The Forfeiture Racket
Around 3 in the morning on January 7, 2009, a 22-year-old college student named Anthony Smelley was pulled over on Interstate 70 in Putnam County, Indiana. He and two friends were en route from Detroit to visit Smelley’s aunt in St. Louis. Smelley, who had recently received a $50,000 settlement from a car accident, was carrying around $17,500 in cash, according to later court documents. He claims he was bringing the money to buy a new car for his aunt.
The officer who pulled him over, Lt. Dwight Simmons of the Putnam County Sheriff’s Department, said that Smelley had made an unsafe lane change and was driving with an obscured license plate. When Simmons asked for a driver’s license, Smelley told him he had lost it after the accident. Simmons called in Smelley’s name and discovered that his license had actually expired. The policeman asked Smelley to come out of the car, patted him down, and discovered a large roll of cash in his front pocket, in direct contradiction to Smelley’s alleged statement in initial questioning that he wasn’t, in fact, carrying much money.
A record check indicated that Smelley had previously been arrested (though not charged) for drug possession as a teenager, so the officer called in a K-9 unit to sniff the car for drugs. According to the police report, the dog gave two indications that narcotics might be present. So Smelley and his passengers were detained and the police seized Smelley’s $17,500 cash under Indiana’s asset forfeiture law.
But a subsequent hand search of the car turned up nothing except an empty glass pipe containing no drug residue in the purse of Smelley’s girlfriend. Lacking any other evidence, police never charged anybody in the car with a drug-related crime. Yet not only did Putnam County continue to hold onto Smelley’s money, but the authorities initiated legal proceedings to confiscate it permanently.
Smelley’s case was no isolated incident. Over the past three decades, it has become routine in the United States for state, local, and federal governments to seize the property of people who were never even charged with, much less convicted of, a crime. Nearly every year, according to Justice Department statistics, the federal government sets new records for asset forfeiture. And under many state laws, the situation is even worse: State officials can seize property without a warrant and need only show “probable cause” that the booty was connected to a drug crime in order to keep it, as opposed to the criminal standard of proof “beyond a reasonable doubt.” Instead of being innocent until proven guilty, owners of seized property all too often have a heavier burden of proof than the government officials who stole their stuff.
Municipalities have come to rely on confiscated property for revenue. Police and prosecutors use forfeiture proceeds to fund not only general operations but junkets, parties, and swank office equipment. A cottage industry has sprung up to offer law enforcement agencies instruction on how to take and keep property more efficiently. And in Indiana, where Anthony Smelley is still fighting to get his money back, forfeiture proceeds are enriching attorneys who don’t even hold public office, a practice that violates the U.S. Constitution.
Guilty Property, Innocent Owners
Technically, civil asset forfeiture proceedings are brought against the property itself, not the owner. Hence they often have odd case titles, such as U.S. v. Eight Thousand Eight Hundred and Fifty Dollars or U.S. v. One 1987 Jeep Wrangler. The government need only demonstrate that the seized property is somehow related to a crime, generally either by showing that it was used in the commission of the act (as with a car driven to and from a drug transaction, or a house from which drugs are sold) or that it was purchased with the proceeds.
Because the property itself is on trial, the owner has the status of a third-party claimant. Once the government has shown probable cause of a property’s “guilt,” the onus is on the owner to prove his innocence. The parents of a drug-dealing teenager, for instance, would have to show they had no knowledge the kid was using the family car to facilitate drug transactions. Homeowners have to show they were unaware that a resident was keeping drugs on the premises. Anyone holding cash in close proximity to illicit drugs may have to document that he earned the money legitimately.
When owners of seized property put up a legal fight (and the majority do not), the cases are almost always heard by judges, not juries. In some states forfeiture claimants don’t even have the right to a jury trial. But even in states where they do, owners tend to waive that right, because jury proceedings are longer and more expensive. Federal forfeiture claimants are technically guaranteed a jury trial under the Seventh Amendment, but can lose the right if they fail to reply in a timely manner to sometimes complicated government notices of seizure.
Federal asset forfeiture law dates back to the Racketeer Influenced and Corrupt Organizations (RICO) Act of 1970, a law aimed at seizing profits earned by organized crime. In 1978 Congress broadened RICO to include drug violations. But it was the Comprehensive Crime Control Act of 1984 that made forfeiture the lucrative, widely used law enforcement tool it is today.
“The Crime Control Act did a few things,” says the Virginia-based defense attorney David Smith, author of the legal treatise Prosecution and Defense of Forfeiture Cases. “First, it corrected some poor drafting in the earlier laws. Second, it created two federal forfeiture funds, one in the Justice Department and one in the Treasury. And most important, it included an earmarking provision that gave forfeiture proceeds back to local law enforcement agencies that helped in a federal forfeiture.”
This last bit was key. “The thinking was that this would motivate police agencies to use the forfeiture provisions,” Smith says. “They were right. It also basically made law enforcement an interest group. They directly benefited from the law. Since it was passed, they’ve fought hard to keep it and strengthen it.”
The 1984 law lowered the bar for civil forfeiture. To seize property, the government had only to show probable cause to believe that it was connected to drug activity, or the same standard cops use to obtain search warrants. The state was allowed to use hearsay evidence—meaning a federal agent could testify that a drug informant told him a car or home was used in a drug transaction—but property owners were barred from using hearsay, and couldn’t even cross-examine some of the government’s witnesses. Informants, while being protected from scrutiny, were incentivized monetarily: According to the law, snitches could receive as much as one-quarter of the bounty, up to $50,000 per case.
According to a 1992 Cato Institute study examining the early results of the Comprehensive Crime Control Act, total federal forfeiture revenues increased by 1,500 percent between 1985 and 1991. The Justice Department’s forfeiture fund (which doesn’t include forfeitures from customs agents) jumped from $27 million in 1985 to $644 million in 1991; by 1996 it crossed the $1 billion line, and as of 2008 assets had increased to $3.1 billion. According to the government’s own data, less than 20 percent of federal seizures involved property whose owners were ever prosecuted.
More than 80 percent of federal seizures are never challenged in court, according to Smith. To supporters of forfeiture, this statistic is an indication of the owners’ guilt, but opponents argue it simply reflects the fact that in many cases the property was worth less than the legal costs of trying to get it back. Under the 1984 law, forfeiture defendants can’t be provided with a court-appointed attorney, meaning an innocent property owner without significant means would have to find a lawyer willing to take his case for free or in exchange for a portion of the property should he succeed in winning it back. And to even get a day in court, owners were forced to post a bond equal to 10 percent of the value of their seized property.
The average Drug Enforcement Administration (DEA) property seizure in 1998 was worth about $25,000. In 2000 a Justice Department source told the PBS series Frontline that this figure was also the cutoff under which most forfeiture attorneys advised clients that their cases wouldn’t be worth pursuing. So a law aimed at denying drug kingpins their ill-gotten millions ended up affecting mostly those with so little loot it didn’t even make sense to hire an attorney to win it back.
Police gradually came to view asset forfeiture as not just a way to minimize drug profits, or even to fill their own coffers, but as a tool to enforce maximum compliance on non-criminals. In one highly publicized example from the 1990s, Jason Brice nearly lost the motel he had bought and renovated in a high-crime area of Houston. At the request of local authorities, Brice hired private security, allowed police to patrol his property (at some cost to his business), and spent tens of thousands of dollars in other measures to prevent drug activity on the premises. But when local police asked Brice to raise his rates to deter criminals, he refused, saying it would put him out of business. Stepped up police harassment of his customers caused Brice to eventually terminate the agreement that had allowed them latitude on his property. In less than a month, local and federal officials tried to seize Brice’s motel on the grounds that he was aware of drug dealing taking place there. Brice eventually won, but only after an expensive, drawn-out legal battle.
By the late 1990s, stories such as Brice’s finally moved Congress to act. After a series of emotional hearings in 2000, Congress passed the Civil Asset Forfeiture Reform Act (CAFRA), authored by Rep. Henry Hyde (R-Ill.). The bill raised the federal government’s burden of proof in forfeiture cases from probable cause to a preponderance of the evidence, the same standard as in other civil cases. It barred the government from using hearsay and allowed owners who won forfeiture challenges to obtain reimbursement for legal expenses.
The bill wasn’t perfect. Seizures made by customs agents, as opposed to the DEA or FBI, would still be governed by the old rules. Hyde (who died in 2007) wanted an even heavier burden of proof for the government, the “beyond a reasonable doubt” standard used in criminal cases. That didn’t pass. Under CAFRA, the federal government could still take your property without proving beyond a reasonable doubt that any crime was committed, much less that you yourself had committed one. But at least the reforms made the process a bit more difficult.
Problem was, the 1984 law had already spawned dozens of imitators on the state level, and CAFRA applied only to the feds. Forfeiture had been sending money to police departments and prosecutors’ offices for 16 years, so even in the few states that passed laws to make the process more fair, officials found ways around them. Once the authorities have a license to steal, it turns out to be very difficult to revoke.
Present Punishment for Future Crimes
On February 4, 2009, Anthony Smelley got his first hearing before an Indiana judge. Smelley’s attorney, David Kenninger, filed a motion asking for summary judgment against the county, citing a letter from a Detroit law firm stating that the seized money indeed came from an accident settlement, not a drug transaction. Kenninger also argued that because there were no drugs in Smelley’s car, the state had failed to show the required “nexus” between the cash and illegal activity. Putnam County Circuit Court Judge Matthew Headley seemed to agree, hitting Christopher Gambill, who represented Putnam County, with some tough questions. That’s when Gambill made an argument that was remarkable even for a forfeiture case.
“You have not alleged that this person was dealing in drugs, right?” Judge Headley said.
“No,” Gambill responded. “We alleged this money was being transported for the purpose of being used to be involved in a drug transaction.”
Incredibly, Gambill was arguing that the county could seize Smelley’s money for a crime that hadn’t yet been committed. Asked in a phone interview to clarify, Gambill stands by the general principle. “I can’t respond specifically to that case,” he says, “but yes, under the state forfeiture statute, we can seize money if we can show that it was intended for use in a drug transaction at a later date.” (Smelley himself refused to be interviewed for this article.)
The New York–based attorney Steven Kessler, author of the legal treatise Civil and Criminal Forfeiture: Federal and State Practice, says he has never heard the “future crimes” argument. “Can you imagine any judge in America allowing an argument like that to stand?” Kessler says. “It’s obscene. It’s like something out of that movie Minority Report. We don’t punish people for crimes they haven’t yet committed.”
Smelley’s fight for his money would only get more bizarre. At the conclusion of the February hearing, Judge Headley temporarily granted the motion for summary judgment, ordering the county to return the money. But there was a catch. Under Indiana law, the county had an additional 10 days to amend its complaint to show a connection between the seized property and illegal activity. If after that 10-day period the state didn’t amend its complaint, or if the judge found the amendments insufficient, Smelley could retrieve his cash and be on his way.
But Headley would never rule on the amended complaint. Days after issuing summary judgment, Headley pulled himself off the case without explanation. Smelley’s case was then batted around Indiana county courts for months, before finally ending up in front of Special Judge David Bolk. On August 18, more than seven months after Smelley’s money was seized, Bolk overturned Headley’s summary judgment. The opinion was curt, and didn’t offer an explanation. Bolk ordered a civil forfeiture trial for November 13. The trial was then postponed again until January 29, 2010, due to congestion in the court system. That means Putnam County will have held Smelley’s money for more than a year before giving him the opportunity to argue that he should get it back.
‘Make the Bad Guys Pay!’
A survey of state and federal forfeiture since 2000 shows that CAFRA hasn’t stopped the exponential growth of government asset seizure. Adjusted for inflation, the Justice Department’s asset forfeiture fund, which includes proceeds from forfeitures carried out by all federal agencies except Immigration and Customs Enforcement, grew from $1.3 billion in 2001 to $3.1 billion in 2008. (The total includes some money left over from previous years, but according to Smith, almost all of the money is doled out to local and federal agencies on an annual basis.) National Public Radio has reported that between 2003 and 2007, the amount of money seized by local law enforcement agencies enrolled in the federal forfeiture program tripled from $567 million to $1.6 billion. That doesn’t include property seized by local law enforcement agencies without involving federal authorities.
While the Hyde bill placed some limits on federal civil forfeiture, it eased the process of seizing property in criminal forfeiture cases. Criminal forfeiture requires a conviction, so the property owner at least has to be found guilty of a crime, but the potential for abuse is widespread here, too. For example, prosecutors can “substitute assets” if they believe a defendant has disposed of seizable property. A court will issue a money judgment based on an estimate of how much the defendant has made through criminal endeavors. In some federal districts, prosecutors can then collect by seizing property that they can’t prove was connected to any illegal activity.
Smith, the Virginia-based forfeiture specialist, says courts generally rubber-stamp the government’s estimate on substitute assets, putting the defendant on the hook for that amount the rest of his life. This practice can be particularly unfair in conspiracy cases, where unequal defendants can be conjoined under the doctrine of joint and several liability. If 10 defendants are convicted in a drug conspiracy case and a court enters a total money judgment for $10 million, all 10 are liable until the $10 million is paid in full. If the five most responsible parties are sent to prison for 40 years, the remaining five—be they mid-level dealers, foot soldiers, or a girlfriend who forwarded a few phone calls—are liable for the entire $10 million, no matter who actually got the money in the end. “The government is always going to go after the guy with the most money, regardless of culpability,” Smith says. “Even if he played only a small role in the conspiracy and earned everything he owns legitimately.”
Criminal forfeiture can also prevent defendants from effectively contesting the charges against them. When the DEA accuses a doctor of illegally prescribing pain medication, for example, one of the first actions it takes is to freeze his assets for possible forfeiture. Since most doctors make their entire living from their practice, nearly everything they own can be frozen. Many accused doctors therefore don’t have the resources to hire legal representation, much less experts to counter government assertions that they’re prescribing controlled substances outside the normal practice of medicine. Forfeiture makes it nearly impossible for them to mount a credible defense.
In addition to raising questions of fairness, forfeiture has warped the priorities of law enforcement agencies. In 2008 the Bureau of Alcohol, Tobacco, Firearms, and Explosives asked for bids from private contractors on 2,000 Leatherman pocket knives for its agents, to be inscribed with the phrase “Always Think Forfeiture,” a play on the agency’s traditional “ATF” initials. The agency rescinded the order after it was reported in the Idaho Statesman, but critics said it betrayed the ethic of an organization more interested in taking people’s property than in fighting crime.
Some police agencies come to view forfeiture not just as an occasional windfall for buying guns, police cars, or better equipment, but as a source of funding for basic operations. This is especially true with multijurisdictional drug task forces, some of which have become financially independent of the states, counties, and cities in which they operate, thanks to forfeiture and federal anti-drug grants.
In a 2001 study published in the Journal of Criminal Justice, the University of Texas at Dallas criminologist John Worral surveyed 1,400 police departments around the country on their use of forfeiture and the way they incorporated seized assets into their budgets. Worral, who describes himself as agnostic on the issue, concluded that “a substantial proportion of law enforcement agencies are dependent on civil asset forfeiture” and that “forfeiture is coming to be viewed not only as a budgetary supplement, but as a necessary source of income.” Almost half of surveyed police departments with more than 100 law enforcement personnel said forfeiture proceeds were “necessary as a budget supplement” for department operations.
Such widespread use of forfeiture has created an industry of facilitators. Organizations such as the International Association for Asset Recovery sponsor conferences where law enforcement officials learn how to maximize their asset-seizing potential. They also offer certifications in forfeiture expertise. Advertising a Florida conference on its website in 2009, an outfit called Asset Recovery Watch (slogan: “Make the bad guys pay!”) assures budget-conscious police departments that federal law permits them to use forfeiture funds to send police officers away to forfeiture conferences for training.
Forfeiture may also undermine actual enforcement of the law. In a 1994 study reported in Justice Quarterly, criminologists J. Mitchell Miller and Lance H. Selva observed several police agencies that identified drug supplies but delayed making busts to maximize the cash they could seize, since seized cash is more lucrative for police departments than seized drugs. This strategy allowed untold amounts of illicit drugs to be sold and moved into the streets, contrary to the official aims of drug enforcement.
There is also a potential conflict between forfeiture and criminal prosecution. Smith says prosecutors rarely initiate civil forfeiture proceedings against someone who has been acquitted on criminal charges, although the law allows them to do so. “I think the feeling is that a jury would be very skeptical of that—that this person was acquitted in court and that to now try to take his property too is unfair,” he says. “If they don’t think a jury would be sympathetic, it isn’t worth their time to pursue it.” If a prosecutor pursues a criminal case, with its higher burden of proof, he risks losing the ability to take the suspect’s assets. If he drops the criminal case and just goes after the property with a case that is easier to prove, the suspect goes free, but the government gets to keep his stuff.
“There’s also the temptation for prosecutors to offer a plea on the criminal charges in exchange for forfeiting some of the property,” says Scott Bullock, an attorney with the Institute for Justice, a libertarian public interest law firm. “If you support the drug laws—and not all of us do—but if you support them, you have to question the incentives.”
Highway Robbery in Texas
The Supreme Court this spring will rule on Alvarez v. Smith, a challenge to Illinois’ forfeiture statute, which mostly mirrors the 1984 federal law—property can be seized without a warrant, retained using only probable cause; the government can use hearsay, defendants cannot; the burden of proof rests largely on those who have their stuff seized; and even victorious defendants cannot recover court costs or attorney fees.
The Supreme Court is unlikely to rule on any of those provisions. Instead it will consider a wrinkle that allows the state to keep property for up to six months before giving the owner his first day in court. Innocent property owners can be kept waiting more than a year before getting a decision, a predicament that critics say imposes an unconstitutional burden, particularly in cases where the police have seized someone’s car.
In other states, the problem isn’t so much the strict provisions on the books, but rather the relevant law’s ambiguity, which can give police and prosecutors too much leeway. Tiny Tenaha, Texas, population 1,046, made national news in 2008 after a series of reports alleged that the town’s police force was targeting black and Latino motorists along Highway 84, a busy regional artery that connects Houston to Louisiana’s casinos, ensuring a reliable harvest of cash-heavy motorists. The Chicago Tribune reported that in just the three years between 2006 and 2008, Tenaha police stopped 140 drivers and asked them to sign waivers agreeing to hand over their cash, cars, jewelry, and other property to avoid arrest and prosecution on drug charges. If the drivers agreed, police took their property and waved them down the highway. If they refused, even innocent motorists faced months of legal hassles and thousands of dollars in attorney fees, usually amounting to far more than the value of the amount seized. One local attorney found court records of 200 cases in which Tenaha police had seized assets from drivers; only 50 were ever criminally charged.
National Public Radio reported in 2008 that in Kingsville, Texas, a town of 25,000, “Police officers drive high-performance Dodge Chargers and use $40,000 digital ticket writers. They’ll soon carry military-style assault rifles, and the SWAT team recently acquired sniper rifles.” All this equipment was funded with proceeds from highway forfeitures.
Texas prosecutors benefited too. Former Kimble County, Texas, District Attorney Ron Sutton used forfeiture money to pay the travel expenses for him and 198th District Judge Emil Karl Pohl to attend a conference in Hawaii. It was OK, the prosecutor told NPR, because Pohl approved the trip. (The judge later resigned over the incident.) Shelby County, Texas, District Attorney Lynda Kay Russell, whose district includes Tenaha, used forfeiture money to pay for tickets to a motorcycle rally and a Christmas parade. Russell is also attempting to use money from the forfeiture fund to pay for her defense against a civil rights lawsuit brought by several motorists whose property she helped take. In 2005, the district attorney in Montgomery County, Texas, had to admit that his office spent forfeiture money on an office margarita machine. The purchase got attention when the office won first place in a margarita competition at the county fair.
While police departments have been benefiting from forfeiture policies for years, funneling the money to prosecutors raises even more problems. “Police merely seize the property,” David Smith says. “They don’t determine which cases go forward. It’s a violation of due process if the prosecutor, the person actually deciding whether or not to bring a forfeiture case, benefits somehow from the decision. You can’t have the same person deciding which cases to take also directly benefiting from those cases.”
Smith and the Institute for Justice’s Scott Bullock both believe language in the 1982 Supreme Court decision Marshall v. Jerrico Inc. suggests that if a law allowing prosecutors’ offices to benefit from forfeiture proceeds were challenged in federal court, it might be struck down. “Jerrico actually found that a government agency can be reimbursed from the defendant’s assets for the cost of an investigation,” says Bullock. “But in dicta, the Court indicated that it would strike down a law that allowed a particular public official to benefit from bringing a case.” The Institute for Justice brought such a challenge to New Jersey’s forfeiture law, which allows proceeds to flow into the general budgets of district attorneys. The New Jersey Supreme Court rejected the argument. So far no one has used Jerrico to challenge a state forfeiture law in federal court.
“I think that’s where it needs to happen,” Smith says. “State courts are made up of former prosecutors and other people who have connections to the community. No one wants to be the one who puts an end to all of this. I think it will take a federal court challenge to do it.”
Not every state has kept its old laws intact. Kessler, the New York attorney and forfeiture expert, says 27 states have adopted CAFRA-style reforms. Some go even further, requiring that the proceeds from forfeited property go directly to the state general fund or to a fund earmarked for a specific purpose, such as education.
But here, too, things aren’t always as they seem. In Missouri, for example, forfeited property is supposed to go to the state’s public schools. But in 1999 a series of reports in The Kansas City Star showed how Missouri police agencies were circumventing state law. After seizing property, local police departments would turn it over to the DEA or another federal agency. Under federal law, the federal agency can keep 20 percent or more of the money; the rest, up to 80 percent, goes back to the local police department that conducted the investigation. None of the money in these cases goes to the schools.
The Kansas City Star investigation made national news at the time, but Kessler says the practice of circumventing earmarking through federal “adoption” is now common all over the country. “It happens a lot,” he says. “It clearly goes against the intent of the state legislatures that passed these laws, but I don’t know of any state that has made a serious effort to prevent it from happening.”
‘It’s Blatantly Unconstitutional’
Timothy Bookwalter, the elected chief prosecutor for Putnam County, Indiana, did not represent the county in its effort to keep Anthony Smelley’s money. Nor did anyone else in his office. Instead, the case was handled by Christopher Gambill, a local attorney in private practice. Gambill manages civil forfeiture cases for several Indiana counties, and he gets to keep a portion of what he wins in court. “My contingency for my own county is a quarter; for the others it’s a third,” Gambill says.
The concept is alarming. If allowing public prosecutors to benefit from forfeiture funds brushes up against due process, allowing an unaccountable private attorney to run forfeiture cases and keep a portion of the winnings rams a steamroller straight through the notion. “This is scandalous,” Kessler says. “It’s blatantly unconstitutional.”
Gambill not only argues and briefs Putnam County forfeiture cases; he also determines which cases the county pursues in the first place. That means nongovernmental forfeiture attorneys are making criminal justice decisions that directly bolster their incomes. “It’s really bad policy,” David Smith says. “I also don’t see how it could possibly be legal.”
Mark Rutherford, chairman of the Indiana Public Defender Commission, says he isn’t aware of any court challenges to the practice. “It’s just sort of accepted here that this is the way things are,” Rutherford says. “There are attorneys who have amassed fortunes off of these cases.” The office of Indiana Attorney General Greg Zoeller referred inquiries about this contracting system to the Indiana Prosecuting Attorneys Council, which represents the state’s prosecutors. That organization did not return several calls seeking comment.
Like Missouri, Indiana theoretically allocates asset forfeiture proceeds to its public schools. In fact, that requirement is spelled out in Indiana’s constitution. But there are ways around this restriction. “If you can get someone to settle without having to go to court, under state law that technically isn’t a forfeiture,” Gambill says. “So it can all go to the police and prosecutors’ offices. After the contingency, of course.”
‘We All Get Greedy’
The country’s lurch to the political left won’t necessarily mean a greater protection for civil liberties in forfeiture cases. Asset seizure, in fact, is one area where conservatives tend to take a less law-enforcement-friendly position than liberals. “Conservatives value property,” Kessler says, “so they tend to be sympathetic to property owners in these cases. If you look back at the Supreme Court cases putting limits on forfeiture, most were written by conservative justices. And of course Rep. Hyde was a conservative Republican.”
Don’t be surprised, then, if forfeiture power expands in the coming years, particularly with respect to financial fraud, tax evasion, and other white-collar crimes. “It’s always a pendulum, swinging back and forth,” Kessler says. “I think we are in the pro-government phase now.”
But over the long term, Kessler is more optimistic about reform. Expanding unjust forfeiture laws to include new classes of people makes the members of those classes aware of just how unfair those laws can be. And the government always overplays its hand. “We all get greedy, and the government is no exception,” he says. “I think that in this climate, they’ll go for too much, and then the courts will rein them in. It’s unfortunate that that’s the way it has to happen.”
As for Anthony Smelley: As of this writing, more than a year after the police took $17,500 of his money, he has yet to have his day in court.
February 2010 Issue
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