United States. Congress. House. Committee on the J.

Civil Asset Forfeiture Reform Act : hearing before the Committee on the Judiciary, House of Representatives, One Hundred Fourth Congress, second session, on H.R. 1916 ... July 22, 1996 online

. (page 5 of 37)
Online LibraryUnited States. Congress. House. Committee on the JCivil Asset Forfeiture Reform Act : hearing before the Committee on the Judiciary, House of Representatives, One Hundred Fourth Congress, second session, on H.R. 1916 ... July 22, 1996 → online text (page 5 of 37)
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Mr. Edwards. That is correct. I think that is an accurate and
fair statement.

Mr. Frank. When did this happen?

Mr. Edwards. The seizure occurred in late February 1991. The
trial was in, as I recall, late 1992, and the court's decision ordering
the return of the money was in 1993, roughly, almost 2V2 years
later.

Mr. Frank. Did you ever get a letter of apology in any Federal
official on this?



38

Mr. Jones. No. None.

Mr. Frank. That doesn't surprise me, but disappoints me a bit.

Mr. Cutkomp, with your mother did they adduce any evidence
that there was some comphcity on her part at any point? I am not
talking about whether she was or wasn't.

Did they have any evidence that suggested that she was?

Mr. Cutkomp. She was never part of my brother's conspiracy.

Mr. Frank. Did they claim she was?

Mr. Cutkomp. No.

Mr. Frank. Let me ask, particularly the attorneys here, others,
is there any other area of American law that vou can think of
where this kind of reversal of roles takes place, where fitting a pro-
file doesn't simply subject you to the closer investigation? We have
cases where if vou fit the profile, you get subjected to investigation,
but where the burden of proof gets reversed?

Mr. Komie, can you think of any other area?

Mr. Komie. I can't think of any, or where people have the legal
right to possess the property, which is the money, where they have
to now prove that the source of the money is legitimate as opposed
to the Government having the burdens.

Mr. Edwards. No. I think there is nothing like forfeiture, and
that is probably because of the historical basis of forfeiture. In colo-
nial America if we didn't seize the ship that the smuggled goods
came in on, the tiny Federal Government would have had no re-
course. But the Justice Department has taken those quite irrele-
vant traditions and spawned modem forfeiture.

Mr. Frank. I guess it started with the precedent of having to se-
cure the ship you sailed in on, and they have now applied the old
saying, and the horse you rode in on.

The last question I nad, as I read over the testimony in advance
from the Treasury Department, they talked about the need to do
this, where we were talking about goods which were themselves pi-
rated, intellectual property abuse, ^r instance.

Mr. Komie, is this procedure widely used across the board, or is
it primarily in people being accused of drug abuses?

Mr. Komie. This seems to go on throughout the United States,
whether I am working in the Detroit area or any metropolitan area
that has an airport or train station. In Florida, they have a inter-
state highway system and stop buses.

Mr. Frank. What the Treasury Department said is we need this
because we have to protect people who have counterfeited or pirat-
ed goods. Have you come across much use of it in that capacity?

Mr. Komie. No. I have seen one case in Chicago where we had
pirated goods, where they swooped down on somebody who was
producing unauthorized sweatshirts, T-shirts. But my experience is
that law enforcement does not enforce patent trademark and
unique copyright items. They spend most of their time running
after the crime of the time, which is murder, rape; that is what
they primarily occupy themselves with.

Mr. Frank. Is forfeiture mostly for drug enforcement?

Mr. Komie. Yes, but in the case of Mr. Lombardo, it was the sto-
len property police who picked up the money and then once it got
there they realized, here is a bonanza. We can split it up if we take
it to the Federal building.



39

Mr. Edwards. I believe there is a second area that has experi-
enced very recent boom that is perhaps not quite as evasive as
drug forfeiture, but currency violation forfeiture. I represent a
country doctor in Alabama who had put his entire life savings in
a bank, amounting to about $2.5 million, and had the interest off
that account go to a school in his hometown, a private K through
12 school that was about to close because of financial problems.

About 2V2 years after he set up this account and after he had
benefited the school to the tune of about half a million dollars, he
took the money that he had hoarded over a lifetime of practicing
medicine, he was almost 70 at the time, he had over $300,000 in
the back of his closet and his wife finally persuaded him to take
it out. So he put it in the bank to be added to this account he had
set up for the school, and the bank president did not file a currency
transaction report because the bank president, as he testified in
deposition, knew the doctor was almost obsessive about not being
known as a rich doc. He didn't want people to know he had that
kind of money, this is sort of a throwback kind of doctor. He
charges $5 for a routine office visit and drives an 8-year-old car.

Mr. Frank. How many office visits does he happen to get in in
a day?

Mr. Edwards. A lot. He is a rare creature for 1996.

Anyway, the Grovernment found out that this large amount of
currency had been deposited to this account without a CTR being
filed, so they seized the entire account, almost $3 million at that
time, under section 981, alleging that the entire amount was for-
feitable under the currency forfeiture statutes.

A district court in Montgomery last year granted summary judg-
ment in our favor. The doctor has now gotten back with interest
all of the money, except the $300,000 cash deposit, and we are now
litigating what happens to that money in the eleventh circuit. So
it is attraction of the money. Any time there is a forfeiture statute
on the books, those law enforcement agencies that deal with what-
ever the law is are going to look for ways to take the money.

Mr. Frank. Were they alleging any income tax violations in that
case?

Mr. Edwards. No. They tried to find some, but couldn't. We ulti-
mately showed that the doctor had overreported his cash income
and the IRS had to send him back $20,000-some.

Mr. Frank. Thank you, Mr. Chairman.

I want to say that you are performing a great service here, Mr.
Chairman, ana I will do whatever I can to help you in its comple-
tion.

Mr. Hyde. Thank you very much.

Mr. Gekas.

Mr. Gekas. Yes. I thank the Chair.

I wanted to ask Mr. Jones a couple of questions and/or his coun-
sel.

At the point of contact that you had, the first contact in which
thev confiscated your sum of money, did they inform you that you
haa a right to reclaim it or that there was a process available for
you to go to court to try to get it back, to contest their action; did
they inform you of that?

Mr. Jones. They did somewhat inform me of that; right.



40

Mr. Gekas. What did they say you had a right to do?

Mr. Jones, They told me if tne money was clean that I would be
able to get the money back.

Mr. Gekas. Did they tell you that you would have had to post
bond?

Mr. Jones. No.

Mr. Gekas. You learned that later when you contacted your at-
torney?

Mr. Jones. That is correct.

Mr. Gekas. Mr. Edwards, what was the predicate in the Civil
Rights Act on which you founded the action?

Mr. Edwards. There were two constitutional bases, first, denial
of due process, because the Asset Forfeiture Office had refused to
waive the bond requirement and allow us to get into court; and sec-
ondarily, that the seizure of the money was without probable cause
and violated Mr. Jones' rights under the fourth amendment against
unreasonable search and seizure. We won ultimately on both
points.

Mr. Gekas. Is it to be assumed that when you finally did bring
an action that, in effect, you had the burden of proof?

Mr. Edwards. Oh, yes.

Mr. Gekas. In all those proceedings under the Civil Rights Act?

Mr. Edwards. That is correct.

Mr. Gekas. So that even if this law were adopted you could still
avail yourself of the Civil Rights Act if you found other bases, and
you would still have the burden of proof there. If this bill had been
in place and this were law, would you have resorted to the Civil
Rights Act, do you think?

Mr. Edwards. No. Because I believe under the provisions of this
bill we would not have had the problem of not having $900 to pay
the entrance fee to a Federal court and would have retained judi-
cial review of the seizure without having to resort to becoming a
plaintiff in a 1983 action.

Mr. Gekas. Then the burden of proof under this new act would
rest in the Grovernment's corner, as it were?

Mr. Edwards. That is exactly right.

Mr. Gekas. I have only one other question having to do with the
gentleman whose mother was treated so undignifiably. Did they
ever issue an apology to your mother?

Mr. CUTKOMP. No, sir.

Mr. Gekas. I apologize for them?

Is your mother still living?

Mr. CuTKOMP. Yes.

Mr. Gekas. Tell her that we have all felt her pain, and I am not
quoting anybody on that.

I thank the Chair.

I relinquish the time remaining.

Mr. MOORHEAD [presiding]. All of us that have heard this testi-
mony are appalled that such things can happen here in the United
States where people's rights can be trampled so seriously, espe-
cially without due process. I think the forfeiture laws can be of ben-
efit. I hope that you do, too.

In cases where there is a crack house being continuously used to
sell narcotics, well-known to everybody, there is every reason in the



41

world that the property should be forfeited if that is what it is
being used for. But in some cases, where automobiles are being
used to transport illegals back and forth across the border, some-
thing has to be done to stop that kind of action. But certainly to
reach summary judgment without any evidence in these cases, cer-
tainly goes far beyond what was ever intended, I am sure, by the
legislators.

Mr. Cutkomp, do you have a comment?

Mr. Cutkomp. Can't you put something in for absent owners and
innocent owner provisions?

Mr. MOORHEAD. Where automobiles are involved, if there is a
loan against the properties, normally in the cases I have heard of
in California at least, the rights of the mortgage company or the
lending company have been protected there, as they should be. But,
obviously, if there is an unknowledgeable person that owns the
property, that doesn't know anything about the crime being com-
mitted, there should be a way

Mr. Cutkomp. As long as there is a proof provision in it that
keeps the table clear.

Mr. MooRHEAD. I agree that should be there.

Mr. Komie, do you tnink there is a place for asset forfeiture?

Mr. KOMBE. Absolutely, there can be asset forfeiture if the prop-
erty itself is offending, but the cases we have been telling you
about today, the property has been innocent.

Mr. MooRHEAD. I agree your cases are amazing situations where
the law has been misused.

Mr. KOMIE. We at the Illinois Bar Association support law en-
forcement's efforts to eradicate drugs, but that is not what we are
talking about. We are talking about a program that was thought
to be good on the drawing board, that is turning out to be a disas-
ter.

Mr. MooRHEAD. It certainly sounds that way.

I yield back.

Mr. Hyde [presiding]. I want to thank this panel for very compel-
ling testimony. I wish the world could hear it, or at least those peo-
ple who are interested in justice, which we all ought to be.

I thank you for your contributions. I hope some day we will have
a signing ceremony at which all of you can be present.

Mr. Komie. We would be honorea to attend, I am sure.

Mr. Hyde. Thank you, Mr. Jones. Thank you, Mr. Cutkomp.
Thank you, Mr. Komie. Thank you, Mr, Edwards.

Our next panel consists of Stefan D. Cassella, Deputy Chief of
the Asset Forfeiture and Money Laundering Section of the Depart-
ment of Justice; and Jan P. Blanton, Director of the Treasury Exec-
utive Office for Asset Forfeiture at the Department of Treasury.

Together these two agencies represent the bulk of civil asset for-
feitures at the Federal level. Joining them is James W. McMahon,
superintendent of the New York State Police, here representing the
International Association of Chiefs of Police.

Perhaps we can start with Mr. Cassella.

Normally we try to limit statements to 5 minutes, but I will, just
with the admonition that we have several witnesses, if you could
be less prolix than perhaps you would like to be, that is a softer
way of saying it, but I don t want to cut anybody off.



42

STATEMENT OF STEFAN D. CASSELLA, DEPUTY CHIEFS ASSET
FORFEITURE AND MONEY LAUNDERING SECTION, CRIMI-
NAL DIVISION, DEPARTMENT OF JUSTICE

Mr. Cassella. Good morning, Mr. Chairman.

Five minutes will be fine. 1 understand that our formal state-
ment will be included in the record.

I would ask that the transmittal of the forfeiture bill that we
sent Congress last week and the analysis of it also be included in
the record.

Mr. Hyde. Without objection, so ordered.

[The information follows:]



43




U. S. Department of Justice

Office of Legislative Affairs



OfHce of the Ajsisum Anoiney GcnenI Washington. D.C. 20530

July 17, 1996



The Honorable Newt Gingrich

Speaker

United States House of Representatives

Washington, D.C. 20515

Dear Mr. Speaker:

Enclosed is a draft bill, the "Forfeiture Act of 1996,"
which contains comprehensive legislative proposals to improve the
asset forfeiture program. The proposals are designed to
strengthen and enhance asset forfeiture, improve procedures to
ensure fairness and due process to innoeeftt property owners, and
resolve inconsistencies and ambiguities that have developed in
forfeiture law.

This proposal is the result of a thorough review of the
federal statutes relating to asset forfeiture that has been
undertaken by the Department of Justice for the past two years.
As you know, forfeiture statutes were enacted by the First
Congress and have been an important part of federal law
enforcement for over two hundred years. That is no less true
today. The forfeiture statutes enacted by Congress since 1970
are an essential aspect of the federal arsenal of law enforcement
tools that may be deployed in the war on crime. We have found,
however, that the procedures that may have been appropriate
historically for the forfeiture of smuggled goods, ships on the
high seas, and certain types of contraband may need to be
modified when forfeiture is directed toward assets such as
residences, businesses and bank accounts.

In formulating our own proposals to revise the forfeiture
laws, we have sought to convey a sense of balance. Forfeiture is
an essential law enforcement tool that can be made even more
effective by enhancing and clarifying the powers of the
government while improving procedures to ensure that the rights
of innocent parties are fully protected. The bill recognizes the
inocrtant role that both civil and criminal forfeiture have come



44



- 2 -

to play in federal law enforcement and takes into account the
procedural and substantive needs of the law enforcement
community. Yet it acknowledges the need for procedural reform
and adopts many of the changes suggested recently by Members of
Congress and the organized bar. In short, the bill would ensure
that the enforcement of the forfeiture laws will be tough -but
fair.

The most significant provisions of the bill include the
following: The bill expands the categories of crimes for which
forfeiture may be imposed. Most important, the proceeds of all
crimes in Title 18 of the United States Code would be subject to
forfeiture so that forfeiture would be available as a sanction in
white collar crimes such as fraud and public corruption. In
addition, the bill includes provisions expanding the category of
property forfeitable in connection with alien smuggling and
terrorism, and authorizing forfeiture for additional money
laundering violations.

The bill also includes several provisions designed to
enhance the investigative tools available to law enforcement in
forfeiture cases. These provisions are intended to assist the
government in meeting the heightened burden of proof requirements
set forth elsewhere in the bill by improving the government's
ability to gather the evidence needed to build a competent case.
Thus, the bill authorizes the use of grand jury material by
government attorneys in civil forfeiture investigations,
authorizes the issuance of civil investigative demands to gather
evidence leading to the filing of a forfeiture complaint, gives
government attorneys access to tax and credit report information
in the course of forfeiture investigations, and permits the
dismissal of claims where the claimant refuses to waive bank
secrecy protections in foreign jurisdictions that limit the
government's access to relevant documents.

Finally, the bill includes a number of provisions that
resolve ambiguities in the present forfeiture statutes. For
example, the bill preserves the availability of property for
criminal forfeiture by allowing courts to order defendants to
repatriate forfeitable property from a foreign jurisdiction, and
by authorizing the pretrial restraint of substitute assets in
criminal cases.

In addition to strengthening asset forfeiture as a law
enforcement tool, the package contains proposals designed to
ensure that the rights of innocent property owners are protected
and to avoid unduly harsh application of the forfeiture laws.
The most important of these provisions involve the burden of
proof and the cost bond requirement in the area of civil
forfeiture. The bill shifts the burden of proof from the
property owner to the government and provides for waiver of the



45



cost bond in certain situations. It also extends the deadline
for the filing of claims by property owners.

Finally, the bill contains a uniform innocent owner defense.
Presently, some civil forfeiture statutes contain no provision
allowing even an innocent property owner to resist the forfeiture
of his or her property if it was used by another person for an
illegal purpose. Other statutes contain conflicting,
inconsistent and sometimes inadequate innocent owner provisions.
The uniform innocent owner provision is intended to ensure that
property will not be forfeited if the owner establishes that he
or she did not know of the illegal use of the property or that
the owner did what any reasonable person would have done to stop
the illegal use of the property once he or she found out about
it .

The purpose of this bill is to strengthen and improve the
structure and operation of the Nation's asset forfeiture laws.
It is not intended to be a revenue raising measure. The Omnibus
Budget Reconciliation Act (OBRA) requires that all revenue and
direct spending legislation meet a pay-as-you-go recjuirement .
That is, no bill should result in an increase in the deficit; and
if it does, it will trigger a sequester if it is not fully
offset. The Forfeiture Act of 1996 would increase receipts and
direct spending. Considered alone, it meets the pay-as-you-go
requirement of OBRA.

Our estimate of the impact of this proposed, bill on the
deficit is:

Fiscal Years
(in millions of dollars)

1996-
1996 1997 1998 1998
Receipts 33.250 33.250 33.250 99.750
Outlays 30.495 30.495 30.495 91.485
Net deficit
effect -2.755 -2.755 -2.755 -8.265

With respect to potential impacts on the criminal justice
system, all of the criminal sanctions addressed by this
legislation are economic in nature. It does not impose any new
penalties involving incarceration, nor does it create any new
offenses for which incarceration may be imposed.

It would be appreciated if you would lay this bill before
the House of Representatives. An identical proposal has been
transmitted to the President of the Senate.



46



The Office of Management and Budget has advised that there
is no objection to the presentation of this proposal to the
Congress from the standpoint of the Administration's program.



. C




Andrew Fois

Assistant Attorney General



47



FORFEITURE ACT OF 1996

SECTION-BY-SECTION ANALYSIS

Title I

Section 101 Time for Filing Claim; Waiver of Cost Bond

Under current law, a claimant may file a claim and bond to
convert an administrative forfeiture to a judicial one at any-
time after the property is seized. United States v. $52.800 in
U.S. Currency . 33 F.3d 1337 (11th Cir. 1994). But the claim must
be filed not later than 20 days from the date of first
publication of notice of forfeiture. This requirement, which is
applicable to all civil forfeitures based on the customs laws,
see 19 U.S.C. § 1608, is much more restrictive than its
counterpart in the criminal forfeiture statutes, and has been
criticized for giving property owners too narrow an opportunity
to exercise their right to a "day in court."

The criminal forfeiture statutes give claimants 3 days from
the final date of publication of the notice of forfeiture to file
a claim. See e.g. 18 U.S.C. § 1963(1) (2). This procedure*
represents a reasonable compromise between the property owner's
interest in having a fair opportunity to file a claim in a *
forfeiture proceeding and the government's interest in expediting
the forfeiture process and avoiding unnecessary storage and
maintenance costs in the vast majority of forfeiture cases in
which no claim is ever filed. Accordin'giy;" section 1608 is
amended to replace the 20-day rule with the 30-day rule that
governs the filing of claims in criminal forfeiture cases.

In filing the claim, the claimant will have to describe the
nature of his or her ownership interest in the property, and how
and when it was acquired. This minimal requirement is necessary
to discourage the filing of spurious or baseless claims; but it
is not intended to place on the seizing agency any duty to
evaluate the merits of the claim. To the contrary, the seizing
agency will simply transfer the claim to the United States
Attorney to take whatever action is appropriate under the law.

The amendment also amends the cost bond requirement present-
ly set forth in 19 U.S.C. § 1608 to make it clear that no bond is
required in forma pauperis cases as long as the petition is
properly filed with all supporting information. In addition, the
amendment authorizes the Attorney General and the Secretary of
the Treasury to waive or reduce the cost bond requirement with
respect to matters within their respective jurisdiction in
categories of cases other than those involving indigency or
substantial hardship. This provision will give the Attorney
General and the Secretary the opportunity to review the policy
reasons for requiring a cost bond and to waive or reduce the bond
if those reasons do not apply in a given category of cases.



48



The amendment also amends current law by allowing the
seizing agency to turn the case over to the U.S. Attorney in any
district where venue for the judicial forfeiture action would
lie, thus reflecting the enactment of the broadened venue and
jurisdiction provision in 1992 which no longer limits venue to
the district in which the property is located. United States v.
$633,021.67 in U.S. Currency . 842 F. Supp. 528 (N.D. Ga. 1993) ;
28 U.S.C. § 1355(b) .

Other changes in the wording of § 1608 are merely for the
purpose of clarity. Except as explicitly described above, the
amendments are not intended to alter the ways in which seizing
agencies process administrative forfeitures or turn them over to
the U.S. Attorney when a claim and cost bond are filed.

Section 102 Jurisdiction and Venue

Historically, courts had in rem jurisdiction only over
property located within the judicial district. Since 1986,
however, Congress has enacted a number of jurisdictional and
venue statutes permitting the courts to exercise authority over
property located in other districts under certain circumstances.
See 28 U.S.C. § 1355(b) (authorizing forfeiture over property in
other districts where act giving rise to the forfeiture occurred
in district where the court is located); 18 U.S.C. § 981(h)
(creating expanded venue and jurisdiction over property located
elsewhere that is related to a criminal prosecution pending in
the district); 28 U.S.C. § 1355(d) (authorizing nationwide
service of process in forfeiture cases>-r

Many older statutes and rules, however, still contain
language reflecting the old within-the-district requirements.
These technical amendments bring those provisions up to date in
accordance with the new venue and jurisdictional statutes.
Indeed, several courts have already held that nationwide service
of process provisions necessarily override Rule E(3) (a) . See
United States v. Parcel I. Beginning at a Stake . 731 F. Supp.
1348, 1352 (S.D. 111. 1990); United States v. Premises Known as



Online LibraryUnited States. Congress. House. Committee on the JCivil Asset Forfeiture Reform Act : hearing before the Committee on the Judiciary, House of Representatives, One Hundred Fourth Congress, second session, on H.R. 1916 ... July 22, 1996 → online text (page 5 of 37)