Cause of Action Calls on DOJ IG to Audit Forfeiture Programs

7/26/2019 Cause of Action Calls on DOJ IG to Audit Forfeiture Programs

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VIA CERTIFIED MAIL

Michael

E

Horowitz, Esq.

Inspector General

cmrcAUSE

-

0

ACTION

Advocates for Government Accountability

A 501 c) 3) Nonprofit Corporation

January 29, 2015

U.S. Department

of

Justice

Office of the Inspector General

950 Pennsylvania Avenue, N.W.,

Suite 4706

Washington, D.C. 20530-0001

Re: Request for Audit

or

Review

Dear Inspector General Horowitz:

Cause of Action is a nonprofit, nonpartisan government oversight group that protects

economic liberty by promoting executive branch transparency. We write to request that the

Office oflnspector General ( OIG ) initiate an audit or review

of

the Department

of

Justice's

( DOJ ) forfeiture programs.

Introduction

As you are well aware, on January 16, 2015, Attorney General Eric Holder issued an

order titled Prohibition on Certain Federal Adoptions of Seizures by State and Local Law

Enforcement Agencies, (the Order ) prohibiting federal agencies from taking property seized

by state or local law enforcement under state law (except for property that directly relates to

public safety concerns, including firearms, ammunition, explosives and property associated with

child pornography) and then forfeiting it under federal law using a practice known as

adoption.

1

State and local authorities can retain up to 80 percent of the proceeds stemming

from such adoptions.

2

Also, state and local law enforcement agencies that participate in joint

investigations with DOJ s law enforcement agencies can receive a portion

of

the proceeds

of

1

Press Release, U.S. Dep't of Justice, Office of Pub. Affairs, Attorney General Prohibits Federal Agency Adoptions

of

Assets Seized by State

nd

Local Law Enforcement Agencies Except Where Need to Protect Public Safety (Jan.

16, 2015), available at http://www.justice.gov/opa/pr/attomey-general-prohibits-federal-agency-adoptions-assets

seized-state-and-local-law (the Press Release ). The Order 's prohibition on federal agency adoption includes, but

is

not limited to, seizures by state or local law enforcement

of

vehicles, valuables, cash and other monetary

instruments.

2

See

U.S. Dep t of Justice, Criminal Div., Asset Forfeiture and Money Laundering Section,

Guide to Equitable

Sharing for State and Local Law Enforcement Agencies

(2009),

available at

http://www.justice.gov/usao/ri/projects/esguidelines.pdf (the Guides ).

C a u s e O f A c t i o n

:

1919

Pennsylvania Ave, NW

Suite 650

Washington

DC

2 6


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Mr. Michael E. Horowitz

January 29, 2015

Page 2

forfeited assets resulting from these investigations in the form of cash or property through

DOJ s

"equitable sharing" program.

3

The Order has been praised as a "major reform" of federal asset forfeiture policy.

4

The

Washington Post

described it as "the most sweeping check on police power to confiscate

personal property since the seizures began three decades ago as part of the war

on

drugs. "

5

Even

the Attorney General's critics have hailed the order, with Senator Charles E. Grassley (R-IA)

stating, "[w]e're going to have a fairer justice system because

of

it[.]"

6

While the Order purports to safeguard civil liberties by ending federal adoption, it

actually does not have a significant impact

on

the government's overall use of asset forfeitures.

7

In the analysis that follows, we show that the majority of asset forfeitures involve administrative

forfeitures, which the Order does not restrict. Therefore, if the DOJ in fact believes that

inappropriate asset forfeitures pose systemic risks to our civil liberties, then your office should

immediately audit or review the entire Asset Forfeiture Program.

Discussion

A. The Order fails to address the majority o federal seizures which occur

administratively and not through civil or criminal forfeiture.

DOJ s

authority to conduct asset forfeitures is generally derived from 18 U.S.C. 981

(civil forfeiture), 18 U.S.C. 982 (criminal forfeiture), and 19 U.S.C. 1607 (administrative

forfeiture).

8

Civil forfeitures result when the government files a court action against property

(in

rem). Criminal forfeitures result from the criminal prosecution of a person (in personam). The

government must "indict" the property used or derived from a crime and

if

the jury finds the

property forfeitable, then the court issues an order of forfeiture.

9

However, "administrative

forfeitures," an

in rem

action through which the government takes property without judicial

involvement,

1

are used most often.

3

21 U.S.C. 881(e)(l)(A) and (e)(3), and 18 U.S.C. 981(e)(2) each authorize the Attorney General to share

federally forfeited property with participating state and local law enforcement agencies.

4

Charlotte Alter,

Feds Limit aw that Lets Cops Seize Your Stuff, TIME

(Jan. 16, 2015),

available at

http://time.com/3 672140/civil-forfeiture-assets-ho Ider/.

5

Robert

O

Harrow Jr., Sari Horwitz, Steven Rich,

Holder Limits Seized-Asset Sharing Process That Split

Billions with Local, State Police, WASH. POST (Jan. 16, 2015), available at

http://www.washingtonpost.com/investigations/ho der-ends-seized-asset-sharing-process-that-sp lit-bi lions-with

local-state-police/2015/01/16/0e7ca058-99d4-11 e4-bcfb-059ec7a93ddc_story.html

6

Id

7

See, e.g.

Radley Balko,

How much civil asset fo1feiture will Holder s new policy actually prevent?

WASH. POST

(Jan. 20, 2015),

available

athttp://www.washingtonpost.com/news/the-watch/wp/2015/01/20/how-much-civil-asset

forfeiture-will-holders-new-policy-actually-prevent/.

8

U.S.

Dep t of

Justice, Types of Federal Forfeiture, (December 2014),

available at

http://www.justice.gov/jmd/afp/07federalforfeiture/

9

Id

1 Id

11

See infra note

21.


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January 29, 2015

Page 3

Through administrative forfeiture, and without judicial involvement,

12

the government

may seize monetary instruments; conveyances used to import, transport or store a controlled

substance; and other property with a value of up to $500,000.

13

Maximum Administrative

Forfeiture

Thresholds

Monetary Instruments

(e.g., cash, checks, stocks,

bonds) Unlimited

Value

Hauling Conveyances

(e.g., vehicles, vessels, and aircraft

Unlimited

Value

used

to transport

illegal

drugs)

Other

Property

(e.g., bank accounts, jewelry, etc.) $500,000 or less

As noted, the law concerning administrative forfeitures is in stark contrast to the law governing

civil or criminal forfeitures, which, respectively, require either a civil complaint or criminal

indictment, both of which must be filed in court.

14

The adoption and equitable sharing programs apply to civil, criminal and administrative

forfeitures.

15

By its own terms, the Order is limited to adoptions. Public records, however,

reflect that adoptions are the least-used method of asset forfeiture in

DOJ s

Asset Forfeiture

Program.

16

According to a 2012 report from the Government Accountability Office ( GAO ), [i]n

2003, adoptions made up about

23

percent

of

all equitable sharing payments, while in 2010,

adoptions made up about 17 percent of all equitable sharing payments.

17

Therefore,

GAO s

study suggests the Order's focus on adoptions may ignore the areas where the most significant

civil liberties violations occur. According to DOJ as more states have established their own

forfeiture laws, they may rely less on DOJ to adopt forfeiture cases and may instead pursue

12

19

U.S.C.

1607.

13

Guides, supra note 2 at 8.

14

18 u s c 981, 982.

15

Guides, supra note 2 at 1.

16

The DOJ Administrative Forfeiture Program includes the Asset Forfeiture and Money Laundering Section;

Bureau

of

Alcohol Tobacco and Firearms; Drug Enforcement Agency; Federal Bureau oflnvestigation;

U.S.

Marshals Service; U.S. Attorney's Office; Asset Forfeiture Management Staff; U.S. Postal Inspection Service; Food

and Drug Administration; U.S. Department of Agriculture, U.S. Department

of

Agriculture Office oflnspector

General; Department

of

State, Bureau of Diplomatic Security; and Defense Criminal and Investigative Services.

See

WEBSITE,

UNITED

STATES DEPARTMENT

OF JUSTICE, ASSET

FORFEITURE PROGRAM, PARTICIPANTS

AND ROLES,

available at http://www.justice.gov/jmd/afp/05participants/index.htm.

17

U.S.

GOV T ACCOUNT

ABILITY OFFICE,

Justice Assets Fo1feiture Fund: Transparency ofBalances nd Controls

over Equitable Sharing Should be Improved REPORT

GA0-12-736 (July 2012)

at

43,

available at

http://www.gao.gov/assets/600/592349.pdf.


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January 29, 2015

Page4

forfeitures under state law when appropriate.

8

Furthermore, the DOJ has admitted adoptions

accounted for roughly 3 percent

of

the value

of

forfeitures in the Department

of

Justice Asset

Forfeiture Program.

9

B. Adoptions still occur

through

administrative forfeiture

and are

growing

at

an

alarming rate.

Prompted by concerns about civil liberties violations in civil and administrative

forfeitures, Cause

of

Action submitted a Freedom oflnformation Act request to the DOJ on July

2, 2012 seeking relevant records.

20

On August 6, 2012, DOJ produced documents revealing that

18

/d. One possible explanation for the

DOJ s

decision to decrease its use of adoptions while increasing its use of

administrative forfeiture may relate to a program called Operation Choke Point. Under Operation Choke Point,

the DOJ can use warning letters to banks to effectively force those banks to cut lending to money service

businesses and lenders. See Staff Report, U.S. H. Rep., Comm. on Oversight

Gov t

Reform, The Department of

Justice s Operation Choke Point : Illegally Choking OffLegitimate Business? at 6 (May 29, 2014), available at

http://oversight.house.gov/wp-content/uploads/2014/05 /Staff-Report-Operation-Choke-Point1.

pdf

( Operation

Choke Point is having its desired effect -legitimate merchants in legal industries are being choked-off from the

financial system. In a statement to the House Committee on Financial Services, a trade group of licensed money

service businesses and

lenders

submitted recent account termination letters in which the bank explicitly attributed

the termination to Operation Choke Point ). Money service businesses are considered high risk by the DOJ. See

Kelsey Harkness, Meet Four Business Owners Squeezed by Operation Choke Point,

THE DAILY

SIGNAL (Aug. 12,

2014), available at http://dailysignal.com/2014/08/ 12/meet-four-business-owners-squeezed-by-operation-choke

point. Because of Operation Choke Point's success, DOJ may have determined to rely less on traditional asset

forfeiture programs for targeting money service businesses through adoption or equitable sharing.

See

U.S.

Dep t of

Justice, National Asset Forfeiture Strategic Plan, 2008-2012, at 50, available at

http://www.justice.gov/criminal/afmls/pubs/pdf/strategicplan.pdf ( As the law enforcement community has

developed partnerships with the banking industry, criminals and their syndicates have become increasingly reluctant

to place their money in financial institutions where there is greater scrutiny and tracking capabilities. Criminal

organizations are increasingly exploiting the products offered by money service businesses and are laundering

money through legal entities such as casinos, the insurance industry, and automobile dealers. The Program must

work with the Financial Crimes Enforcement Network (FinCEN) and the law enforcement community to develop

policies and regulations that combat new money laundering methods. The Program must also support

implementation of he 2007 National Money Laundering Strategy and initiatives that pursue the forfeiture of monies

involved in bulk cash smuggling ).

In

fact, seizure

of

cash by states under the adoption policy represents the most

common asset seized valued at above 1 million. See U.S.

Dep t

ofJustice, FY 2013 Seized Property Inventory

Valued Over One Million Dollars

as

of September 20, 2013,

available at

http://www.justice.gov/jmd/afp/02fundreport/2013affr/report7.htm. Recent statements by FinCEN reflect the degree

to which Operation Choke Point is the primary mechanism for the federal government's targeting money service

businesses - not civil, criminal, or even administrative forfeitures. See FinCEN Statement, FinCEN Statement on

Providing Banking Services to Money Services Business, (Nov. 10, 2014), available at

http://www.fincen.gov/news_room/nr/pd'20141110. pdf.

19

Jacob Sullum, Policing for

profit

seizes onward, N.Y. POST (Jan 20, 2015), available at

http://nypost.com/2015/01 /20/policing-for-profit-seizes-onward/

20

See

Letter from Cause

of

Action to Karen McFadden, FOIA Contact, Justice Mgmt. Div., U.S.

Dep t

of Justice

(July 2, 2012), available at http://causeofaction.org/assets/uploads/2014/10/2012-7-2-DOJ-JMD-FOIA-Request-re

Asset-Forfeiture-Program.pdf


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Mr. Michael

E

Horowitz

January 29, 2015

Page 5

administrative forfeitures constitute the vast majority

of

all asset forfeitures, are increasing, and

are the government's preferred form

of

asset forfeiture.

21

Critically, although the Order states that it applies prospectively to all federal

adoptions,

DOJ s

own guidelines suggest that, in practice, the reality

is

otherwise:

A

Guide

to

Equitable Sharing for State and Local Law Enforcement gencies

applies only to the sharing

of

assets that were seized by Department of Justice

investigative agencies and federal agencies participating in the Department

of

Justice Asset Forfeiture Program and that were forfeited judicially or

administratively to the United States by the United States Attorney's Offices or

Forfeiture Program participants.

22

Documents produced to Cause of Action show, in just the first seven months

of

2012,

DOJ reported nearly 10,000 administrative forfeiture cases while the same period reflected not

even 3,300 cases between civil and criminal forfeitures combined:

23

FORFEITURE SUMMARY REPORT BY FORFEITURE TYPE

Forfeiture Activity BelwHn 1/112007 and

713 12 12

D1ll

11 of

uly 30

20t2

FlacaJ Year: 2012

Admlnlslrative

9.808

20 300

:

o

0

CMUJudlcial

1,010

e 773

453 . 964

Criminal

2.281

~ ~ 8

886

~

- -

2012 Total1:

13 099

40,757.

1 319

3 234

..

.

-

Furthermore, records reviewed by Cause of Action reflect that since 2007, administrative

forfeitures have been steadily increasing every year:

4

21

See

Letter from Robert Marca, Deputy Director, U.S. Dep't

of

Justice, Asset Management Forfeiture Staf f to

Cause of Action, (Aug. 6, 2012), available at http://causeofaction.org/assets/uploads/2014/10/2012-8-6-DOJ-JMD

Production-2526319.pdf (the Marca Letter ).

22

Guides, supra note 2 at 1 (emphasis added) .

23

Marca Letter, supra note 21.

24 Id


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January 29 2015

Page 6

FORFEITURE SUMMARY REPORT BY FORFEITURE TYPE

Forfeiture Activity Between 111/2007 and 7130/2012

Fiscal Year: 2007

AdmlnlttraUve

7 541

CiviUJudlcisl

Criminal

1 ?76

2007 Totals 10 179

Fiscal Year:

2008

AdmlnlslraUve

-

..

.

Clvll/Judlclal

Criminal

2008 Totals

Fiscal Year: 2009

AdmlnlstraUve

CivillJudiclal

Criminal

2009 Totals

Fiscal Year: 2010

Administrative

ClvlllJudlclal

Criminal

1 384

2 168

12 801

10 447

1 487

2 820

14 554

9 421

1 371

2 819

36 624

1 777

4 043

42 444

2 ~ ~ 2 2 ;

2 990

6 143

33 oss

31 728

4 281

8 713

44 722

34 054

3 472

7 881

Data aa

of July 30 2012

0

367

497

864

_

o

383

759

1 142

0

526

888

1 394

o.

486

1 034

. .

0

686

1 ~ 0 9

1 995

0

815

1 676

2 491

0

973

2 389

3 342

0

848

2 804


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January 29, 2015

Page 7

2010 Tolals:

Fiscal Year: 2011

Admln18trauve

Civll/Judlclal

Criminal

2 11 Totals:

13,811

12,750

1,379

3,047

17,176

45,387

39,393

2,545

8,729

50,667

1,620

0

480

1.045

1,525

3,652

1,205

3 807

5 012

Finally, a 2012 report from your office revealed that from 2001-2011 , 70% of all seized

assets were processed as administrative forfeitures:

25

Exhibit

3:

FYs

2001

Through 2011 Seized Assets

t>Y Type of Forfeiture

9

Number of Assets r Asset Value

in millions)

by Type of

Forfeiture by Type of Forfeiture

Administrative Civil Criminal

Adm nlstrative CMI

_

Source: DOJ s Conso

li

dated Assets Tracking System

These data reflect the degree to which inappropriate property seizures may continue, if

not worsen, over time, as the Order neither ends equitable sharing nor addresses the majority

of

asset forfeitures.

26

25

OFFICE OF INSPECTOR GENERAL, U.S. DEP T OF JUSTICE,

Audit of he Drug Enforcement Administration s

Adoptive Seizure Process

nd

Status

of

Related Equitable Sharing Requests,

at 6,

available at

http://www.justice.gov/oig/reports/2012/al240.pdf(while the OIG report focuses on one component of the Asset

Forfeiture Program, Exhibit 3 includes adoptive and joint seizures processed by the DEA and other federal

agencies see id., n.9).


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January 29, 2015

Page 8

C. Asset Forfeiture

Program participant

contractors may pose increasing risks to civil

liberties.

The civil liberties violations caused by inappropriate asset forfeitures may be

symptomatic

of

the harm that results when taxpayer-subsidized entities are incentivized by the

financial payoffs of aggressive state and local police tactics.

Public documents suggest that state and local asset seizures under the adoption program

were facilitated by a federally funded entity, Desert Snow LLC ( Desert Snow ). A September

7 2014

Washington Post

article detailed how Desert Snow, run by former California state

highway patrol officer Joe David, received millions of dollars in federal contracts and grants

from Asset Forfeiture Program participants, including the DOJ and the Department ofHomeland

Security ( DHS ), in order to teach state and local police offices aggressive methods for

highway interdiction.

27

Desert Snow started a private intelligence network for police known as

the Black Asphalt Electronic Network Notification System ( Black Asphalt ), which enabled

more than 25,000 officers and federal authorities throughout the country to share reports about

American motorists, many ofwhom had not been charged with any crimes.

28

The federal government's investment in Desert Snow has been a financial windfall to

state and local police. The

Washington Post

found that the Desert Snow training has helped

fuel a rise in cash seizures in the Justice Department's main asset forfeiture program.

29

According to the

Post,

Desert Snow-trained officers reported taking $427 million during

highway

encounters. Although officials at DOJ and the Drug Enforcement Agency ( DEA )

are reportedly reviewing their use

of

Black Asphalt, records reviewed by the Post continue to

identify officials at DOJ, DEA, OHS, Customs and Border Protection, and Immigration

Customs Enforcement as members

of

Black Asphalt.

Taxpayer subsidies and seized property-funded educational training can be highly

profitable. For example, a brochure

of

Desert Snow's General Services Administration-approved

courses show fees ranging from a few thousand dollars to $145,000 for a three-day workshop.

30

These sources of revenue allowed Joe David, who founded Black Asphalt, to purchase a yacht

26

ln addition to the failure to include administrative forfeitures, other aspects

of

the new policy indicate the very

modest nature

of

these reforms. According to reports, adoption seizures account only for approximately 14%

of

all

equitable sharing, while the overwhelming majority comes from occasions when federal and local authorities are

collaborating on enforcement matters. Such collaborations, however, are exempt from the new policy. See Jacob

Sullum, How the Press Exaggerated Holder s Forfeiture Reform, REASON.COM (Jan. 19, 2015), available at

http://reason.com/blog/2015/01I19/how-the-press-exaggerated-holders-forfei.

27

Robert O'Harrow Jr. Michael Sallah,

Police intelligence targets cash, WASH.

POST (Sept. 7 2014),

available at

http://www.washingtonpost.com/sf/investigative/2014/09/07 police-intelligence-targets-cash/ ( States and localities

also have used homeland security grants and seized cash to pay for classes from Desert Snow and its competitors )

(the O'Harrow Article ) .

s Id

29 .

30

Price List, Desert Snow, LLC, available at http://goo.gl/sve4po .


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January 29, 2015

Page 9

and a condominium in Caho San Lucas, Mexico.

31

In Washington, subsidy addictions are

supported by lobbying habits, so Joe David hired lobbying firm Brandon Associates to further

secure taxpayer dollars for his growing business.

3

And when there is cronyism, corruption persists. In September, 2014, the American Civil

Liberties Union sued Logan County, Oklahoma for access to Black Asphalt, which is now

government-run, after discovering Desert Snow employees were impersonating police officers .

. .

'as

part

of

a scheme with the local district attorney to make traffic stops, seize cash and

property from citizens, and funnel it into local coffers in exchange for a percentage

of

the

profits.

'

33

Reports from USASpending.gov reflect that Desert Snow continues to receive

federal funds, including funding from DOJ.

34

The Asset Forfeiture Program's relationship with

contractors like Desert Snow should be audited and reviewed.

onclusion

In his press statement on the Order, the Attorney General stated, [t]his is the first step in

a comprehensive review that we have launched

of

the federal asset forfeiture program.

35

We

believe a comprehensive review requires the DOJ OIG to examine all relevant program

procurement, implementation, efficiency and costs, including with respect to administrative

forfeitures. Furthermore, as the analysis in footnote

18 of

this letter indicates, we are concerned

that programs like Operation Choke Point will allow DOJ to target certain businesses that were

otherwise pursued under adoption, thereby circumventing the Order and rendering it even less

significant. Finally, we suggest that your office must meaningfully participate in DOJ's

broader

review to ensure objectivity, fairness and accountability.

31

O'Harrow Article, supra note 27.

32

Id. See also U.S. Senate, Lobbying Disclosure Act Database, available at

http://soprweb.senate.gov/index.cfm?event=processSearchCriteria (search Desert Snow under client name ).

33

David Lee,

heriffAccused

of

Keeping Secret Database

COURTHOUSE NEWS SERV. (Sept. 15, 2014),

available at

http://www.courthousenews.com/2014/09/15/71368.htm.

34

USASPENDING.GOV PRIME AWARD SPENDING

DATA available at

http://www.usaspending.gov/explore?tab=By+Prime+Awardee&frompage=contracts&contractorid=859675329&co

ntractomame=DESERT+SNOW+LLC&fiscal_year=all&typeofview=complete (search Desert Snow LLC

in

Contractor ).

35

Press Release,

supra

note

1.


10/10

Mr. Michael

E

Horowitz

January 29 2015

Page

10

Thank you for your attention to this matter.

DANIEL

Z.

EPSTEIN

CAUSE OF ACTION

cc: Attorney General Eric H Holder Jr. U.S. Department o Justice

Senator Charles

E

Grassley Chairman Senate Committee on the Judiciary

Senator Patrick J. Leahy Ranking Member Senate Committee on the Judiciary

Representative Bob Goodlatte Chairman House Committee on the Judiciary

Representative John Conyers Jr. Ranking Member House Committee on the Judiciary