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[1] Forfeiture Info from BJA, II
Keywords: Bureau of Justice Assistance, Forfeiture
Date: Thu May 06 20:12:03 MDT 1993
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BTW, for more info send mail to publish@ganymede.apple.com
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help
send /publish/Index
i have some GAO reports (not many :-<) and am putting on this series
of 14 pamphlets on Forfeiture for police.
ps: i am not selling anything, this is all free info.
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ASSET FORFEITURE
Public Record and Other Information on Hidden Assets
Prepared by:
Police Executive Research Forum
Frank R Booth
November 1988
Reprinted January 1992
U.S. Department of Justice
Office of Justice Programs
Bureau of Justice Assistance
U.S. Department of Justice
William P. Barr.........................Attorney General
Office of Justice Programs
Jimmy Gurule............................Assistant Attorney General
Bureau of Justice Assistance
Gerald (Jerry) P. Regier................Acting Director
Elliott A. Brown........................Deputy Director
James C. Swain..........................Director, Policy Development
and Management Division
Curtis H. Straub, II....................Director, State and Local
Assistance Division
Pamela Swain............................Director, Discretionary Grant
Programs Division
William F. Powers Director..............Special Programs
Division
Bureau of Justice Assistance
633 Indiana Avenue NW., Washington, DC 20531
(202) 514 6278
The Assistant Attorney General, Office of Justice Programs, coordinates
the activities of the following program Offices and Bureaus: Bureau of
Justice Assistance, Bureau of Justice Statistics, National Institute of
Justice, Office of Juvenile Justice and Delinquency Prevention, and the
Office for Victims of Crime.
U.S. Department of Justice
Office of Justice Programs
Bureau of Justice Assistance
Office of the Director Washington DC 25031
Dear Colleague:
Illicit drug traffic continues to flourish in every part of the country.
The cash received by the traffickers is often converted to assets that
can be used by drug dealers in ways that suit their individual tastes.
Since 1981, federal authorities have increased their attack on these
assets through both criminal and civil forfeiture proceedings with
remarkable success. The recent passage and use of state asset forfeiture
laws offers an excellent means for state and local jurisdictions to
emulate the federal success.
The Bureau of Justice Assistance (BJA), in the Office of Justice
Programs, has funded a nationally focused technical assistance and
training program to help state and local jurisdictions facilitate
broader use of such laws. BJA selected the Police Executive Research
Forum to develop and administer this program because of its history of
involvement in practical problem-oriented research to improve police
operations and the Forum's central role in developing training materials
for use by police agencies and chief executives.
As part of this project, the Forum has contracted with experts in the
area of asset forfeiture and financial investigations to prepare a
series of short manuals dealing with different concerns in the area of
asset forfeiture. We hope these manuals help meet the rapidly unfolding
needs of the law enforcement community as more and more agencies apply
their own forfeiture laws and strive to learn from the successes and
problems of their peers.
I welcome hearing your comments about this program. We have this project
so that most requests for information or assistance can be handled
through the Forum staff in Washington, D.C., by calling 202/466-7820.
Sincerely yours,
Gerald (Jerry) P Regier
Acting Director
Table of Contents
Introduction
The Initial Lead
Intelligence
Sources Of InformationQGovernment Records
County Records
Recorder of Deeds
Liens Office/Clerk of Courts
Health Departments
Weights and Measures Department
County Taxing Authority
Sheriff/County Prosecutor
State Records
Corporation Bureau
Labor and Industry
Department of Revenue
State Police/Fire Marshals
Licensing Boards/Regulatory Bodies
Federal and Local Records
Sources Of InformationQAffiliated Businesses
The Former Property Owner/Lessor
The Realtor
The Title Company
The Bank Account
The Accountant
Vendors
Tenants/Former Employees
Conclusion
Endnotes
Selected References And Writings
Introduction
In 1970, the federal Organized Crime Control Act was enacted. Part of
this Act included the Racketeer Influence and Corrupt Organizations
statute (RICO), which allowed for both the civil and criminal
prosecution of individuals investing moneys derived from illegal sources
into legitimate enterprises. This legislation also allowed for civil and
criminal seizure of identified properties or assets that had been
purchased with these illicit funds.
In the last ten years many states have enacted asset forfeiture and
seizure laws, modeled to varying degrees after the 1970 federal statute,
to target the great profits in crime that help sustain and further
promote criminal enterprises. Some states also permit the prosecutor or
law enforcement agency to convert seized assets to real dollars for
agencies use in future investigations. For example, the seizure of a
boat valued at six figures that was purchased as a result of illegal
narcotics profiteering can certainly ease the strain of tight government
budgets and increase the availability of "buy" or "flash" money.
Federal and state laws regarding ill-gotten assets have several
important meanings to the law-enforcement community and the general
public:
- The statutes provide another legal tool for prosecuting major
offenders.
- The laws allow for a comprehensive crippling assault on major
offenders allowing their illicit investment assets to be seized and
removed as supplemental sources of "legitimate" income.
- Seizing and eliminating the illicit business assets of major offenders
also strengthens the legitimate business community. The major
offender/"businessman" will certainly inject his criminal tactics into
the business community and secure for himself an unfair competitive
edge. Elimination of the illicit assets can help eliminate this edge.
- And, as noted above, asset forfeiture can be a financial benefit to
all levels of government if the illicit assets are converted to funds
that benefit the law-enforcement community.
The major offender with cash ready for investment is usually surrounded
by a cadre of professionalsQattorneys, accountants, investment
counselors, bankers and realtors. These professionals are supplemented
by a ready supply of individuals and corporate "straws" and "fronts."
These associates may range from criminal cronies to the attorney's
secretary, from trusted relatives to legitimate businessmen seeking new
partners or lucrative, quick turn around investments.
As major offenders use these professionals and associates to oversee
their investments, law enforcement agencies face major barriers in
detecting and identifying the real ownership and sources of investment.
There are, however, methods and sources of information available to the
investigator which, if applied diligently and explored fully, can reveal
these assets and investments and at least partially remove the veil of
secrecy that surrounds these transactions.
The purpose of this paper is to explore these unveiling methods and
share these sources of information. Some are obvious and have been
mentioned in many publications; others are less so. Many are
interrelated, with the result that one source of information leads to
the necessity of pursuing another source of information. Some may
require special investigative tools, such as subpoenas, writs or search
warrants; others simply require instinct, diligence, hard work and
attention to detail.
For the purpose of this paper we will limit the nature of the hidden
asset to those of real estate investment and investment in a business
enterprise.
The reader will note that references to various state, county and local
government sources of information have a "Pennsylvania flavor." This
reflects the author's experiences with sources of information and laws
in that state. The sources in your jurisdiction may be known by other
names, but the same information is sure to be available regardless of
the jurisdiction.
The Initial Lead
The initial information or lead that generates hidden asset
investigations may result either as a "spin-off" or developed lead from
another investigation, or as a result of a "proactive" investigation
specifically targeting a major offender.
The spin-off lead results from an investigation not directly relating to
revealing hidden assets. It most often arises from a more traditional
criminal investigation, such as that of a major narcotics trafficker, or
as a result of intelligence gathering. This type of initial information
may also surface indirectly when debriefing a criminal informant,
conversing with a legitimate businessman, or conducting surveillance.
For example:
- A meeting observed between a recognized major organized-crime figure
and the president of a local meat cutters' union in southeast
Pennsylvania was the catalyst that generated an investigation into the
relationship between a health benefit provider and a union employee
group. The result was a significant prosecution of an organized crime
figure in this industry.(1)
- A major numbers banker visiting a work crew at a small multiple-unit
dwelling led to a major recovery of hidden investments of ill-gotten
gambling monies in various businesses in Chester, Pennsylvania.(2)
The spin-off lead also may be generated through analyzing telephone toll
records, bank records or business records in an unrelated investigation.
The payment of a utility bill or real estate taxes on a property
unrelated or previously unconnected to the offender by investigators can
be the single item leading to a major hidden-asset investigation.
In addition to the spin-off lead or the lead developed from another
investigation, leads to hidden-asset investigations can be developed in
a proactive manner. If the investigator allows, as his initial premise,
that a major offender has generated capital for investment and that this
capital may have been invested, then initial investigative procedures
can be taken to determine the validity of this premise.
If proper legal process and cause can be developed, both mail covers and
telephone toll analysis, in combination with the use of a Dial Number
Recorder (DNR), are valuable tools in this proactive approach to initial
leads. Telephone or mail contacts between the targeted offender and
professionals and businesses involved in real estate investments or
financing can prove to be critical leads. If patterns of contacts are
observed, the likelihood of an investment transaction increasesQas does
eventual success in detection.
The types of contacts by mail or telephone that indicate asset
investment include communications with realtors and real estate
businesses; banks and savings and loan institutions (particularly those
not previously identified); and attorneys known as investment or real
estate specialists. Others include contacts with accounting firms,
insurance companies, utility companies, taxing authorities, commercial
trash haulers, construction companies, home improvement and repair
businesses, title companies, telephone companies and business consulting
firms. These contacts are major indicators of asset investment, as well
as your "lead sheet OQnot only to documenting the asset ownership, but
to identifying knowledgeable sources of information and potential
witnesses for prosecution.
In addition to the analysis of mail and telephone records as proactive
tools, the legal pick-up and careful analysis of your target's trash, at
either their residences or known businesses, should never be overlooked
as a potentially important proactive source of intelligence. It must be
stressed, however, that this must be accomplished in a totally legal
manner to avoid tainting the evidence.
If you are legally able to secure your target's trash, you may well
obtain leads and information generated by the group of businesses and
individuals identified above. In addition, you may find notes written by
your target regarding his involvement in some previously undisclosed
business or investment. Or you could discover hand-carried invoices or
bills from a supplier to the hidden-asset business. Many businesses do
this as a matter of practice. Others may be requested to hand deliver
the material to avoid detection and to avoid the mails. Many
sophisticated criminals today are wary of potential mail fraud charges
and take extreme measures to avoid use of the mails.
If you have identified a particular professional involved in investment
who has been determined to have extensive contact with your target, a
"targeted surveillance" could be initiated on this professional. This
could prove very productive if your target and this professional meet
and are observed visiting a business site, or if they are involved in a
business meeting with some previously unknown associates. The potential
for additional initial leads from this scenario are vast. Depending upon
your available resourcesQboth time and staffQthis approach should be
considered carefully. However, a surveillance of this nature can be
quite time consuming, costly and of limited productivity unless specific
prior knowledge of a meeting is known.
Both the "spin offS lead and the "proactive" effort, if properly
pursued, can generate that initial lead so vital to an asset-disclosure
investigation. However, as important as proper pursuit is, of equal
importance is the need for investigator awareness and education. The
investigator in a major narcotics case must realize the great potential
for asset disclosure in these matters and be alert to asking that extra
question or two that could provide that initial detail or lead to asset
disclosure. The investigator also must be aware of the need for
attention to detail and the potential significance of a seemingly minor
item. For instance, the discovery of a utility bill of less that $10
paid by the major narcotics trafficker on a property previously
unrelated to him can be that vital initial lead to a major asset
disclosure investigation.
Intelligence
The value of intelligence to the hidden asset investigation is directly
related to the quality, quantity and source of the intelligence
information. In conducting a traditional narcotics related investigation
over a lengthy period, great quantities of information can be developed
from a multitude of sources. Sometimes information is maintained in a
well-organized, retrievable and manageable manner, however, often it is
not. This information is not considered true intelligence if it has not
been maintained in a manageable manner and is not retrievable. It also
is not considered intelligence unless some effort has been made to
determine its validity, its source's reliability, or to confirm it
through other investigative efforts.
If the criminal intelligence relating to your investigation target has
been managed properly, it is a primary source of leads and information
for your investigation. Information that should be extracted from this
organized intelligence should include at least the following:
- Names and identifying data of all participants, major and minor, in
the criminal structure.
- The participants' past and present occupations, places of employment
and their businesses.
- Female participants in the criminal structure, and wives and
girlfriends of participants in the criminal structure, should be
identified by all previously known names.
- All non-criminal associates and friends of members of the criminal
organization should be identified, along with their businesses and
occupations.
- Past and current business partners of all members of the criminal
structure should be identified.
- All known associates in the financial community should be identified.
Included should be those associated with real estate, banking, the law
and accounting.
Information in these categories is important as raw material to connect
with intelligence developed later in the investigation which may reveal
the "front" or "front organization."
Previously used criminal informants who have knowledge of your target
may prove helpful. Were these sources who had knowledge of the target's
narcotics operation ever questioned concerning his investments? If not,
they should be located immediately and be debriefed in this area. Also,
leads may be generated from others who have previously investigated your
target. Investigators and prosecutors do not commit to paper all of
their knowledge regarding an investigation. That initial lead, so
important to success in an asset probe, could be gained from them as a
result of a simple telephone call.
All other information in law-enforcement files relating to your target
that has not been organized properly should be thoroughly examined, and
pertinent information in the above categories and any other data should
be consolidated into a new, comprehensive intelligence system that
allows ready retrieval.(3)
Having extracted, organized and consolidated all available intelligence
from the traditional criminal files and intelligence, there likely will
be significant gaps in the information needed to pursue your asset
investigation.
Now you must fill those information and intelligence voids. Much of the
balance of this paper will explore the sources of information that will
assist you, not only filling these voids, but in providing additional
information and potential witnesses and informants for success in a
difficult investigative undertaking.
Sources Of InformationQGovernment Records
Government records are probably the most accessible records, with the
most broad applications, available to assist in the hidden-asset
investigation as it relates to real estate purchases or investments in a
business enterprise. Of particular value are the records maintained at
the county and state level.
County Records
Recorder of Deeds.
This office is responsible for recording all deeds in the county
regarding real estate transactions. The recorded deed contains the names
of both the buyer and seller, in addition to a description of the
property, and in most cases, the recorded selling price.
In addition, the deed may reveal the addresses of the buyer and the
seller (known respectively as the grantor and the grantee) and the
identification of the attorney or other representative of either the
buyer or seller. The identification of the seller of the property or his
representative is, of course, an immediate lead possibility for the
hidden asset investigation.
In addition to maintaining deeds, the Recorder of Deeds also maintains
and records all mortgages relating to real estate or property
transactions. This document is the source of a number of vital pieces of
information. One obvious piece of information is the source of a loan
(mortgage) to purchase the property. The mortgage document identifies a
lending institution that has agreed to finance the purchase of the
property. This leads the investigation to possible sources of
documentation and witnesses who may know and have done business with the
target of the investigation.
The mortgage, and sometimes the deed, also may provide another
potentially vital lead to true ownership and the unveiling of the hidden
assetQ the title company. If a title company was involved in the sale,
that company will hold such important information as the settlement
sheet, which reveals the distribution of monies to the buyer and seller
resulting from the sale. In
addition, the title company may retain copies of the financial
instruments, such as checks, used to consummate the transaction.
Title companies may not be readily identifiable on a deed or mortgage.
They may only be identifiable as a code stamped or handwritten on the
public document. For example, you may observe the following: CT 12345Q
03. In this example, the letters "CT" identify Commonwealth Title
Company and the number "03" identifies Commonwealth Title's #3 office at
a certain location. The number "12345" identifies their file number.
Liens Office/Clerk of Courts.
Locating a supplier or vendor to whom the subject of the investigation
or his "front" or "front corporation" is indebted can be a valuable
lead. Because the indebtedness may have been involuntary, this can lead
the investigator to a target's antagonist, who may have reason to
cooperate. Liens or judgments filed by businesses or individuals against
other businesses can be located in county offices of various names. In
Pennsylvania, this office is known as the Office of the Prothonotary.
These files should be reviewed carefully. The filing of a lien does not
always indicate that a true debt has been established. For instance, a
mechanic's lien is filed by a subcontractor against the property owner
to secure the subcontractor against the possible future contractor's
failure to compensate for work completed.
If liens or judgments are located, the next step in developing lead
material is checking with the Office of the Clerk of Courts. This office
maintains records of all civil and criminal actions in the county. A
thorough review of these records should be made relevant to each
judgment or lien. If civil litigation has been initiated, it can produce
additional leads and information valuable to the hidden-asset case. Of
primary significance in these files are sworn depositions and
interrogatories, possibly used by both sides. These documents can be
particularly revealing.
Health Departments.
Most county health departments have an inspection division that is
responsible for routine sanitary or health inspections of various
businesses within the jurisdiction. These inspectors are potential
sources of information because of their on-site presence and their
routine contacts with business employees and owners. In this capacity,
they can identify former employees as possible future sources or they
may provide insight into the true ownership of the business.
Weights and Measures Departments.
Like the county health department, the county weights and measures
department (in most counties) has an inspection division. In this
capacity the inspectors have access to the employees and the owners of
the inspected business, and thus have information potentially valuable
to the investigation. They may have leads, for example, to former
employees or dissatisfied vendors.
Also, because of the weights and measures department's enforcement
responsibility, an adversarial situation may exist, thereby bringing the
true ownership closer to the surface or providing other insight into the
true ownership.
County Taxing Authority.
The county taxing authority can be the source of several types of
valuable information. Identification of who pays the taxes on a property
and where the billing notice is mailed are often of interest. If the
billing notice is mailed to a practitioner associated with the hidden
owner, rather than the owner of record, a key lead has just been
developed. The taxing authority also will have a record of payment of
taxes that may lead to a previously unknown bank account, which could in
turn be traced to the true owner. A tax dispute can lead to some
connection to true ownership, either directly or through professional
representation.
Sheriff/County Prosecutor.
Beyond general criminal intelligence, the sheriff and county prosecutor
may maintain a general incident file related to businesses within the
county, in addition to maintaining an emergency telephone contact
number.
The incident file can lead to non-criminal reports or contacts with the
managers or owners of a business, or identification of individuals
involved in a non-criminal incident reported and investigated by county
officials. This may develop further lead material or even connect the
subject of the investigation to the business or property.
If an emergency telephone contact number is provided, it should be
checked to determine if its subscriber is consistent with the recorded
ownership.
State Records
Corporation Bureau.
If initial leads in the investigation disclose corporate entities as
possibly holding these assets, the first investigative source should be
the state's Corporation Bureau or Office of Corporate Registry.
The quality and substance of information maintained by this office
varies from state to state. However, certain data appears common to most
jurisdictions. That information includes the following:
- Name of Corporation
- Purpose of Corporation
- Corporate Officers
- Corporate Directors
- Stock Distribution
- Date of Incorporation
- Registered Agent (if any)
Some states require additional data and periodic updates of changes in
any of the above areas. Enforcement of these changes varies widely from
state to state; some enforce aggressively, others less so. Certain
states also require the periodic filing of financial statements that can
be an asset to the investigator.
Those states with aggressive enforcement programs may seek to revoke
corporate charters if certain filing requirements are not met. By
forcing the corporation structure to file information or face charter
revocation, states can help generate additional investigative leads.
In reality, the sophisticated major offender normally will not file
information that will aid the investigation effort. But all avenues must
be thoroughly examined in seeking even the slightest opening in the
corporate veil. For example, if filed information can be shown to be
false, the investigation could use the Corporation Bureau's regulatory
authority to revoke the charter of the front corporation. If this action
is fought by the corporation counsel or other representative, the
resulting conflict could further remove the veil of secrecy.
Labor and Industry.
Many states, under their labor departments, require the filing of
periodic lists of employees, revealing their names, social security
numbers and salaries. In Pennsylvania, this is accomplished on a
quarterly basis through the Department of Labor and Industry.
This provides a relatively updated listing of employees, their salaries
and social security numbers. In addition, it gives the investigator the
opportunity to identify former employees by comparing old quarterly
reports with recent ones. As mentioned, former employees can be
excellent inside sources of information.
The Labor Department in your state may also have a Labor Relations
Board, a Bureau of Mediation or both. If the alleged hidden asset
business employs a unionized work force, these offices may well provide
leads, particularly if a labor dispute has arisen.
Department of Revenue.
Although state revenue departments, like the U.S. Internal Revenue
Service, are statutorily prohibited from disclosing much tax
information, they can be sources of certain vital information of a
public record nature.
Some revenue departments license businesses. The department may issue
sales tax licenses. Generally, these licenses and the applications for
them are considered public information. If so, they will contain
potentially useful elements of information. However, of even greater
potential value is the local or regional state tax collector who has
been assigned to a targeted business' delinquent collection. The revenue
investigator may be able to provide inside information regarding the
business, its true ownership, who represents the business and other
"inside" information. A contact with a revenue investigator, however,
must be conducted carefully to avoid improper receipt or disclosure of
confidential tax information.
In some states and under specified conditions, law enforcement and
prosecutors can obtain access to corporate, business and personal income
tax information.
If you are able to access either corporate or personal state income tax
returns in your jurisdiction, you have access to an invaluable source of
information. Several leads to possible sources of hidden investments can
be derived from personal and corporate tax returns.
Loans to and from stockholders, and loans to and from corporate
officers, can be questionable and should be pursued. Also, mortgages,
notes and bonds shown as liabilities on a corporate return must be
closely investigated.
Another key item on both corporate and personal returns that should be
analyzed carefully are interest payments. Interest income may have been
derived from a source, often a bank, that was previously unknown to the
investigator. This may lead to bank accounts controlled by the subject
of the investigation that have been used for an illicit investment
financed with illegally earned funds.
Tax returns also may disclose the identity of the accountant preparing
the return. This provides the identity and location of a person
intimately familiar with either the corporation or the target. In
addition, the investigator now has potential access to additional
important recordsQthe accountant's work papers. These will be discussed
in more detail later.
State Police/Fire Marshals.
Any record of a fire related to the subject business or property should
be thoroughly pursued. Fire often relates to insurance. The
identification of a previously unknown insurance company can be an
important lead. Who pays the premium? Who are the beneficiaries? And the
agent assigned or responsible for the policy can be an important lead
because of his first-hand knowledge of the business.
When arson is investigated, additional witness interviews of employees,
owners or other witnesses could prove useful.
Licensing Boards/Regulatory Bodies.
Like other types of state and local authority, the licensing and
regulation of businesses and occupations varies from state to state and
from jurisdiction to jurisdiction.
In a hidden-asset investigation, the various boards, agencies and bodies
that license, regulate and inspect must be considered primary sources of
information. And in most jurisdictions, the files and records of these
agencies are considered public information and are readily accessible.
In Pennsylvania, a myriad of occupations and businesses are licensed,
regulated and inspected. The Department of State alone licenses twenty-
six separate areas, including accountants and real estate agents that
can be significant to the hidden-asset investigation. State licensing
ranges from architects to auctioneers, cosmetologists to chiropractors,
and podiatrists to psychologists. In addition, licensing and inspection
or audit occurs in banking, insurance, environmental resources, fish and
game, liquor, milk marketing, public utilities, securities and
transportation.
Obviously, the range of oversight is great, and the degree of useful
information available from these various agencies ranges from a simple
application that is approved routinely and without follow-up, to an
application requiring in-depth financial statements, bonding and
thorough background investigation before approval is allowed.
Whatever information the licensing board or regulatory agency requires,
investigators should search for the following types of information:
- An application with basic information provided by the applicant that
may be used to develop leads,
- Sources of financing often are required, which can be traced in an
attempt to identify the hidden owner,
- Bonding and insurance sources may be identified which, when pursued,
may lead to hidden ownership,
- Employment and occupation histories may be required that can aid
investigations,
- Leads to accountants, attorneys and lending institutions can be found
and lead to valuable information, and
- Inspection or audit divisions within the licensing and regulatory
bodies provide on-site sources that may lead to quality informants or
witnesses.
It must also be pointed out that the regulatory or licensing authority
may do more than license; it also may exercise the authority to suspend,
fine or even revoke the license necessary for the business to operateQa
powerful legal weapon. Effective use of state regulatory agencies is a
largely untapped investigative tool.
Federal and Local Records.
In pursuing the hidden-asset investigation, state and county records are
of predominant importance, but federal and local records sources also
must be combed. In many instances, similar categories of information
will be developed from these sources. Both conduct regulatory and
inspection operations, in that data, as categorized above, will be
developed which could be useful. Federal and local data falls into two
broad categories: (1) applications and documents as required by the
agency, and (2) documents that will lead to potential informants or
witnesses who can link the hidden owner to the hidden asset.
Because it would be repetitious in many cases, no further discussion
will be given to the local and federal sources of information. Suffice
it to say that at the local level, licensing boards and agencies, health
inspectors, zoning boards and taxing authorities can be prime sources,
in addition to such sources as local law enforcement and prosecutors. At
the federal level, the same licensing and inspection authorities, in
addition to the various federal law enforcement and investigation
agencies, are key sources.
Sources Of Information - Affiliated Businesses
In addition to using previously collected information and intelligence
and government records as sources of information and leads, information
must be gathered on businesses affiliated with the business or real
estate investment being investigated. There are two categories. The
first category is the business that supplies services necessary for day-
to-day basic business operations. This includes suppliers of raw
materials, vendors and trash collectors. The second category is the
provider of professional servicesQfor instance, the accountant, banker
and realtor.
Before probing these two categories of affiliated businesses, the
investigation should have accomplished the following:
- Identified, analyzed and consolidated all available intelligence into
a retrievable, understandable intelligence system.
- Completely identified all participants in the criminal organization
and developed background information on their businesses and
occupations.
- Completely identified all noncriminal associates of your criminal
target who have relations to the business community or the professional
community.
- Established one or more initial leads to an undisclosed investment in
real estate or a business enterprise.
- Searched all potential public records available regarding these
initial leads and incorporated these findings into the intelligence
system.
Up to this point, most of the sources of information discussed would be
considered part of the public domain and readily accessible. Information
required from these affiliated businesses, however, in most cases, will
require legal proceeding to fully secure them.
Also, your investigation has now moved from its confidential phase to an
overt stage where your attorney (whom you will need) most likely will be
required to engage in enforcement litigation with attorneys opposing
your access to records. Hidden asset investigations cannot succeed
without the combined efforts and talents of the investigator and the
attorney, working as a team.
The Former Property Owner/Lessor.
The investigation likely will turn up, at some point, a physical
property. It may simply be a piece of land, or it could be a small
building, an apartment house or a restaurant. This physical property may
have been purchased, it could be leased, or it may be used on a
lease/purchase arrangement. Regardless of the nature of the relationship
of the hidden owner to the property, there are several common
denominators.
In each interview or contact with anyone associated with the hidden
asset investigation, the investigator must obtain the two necessary
ingredients for successQdocumentation and potential witnesses.
An initial interview with either the owner (if the property is leased)
or the former owner (if the property has been purchased) should be
conducted. The interview should cover the following:
- Why did you sell or lease the business?
- How did you advertise that the business was for sale or lease?
- Identify all individuals who expressed any interest whatsoever in the
purchase or lease of the business.
- What were the terms of the sale or lease agreement?
- Where was the agreement of sale or lease consummated? Who was present?
- How were (are) you compensated for the purchase or lease of the
business?
- What changes in vendors or employees have occurred since your sale or
lease?
- What documents do you have concerning the purchase or lease?
Responses to these inquiries may identify the subject as having
personally shown an interest in the property at some time; it may
identify a title company involved; it will surely identify Realtors
involved; it may identify associates of the target as expressing
interest, or as serving as new employees, vendors or financial sources;
it will identify banks or payment and lending institutions; it will
identify former employees and former vendors as potential sources; and
it may identify the target's accountant or attorney.
Contact with these affiliated businesses will provide varying degrees of
cooperation. The recalcitrant interviewee should be made aware of the
possibility of legal processes and that he is not a target of the
investigation, if this is so. If he continues to be uncooperative, legal
proceedings should be used.
In these contacts, the investigator also must remain attentive to the
smallest item that can seem unimportant but that could lead to a major
breakthrough. For instance, a single call from a Realtor to the seller
expressing interest in the business, but with no follow-up, can develop
a lead to other property investments or a key future witness.
The Realtor.
Having made that contact with the owner/lessor and having established
involvement by a Realtor, the Realtor is the next logical contact.
The Realtor can be the source of a variety of information, and the
Realtor's role can range from full knowledge of hidden ownership to
merely servicing an account. The Realtor's cooperation will vary in
proportion to his role and his knowledge; if deeply involved, he likely
will be uncooperative.
The Realtor could have been contacted by the hidden owner who, after
expressing interest in the asset, replaced himself with a front or front
corporation, or a close criminal associate of the subject could have
assumed the same role.
In addition the Realtor may have executed the Agreement of Sale and
established escrow accounts for the deposit of down payment monies.
These documents may be retained by the Realtor and are vital leads. A
new bank account with a record of deposits for asset purchase purposes
may lead to or connect to the subject of the investigation.
The Realtor may also have a management role in the asset, depending on
the nature of the business. He could, for example, be responsible for
collecting rent, maintaining the property or paying utility bills. If
so, this allows for new avenues of inquiry. Exercising a management role
means a Realtor has a more intimate knowledge of the hidden asset than
the Realtor merely providing servicing. The management Realtor should be
questioned regarding former and current tenants, vendors and employees
of the hidden asset.
The Title Company.
Most transactions between buyer and seller involve title insurance. The
purpose of title insurance is to assure the buyer that the asset is free
from any unknown encumbrances or debts. This protection is provided by a
title company. In many cases, the title company is the location where
the asset actually changes ownership. For this reason, title companies
can be excellent sources of information. Unfortunately, most title
companies require a subpoena or some other legal process before
relinquishing their records.
Not only does the title company maintain documents important to the
investigation, but the company officer assigned the transaction may have
first-hand knowledge of the asset's ownership because title insurance is
buyer generated. As with the Realtor, the title company officer must be
questioned thoroughly in all aspects of the transaction, from initial
contact by the buyer to consummation of the sale.
The records maintained by the title company will include the settlement
sheet, which will show the distribution of monies between buyer and
seller. Also, the title company should retain copies of any financial
instruments used in the transaction. These instruments could be checks,
money orders or other financial instruments. If cash was involved, a
record of that is also available from the title company. In addition,
like the Realtor, the title-company escrow account may have been used as
a repository for down payments or other transactions involving the asset
purchase.
The Bank Account.
The financial transaction may relate to a bank, or it could relate to
another category of financial institution: a savings and loan
association, a brokerage account, a credit union, a pension fund, or any
combination of these institutions. Or it could be a pure cash
transaction.
At all financial institutions two functions occur: money flows in and
money flows out. In a hidden-asset investigation, the money flowing from
the account may be the investment in the hidden asset. The money flowing
into the account may be even more important.
When an account has been identified as the source (or possible source)
of an illicit investment, you must secure that account in its entirety.
That account can only be secured by proper legal process to the bank or
other institution, or directly to the subject business.
Often it is preferable to secure the financial records directly from the
subject business or the suspected front, for a number of reasons. You
will be securing the original document, which is, of course, the best
evidence. Also, you may obtain the records even faster and you will
eliminate the possibility of poor quality documents so often associated
with financial institution duplication.
This method is suggested but must be tailored to your investigation. If
your effort is overt at this phase of the investigation, the bank or
financial institution can be used as a backup source for documents not
received from the subject business or suspected front.
Upon receipt of financial records, tracing of investments begins.
Assuming that the investigation has revealed an investment of a specific
amount from a front's corporate account, the following should be
analyzed at once:
- All opening account deposits should be obtained and examined.
- All major deposits shortly before and shortly after the date of
investment in the illicit enterprise should be obtained.
- All cash deposits during the same period as (2) should be noted.
- Establish a dollar threshold based on the magnitude of the account and
record all deposits greater than that threshold.
- Complete (4) for all withdrawals of funds.
- Pay special attention to even-dollar disbursements.
- Identify and investigate all regular payments for potential leads.
- Note all wire transfers and credit and debit memos for follow-up
investigation.
Pursuit of the above items should be the initial steps in the analysis
of bank or financial accounts. The purpose is to identify funds of major
proportion flowing in and out of the account to the subject of the
investigation or his accounts. It may also generate new lead material.
In the analysis of bank accounts, it is crucial that attention be given
to detail and items small in size. Although you may want to focus
initial investigation on the major items in the account as suggested
above, do not overlook the balance of the records. They could be
critical.
There are an array of banking records that could prove valuable,
including certificates of deposit, credit card advances and currency
transaction reports. Loan records deserve special attention.
If a deposit analyzed in the financial records was generated as a result
of a loan, it should be pursued diligently. Several questions should be
addressed. Who applied for the loan? How were the proceeds deposited to
the account of interest to the investigation? And perhaps most
important, how was it secured or collateralized?
Answers to these questions regarding the loan could tie your target to
the business, especially the security or collateral for the loan.
Along with bank records, consider the banker. The banker could be the
liaison between the loan for the investment in the illicit asset and the
subject of your investigation. He may also have intimate knowledge of
the business and may even be an informal advisor. Include the banker in
your investigation as a possible valuable source of "inside" information
concerning the ownership and operation of the illicit enterprise.
The Accountant.
In the hidden-asset investigation, the accountant for the targeted
business enterprise can be an important source, not only for documents
but also as an "insider" and possible witness. Like the Realtor and the
banker, the accountant's degree of cooperation will be directly
proportional to his personal and professional involvement with the
subject of the investigation and the investments.
The documents held by the accountant most vital to a hidden-asset
investigation are known simply as the accountant's work papers. These
work papers will identify expenditures made by the enterprise; sources
of business income; loans obtained by the business; loans made by the
business; and other financial records. Generally, the accountant's work
papers are not only an excellent supplement to the bank records, but
also may serve as a primary source of new information or records.
Of particular interest in the work papers are notes or memos made by the
accountant during the preparation of tax returns, m conversation with
those operating the hidden-asset business, or both. For example, if a
business loan had been made to a corporate officer, there may be a note
indicating the purpose of the loan. This note also could identify who
approved the loan, and this could lead to your target.
The accountant's work papers may also include copies of tax returns
prepared by the accountant for the hidden-asset business. If you do not
have access to state or local tax returns, these work papers may provide
you with access. These papers also may provide possible new sources of
information, such as former accountants, vendors, real estate or asset
investments by your target, and employee records.
In addition to his function as accountant and preparer of tax returns,
the accountant may serve as a business advisor or investment consultant
to the business or your target. His activity m this role may shed
further light on the case.
Vendors.
As mentioned earlier, the identification of vendors, particularly former
vendors, can be critical to a hidden-asset investigation. The vendor has
access to the day-to-day operation of the business and often has
critical insight into the business management and financial workings.
The vendor may have direct contact with the true ownership, particularly
m the early stages of the vendor/business relationship.
Vendors can range from renovation contractors and insurance providers to
trash collectors and vending-machine managers. The more substantial the
vendor's dollar role in the hidden-asset business, the more likely a
direct contact between the vendor and your target has occurred.
For example, as evidenced in a past investigation, a vending company
supplied a variety of vending machines to a bar/restaurant owned by a
major criminal figure but fronted by an associate. The vending company
offered an interest-free loan to the business for using their vending
machines, with the loan being paid on a monthly basis from 50 percent of
the vending machine receipts. The loan was substantial and of major
concern to the hidden owner. As a result, he negotiated the loan
repayment agreement and his name and a record of his involvement
appeared in the vending company records. This was not conclusive
evidence on its own, but served as a critical element that subsequently
was combined with other investigative evidence in a successful hidden-
asset investigation.
Former or current vendors who have been identified as experiencing
financial problems with the suspect business may be primary leads
because their adversarial relationship makes these vendors more likely
than others to cooperate.
The vendor's own records may prove helpful. The investigation should
check samples of payment sources relating to the vendor; review any
contractual agreements between vendor and target business; and identify
all vendor employees involved with supplying goods and services to the
target enterprise.
Tenants/Former Employees.
If the hidden-asset business leases space or apartments to tenants, the
tenants may give valuable information. The tenants and former tenants
share a business relationship with the hidden asset and, as such, should
be questioned regarding payments of rent, identification of collectors,
identification of vendors, and who responds to complaints.
One of the best sources of information regarding any business is the
former employee. His usefulness to the investigation centers on his role
in the business, how long he functioned m that role and why his
employment was ended.
A former employee involved m the hidden-asset business from its
inception is most valuable because of his knowledge of the hidden
owner's initial involvement. Also, a former employee who had a role in
the financial aspect of the business is invaluable. As mentioned
earlier, analysis of state Labor and Industry reports can be valuable m
locating former employees prior to obtaining bank or business records
from other sources.
Conclusion
The hidden-assets investigation is difficult, time-consuming and costly.
But, it is critical and must be pursued to prevent the corruption and
disruption of the legitimate business community and to deter the illegal
marketplace from meshing successfully with the legitimate marketplace.
Success in the hidden-asset investigation also discourages other major
narcotics financiers or dealers and their corrupt business and
professional associates from future investment.
To succeed in the hidden-asset investigation requires sincere commitment
and total dedication by the attorney/investigator team. In most cases,
it requires a proactive effort, rather than the traditional reactive
investigation. And it requires dogged attention to detail, logic in your
methods, organization of effort, and patience. But it can be successful.
Endnotes
1. Health Care Fraud: A Rising Threat; Pennsylvania Crime Commission,
1981.
2. Chester City Racketeer; Pennsylvania Crime Commission, 1978.
3. Use of a mini or personal computer, if available, and legal in your
jurisdiction is an excellent tool for managing this kind of data.
4. May be identified elsewhere as County Court, Circuit Court, Court of
Quarter Sessions or some other designation.
Selected Reference And Writings
The Detection, Investigation and Prosecution of Financial Crimes,
Richard A. Nossen (1982).
The Cash Connection: Organized Crime, Financial Institutions and Money
Laundering, President's Commission on Organized Crime (1984).
RICO Investigations: A Case Study, Gregory T. Magarity, American
Criminal Law Review (1980).
A Chester City Racketeer: Hidden Interests Revealed, Pennsylvania Crime
Commission (1978).
Health Care Fraud: A Rising Threat, Pennsylvania Crime Commission
(1981).
Sources of Information for Criminal Investigators, ANACAPA Sciences,
Inc.
Penetration of Legitimate Business by Organized Crime, National
Institute of Law Enforcement and Criminal Justice (1970).
Racketeer Influenced and Corrupt Organizations Statute, US Department of
Justice, Criminal Division, 4th Edition.
Techniques in the Investigation and Prosecution of Organized Crime,
Materials on RICO, G. Robert Blakey (Editor), January 1980.
The First National Seminar on Asset Seizure and Forfeiture, National
Institute on Economic Crime, and Washington Crime News Service, April
1985.
End of article 21 (of 37)--what next? [npq] alt.society.resistance #22 (7 more) [1]
From: kiddyr@gallant.apple.com (Ray Kiddy)
[1] Forfeiture Info from BJA, III
Keywords: Bureau of Justice Assitance, Forfeiture
Date: Thu May 06 20:13:13 MDT 1993
Organization: Apple Computer Inc.
Lines: 451
BTW, for more info send mail to publish@ganymede.apple.com
body of msg:
help
send /publish/Index
i have some GAO reports (not many :-<) and am putting on this series
of 14 pamphlets on Forfeiture for police.
ps: i am not selling anything, this is all free info.
=======================================================================
ASSET FORFEITURE
The Management and Disposition of Seized Assets
Prepared by:
Police Executive Research Forum
G Patrick Gallagher
November 1988
Reprinted January 1992
U.S. Department of Justice
Office of Justice Programs
Bureau of Justice Assistance
U.S. Department of Justice
William P. Barr.........................Attorney General
Office of Justice Programs
Jimmy Gurule............................Assistant Attorney General
Bureau of Justice Assistance
Gerald (Jerry) P. Regier................Acting Director
Elliott A. Brown........................Deputy Director
James C. Swain..........................Director, Policy Development
and Management Division
Curtis H. Straub, II....................Director, State and Local
Assistance Division
Pamela Swain............................Director, Discretionary Grant
Programs Division
William F. Powers Director..............Special Programs
Division
Bureau of Justice Assistance
633 Indiana Avenue NW., Washington, DC 20531
(202) 514 6278
The Assistant Attorney General, Office of Justice Programs, coordinates
the activities of the following program Offices and Bureaus: Bureau of
Justice Assistance, Bureau of Justice Statistics, National Institute of
Justice, Office of Juvenile Justice and Delinquency Prevention, and the
Office for Victims of Crime.
U.S. Department of Justice
Office of Justice Programs
Bureau of Justice Assistance
Office of the Director Washington DC 25031
Dear Colleague:
Illicit drug traffic continues to flourish in every part of the country.
The cash received by the traffickers is often converted to assets that
can be used by drug dealers in ways that suit their individual tastes.
Since 1981, federal authorities have increased their attack on these
assets through both criminal and civil forfeiture proceedings with
remarkable success. The recent passage and use of state asset forfeiture
laws offers an excellent means for state and local jurisdictions to
emulate the federal success.
The Bureau of Justice Assistance (BJA), in the Office of Justice
Programs, has funded a nationally focused technical assistance and
training program to help state and local jurisdictions facilitate
broader use of such laws. BJA selected the Police Executive Research
Forum to develop and administer this program because of its history of
involvement in practical problem-oriented research to improve police
operations and the Forum's central role in developing training materials
for use by police agencies and chief executives.
As part of this project, the Forum has contracted with experts in the
area of asset forfeiture and financial investigations to prepare a
series of short manuals dealing with different concerns in the area of
asset forfeiture. We hope these manuals help meet the rapidly unfolding
needs of the law enforcement community as more and more agencies apply
their own forfeiture laws and strive to learn from the successes and
problems of their peers.
I welcome hearing your comments about this program. We have this project
so that most requests for information or assistance can be handled
through the Forum staff in Washington, D.C., by calling 202/466-7820.
Sincerely yours,
Gerald (Jerry) P Regier
Acting Director
Table of Contents
Introduction
Background on Seized Assets
Major Issues in the Management of Seized Assets
Disposition Issues
Methods for Handling Common Problems
Liability Issues
Resource Directory: Roster of Persons Interviewed
Introduction
From March to May, 1987, the Police Executive Research Forum (the
Forum), surveyed seven law enforcement agencies on how they manage and
dispose of seized assets, and the liability issues involved in asset
seizure and forfeiture.
The agencies covered in the study are the U.S. Marshals Service; the
U.S. Customs Service; the Florida Department of Law Enforcement; the
Broward County, Florida SheriffUs Department; the Metro-Dade, Florida
Police Department; the Fort Lauderdale, Florida Po,ice Department; and
the Detroit, Michigan Police Department. These agencies were chosen
because they have been dealing with large volumes of seized assets over
an extended period and the non-federal agencies, in particular, have
acquired a reputation for sophisticated management of those assets.
The July, 1985, National Institute of Justice, Research in Brief
entitled "Use of Forfeiture Sanctions in Drug Cases, " provides an
overview of the forfeiture provisions on a state-by-state basis.
Regarding the disposition of forfeited property, that brief notes that:
more than half the states provide that confiscated property goes to the
State or local treasury, or part to each. In some States, however, law
enforcement agencies may keep the property for official use. If the
property is sold or if it is cash, then the money goes to the State or
local treasury. In eight States, law enforcement agencies can keep all
property, cash, and sales proceeds (p. 5).
Some federal agencies have been actively involved in managing seized
assets. The state of Florida, pushed by its proximity, and in response
to substantial, drug traffic, has responded to the point that many of
the state's law enforcement agencies have developed smoothly operating
forfeiture processes under the State forfeiture statute, and high-
quality management procedures for handling and disposing of seized
assets. While this should be the response of any advanced and
professional agency, in Florida the agencies' expertise has developed
out of necessity. Innovative procedures must be used to take the
offensive against the drug trade. Moreover, the agencies literally would
be inundated with seized assets if they had not learned to process them
expeditiously, and turn the newly acquired properties into valuable
resources in the fight against drug trafficking.
Background On Seized Assets
When asked what were the most commonly seized assets, the seven
agencies' responses were remarkably similar: the two top assets were
cash and cars, followed by boats, planes, jewelry and weapons. Those
items made up 95 percent of all seized assets. Local agencies rarely
become involved in seizing businesses or real property (although this
seems to be changing as more and more state forfeiture laws are used to
seize so-called derivative assets). State and federal agencies, in
contrast, conduct such seizures frequently.
One reason local agencies usually did not target real property for
seizure is because they recognize the attendant difficulties in managing
them (Detroit made this very clear: " . . . if at all possible do not
get involved in seizing property"). Under the Florida Contraband
Forfeiture Act, authorities can seize only that property that is an
instrumentality of the crime--that is, cars, cash, and the Rolex watch
mentioned below. Property seizable under federal law and special
provisions of the Florida statutes are property and assets acquired by
using financial resources accruing (derived) from illegal activities.
Therefore, under Florida Racketeer Influenced and Corrupt Organizations
(RICO) statutes, law enforcement agencies may be aggressive in seizing
real estate acquired with drug or other racketeering proceeds.
The U.S. Marshals Service generally does not seize assets, except for
judicial seizures conducted pursuant to a federal court order. However,
the marshals do manage assets seized by other federal agencies, such as
the Federal Bureau of Investigation, the U.S. Immigration and
Naturalization Service, and the Drug Enforcement Administration (DEA),
with DEA accounting for 90 percent of seized items.
Among the more unusual items seized or turned over to the Marshals from
other agencies are a bank, a horse ranch, a golf course, gas stations,
flower shops, a drug store, a recording studio and a brass foundry. The
U.S. Customs Service lists elephants and kangaroos among the noteworthy
items seized, while local agencies reported gymnastic equipment,
Kruggerands, pill machines for making quaaludes, and even a Rolex watch
(noted earlier) used to set the time for a drug deal.
Most of the survey respondents, as local agencies, operate independently
of the U.S. Marshals Service, although Detroit currently is trying to
establish a working relationship with the Service. The Broward County
SheriffUs Department has probably the closest arrangement with the
Service, for their county's personnel are named special U.S. Deputy
Marshals for enforcement purposes, and they operate under their legal
umbrellaQtraveling cross country to serve subpoenas, gaining access to
selected Service intelligence, and receiving information on federal
investigations in their area. In short, this cooperative arrangement
provides a major boost to furthering the Broward County Sheriff's
Department's objectives.
In pursuing forfeiture action against such property, local agencies have
not been deterred by the need to track assets to other states: The
Broward County Sheriff's Department, for example, seized sixty-four
Arabian horses and autos
on a farm in Michigan where marijuana was being grown. The Detroit
Police Department went far afield to seize a farm in Tennessee.
Major Issues In The Management Of Seized Assets
When Detroit personnel were asked about how they maintain and preserve
the value of such assets as cars, real estate, farms, and businesses,
their answer was precise: "prompt disposal." The issues of maintenance
and preservation were of major concern to all seven agencies, or they
remained sensitive to the requirement to responsibly manage the asset
while it was in their possession.
In Florida, local departmental use of the most frequently seized
property, cars, requires approval from local courts. Then, the agency
can use the autos in investigations or hold them for auction with the
proceeds going to the asset forfeiture Law Enforcement Trust Fund
(LETF). This type of account can be set up in Florida jurisdictions to
hold seized proceeds, pending approval of city or county commissions for
its expenditureQexclusively for additional investigative activity.
After seizure, an item should be appraised in order to document its
value at the time of seizure, and to identify encumbrances and liens
(especially those affecting autos and real estate parcels) that might
make an item a financial liability to the seizing agency. Detroit even
has second appraisal done if they must go to court, so that they have a
record that the property did not decrease in value while in their
possession.
Some agencies (e.g., the U.S. Marshals Service and the Florida
Department of Law Enforcement) report that they try to determine if an
item will be a financial liability prior to deciding whether to seize
it. In fact, the Marshals Service participates with the local U.S.
AttorneyUs Office and the investigating federal agency in a "pre-seizure
planning" process to avoid having to assume responsibility for high
financial liability items.
Storing conveyances (including planes, boats and automobiles) often
requires an enclosed space to preserve the items in optimum condition.
This requires either owning or renting storage space. Often the dollar
value of the conveyance will determine how it is held in storageQfor
example, a Rolls Royce in good condition warrants an enclosed storage
facility, while an old model automobile in poor condition could be
stored in an open-fenced area. Broward County processes older and less
valuable cars (with book values of $500 to $1000) by allowing owners to
repossess them for a fee of $250 to cover the agencyUs legal costs. Ft.
Lauderdale places a $250 service charge on seized rental cars, or those
with legitimate liens.
In addition to storage, mechanical maintenance must be provided, and
that requires either using staff skills within the agency or hiring
qualified contractors. If a conveyance such as a boat or plane is
expected to be stored for an extended period, experienced mechanics must
be hired to specially prepare ("pickle") the engine and other mechanical
parts for long-term storage.
Autos are comparatively simple to maintain, and some agencies use their
own people (in many cases sworn personnel) to handle servicing. In other
agencies, civilians assigned to city or county maintenance yards care
for cars. Planes and boats present a more difficult task, for their
maintenance requires much more technical knowledge and skill. Most
agencies that deal with planes and boats use contracted maintenance
servicesQexcept for Broward, which assigns the boats permanently to the
Marine Interdiction Unit of the Organized Crime Bureau. The planes are
assigned to their own Aviation Section.
Usually, the boats and planes are first stripped of valuable electronic
equipment. This is either used by the agency (for, in many cases, the
hardware is better and more sophisticated than the agencies current
equipment) or, in Florida, sold with the proceeds going into a Law
Enforcement Trust Fund (LETF). Every agency commented on the
extraordinary expense of maintaining boats and planes.
Seized cash is immediately placed in interest bearing accounts. In
Florida, upon receiving court approval through the receipt of title, the
account with the cash is transferred to the appropriate LETFQlocal or
state, depending upon the seizing agency. Ft. Lauderdale's arrangement
with a local bank and the state's attorney allows the bank to use its
machines to count and simultaneously photograph every bill, and then
deposit the funds in the agencyUs account.
Florida's Law Enforcement Trust Fund (LETF) program merits special
mention. Seized money and the proceeds from sales and auctions are
placed in such accounts, subject to certain state statutory provisions.
A local department must apply to the locally maintained Fund to use the
money; a state agency applies to the state fund. A request from a
particular division or bureau in a locality is passed through the chain
of command to the chiefs office and, if approved, is forwarded to the
respective city or county council for consideration. Ft. Lauderdale has
to submit monthly reports on all seizures and trust fund activity to the
city manager, and along with other Florida agencies, another complete
list to FDLE.
As an example of concrete activity in Florida's trust fund program,
Metro-Dade recently requested and received funds to rent a large airport
hangar as an enclosed space for a large number of seized vehicles
managed by the department. Previously, the vehicles were housed in an
open-fenced lot. In addition, Ft. Lauderdale funds five staff positions
out of this fund: an attorney, three forfeiture specialists, and a
secretaryQall of whom work directly on forfeiture legal proceedings and
the preservation and maintenance of seized assets.
Most agencies use a combination of in-house expertise, such as sworn
personnel who are pilots or auto mechanics, and hired consultants,
including aircraft mechanics and marina staff, to manage the various
types of conveyances seized. Following a competitive bidding process,
the U.S. Customs Service hired a general management consultant who is
responsible for all custody, management and disposition of seized
conveyances. The general contractor is responsible for hiring
subcontractors to deal with specific mechanical and storage requirements
of seized assets.
When businesses are seized, it must be determined whether to continue
operating the business or close down its activity. Experiences among
agencies has varied. Obviously, Broward County did not choose to
continue to operate a seized porno theatre, on the rare occasion when it
seized a business. If it is projected to be cost-effective to continue
operation of a seized business, the U.S. Marshals will employ a business
manager to oversee the business. The Florida Department of Law
Enforcement has never had occasion to continue operating any business
seized, and the U.S. Customs Service and local agencies usually avoid
seizing businesses.
When hiring consultants to appraise the value of a conveyance or a
business, provide mechanical maintenance, store items or actually manage
a business, the seven agencies reported using a variety of methods to
locate reputable contractors. Typically, local trade associations and
professional groups are contacted for referrals, advertisements are
placed in appropriate trade journals and newspapers, and other law
enforcement agencies may be contacted for assistance. Metro-Dade uses
the countyUs current list of approved vendors. References are requested
and checked to assure that the contractors are competent and reputable.
The U.S. Marshals Service maintains a list of vendors in each of its
thirteen regional offices, while the other agencies surveyed stated that
they do not maintain approved lists but can easily retrieve the names of
reputable contractors with whom they have dealt in the past.
Disposition Issues
All agencies stated that they are allowed to convert seized equipment to
departmental use. Although a state or federal agency may on its own
decide to use a vehicle which has been seizedQusually in a district or
region outside the one where it was seizedQa local agency is more likely
to sell the seized vehicle. In Florida, an agency may in turn request
money from the Law Enforcement Trust Fund to purchase another needed
vehicle. By selling assets, a local agency avoids any appearance of
seizing an item specifically for agency use. Broward County has even
"traded" one piece of seized equipment for another. On one occasion,
because its regular radios did not have enough channels, the
and those of its membership to address law enforcement groups and to
make sure that those groups are familiar with all of the requirements of
the pertinent statutes. All agencies reported that, if at all possible,
each asset is evaluated before seizure to be sure that it actually
belongs to the suspect.
The Marshals use a system of "pre-seizure planning," in which targeted
assets are evaluated to ascertain ownership and the existence of any
encumbrances or liens. The Marshals stated that they have had difficulty
with mortgage lenders and title insurance companies recognizing the
Marshal's title to a piece of seized real estate. Such companies are
concerned that owners may claim their constitutional rights have been
violated, and that the property is still theirs. For example, has a
fugitive received the notification required by law regarding the pending
disposition of his property?
The Marshals Service has never been sued directly, but they reported a
suit has been brought challenging the constitutionality of a particular
seizure. The Marshals also noted that they would hesitate to seize an
asset deemed a financial liability because of encumbrances or liens that
summed to an amount greater than the propertyUs assessed value.
Asset seizure and forfeiture lawsuits have focused almost exclusively on
the perceived slowness of the process for returning a seized asset to
the rightful owner. However, on the bright side, when jurisdictions have
been sued, their actions have been upheld in every case (such as Ft.
Lauderdale and Detroit).
With the reasonable burden of proof and the preponderance of the
evidence burden in civil cases, the above agencies reported few
reservations about pursuing a case or deciding to attempt the seizure.
After seizure, however, other troublesome situations may arise. Broward
wrestled with the problem of what to do with a load of maple wood that
was surrounded by a load of hashish. Could they donate it to a shelter
facility? They eventually destroyed it, feeling that they could not
justify returning it, or giving it away.
Resource Directory:
Roster Of Persons Interviewed
1. U.S. Marshals Service
Joseph Enders, Chief
Operations Support
(703) 285-1271
2. U.S. Customs Service
Gary George
Seized Property Officer
(202) 566-5435
3. Metro-Dade Police Department
Major Art Nehrbass
Executive Officer
Special Investigations Division
(305) 592-7323
George Aylesworth, Esq.
Supervisor
Police Legal Unit
(305) 547-7404
4. Ft. Lauderdale Police Department
Robert Wennerholm, Esq.
Legal Advisor
(305) 761-5626
5. Broward County SheriffUs Department
Captain Carl Parrott
Assistant Commander
Organized Crime Unit
Commander William Dunman
Director
Organized Crime Centre
(305) 492-1810
6. Detroit Police Department
Inspector Terry Ford, Esq.
Director
Forfeiture Unit
(313) 224-4490