Introduced in Congress on March 29 2017 and misleadingly called the “DUE PROCESS Act of 2017”, H.R. 1795 takes a scalpel to federal civil asset recovery when, at best, it needed only a little Botox. In so doing, H.R. 1795 threatens to undermine the whole process of federal civil asset recovery by horribly scarring the whole federal asset recovery process based upon false facts and out-of-context horror stories.
What is Federal Civil Asset Recovery or Forfeiture?
Civil forfeiture is used as a law enforcement tool primarily to recover proceeds of federal crimes. Normally a forfeiture follows a criminal conviction, but this is not always possible: for example, when the identity of criminals are unknown (internet crime), or beyond US criminal jurisdiction (foreign drug trafficking), or the accused are immune from prosecution (foreign corrupt political officials); or when proof to convict of a criminal offense (beyond a reasonable doubt) is lacking. Where a “preponderance of the evidence” (i.e., the same legal standard plaintiffs must prove in civil or commercial litigation) shows that funds found in the suspect’s accounts or hands are illegally generated, and civil asset recovery provides a just means for law enforcement to recover those assets so they can be repurposed for the common good.
H.R. 1795 proposes to change the evidentiary standard from a preponderance of the evidence to one requiring “clear and convincing evidence” that the property is subject to forfeiture. In addition, H.R. 1795 provides for recovery of attorney’s fees with respect to settled claims in which the claimant prevails; it adds notice requirements; and expedites and modifies certain procedures, for example by reducing many Government time limits from 60 days to 30 days. Whilst criticism can be levelled at the other changes, this blog concentrates on the change in evidentiary standard.
Why the Proposed Changes?
Out-of-context horror stories, fueled by internet driven e-media and biased analysis of raw data has led to a cacophony of op-eds concluding that civil asset recovery is by its very nature abusive of citizen’s property rights and is “policing for profit”. These claims have been made by both groups on the left and on the right. Examples include claims that 87% of federal forfeitures were without a conviction and that federal cops and prosecuters arbitrarily keep the criminal proceeds they help recover and spend forfeited funds as they see fit.
The Truth about the 87% Claim
The majority of federal forfeitures follow criminal convictions, not civil recoveries. This follows a policy directive that asset recovery in criminal cases is the preferred method of accomplishing asset recovery. Between 2010 and 2014 less than 50% of federal asset recovery judgments were civil, in some years less than a third of federal forfeiture judgments were civil.
There are no pre-trial restraint provisions for federally ordered asset recovery after a criminal conviction. Fortunately, federal civil asset recovery powers permits extensive pre-trial restraint of assets, so is the federal law enforcement remedy of choice in all victim cases, so that stolen assets are more likely to find their way back to the victims.
Even DOJ statistics can mask the reality. For example, Madoff was a (relatively) uncontested criminal case, but Bernie and his family had limited assets. Civil forfeiture was used to recover $2 to $4 billion of assets from folks in the Ponzi scheme who had received bogus profits and those assets were returned to victims. Statistics would record these as forfeitures without a criminal conviction. But statistics only show part of the story.
The Truth about the Policing for Profit Claim
There are some documented cases of asset recovery abuse, but the reported abuses are by and large NOT at federal level. The use of federal asset recovery tools is more tightly-regulated at the federal level than at the state and local official levels, where some laws are too draconian and have insufficient due process protections. H.R. 1795 will not address this concern as it aimed solely at federal civil forfeiture procedure.
While certain state forfeiture regimes allow local cops and prosecutors to keep the criminal proceeds they recover, giving the reputation of “policing for profit”, this is not true at the federal level. Forfeited assets are deposited into two federal “assets forfeiture funds” that are closely and independently audited by independent administrative staffs. Forfeited assets can only be spent on law enforcement equipment, training and other asset recovery or law enforcement operational support.
Even if all the reported examples of abuse were federal civil asset recovery cases, they still likely only amount to 0.01 % of the total federal civil asset recovery cases. Included in this figure will be mistakes of a legal technicality – missed statutory deadlines (60-day notice) or improper notice, rather than an abuse of power as portrayed in the e-media. H.R. 1795 is an over-reaction.
The Truth about Property Rights
Federal laws were overhauled in 2000 to balance human rights against the needs of Justice. The federal government still has the burden of proof and owners of property have very broad rights to be given notice of and participate in the asset recovery process. Civil asset recovery laws have been found to be Constitutional.
Civil asset recovery is already resource intensive, often involving lengthy civil discovery disputes and frivolous motion practice by financially well-armed criminals. Raising the evidentiary standard by H.R. 1795 will exacerbate this problem making cases more expensive and lengthy to bring to a successful conclusion.
In fiscal year 2016, there were 115 seizures of $1 to $2 million in cash, 62 seizures of $2 to $5 million in cash, and 21 seizures of over $5 million in cash. Those 198 seizures account for almost half of the $1.2 billion in currency seized by DOJ law enforcement agencies in fiscal year 2016. Requiring clear and convincing proof of this currency’s illegitimate nature, as H.R. 1795 calls for, risks leaving this cash in the hands of drug traffickers.
H.R. 1795 was proposed to battle perceived, yet virtually non-existent, abuses of civil asset recovery laws at the federal level, based upon a false narrative the e-media continues to champion. The change in the evidentiary standard will most likely kill a bedrock law enforcement tool that benefits society in ways that DOJ has simply failed to effectively advertise to the general public.
Instead Congress should preserve the current federal civil asset recovery powers, reinstate old DOJ policies and make such minor amendments as may be recommended after an independent analysis of the issues and data. H.R. 1795’s proposed change to the evidentiary standard is a surgical disaster and will likely kill the patient.
Jack de Kluiver, Managing Partner
Baker de Kluiver PLLC
Recent alumnus, United States Department of Justice,
Money Laundering and Asset Recovery Section