Senate, where they think they've got the deck stacked in their favor.
Mr. DELAHUNT. Well, then let me just—is that a true representation of the administration's position, Mr. Cassella?
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Mr. CASSELLA. No, not exactly, Congressman. Our position is that we will work out a compromise in this chamber in good faith. We've done—come a long way meeting with Mr. Smith and his colleagues as well as the committee staff, but the Senate is another body, and the administration's view is that it doesn't make deals in the House that bind the Senate; that is what I am told has been always the administration's view. A different dynamic may be at work; Members there may have different views. Neither party will be bound by whatever happens in the House. When we get to the Senate, we'll see what the Senators want to do, but as to this body, if we can work out a deal that we can support, we will support it.
Mr. DELAHUNT. Can I—let me ask a question of Mr. Cassella. What is the bottom line in terms of the moneys that are—the dollars that are realized, either through the sale of assets or through the sale of cash?
Mr. CASSELLA. How many dollars are deposited into the assets forfeiture fund?
Mr. DELAHUNT. Right.
Mr. CASSELLA. Two years ago it was $549 million per year. Then it dropped down to $480 million, and last year it was $338 million, a 38-percent decrease.
Mr. DELAHUNT. Can you tell me how those moneys are disbursed?
Mr. CASSELLA. About half of it goes to the State and local law enforcement agencies through the equitable sharing program, and the rest of it, through an appropriation that Congress gives the Attorney General, is used to finance the Asset Forfeiture Program. It pays for the storage of the property that is being seized and stored pending trial; it pays for contractors who process the claims that are filed. There's a process by which remission petitions can be filed, so that persons who don't have a valid claim at law, nevertheless, can petition the Attorney General for mitigation of the forfeiture, and there's some overhead cost in administering that program. And then, of course, we pay for the training of the agents and so forth, out of the appropriation. So it's split in that way.
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Mr. DELAHUNT. I thought I heard earlier testimony that some funding had been available for victim programs and for——
Mr. CASSELLA. Of the money that's distributed to——
Mr. DELAHUNT. Is that what you—is that the equitable sharing program that you referred to?
Mr. CASSELLA. Of the money that goes through equitable sharing to the State and local police, 15 percent may be passed through by the police to other community-based organizations that might make use of the money. With respect to property that we seize in kind, that is real property in a rural area that might be turned into a rural retreat for a drug treatment program through the Weed and Seed Program; we can turn that property over to a community-based organization.
Mr. DELAHUNT. Mr. Chairman, I just conclude by making a statement to you, given the representation made by the Department of Justice. You might seriously want to consider communicating with that other body, either through members of this committee or members of the staff, to try to bring finally to closure what ought to have occurred, I presume, years ago.
Mr. HYDE. You mean work with the Senate? Is that what you're suggesting? [Laughter.]
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Go over and talk to them and discuss this issue with them? I think that's a brilliant insight, and I intend to follow your suggestion.
Mr. DELAHUNT. Thank you, Mr. Chairman.
Mr. HYDE. But I will say this to Mr. Cassella, two things: first of all, you're very honest, God love you for that. No. 2, the only purpose of negotiating with you is to get your support, to get the support of your agency, so that they will back whatever we agree on over in the other body. If your support ends at the ocean shore there, and it's a new sheet of paper over in the other body, we're kind of spinning our wheels. I mean, your support is kind of academic. It certainly isn't political, and I would rather get a little more substance from you. I'd like to have a product that you can say, ''We can live with this,'' and start out with it over in the other Chamber at least and not repudiate or reject the work that we're doing. Otherwise, we are spinning our wheels. So, anyway, you were candid with us and we want to negotiate; we want your ideas. There are many reasons, things we don't see that you see in the bill; you have already. We certainly want Mr. Smith's very helpful assistance, and we'll come out with the best bill we can, and then we'll try to sell it to the Senate, and we would like to have you helping us, not obstructing us. Very good.
Well, thank you. This has been a great day, exhausting, but we've all learned something. Thank you. The committee stands adjourned.
[Whereupon, at 6:52 p.m., the committee adjourned.]
A P P E N D I X
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Material Submitted for the Hearing
PREPARED STATEMENT OF NADINE STROSSEN, PRESIDENT, AMERICAN CIVIL LIBERTIES UNION
I. INTRODUCTION
Mr. Chairman and Members of the Judiciary Committee, on behalf of the American Civil Liberties Union, I am pleased to here to day to support the bi-partisan sponsored Asset Forfeiture Reform Act (hereinafter ''the Act''). Also, thank you for inviting me to share our comments with you regarding civil asset forfeiture laws and their need for reform.
The ACLU believes that all civil forfeiture schemes inherently violate fundamental constitutional rights, including the right not to be deprived of property without due process of law and the right to be free from punishment that is disproportionate to the offense. While we believe the practice of civil forfeiture should be abandoned, we support meaningful reform efforts which would mitigate its harshness and incorporate equitable provisions and principles of due process. The Act addresses many of our concerns and takes a significant step forward that is long overdue. This bill would reform forfeiture proceedings to provide property owners with some significant procedural protections. It would also make it more difficult for the government to confiscate the property of innocent owners—people who were not aware of, or did not consent to, any illicit activity in connection with their property. In addition, it provides indigent property owners with the opportunity to have counsel appointed to represent them during the forfeiture proceedings. These reforms are critically needed because innocent property owners, or those who have committed only minor infractions are now subject to draconian punishments and property deprivations with rather limited constitutional or procedural protections. Because of these and other important procedural protections it provides, the ACLU endorses this legislation and urges Congress to swiftly pass the Civil Asset Forfeiture Reform Act.
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I would like to personally commend Chairman Hyde for his leadership and long standing commitment to reforming civil asset forfeiture in our nation. Mr. Chairman, you began this legislative journey, with the support of the American Civil Liberties Union and the National Association of Criminal Defense Lawyers, back in 1993, with the introduction of the H.R. 2417, the ''Asset Forfeiture Reform Act of 1993.'' You also made a powerful case for civil asset forfeiture reform in your book(see footnote 9) in which you documented and exposed many of the abuses inherent to the asset forfeiture system. Last year, you reintroduced your civil asset forfeiture reform legislation, however, there was insufficient time left in the 104th Congress to fully consider the bill.(see footnote 10) It is now time to complete the good work you started by passing your legislation early in the 105th Congress.
The current legislation is a hallmark of your legislative leadership. You have drafted a bill that has gained wide bi-partisan support, as well as endorsements from across the political spectrum. From the ACLU to the Institute for Justice to the CATO Institute, you have forged a diverse coalition of support from organizations that traditionally make for ''strange bedfellows.'' All of these organizations are united with one common goal—reforming the terribly unjust federal civil asset forfeiture laws.
II. PROBLEMS WITH CIVIL ASSET FORFEITURE
The roots of civil forfeiture can be traced back to medieval England where kings used the procedure to seize the property of disloyal nobles. The American model for civil forfeiture dates back to the eighteenth-century where forfeiture laws were used to combat piracy and customs violations. Under this system, courts permitted the government seize the offending ship as a civil remedy, rather than requiring criminal prosecution of the owners. These owners were usually not American and difficult to locate for criminal prosecution. Thus, permitting the government to proceed against the vessel under a civil forfeiture action, the government could punish an owner for a crime with minimal evidence and without any of the constitutional protections afforded a criminal defendant.
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The modem era of civil asset forfeiture flows from these same archaic legal concepts. It is based on the legal fiction that inanimate objects may be found guilty and condemned. Thereby, the object or property is subject to seizure and forfeiture to the government. Pursuant to this construct, the guilt or innocence of the owner is irrelevant, because the forfeiture action is against the ''object'' not the ''owner.'' In fact, no criminal arrest or conviction is even necessary to subject property to forfeiture. Government authorities must simply satisfy a requirement of probable cause that the property was used in an illicit activity or was purchased with funds from illicit activity in order to subject the property to forfeiture. As a result, civil forfeiture constitutes a dangerous, collateral weapon for law enforcement agencies where criminal convictions are more difficult to come by.
The profound inequity of civil asset forfeiture system is exemplified by the distinction between criminal and civil forfeiture. Criminal forfeiture is imposed in a criminal proceeding directed against an individual for his or her alleged misconduct. While a defendant in a criminal forfeiture prosecution is entitled to all the constitutional and procedural protections associated with the criminal process, a person facing civil forfeiture, on the other hand, receives none of the constitutional safeguards associated with the doctrines of due process and criminal procedure.
The irony and unfairness created under this system is worth illustrating. A major drug trafficker prosecuted under criminal forfeiture statutes is correctly afforded all of the due process and constitutional protections governing the forfeiture of their property. Whereas, an innocent 72 year old grandmother, whose grandson, without her knowledge, allegedly makes a drug sale from her front porch is subject to losing her home and possessions without the benefit of indictment, hearing, trial, or any other constitutional or procedural protection—not even the right to counsel.(see footnote 11)
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Not surprisingly, civil forfeiture has been especially attractive to law enforcement authorities because success demands very little in the way of proof or connection to actual wrong. Civil asset forfeiture originally was championed by law enforcement officials as a powerful weapon to fight the ''war on drugs.'' Indeed, it was thought of as some form of poetic justice: seizing the assets of major drug traffickers and using these assets to fund legitimate law enforcement initiatives. However, as a result of the ease with which law enforcement authorities are able to secure forfeitures, the use and abuse of forfeiture has skyrocketed. In some localities, it is being used against everything from drugs to drunk driving to prostitution. Unfortunately, in their zeal, law enforcement agencies have turned civil forfeiture into a nightmare come true for thousands of ordinary people who have minor brushes with the law or who are completely innocent of wrongdoing. Tragically, scores of innocent citizens and the Constitution have become casualties in this so-called ''war.''
While civil forfeiture proceedings have been held not to require the fundamental protections essential to a criminal proceeding, they are nevertheless penal. Indeed, the Supreme Court has recognized that in certain circumstances civil forfeiture may be punitive in nature and thus regulated by the Excessive Fines Clause of the Eighth Amendment.(see footnote 12) The legal fiction that surrounds civil asset forfeiture provides no comfort for those individuals who find themselves exposed to the harsh penalties associated with the criminal system without any of the fundamental constitutional and procedural protections inherent to the criminal justice system.
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III. ABUSES IN CIVIL ASSET FORFEITURE: THE VICTIMS
The limited constitutional protections for individuals subjected to civil forfeiture laws coupled with unbridled, permissive law enforcement authority, creates a civil forfeiture system that is ripe for abuse. Particularly appalling is the list of cases documenting the disproportionate victimization of minorities through the use of racially based criteria to unlawfully target and stop African-American and Hispanic travelers. Willie Jones, an African-American landscaper, had the misfortune to experience this humiliation.(see footnote 13) He had $9600 in cash seized from him at the Nashville airport simply because he fit a so called ''drug courier profile''—that is, an African-American paying for a round-trip airline ticket with cash. He actually planned to use the money to buy landscape materials. Unfortunately, Mr. Jones' plight is not that unusual. Several investigative media reports have chronicled and exposed how civil forfeiture is particularly harsh on minorities as a result of the extensive use of racially based profiles to determine law enforcement targets.(see footnote 14)
Further abuse is found in what is sometimes described as law enforcement extortion. This involves the practice of offering ''out of court'' cash settlements to otherwise innocent or minimally culpable individuals whose property was seized in exchange for a return of their property. Debra V. Hill's case illustrates this practice in action. She and her family were guests in a house that police raided. During the raid, the police discovered a small amount of methamphetamine in a box of clothing that did not belong to her. The police confiscated the $550 in her possession. She was so desperate for the cash that she agreed to forfeit $250 to the prosecutor in return for the remaining $300. When the charges against her were dropped, she did not receive the balance of her money.(see footnote 15) And there is the case of Kevin Perry, a gravel pit laborer from Ossipee, New Hampshire. After he and his wife pleaded guilty to the misdemeanor of growing four marijuana plants, the United States sought to forfeit their mobile home, worth $22,000. Following a fifteen-month battle to avoid homelessness, the government finally agreed to return the home for $2500. In order to pay the $2500, Mr. Perry had to take out a loan to be repaid at a rate of $155.63 a month.(see footnote 16)
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Finally, the lucrative business of asset forfeiture has created a strong temptation for law enforcement officials to pursue assets at the expense of pursuing convictions. The extensive use of civil forfeiture by federal and state law enforcement authorities has led to the confiscation of billions of dollars in drug assets. All of the money and property seized by state and federal officials is deposited back into the budgets of the seizing agencies. What originally was seen as a means of forcing criminals to pay for their own apprehension, has become an incentive for local, state and federal officials to seize property to auction justice to the highest bidder. As a result, major drug dealers are allowed to barter their way out of lengthy prison terms by prosecutors who have become preoccupied with huge sums of money to be obtained from drug forfeiture assets.
Conversely, low level drug users, with no assets or information to swap, are exposed to the full wrath of the harsh drug laws. specifically designed over the past decade for the worst drug offenders. Last fall, two reporters from the Boston Globe uncovered the distressing truth about this practice in action in Massachusetts. They compared the distinctly different experiences of Rachel Acevedo and Stephen Fenderson. Rachel Acevedo, a 25-year-old mother of three, is currently serving a ten year mandatory sentence, without the possibility of parole. She was prosecuted along with her former boyfriend for selling four ounces of cocaine to an undercover drug officer. The boyfriend fled before trial, leaving Ms. Acevedo the lone target for the prosecutors. Stephen Fenderson, on the other hand, had his home raided by police, where they found 23 bags of cocaine, a loaded illegal shotgun, ammunition, and other drugs hidden throughout the house. All tolled, these offenses would normally subject him to a mandatory sentence of fifteen years in prison. This did not occur. Mr. Fenderson forfeited $425,000 in drug money, and is a free man today after serving only 2 1/2 years.(see footnote 17) It seems that crime does pay if you are able to ante up to law enforcement.
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IV. REFORMING FEDERAL CIVIL ASSET FORFEITURE LAWS
To be sure, the abuses discussed above clearly make the case for the need to reform the civil asset forfeiture laws. The current law of civil forfeiture borders on the Medieval: it allows law enforcement authorities full discretion to confiscate any and all cash and property based upon mere suspicion of wrong doing; owners of such money and property are not entitled to appointed legal counsel; unjust procedural barriers such as unreasonable short time limits to contest a seizure and the requirement that a property owner post a bond in order to contest the seizure often times bar recovery; and the uncharged and completely innocent are presumed guilty in court because the burden of proof is on the individual whose property is being seized. The Act represents a sound first step in the effort to reform the civil asset forfeiture laws. While the Act contains several significant improvements, we believe that the following provisions are particularly essential to any meaningful forfeiture reform legislation.
Possibly the most important provision in the Act, places the burden of proof on the government to prove that property it has seized was subject to forfeiture by clear and convincing evidence.(see footnote 18) Under current law, the government is simply required to meet its low standard of proof—probable cause that the property is subject to forfeiture—then the burden shifts to the property owner to prove either the ''properties innocence,'' or that the owner did not know and did not consent to the property's illegal use.(see footnote 19) The government's probable cause burden, in reality, means only slightly more than a hunch and far less than what is necessary to prove guilt in a criminal court. It is commonplace to have a seizure and forfeiture of money and property based solely on hearsay ''evidence'' that is deemed too unreliable to be admissible in most other judicial proceedings. These burdens, easy on the government, hard on the property owner, often result in the seizure of property owned by one against whom the government cannot support a criminal charge.(see footnote 20) An owner can only overcome this presumption by proving that he had no knowledge of the illicit activity or did not consent to that activity. That is, the owner is required to prove a negative. The Act corrects this unfairness by simply restoring fundamental due process for property owners by changing these unfair evidentiary rules.
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The Act also offers a clarification of the ''innocent owner'' defense. This provision specifically provides for the protection of owners from civil forfeiture who neither knew of the criminal misuse of their property nor consented to the illegal activity. Although under this codification, an innocent owner would still have the burden of proving his ignorance or nonconsent, the ACLU believes this provision would provide additional protection for innocent property owners and insure uniform enforcement of the forfeiture laws.(see footnote 21)
The appointment of legal counsel for indigent property owners is provided for under the Act. Indigent property owners are given the opportunity to obtain court-appointed counsel to assist them throughout the forfeiture process. Since the civil forfeiture system can be just as punitive as the criminal system, it is essential that those citizens exposed to either system receive legal counsel to protect their rights and liberties. The ACLU believes that this provision is absolutely essential in order to insure that individuals can avail themselves of the other reforms contained in the Act that are designed to protect their property rights and liberties. Indeed, without the right to counsel, the other reforms in the Act may be rendered meaningless for many property owners. In many respects, this provision alone breathes life into the Act.
The ACLU also strongly supports the provisions in Act that improve the unfair procedural obstacles that make it difficult to contest forfeitures. First of all, the Act extends the deadline to contest a government forfeiture from as little as ten days to thirty days. Although we would prefer a longer period of time,(see footnote 22) this provision improves the extremely short time period currently in effect; thus, reducing the chances that a claimant will miss the deadline for filing a claim to recover his property. In addition, the Act also eliminates the need for an owner to pay the cost of a bond in order to file a claim. The government has strictly enforced these requirements, and has permanently deprived owners of their property for any slight non-compliance with them. It also would allow for the release of confiscated property if the seizure causes a substantial hardship on the owner and a right to sue if confiscated property is damaged through governmental negligence.
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V. THE ACLU SUPPORTS ADDITIONAL REFORM MEASURES
While the ACLU supports the Act and urge its adoption, we believe additional provisions should be added to the bill that would further curtail abuses and protect the civil liberties of citizens. Any future forfeiture reform initiatives should include the following measures:
A person should be convicted criminally before the government may seize the property involved.
The government should be required to conduct an adversarial preliminary hearing prior to seizure.
The standard of proof to support a property forfeiture should be beyond a reasonable doubt.
The property seized should be limited to the items used to facilitate the criminal enterprise.
Civil asset forfeiture proceeds should be turned over to the federal government's general fund to allow for the equitable distribution of the proceeds among federal governmental agencies.
VI. CONCLUSION
Civil forfeiture as a whole stands outside the doctrines of due process and criminal procedure. Despite the widespread use and well documented misuse of civil forfeiture, it is an arcane legal doctrine which exists merely because of its historical foundation and its fiscal advantage to law enforcement agencies. While promoted as a civil cause of action, its ramifications are more akin to the harsh punitive aspects associated with the criminal system—without any of the important fundamental constitutional due process protections for civil rights and liberties. This leaves many citizens unprotected from law enforcement's overzealous and unencumbered use of these laws. The time is long overdue to reform the unfair civil asset forfeiture system.
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As stated earlier, while the ACLU believes that all civil forfeiture schemes should be abandoned, we do endorse the bi-partisan supported Civil Asset Forfeiture Reform Act. It mitigates the harshness of civil asset forfeiture by establishing important equitable provisions and principles of due process for individual property owners who are faced with a prospective forfeiture. Accordingly, we urge Congress to promptly pass the Act. We also hope that Congress will eventually pass further measures that will completely overhaul civil asset forfeiture programs. Only such a complete overhaul will fully restore fundamental rights for all Americans.
We thank you, Chairman Hyde, for the opportunity to present our comments to the Judiciary Committee today.
———
PREPARED STATEMENT OF ROGER PILON, PH.D., J.D., SENIOR FELLOW AND DIRECTOR, CENTER FOR CONSTITUTIONAL STUDIES, CATO INSTITUTE
Mr. Chairman, distinguished members of the committee, my name is Roger Pilon, I am a senior fellow at the Cato Institute and the director of Cato's Center for Constitutional Studies.
I want to thank you, Mr. Chairman, for inviting me to testify before the committee on H.R. 1835,(see footnote 23) the Civil Asset Forfeiture Reform Act of 1997. Your recent book on forfeiture, which I am pleased to have edited and the Cato Institute is proud to have published,(see footnote 24) is a refreshing call for reform. You are to be commended for having written it, for having introduced this bill, and, more generally, for having taken up the issue of forfeiture reform when so many in Congress have ignored it.
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That the state of our forfeiture law today is a disgrace is hardly in question. A body of ''law'' that enables law enforcement personnel to stop motorists and seize their cash on the spot, to seize and sometimes destroy boats, cars, homes, airplanes, and businesses in often fruitless drug searches, and even to kill and maim in the course of seizure operations is out of control.(see footnote 25) Even lawyers who come upon this area of the law for the first time are taken aback by the injustice and utter irrationality of it all.
About the only people who defend forfeiture law today are those in law enforcement who benefit from it, either as a ''tool of their trade'' or, more directly, by keeping the goods they seize—a conflict of interest so stark that it takes us to another age. In fact, that is just the problem with modern forfeiture law: in practice as well as in theory, its roots are in notions that have no place whatever in our legal system, animistic and authoritarian notions that countless people have died over the ages to bury and replace with the rule of law.
The very styling of the relatively few cases that make it to court tells the story: United States v. $405,089.23 U.S. Currency;(see footnote 26) United States v. 92 Buena Vista Avenue;(see footnote 27) United States v. One Mercedes 560 SEL.(see footnote 28) Civil forfeiture actions are brought against the property, not against the person. They are in rem proceedings—not for the purpose of gaining jurisdiction over a real person but for the purpose of seizing property for forfeiture to the government. Fantastic as it may sound, it is the property that is charged.
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How can that be? Finding its origins in the Old Testament and in medieval doctrine, in the idea that animals and even inanimate objects involved in wrongdoing could by sacrificed in atonement or forfeited to the Crown, modern forfeiture law, filtered through early American admiralty and customs law, has simply carried forward, uncritically, the practice of charging things.
Thus, officials today can seize a person's property, real or chattel, without notice or hearing, upon an ex parte showing of mere probable cause to believe that the property has somehow been ''involved'' in a crime. Neither the owner nor anyone else need be charged with a crime, for the action, again, is against the thing. The allegation of ''involvement'' may range from a belief that the property is contraband to a belief that it represents the proceeds of crime (even if the property is in the hands of someone not suspected of criminal activity), that it is an instrumentality of crime, or that it somehow ''facilitates'' crime. And the probable cause showing may be based on nothing more than hearsay, innuendo, or even the paid, self-serving testimony of a party with interests adverse to the property owner.
Once the property is seized, the burden is upon any owner who wants to get his property back to prove its ''innocence''—not by a probable-cause but by a preponderance-of-the-evidence standard. Yet that is possible only where innocent-owner defenses have been enacted or allowed.(see footnote 29) In defending the innocence of his accused property, the owner must of course prove a negative. Moreover, he must do that against the overwhelming resources of the government. And if he has been involved in activity that in any way might lead to criminal charges—however trivial or baseless those charges might ultimately prove to be—he has to weigh the risk of self-incrimination entailed by any effort to get his property back against the value of the property. As a practical matter, the burden is simply too high for many innocent owners, who end up walking away from their loss.
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That, in a nutshell, is the state of much of our modern civil asset forfeiture law, despite periodic efforts by Congress to reform some areas, and despite court challenges in recent years that have succeeded, when they have, only in chipping away at the doctrine. It is a body of law that enables prosecutors to go directly against property—a ruse that permits the abandonment of elementary notions of due process. And it does so, most notoriously, on the ground that the property is guilty of ''facilitating'' a crime—a doctrine that is infinitely elastic.
Because others will testify before the committee about their tragic experiences under this law—many examples of which you set out in your book, Mr. Chairman—let me not give further examples here but instead focus on two basic questions: (1) What is the legitimate function and scope of forfeiture law? and (2) Does this bill comport with such law?
As suggested above, I am of the view that our civil forfeiture law is fundamentally unsound and that we need for the most part not merely to reform but to abandon it, relegating it to the dustbin of history from which it came. Because I have discussed the basis for that conclusion in some detail in an essay that I have attached to this statement,(see footnote 30) let me simply summarize my arguments here.
Only people commit crimes. The idea that property can be ''guilty''—an idea that flows from the so-called personification doctrine, which is the basis of our civil forfeiture law—is simply too fantastic to be taken seriously. Unfortunately, however, this bill does nothing to challenge that ''hoary doctrine''—as you characterized the guilty-property fiction in your book, Mr. Chairman. Under the bill, the government could continue to bring cases not against people but against property. In quasi-criminal proceedings, the property would be charged, but those proceedings would have few of the safeguards found in true criminal proceedings. To be sure, the government would have the burden of proving, ''by clear and convincing evidence, that the property was subject to forfeiture''—no small improvement. But the substantive law—the criteria for determining when property would be ''subject to forfeiture''—would remain unchanged.
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Thus, even under this proposal for reform, the personification doctrine remains the linchpin of our forfeiture law, even if we no longer say that in so many words. To see how the doctrine cannot be justified, it is useful to look first at the ordinary criminal case, where a real person is charged. In such a case, the aim of the criminal proceeding is to determine the guilt or non-guilt of the accused and, if guilty, to determine a remedy that will right the wrong at issue. Thus, not only compensation for crime victims but even punishment is, in this generic sense, ''remedial''—a term the Court, in forfeiture cases, has found it all but impossible to define or apply in a principled way.(see footnote 31) Ideally, those and only those who commit crimes should remedy their wrongdoing. The remedy should be a function of the wrong to be remedied: it should ''fit'' the wrong, whether it takes the form of compensation or punishment proper or both. And property should come into play only insofar as it may satisfy one of those sanctions against the person.
When we turn to forfeiture law, however, we are invited to shift our focus from the accused person to some property (of his or of someone else) and invited further to believe that the property committed some ''wrong,'' for it is the property that is charged and is ''subject to forfeiture.'' Why? Why go after the property rather than, or in addition to, the accused? There are indefensible practical reasons: e.g., a prosecutor may think the evidence too thin for a criminal indictment; but since forfeiture concerns ''only property,'' he may be less reluctant to argue, ex parte, that there is probable cause to believe the property ''facilitated'' a crime.
Such practical reasons do not go to the underlying theory of the matter, however. By way of deeper ''justification,'' there are three basic rationales for forfeiture: to return ill-gotten goods; to remove contraband; and, of particular importance for our purposes, because the property ''facilitates'' crime. What we need to ask, then, is whether any of those rationales can be justified as remedial.(see footnote 32)
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Clearly, the first is. If a man robs a bank, we can seize the ill-gotten gain not for forfeiture to the government but for return to the bank. Setting aside complications that might later arise from conversions and third-party victims, no one objects to forfeiture in this context, not least because the forfeiture is less ''of the property'' than ''from the criminal,'' and is directly related to the crime the forfeiture is meant to remedy. The forfeiture, in short, remedies the wrong, at least in part. But we don't need forfeiture—much less the personification doctrine—to bring about that end. An ordinary criminal proceeding will do.
But if the fruits-of-crime rationale for forfeiture is not ordinarily problematic from a remedial perspective, neither is the contraband rationale. To be sure, there is always disagreement about what should be contraband—especially, today, regarding the never-ending ''war on drugs.'' But once Congress decides to make the possession of alcohol, or drugs, or tobacco, or whatever illegal, then the seizure for forfeiture of that contraband can be said to remedy the ''wrong'' of possession. Here too, however, it is not ''guilty property,'' or the personification doctrine, that justifies this remedy.
We come, then, to the facilitation doctrine proper. When property is forfeited because it ''facilitates'' a crime—even when it is the property of the criminal himself—there is no obvious connection between the ''remedy'' and the wrong to be remedied. If I make a call from my home to consummate a drug deal, how does the forfeiture of my telephone, or my home, or the livestock on my property, ''remedy'' that crime? What is the connection, from a remedial perspective, between the crime and—let us be more candid than the Supreme Court—the ''punishment''? And if that connection is missing when it is my property that is being forfeited, it is missing a fortiori when the property of some third party is forfeited on the ground that his property ''facilitated'' my crime.
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Today, countless forfeitures take place under the facilitation doctrine. The property is personified. It is then said to be ''guilty'' because it ''facilitated'' a crime—however tenuous the connection may be. As a result, it is ''subject to forfeiture.'' Never mind that the forfeiture will in no way remedy the crime—especially if the owner is not the criminal. Facilitation forfeiture can make no pretense at being remedial because it need take no measure of the crime that gives rise to it. Minor crimes can lead to major facilitation forfeitures. Ships can and have been forfeited over the discovery of a marijuana ''roach'' on board.(see footnote 33) Apartment buildings, hotels, cars, and second mortgages can and have been forfeited over illegal activities ''involving'' them.(see footnote 34)
The facilitation doctrine is boundless in practice because it is groundless in principle. Yet it drives our forfeiture law and practice today, and this bill leaves it in place. No ''nexus'' refinements will solve the problem. Nor will refinements of the ''innocent-owner defense,'' which effectively deputizes innocent people. The inclusion of that defense in all federal forfeiture statutes is to be welcomed, of course, even if the bill leaves the burden on the owner to prove his innocence, and even if such proof may be difficult or may be otherwise problematic. (Suppose, for example, that my son makes a drug deal from our house, on a phone that is tapped at the other end. In principle, under this bill, I am now put to a choice between reporting my son to the police or losing my home for its having ''facilitated'' a crime.) None of this, however, goes to the facilitation rationale for forfeiture. This substantive foundation of so much of our civil forfeiture law, the handmaiden of the personification doctrine, must be torn up, root and branch. Only then can we hope to secure the idea that forfeiture, in a free society, is not a free-standing doctrine but a very limited element in a remedial scheme that is rooted, in the end, in a rational system of wrongs to be remedied.
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In summary, I commend you again, Mr. Chairman, for taking on this issue and for proposing this legislation. The bill does not, in my judgment, go far enough, for the reasons I have stated. Nevertheless, it would bring about a significant improvement over the situation we have today. Thus, for this reason alone I support it. Thank you.
INSERT OFFSET RING FOLIOS 108 TO 131HERE
42–848CC
1997
CIVIL ASSET FORFEITURE REFORM ACT
HEARING
BEFORE THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTH CONGRESS
FIRST SESSION
ON
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H.R. 1835
CIVIL ASSET FORFEITURE REFORM ACT
JUNE 11, 1997
Serial No. 22
Printed for the use of the Committee on the Judiciary
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
COMMITTEE ON THE JUDICIARY
HENRY J. HYDE, Illinois, Chairman
F. JAMES SENSENBRENNER, Jr., Wisconsin
BILL McCOLLUM, Florida
GEORGE W. GEKAS, Pennsylvania
HOWARD COBLE, North Carolina
LAMAR SMITH, Texas
STEVEN SCHIFF, New Mexico
ELTON GALLEGLY, California
CHARLES T. CANADY, Florida
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BOB INGLIS, South Carolina
BOB GOODLATTE, Virginia
STEPHEN E. BUYER, Indiana
SONNY BONO, California
ED BRYANT, Tennessee
STEVE CHABOT, Ohio
BOB BARR, Georgia
WILLIAM L. JENKINS, Tennessee
ASA HUTCHINSON, Arkansas
EDWARD A. PEASE, Indiana
CHRISTOPHER B. CANNON, Utah
JOHN CONYERS, Jr., Michigan
BARNEY FRANK, Massachusetts
CHARLES E. SCHUMER, New York
HOWARD L. BERMAN, California
RICK BOUCHER, Virginia
JERROLD NADLER, New York
ROBERT C. SCOTT, Virginia
MELVIN L. WATT, North Carolina
ZOE LOFGREN, California
SHEILA JACKSON LEE, Texas
MAXINE WATERS, California
MARTIN T. MEEHAN, Massachusetts
WILLIAM D. DELAHUNT, Massachusetts
ROBERT WEXLER, Florida
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STEVEN R. ROTHMAN, New Jersey
THOMAS E. MOONEY, Chief of Staff-General Counsel
JULIAN EPSTEIN, Minority Staff Director
C O N T E N T S
HEARING DATE
June 11, 1997
TEXT OF BILL
H.R. 1835
OPENING STATEMENT
Hyde, Hon. Henry J., a Representative in Congress from the State of Illinois, and chairman, Committee on the Judiciary
WITNESSES
Bailey, F. Lee, Esq.
Blanton, Jan P., Director, Executive Office for Asset Forfeiture, Department of the Treasury
Cassella, Stefan D., Assistant Chief, Asset Forfeiture and Money Laundering Section, Criminal Division, U.S. Department of Justice
Davis, Susan, C.P.A., McMillan, Unruh & Davis P.A., Fort Lauderdale, FL
Edwards, E.E. (Bo), III, Esq., on behalf of the National Association of Criminal Defense Lawyers
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Lefcourt, Gerald B., Esq., president-elect, National Association of Criminal Defense Lawyers
Moody, Bobby D., chief of police, Marietta, GA, Police Department, and first vice president, International Association of Chiefs of Police
Munnerlynn, William
Smith, David B., Esq., on behalf of the National Association of Criminal Defense Lawyers
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Blanton, Jan P., Director, Executive Office for Asset Forfeiture, Department of the Treasury: Prepared statement
Cassella, Stefan D., Assistant Chief, Asset Forfeiture and Money Laundering Section, Criminal Division, U.S. Department of Justice:
Prepared statement
Section-by-section analysis of H.R. 1745, Forfeiture Act of 1997
Conyers, Hon. John Jr., a Representative in Congress From the State of Michigan: Prepared statement
Davis, Susan, C.P.A., McMillan, Unruh & Davis, P.A., Fort Lauderdale, FL: Prepared statement
Edwards, E.E. (Bo), III, Esq., on behalf of the National Association of Criminal Defense Lawyers: Prepared statement
Jackson Lee, Hon. Sheila, a Representative in Congress From the State of Texas
Lefcourt, Gerald B., Esq., president-elect, National Association of Criminal Defense Lawyers: Prepared statement
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Moody, Bobby D., chief of police, Marietta, GA, Police Department, and first vice president, International Association of Chiefs of Police: Prepared statement
Smith, David B., Esq., on behalf of the National Association of Criminal Defense Lawyers: Prepared statement
APPENDIX
Material submitted for the hearing
(Footnote 1 return)
Trial Transcript, United States v. One Parcel of Real Estate at 3241 N.W. 40th Court, Fort Lauderdale, Florida, CIV-Paine, Case No. 90–6761 (S.D. Fla. Oct. 26, 1992), at page 32.
(Footnote 2 return)
Mr. Kaufman was lured into exchanging the undercover agent's cash for checks provided by Mr. Kaufman. Mr. Kaufman was selected because, as part of the Orthodox Jewish community, ''everything [he] do[es] is with cash.'' Transcript 1, at p. 53. I.e., because their religious institutions had legitimate sources for their money—coming in large part from cash contributions from their congregants—and legitimate bases for their excellent relationships with their banks (enabling them to certify checks for large amounts).
(Footnote 3 return)
See e.g., Bennis v. Michigan, 516 U.S. ———, 116 S.CT. 994 (1996) (5–4).
(Footnote 4 return)
21 U.S.C. sec. 881(e)(1)(A) authorizes the Attorney General to transfer part or all of forfeited personal property to ''any State or local law enforcement agency which participated directly in the seizure or forfeiture of the property.'' Up to 85% of property forfeited may be returned to the State.
(Footnote 5 return)
Guidelines 2.01(F)(5)(v) and (vi), reprinted as an appendix to United States v. One 1985 BMW 3181, 691 F. Supp. 1074 (N.D. III. 1987) (However, in this case, the court held that it was without authority under the Criminal Justice Act to appoint counsel to represent the wife of a CJA defendant who was contesting the forfeiture of her property.)
(Footnote 6 return)
Interestingly too, sec. 888(c) gives the government only 60 days to file a complaint. This bill gives the government an extra 30 days to do that.
(Footnote 7 return)
Rather, the DOJ wants to wrongly treat criminal forfeiture as a simple sentencing matter—just like a sentencing guidelines issue.
(Footnote 8 return)
Please see also the second attachment to this Statement, also contained in the July 22. 1996 Hearing Report. This is a detailed 21 page letter I wrote on behalf of NACDL to Stefan B. Cassella, on September 5, 1996. That letter also sets forth our views or, some of the DOJ's most objectionable criminal forfeiture proposals, as well as its civil forfeiture proposals.
(Footnote 9 return)
See Representative Henry J. Hyde, Forfeiting Your Property Rights: Is Your Property Safe From Seizure? (1995).
(Footnote 10 return)
H.R. 1916 (104th Congress, Second Session).
(Footnote 11 return)
Illustration is based upon a real case documented in the statement of James Hoyle, submitted to the House Committee on Government Operations, Legislation and National Security Subcommittee, Re: The Federal Asset Forfeiture Program, September 30, 1992.
(Footnote 12 return)
See, e.g., Austin v. United States, 113 S. Ct. 2801 (1993); Alexander v. United States, 113 S. Ct. 2766 (1993).
(Footnote 13 return)
Andrew Schneider & Mary P. Flaherty, Drug Agents Are More Likely to Stop Minorities. Pitt. Press. Aug. 12., 1991, at A1.
(Footnote 14 return)
See e.g., Steve Berry & Jeff Brazil. Tainted Cash or Easy Money?, Orlando Sentinel, June 14. 1992, at A–1; supra note 3; see also 60 Minutes: You're Under Arrest (CBS television broadcast. Apr. 5, 1992).
(Footnote 15 return)
Oregonian, June 20, 1990, p. D4.
(Footnote 16 return)
USA Today, May 18, 1992, pp. 1A, 7A.
(Footnote 17 return)
Dick Lehr & Bruce Butterfield, Small-Timers Get Hard Time, The Boston Globe, Metro p.1 (September 24, 1995).
(Footnote 18 return)
This standard has been adopted in New York and Florida. See, N.Y. Civ. Prac. L & R Section 1311(3) (McKinney, Supp. 1994): Department of Law Enforcement v. Real Property, 588 So.2d 957, 967 (Fl. 1991).
(Footnote 19 return)
This is commonly referred to the ''innocent owner'' defense which requires the owner of seized property to carry the burden of proving that she did not know and did not consent to the property's illegal use. 21 U.S.C. Sec. 881(a).
(Footnote 20 return)
Eighty percent of the people who lost property to the Federal government were never charged with a crime. ''Government Seizure Victimize Innocent,'' Pittsburgh Press. August 11, 1991.
(Footnote 21 return)
The Supreme Court's recent confounding decision in Bennis v. Michigan, 116 S. Ct. 994 (1996) emphasized the importance of the innocent owner defense. Despite acknowledging, that Ms. Bennis lacked any knowledge that her husband had used their jointly owned automobile to engage in criminal sexual indiscretions with a prostitute. the Court permitted the forfeiture of the automobile.
(Footnote 22 return)
Chairman Hyde's previous Asset Forfeiture Reform Act H.R. 2417, provided for a sixty day time period for filing a claim. This would be a preferable time period.
(Footnote 23 return)
The bill is to be assigned a new number late in the day on June 10, 1997.
(Footnote 24 return)
Henry J. Hyde, Forfeiting Our Property Rights: Is Your Property Safe From Seizure? (Cato Institute, 1995).
(Footnote 25 return)
For those and many more examples, see Chairman Hyde's book.
(Footnote 26 return)
516 U.S. ———, 116 S. Ct. 2135 (1996).
(Footnote 27 return)
507 U.S. 111; 113 S. Ct. 1126 (1993).
(Footnote 28 return)
919 F.2d 327 (5th Cir. 1990).
(Footnote 29 return)
Thus, in the Bennis case, which the Supreme Court decided in its last term, Mrs. Bennis lost her half-interest in the family car when Michigan officials seized it following her husband's use of the car for an assignation with a prostitute—there being no innocent-owner defense available under the state statute. Wronged by her husband, Mrs. Bennis was wronged again by the Michigan law. Bennis v. Michigan, 116 S. Ct. 994 (1996).
(Footnote 30 return)
Roger Pilon, Can American Asset Forfeiture Law Be Justified? 39 N.Y.L. Sch. L. Rev. 311 (1994).
(Footnote 31 return)
For the most recent example, see United States v. Ursery, 516 U.S. ———; 116 S. Ct. 2135 (1996), in which the Court said that forfeiture is punishment ''for purposes of'' the Excessive Fines Clause of the Constitution but not ''for purposes of'' the Double Jeopardy Clause—about which Justice Stevens said, in dissent, that the argument makes ''little sense.'' I have criticized the Court's analysis in Ursery (and in Bennis) in the Federalist Society's Criminal Law and Procedure News, Vol. 1, No. 2, Spring 1997; see also there my criticisms of arguments put forth in that same issue in defense of forfeiture by Mr. Stefan D. Cassella, assistant chief, Asset Forfeiture and Money Laundering Section, U.S. Department of Justice.
(Footnote 32 return)
A quite different rationale—the rationale that led to American forfeiture law in the first place—is to enable a court to obtain jurisdiction over a real person—such as a foreign ship owner who failed to pay customs. That use of seizure and forfeiture is not at issue here.
(Footnote 33 return)
See National Association of Criminal Defense Lawyers, Washington Digest, July 25, 1988, at 1–2. (Seizure of the Woods Hole (Mass.) Oceanographic Institute's Atlantis.)
(Footnote 34 return)
See Seth Faison, ''In Largest Takeover Under Narcotics Law, U.S. Seizes a Large New York City Hotel,'' New York Times, June 9, 1994, at A1, B3.