Christmas came early to state, local and tribal law enforcement agencies in the United States; and it came in the form of a lump of coal.  On December 21, 2015, Kendall Day, Chief of the U.S. Justice Department’s Asset Forfeiture and Money Laundering Section (AFMILS), advised these agencies that the Department was suspending its Equitable Sharing Program.¹ Mr. Day attributed the suspension to Congress’ decision to cut an additional $458 million from the Department’s budget as part of its year-end stopgap spending bill. 

In his letter, Mr. Day pledged the Department’s long-term commitment to the Equitable Sharing Program, but media outlets and opponents of the asset forfeiture program – particularly the civil side of the process – predicted its demise.  While it is impossible to predict the future of the program from outside the Justice Department, there is no doubt that 2015 was a difficult year for asset forfeiture, and the signs point to a curtailed program in the long run.

Asset forfeiture has long been a feature of our law enforcement system.  Criminal asset forfeiture laws date to medieval times under the theory that wrongdoers should be deprived of the profits of their crime and of the tools that facilitated it.  Civil asset forfeiture laws date to 17^th century English maritime law which allowed violations to be punished by the seizure and forfeiture of ships and cargo in circumstances where commencing criminal proceedings was difficult, if not impossible, because property owners were outside the reach of U.S. criminal jurisdiction.  And therein lies the key difference:  criminal forfeiture follows the conviction for a crime; civil forfeiture proceeds without regard to a criminal conviction.

Despite its historical basis, civil asset forfeiture was little used until passage of the 1984 amendments to the Drug Abuse Prevention and Control Act.  These amendments, inter alia, created the Department of Justice’s Asset Forfeiture Fund and allowed the sharing of the proceeds of criminal and civil forfeitures with state, local and tribal law enforcement agencies.  This change allowed strapped law enforcement agencies to tap into a pot of cash and assets to fund agency operations, purchase equipment and beef up their budgets if they participated in the law enforcement action that produced the seizure.  Critics charged that creation of the fund, and allowing local, state and tribal law enforcement agencies to share in the proceeds, incentivized agencies to be more aggressive in seizing assets and to pursue those assets even when they could not bring a criminal case.   

There is no dispute that, since the creation of the Asset Forfeiture Fund and implementation of the sharing program, there has been a dramatic increase in forfeiture activity.  In 1986, the year after the Asset Forfeiture Fund was created, it collected some $93.7 million in assets.  By 2014 seizures placed in the fund totaled $4.5 billion, a 4,667% increase.  Between 2001 and 2014 the total deposited into the fund was nearly $29 billion.  Of these amounts, the vast majority were the result of civil forfeiture actions.  Between 1997 and 2013 only 13 percent of the Justice Department’s forfeitures were criminal while 87 percent were civil.

To put an even finer point on the issue, 88 percent of the Department of Justice’s civil forfeitures were accomplished “administratively.”  Administrative forfeitures happen automatically when a property owner fails to challenge a seizure for any reason.  The seized property is presumed to be forfeitable as the proceeds or instrumentality of a criminal act.  So, the vast majority of assets seized by the Department of Justice were seized apart from a criminal prosecution, and most of these seizures were never reviewed by a Court in any way.

In the last several years critics of the Asset Forfeiture Fund and its sharing component have become more vocal.  Reacting to the numbers outlined above, they complain that the civil aspect of the program poses serious risks to individual property and due process rights.  Civil forfeiture, they argue, allows for the seizure and forfeiture of assets at a much lower legal standard than in a criminal matter, and, once seized, the property owner must file a claim for their return.  They also argue that the equitable sharing component of the program encourages overly aggressive law enforcement actions focused more on asset collection and less on punishing criminal conduct, and that it places law enforcement funding beyond the reach of oversight bodies (city councils, county commissions, etc.) and offers little transparency as to how funds are obtained and how they are spent. 

The critics also have pointed to individual cases of abuse to bolster their arguments.  For example, the IRS seized more than $30,000 from the owner of a Mexican restaurant in Spirit Lake, Iowa after agents alleged that she had structured her deposits to avoid bank reporting requirements.  The agent never alleged that the funds were the proceeds of criminal activity, nor did prosecutors charge her with a crime.  See, here. 

In February of 2014 law enforcement officials seized $11,000 in cash from a 24 year old man as he was boarding a flight from Ohio to Florida.  The young man carried the cash because his bank did not have any physical locations in his area, and he wanted to protect the cash from loss while he and his mother moved to a new apartment.  Investigators found no evidence of criminal activity and could not tie the seized funds to any particular misconduct.  See, here. 

Likewise, agents seized cash from an aspiring music entrepreneur aboard a train.  Refusing to believe his explanation for the cash he was carrying, agents seized the money, and the responsibility fell on the young man to get the money back from them.  Again, investigators could point to no specific crime as the source of those funds.  See, here. 

And, as we have highlighted before, the United States Attorney for the Eastern District of North Carolina recently dismissed a forfeiture case against a store owner in a rural community because he allegedly structured his bank deposits.  The Federal Government seized more than $100,000 and yet was unable to demonstrate that the funds were the proceeds of or facilitated any criminal activity.  They did not charge him with any crime.  See our discussion of this issue here.

Throughout 2015 the Department of Justice backpedaled in the asset forfeiture realm in an effort to quiet criticism.  On January 16, 2015, former Attorney General Eric Holder issued an order prohibiting the adoption of certain seizures conducted solely by state and local law enforcement authorities.  See, here.  This order effectively eliminated the procedure by which the Department of Justice would process a seizure in which its investigators had played no role.  Previously the Department, via the DEA or FBI for example, could “adopt” a solely state or local seizure, process the funds through the Department’s Asset Forfeiture program, take its own cut of the proceeds, and then return the balance to the state and local agencies under the Equitable Sharing Program.²

In March of 2015 former Attorney General Holder again narrowed the parameters of the asset forfeiture program by limiting its use in purely structuring cases.  See, here. This directive significantly limited forfeiture authority where the only chargeable offense was a violation of Title 31, United States Code, Section 5324(a), which prohibits the evasion of certain currency transaction-reporting and record-keeping requirements, including structuring schemes designed to avoid those rules.  This policy shift addresses the problems in the Iowa case and led directly to the dismissal of the North Carolina forfeiture action.

But law enforcement is fighting back.  In response to the recent suspension of the Equitable Sharing Program, six organizations, representing significant state and local law enforcement agencies in the United States, complained to President Obama about the suspension of the program and threatened to withdraw from participation in joint task force operations with the federal government.  See, here.  

As noted above, it is impossible to predict the outcome of this battle.  The fight over asset forfeiture and equitable sharing joins the issue of adequate funding of public safety operations with that of personal property and due process rights.  But, as the public outcry grows, it seems likely that the federal Asset Forfeiture Program, and its equitable sharing component, will undergo some changes and will be narrowed in scope.  The Department’s own success – and the significant imbalance in favor of non-criminal forfeitures – gives significant strength to the arguments of the critics.