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Federal Asset Seizures Rise Netting Innocent With Guilty

New York businessman James Lieto was an innocent bystander in a fraud investigation last year. Federal agents seized $392,000 of his cash anyway.

An armored-car firm hired by Mr. Lieto to carry money for his check-cashing company got ensnared in the FBI probe. Agents seized about $19 million—including Mr. Lieto's money—from vaults belonging to the armored-car firm's parent company.

He is one among thousands of Americans in recent decades who have had a jarring introduction to the federal system of asset seizure. Some 400 federal statutes—a near-doubling, by one count, since the 1990s - empower the government to take assets from convicted criminals as well as people never charged with a crime.

Last year, forfeiture programs confiscated homes, cars, boats and cash in more than 15,000 cases. The total take topped $2.5 billion, more than doubling in five years, Justice Department statistics show.

The expansion of forfeiture powers is part of a broader growth in recent decades of the federal justice system that has seen hundreds of new criminal laws passed. Some critics have dubbed the pattern as the overcriminalization of American life. The forfeiture system has opponents across the political spectrum, including representatives of groups such as the American Civil Liberties Union on the left and the Heritage Foundation on the right. They argue it represents a widening threat to innocent people.

"We are paying assistant U.S. attorneys to carry out the theft of property from often the most defenseless citizens," given that people sometimes have limited resources to fight a seizure after their assets are taken, says David Smith, a former Justice Department forfeiture official and now a forfeiture lawyer in Alexandria, Va.

Backers of the system say there are adequate protections for the innocent, and describe the laws as a powerful tool for returning money to crime victims.

The government has recovered for eventual distribution to victims more than $650 million from imprisoned swindler Bernard Madoff and others who received money from his scheme. Federal officials are in the process of recovering over $6.5 billion more from the Madoff fraud.

Last year, federal authorities say, some $293 million of forfeiture proceeds were returned to crime victims nationally, nearly double the amount in 2009. The Justice Department filed about 90,000 criminal cases last year. There were forfeiture actions in a total of about 3,700 criminal cases, double the number of 5 years earlier.

Supporters further say there should be many more forfeiture actions. Even an imprisoned criminal "can have a smile on his face because he is going to be able to enjoy the proceeds of his crime when he gets out," says Charles Intriago, a former federal prosecutor and now president of the International Association for Asset Recovery, a Miami organization for asset-recovery specialists.

Forfeiture law has its roots in the Colonial days, when it was used to battle pirates and smugglers. In the 1970s and 1980s, Congress began giving law-enforcement officials power to go after the assets of other criminals, such as organized-crime figures.

The more than 400 federal statutes allowing for forfeiture range from racketeering and drug-dealing to violations of the Northern Pacific Halibut Act, according to a December 2009 Congressional Research Service report. The report shows that seizure powers were extended to about 200 of those laws in 2000 in a major congressional overhaul of the forfeiture system.

Top federal officials are also pushing for greater use of civil-forfeiture proceedings, in which assets can be taken without criminal charges being filed against the owner. In a civil forfeiture, the asset itself—not the owner of the asset—is technically the defendant. In such a case, the government must show by a preponderance of evidence that the property was connected to illegal activity. In a criminal forfeiture, the government must first win a conviction against an individual, where the burden of proof is higher.

Raul Stio, a New Jersey businessman, is caught up in the civil-forfeiture world. Last October, the Internal Revenue Service, suspicious of Mr. Stio's bank deposits, seized more than $157,000 from his account. Mr. Stio hasn't been charged with a crime.

In a court filing in his pending civil case, the Justice Department alleges that Mr. Stio's deposits were structured to illegally avoid an anti-money-laundering rule that requires a cash transaction of more than $10,000 to be reported to federal authorities. Mr. Stio made 21 deposits over a 4-month period, each $10,000 or less, the filing said.

Steven L. Kessler, Mr. Stio's attorney, says there was no attempt to evade the law and that the deposits merely reflected the amount of cash his client's businesses, a security firm and bar, had produced. Mr. Stio was saving to buy a house, he says.

Speaking about civil forfeiture broadly, another Justice Department official called it a tool of "critical" importance in taking away the ill-gotten gains of international criminal organizations operating in the U.S. Otherwise, participants in criminal operations such as these might often be beyond federal authorities' reach, leaving asset seizure as one of the ways authorities can target an operation.

In fiscal year 2010, there were more than 11,000 noncriminal forfeiture cases, according to available federal statistics. That figure has held fairly steady the past 5 years.

It's tough to know how many innocent parties may be improperly pulled into the forfeiture system. Last year, claimants challenged more than 1,800 civil-forfeiture actions in federal court, Justice Department figures show.

Justice Department officials say they rarely lose such cases, a fact they cite as evidence the system is working properly. Forfeiture attorneys counter that the government often settles cases, returning at least part of the seized assets, if it thinks it might lose.

 

So wishing you the best in safety,

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