Asset Seizure and Forfeiture: Ethical Issues
By Colin May, M.S.
Part one of this article, an introduction to the topic, helped readers gain a basic understanding of asset seizure and forfeiture, including basic investigative techniques and best practices for law enforcement.1 This second part will focus on ethical and legal issues faced in safeguarding, managing, and disposing of seized and forfeited assets.
Recent press reporting has highlighted some of the unfavorable issues encountered in law enforcement’s use of seized assets and forfeiture funds.2 Agencies cannot forget to treat seized and forfeited assets as a public trust. Failing to do so can bring about severe consequences as illustrated by some recent cases.
Mismanagement of seized assets and forfeiture funds generally falls into four categories.
1) Theft or embezzlement by persons entrusted with their safekeeping
2) Improper management
3) Poor internal controls and policies
4) Lack of proper supervisory oversight from elected or appointed officials
Law enforcement leaders must recognize how the loss of forfeiture funds negatively impacts their departments, agencies, programs, and personnel and how to prevent such issues. Also, agency heads must deal with any improper conduct swiftly and with resolve to ensure the continued trust and confidence of the public, as well as municipal leadership and judicial authorities.
Theft and Embezzlement
The Michigan State Police and a local prosecutor’s office charged a former chief and his wife, along with a detective sergeant and four detectives, with falsely manufacturing and manipulating an investigation of two bars.3 The case supposedly focused on liquor-license violations, prostitution, and drug trafficking at the establishments, but actually involved a scheme to obtain assets—primarily forfeiture funds—that the defendants then converted to their own benefit.4
During the investigation the officers allegedly embezzled over $49,000 in cash, solicited prostitutes, and falsified investigative reports.5 A jury convicted the chief’s wife for her role, which involved using $75,000 of forfeited drug proceeds to buy a tanning salon.6 Two of the detectives were found guilty of official misconduct—misusing forfeited funds.7
In another case in Mississippi, following the guilty plea of a sheriff for witness intimidation and obstruction of justice, the new acting sheriff took an inventory of the seized assets and noticed a major discrepancy.8 A county elected official admitted that the sheriff’s office had acted as an “island,” and officials began reviewing the accounting records and conducting a full asset inventory for the first time in years.9 Press reports indicated that the office bought all-terrain vehicles and trucks but never used them officially.10 Agencies purchasing vehicles with federal forfeiture equitable-sharing funds must use them for official purposes for at least 2 years.11
Increasing department transparency, especially regarding the acquisition and use of forfeiture funds, shows that the department takes responsibility and embraces openness. This includes employing outside agencies to conduct investigations into theft or misconduct, as well as using state or external auditors to conduct annual reviews and report the results to the public.12 Officials should respond appropriately to public pressure on departments to increase their transparency and release more public information, especially regarding seizures and forfeitures.
Mr. May is a forensic auditor for the U.S. government and an instructor at Stevenson University in Owings Mills, Maryland.
Following the new sheriff’s election, the agency started posting press releases to report misconduct.13 It now documents investigations in a simple manner that describes the case, alleged crime, and outcome; the department also maintains the privacy of the individual involved.14 This strengthens public confidence especially because outside agencies assist in the investigations.
Prosecutors’ offices also can come under scrutiny. Recently a county attorney in New Hampshire resigned under pressure when facing an investigation that began as a sexual harassment and retaliation case and evolved into one focusing on improper management of the county’s forfeiture fund.15
The state’s attorney general took the extraordinary step of filing a civil complaint before a court to temporarily remove the county attorney, who allegedly had “manipulated the management of the ‘forfeiture account’ to fund activities beyond the county [charter’s] lawful appropriation….”16 According to the attorney general’s civil complaint, the county attorney opened the forfeiture account in 2003 at a bank other than the one used by the county.17 He also “reimbursed” himself for trips and others involved for expenses unrelated to the enforcement of the state’s liquor laws, the primary purpose of the forfeiture account.18
Additionally, the county attorney allegedly commingled state liquor fines with federal drug-forfeiture equitable-sharing proceeds, a violation of the terms of the office’s agreement with the U.S. Department of Justice.19 While he disputed the allegations in the complaint, the damage was done, and the public trust irreparably harmed. The county attorney eventually was reinstated briefly, but he retired abruptly several weeks before the beginning of a scheduled trial.20
In 2014 county auditors found that a Texas district attorney used forfeiture funds to pay for expenses unrelated to a legitimate law enforcement purpose as required by state law.21 Paying for costs not applicable to law enforcement creates the potential for misuse and abuse. It also undermines the ability for agencies to obtain these funds and fuels public mistrust. In this case, the audit report found that the district attorney’s office paid for Mardi Gras beads and the referee fee for the employee football team.22
Expenses covered by forfeiture funds should have a readily apparent law enforcement purpose and include documentation to substantiate the expenses. These detailed explanations can help auditors, elected officials, and the public better understand the proper use of assets or expenses.
Poor Internal Controls
Internal controls include mechanisms that help curb the risk of theft, loss, or other misappropriation of funds or property. Like all public officials, law enforcement officers are entrusted with properly using taxpayer funds, as well as safeguarding other lost, abandoned, or seized property. Department leadership must ensure that the agency does not lose, misplace, or misappropriate these assets, which would devastate public confidence.
Having a strong internal-control program proves essential for properly managing seized and forfeited assets. Internal controls should be tailored to the department or agency and include a minimum of five components.
1) Agencies must have written policies and procedures that cover the entire seizure-and-forfeiture process. They also should address preseizure planning, storage and management, disposition, and safeguarding of the items.
2) Personnel should deposit any seized funds into a separate account monitored continuously and audited at least quarterly. They should record deposits on a separate form.
3) Two senior agency officials should approve withdrawals or countersign checks related to the forfeiture account. Appropriate justification and documentation must accompany the request and all records maintained.
4) No one employee should handle all or even multiple steps within the seizure-and-forfeiture process. Segregation of duties helps ensure no single person has access, control, or signatory authority over the account.
5) Officers should properly document all seizures of cash, to include photographs of the currency as personnel found it and a count of the specific denominations of cash seized.23
The New Jersey State Police, attorney general, and Division of Criminal Justice have developed seizure-and-forfeiture policies for law enforcement agencies in the state. These documents provide a valuable example for use, in conjunction with the federal forfeiture-funds equitable-sharing regulations, in developing sound policy and practice.24
Poorly conceived, supervised, or executed internal controls can lead to serious consequences, like theft and misappropriation of the funds or property. In Kentucky an audit of a sheriff’s office for fiscal year 2008 noted issues and discrepancies involving the agency’s forfeiture fund.25 By the end of the year, a beginning balance of $33,431 dropped to $2,543.26 Even though the fund gained $62,368 during the year through forfeitures and seizures, it lost over $93,000.27 The audit identified $40,410 used for expenses not eligible to be covered under the forfeiture fund and also questioned nearly $6,000 in other costs.28 Other issues in the internal controls surfaced.29
- Lack of adequate separation in the roles and duties of personnel who seize the assets and those who manage the fund, including making withdrawals for payments
- Absence of proper documentation of receipts and expenditures from the forfeiture account
- Failure to file notice of property seized with prosecutors or a court
Following the investigation the sheriff pleaded guilty to official misconduct and resigned from office.30 This example highlights two important controls: 1) if senior management and leadership are not fully invested, the project or program will fail—in this case, the sheriff clearly directed all of the ineligible expenditures; and 2) without continuous monitoring and review, a small theft or problem can grow into a much-larger issue. Agencies may never totally prevent theft or other problems associated with a forfeiture account, but they can prevent small issues from blossoming into huge problems.
Lack of Proper Oversight
The Fourth Amendment was enacted for an important reason; British forces occupying North America invaded civilians’ homes and often took items without a justifiable reason or proper authorization.31 This highlights the importance of seizing property only after submitting an application to a court for a probable-cause determination. The court and prosecutors—who help determine if the facts meet the legal standard—provide significant checks and balances and a measure of oversight by reviewing the legal issues and factual bases for seizures and forfeitures.
Elected officials and senior municipal leaders should receive education on the theory, history, objectives, process, and safeguards for forfeited-property and seized-asset management. Training and discussions of these issues help educate agency staff.
Political officials can offer necessary leadership. They also may support a regional partnership with other agencies that can provide combined resources, expertise, and cost sharing. Authorities in the United Kingdom (UK) take a similar approach through Regional Asset Recovery Teams (RART).32 These teams encourage a multiagency approach that provides verification and peer review to ensure compliance with laws, regulations, and policies.33 RARTs consolidate forfeiture resources, expertise, and asset-management contracts that every member agency can tap into.34 This concept has proven so successful that UK authorities expanded it nationally and added proactive special financial and money-laundering investigations to its mandates.35
IMPACT OF A PROBLEM
Leaders must face the consequences when an issue surrounding a forfeiture fund has become public. Agencies may take years to fully rectify some of the major problems and regain the confidence of the community.
- Damage to the agency’s reputation
- Negative publicity in the community
- Loss of public faith in law enforcement
- Lower employee morale
- Cost of litigation and investigation (for individuals, agencies, and the jurisdiction)
- Disruption to investigative, patrol, and administrative operations
- Revocation of federal forfeiture equitable-sharing funds
- Increase in municipal or agency insurance premiums
- Direct budget cost to reimburse mismanaged funds not covered by insurance36
The loss of trust makes maintaining effective operations and successful police-community relations more difficult when a seized-asset or forfeiture issue is at stake. The public expects law enforcement agencies to safeguard property. Without public trust and confidence in the department, a community finds itself significantly at risk and may not cooperate with officers, thus providing an opportunity for criminal elements to take advantage of.
National Code of Professional Conduct for Asset Forfeiture
1) Law enforcement is the principal objective of forfeiture. Potential revenue must not jeopardize the effective investigation and prosecution of criminal offenses, safety of officers, integrity of ongoing investigations, or due process rights of citizens.
2) No prosecutor or sworn law enforcement officer’s employment or salary shall depend upon the level of seizures or forfeitures achieved.
3) Whenever practicable (excluding border searches and exigent circumstances) and in all cases involving real property, agencies must secure a judicial finding of probable cause when seizing property for forfeiture. Entities shall comply strictly with all applicable legal requirements governing seizure practice and procedure.
4) If entities do not secure a judicial finding of probable cause, a prosecuting agency attorney or supervisory-level official must approve the seizure in writing.
5) Agencies shall have a manual detailing the statutory grounds for forfeiture and all applicable policies and procedures.
6) The manual must include procedures for prompt notice to interest holders, expeditious release of seized property where appropriate, and prompt resolution of claims of innocent ownership.
7) Entities retaining forfeited property for official law enforcement use shall impose internal controls consistent with those applicable to property acquired through the normal appropriations process of that agency.
8) Unless otherwise provided by law, entities must maintain forfeiture proceeds in a separate fund or account subject to appropriate accounting controls and annual financial audits of all deposits and expenditures.
9) Agencies shall ensure the protection and preserve the value of seized property.
10) Entities must avoid any appearance of impropriety in the sale or acquisition of forfeited property.
Source: Adapted from Sergeant James A. Cox III, “The Ethics of Asset Forfeiture Programs” (lecture, COPS Conference, August 2, 2011), http://www.cops.usdoj.gov/pdf/conference/2011/EthicsofAssetForfeiture Programs.pdf; and John L. Worrell, “Asset Forfeiture: Response Guide No. 7,” Center for Problem-Oriented Policing, http://www.popcenter.org/responses/asset_forfeiture.
Police leaders, along with agency legal counsel, should fully comprehend the issues, responsibilities, and controls involved in managing seized assets and forfeiture funds. They have three basic points to consider.
1) Develop written policies and procedures for the entire seizure, asset-management, and forfeiture lifecycle, including preseizure planning, maintenance, and ultimate disposition of the asset
2) Employ strong internal controls that define segregation of duties, ensure proper records, and preserve the value of the asset pending final disposition
3) Educate staff, elected and appointed officials, and the public about the goals, objectives, processes, and safeguards of the seizure-and-forfeiture system37
Agencies must remember that forfeiture funds are not “free money” and never should replace appropriated and budgeted agency finances. These funds merely allow law enforcement personnel to remove the profitability of crime. The enforcement of criminal statutes and public safety regulations should remain the primary goal of asset forfeiture.
Leaders must consistently communicate this policy and mission to officers, support staff, prosecutors, and the public. Problems can develop without sufficient resources, training, policies, and oversight of forfeiture accounts and seized property.
Mr. May can be contacted at email@example.com.
The views presented in parts one and two of this article are those of the author. For an overview of asset forfeiture from the FBI, visit https://www.fbi.gov/about-us/investigate/white_collar/asset-forfeiture.
1 Colin May, “Asset Seizure and Forfeiture: A Basic Guide,” FBI Law Enforcement Bulletin, August 2016, accessed August 22, 2016, https://leb.fbi.gov/2016/august/asset-seizure-and-forfeiture-a-basic-guide.
2 A forfeiture fund is set aside to contain monies related to the sale of property “[taken by a government agency] used or acquired illegally, without compensating the owner.” Based on U.S. Marshals Service, United States Marshals Service Policy Directives: Asset Forfeiture, USMS Policy Directive 13.2A, March 4, 2010, accessed May 13, 2016, http://www.usmarshals.gov/foia/ directives/asset_forfeiture.pdf.
3 State v. St. Andre, Balzer (Wayne County, 12-009342-01-FH); and “Ex-Romulus Police Chief Pleads Guilty in Corruption Case,” CBS Detroit, May 29, 2014, accessed April 14, 2016, http://detroit.cbslocal.com/2014/05/29/ex-romulus-police-chief-pleads-guilty-in-corruption-case/.
6 Gus Burns, “Romulus Police Chief’s Wife, Patricia St. Andre, Gets 7 to 20 Years in Prison for Operating Criminal Enterprise,” MLive, February 20, 2014, accessed May 13, 2016, http://www.mlive.com/news/detroit/index.ssf/2014/02/romulus_police_chiefs_wife_pat.htm.
8 Knox Graham, “Jackson County Interim Sheriff Wants to Inventory Purchases Made Under Ex-Sheriff Byrd,” newsms, January 27, 2014, accessed May 13, 2016, http://newsms.fm/jackson-county-interim-sheriff-wants-inventory-purchases-made-ex-sheriff-byrd/; and Margaret Baker, “Jackson County Sheriff: ‘We Didn’t Even Know the Items Existed,’” SunHerald, March 23, 2016, accessed May 13, 2016, http://www.sunherald.com/news/local/crime/article67714117.html.
9 John Fitzhugh, “About the Jackson County Equipment Inventory,” SunHerald, March 23, 2016, accessed May 13, 2016, http://www.sunherald.com/news/local/crime/article67757407.html.
11 U.S. Department of Justice, Criminal Division, Asset Forfeiture and Money Laundering Section, Guide to Equitable Sharing for State and Local Law Enforcement Agencies, April 2009, accessed April 14, 2016, https://www.justice.gov/criminal-afmls/file/794696/download.
12 Auditors for state agencies or other localities, as well as contracted auditors, can provide valuable verification of the state of forfeiture funds. Special prosecutors or, at the request of a locality, the FBI can undertake investigations.
13 For example, see “State Auditor’s Office Investigates Deputy,” press release, Jackson County Sheriff Department, September 18, 2014, accessed April 14, 2016, http://www.co.jackson.ms.us/ officials/sheriff/news.php?subaction=showfull&id=1411067627&archive=&start_from=&ucat=1&.
15 New Hampshire Attorney General Joseph A. Foster and Rockingham County Commissioners v. James Reams, 217 (2014) cv 133, accessed April 15, 2016, http://doj.nh.gov/media-center/press-releases/2014/documents/20140311-reams-complaint.pdf; and Jason Schreiber, “Embattled Reams Resigns as Rockingham Attorney,” Seacoastonline.com, June 18, 2014, accessed April 14, 2016, http://www.seacoastonline.com/article/20140618/News/406180375.
20 “Rockingham County Attorney James Reams Retirement Announcement,” news release, Rockingham County, New Hampshire, June 17, 2014, accessed April 15, 2016, http://doj.nh.gov/media-center/press-releases/2014/20140617-james-reams.htm.
21 State of Texas Auditor’s Office, An Audit Report on the Expenditure of State Asset Forfeiture Funds at the Dallas County District Attorney’s Office, CPA John Keel, report no. 16-007, October 2015, accessed May 13, 2016, http://www.sao.texas.gov/reports/main/16-007.pdf; Texas Code of Criminal Procedure, Title 1, Article 59.06 (G), Texas Constitution and Statutes, accessed April 15, 2016, http://www.statutes.legis.state.tx.us/Docs/CR/htm/CR.59.htm; and Jennifer Emily, “Audit of Dallas County DA’s Forfeiture Finds Few Clear Answers,” The Dallas Morning News, November 7, 2014, accessed April 15, 2016, http://www.dallasnews.com/news/metro/20141107-audit-of-da-forfeiture-fund-provides-few-clear-answers.
23 Adapted from The Importance of Internal Control in Financial Reporting and Safeguarding Plan Assets, American Institute of CPAs, 2014, accessed May 13, 2016, https://www.aicpa.org/ InterestAreas/EmployeeBenefitPlanAuditQuality/Resources/PlanAdvisories/DownloadableDocuments/Plan_AdvisoryInternalControl-hires.pdf.
24 See the State of New Jersey, Department of Law and Public Safety, Office of the Attorney General, Forfeiture Program Administration—Standard Operating Procedure (March 1, 1998), accessed April 15, 2016, http://www.njdcj.org/pdfs/sop_2.pdf; and New Jersey Division of Criminal Justice, The Property and Evidence Function, October 1989, accessed April 15, 2016, http://www.nj.gov/oag/dcj/agguide/propevid.pdf.
25 Report of the Audit of the Nicholas County Sheriff for the Year Ended December 31, 2008, by Crit Luallen, auditor of public accounts, Frankfort, Kentucky, (October 16, 2009) accessed April 15, 2016, http://apps.auditor.ky.gov/Public/Audit_Reports/Archive/2008nicholasfesaudit.pdf.
30 Greg Kocher, “Former Nicholas Sheriff Garrett Avoids Jail Time in Theft Case,” Lexington Herald-Leader, November 4, 2011, accessed May 13, 2016, http://www.kentucky.com/news/local/ crime/article44134686.html.
31 U.S. CONST. amend. IV; and U.S. Congress, Constitution of the United States of America: Analysis and Interpretation, Fourth Amendment: Search and Seizure, accessed April 11, 2016, https://www.congress.gov/content/conan/pdf/GPO-CONAN-REV-2014-10-5.pdf.
32 See “Regional Asset Recovery Team,” Staffordshire Police, accessed April 15, 2016, http://www.staffordshire.police.uk/info_advice/help_advice/rart/.
33 CPS Asset Recovery Strategy, The Crown Prosecution Service, June 2014, accessed May 13, 2016, https://www.cps.gov.uk/publications/docs/cps_asset_recovery_strategy_2014.pdf.
36 Based on the author’s research and experience.
37 Based on the author’s research and experience.