August 2007, FEAR bulletins with associated articles

Prepared Remarks of Attorney General Alberto R. Gonzales at the Organized Crime and Drug Enforcement Task Force (OCDETF) & Asset Forfeiture Program National Leadership Conference

Investigation launched into police's seized funds

AMERICAN-STATESMAN STAFF
Thursday, August 09, 2007

Austin Police Chief Art Acevedo on Wednesday launched a criminal inquiry into how department officials have spent money seized from investigations during the past five years and whether they violated rules about how such dollars must be used.

Acevedo, who began his third week on the job Monday, said he wants to scrutinize several payments from millions of dollars seized during investigations but declined to identify the transactions or amounts.

City officials said this week that at least one payment, a $13,000 college tuition reimbursement for a commander, probably violated guidelines about how the money should be used.

An Austin American-Statesman review of thousands of transactions obtained under Texas open records laws showed that much of the money was spent on vehicle maintenance, training and equipment purchases.

Other spending included:

• A payment of $12,025 in October 2002 for an awards banquet.

• A $3,314 expense for clothing for the department's running team in November 2005.

• An $1,895 expense in May 2005 for a "race clock."

• An expense of $625 in October 2001 for coffee mugs.

Federal guidelines and state law require the money that police departments get as the result of asset forfeitures in criminal cases to be spent on law enforcement. Federal rules have specific restrictions, saying, for example, that the money can't be spent to pay for existing staff or supplant existing funding.

A Justice Department spokesman declined to discuss Austin's use of the money.

State laws say that money can be used for salaries, overtime, officer training and investigative equipment and supplies. Other items may be bought with state funds only if used by officers in "direct law enforcement duties."

Officials had said they hoped to provide a specific accounting as early as Wednesday of how the money was used but said Wednesday that the criminal investigation would prevent them from doing so until further notice.

"It's important for me, and for the confidence level, and for transparency sake, to make sure we are doing the right thing," Acevedo said.

Acevedo said he wants to correct any possible errors in how the money was used, in part to ensure the department's ability to receive seized money in the future.

Austin City Manager Toby Futrell said through a spokesman Wednesday that such expenses during the past five years have been managed at the Police Department and that agency leaders have had the final authority in how such money is spent.

Futrell had no further comment, pending the outcome of the investigation, the spokesman said.

Former Police Chief Stan Knee, contacted in Afghanistan, where he is a mentor to the country's minister of interior, said he tried to use seized money to better the department, including the $13,000 tuition reimbursement.

Cathy Ellison, who served as acting chief for a year after Knee left in May 2006, declined to comment.

Acevedo sent an e-mail throughout the department Wednesday, ordering officers and employees not to talk to reporters about the investigation.

The Statesman in mid-June requested under Texas open records laws an accounting of how seized money was spent during the past five years.

Acevedo also had requested an update of the department's finances, which resulted in two internal memos — one from a new budget officer to Acevedo and the other from Futrell to the City Council — describing general "financial disarray," including not paying a $1.1 million bill to Travis County for using the jail.

The department's budget officer resigned in February after officials discovered the bill had not been paid.

The memos also said the agency had used seized funds in 2005 and 2006 to balance the department's budget. One document said seized funds had started running negative cash balances in June, mainly because they had been used to balance the 2006 budget.

Federal guidelines prohibit spending seized funds before they are received.

On Wednesday, several City Council members said they were concerned.

Council Member Sheryl Cole said the problems highlight "the need for better internal controls. Hopefully the dollars we are allocating (in the 2008 budget) will help alleviate the problem."

Cole said the city had budgeted about $200,000 for two new employees in the department's budget office.

Council Member Betty Dunkerley said she sounded alarms several years ago when the city slashed about $17 million in administrative jobs.

"I told everybody that administration includes internal controls and that we were cutting things too thin and that we should expect if we didn't add these positions back soon, that people were going to be overworked and not have the checks and balances, and mistakes would be made," Dunkerley said.

"I think that's exactly what has happened here."

tplohetski@statesman.com; 445-3605

Attorneys who represented claimants trying to recover money seized by customs agents in violation of the USA PATRIOT Act will not be awarded fees.

The 2nd U.S. Circuit Court of Appeals said attorneys John P. Donohue and David B. Smith are not entitled to the $157,888 in fees they sought -- almost one-third of the money seized by customs agents in September 2002 from three couriers who were trying to board a flight from New York to Pakistan.

The couriers, Ali Sher Khan, Akbar Ali Khan and Fazan Subhan, were carrying $515,000 in U.S. currency for themselves and approximately 80 Pakistanis who were eschewing the international banking system. The money was concealed throughout their luggage in places such as soap and toothpaste boxes.

The attorneys represented two of the three men convicted in the smuggling and many of the contributing claimants who sought to fend off a forfeiture and have their money returned.

The lawyers were partially successful. After three years, the contributing claimants had their money returned. The convicted couriers were given back 50 percent of their seized funds, after Eastern District of New York Judge Jack Weinstein found that anything in excess of 50 percent would violate the Excessive Fines Clause of the Eighth Amendment.

But Weinstein in 2005 denied the attorneys their fee request because there were "competing claims" to the same property within the meaning of §2465(b)(2)(ii), the Civil Asset Forfeiture Reform Act of 2000.

The judge also ruled the attorneys could not receive fees for their work on behalf of the convicted couriers because the government had been "substantially justified" in seeking forfeiture of their money.

Alternatively, Weinstein reasoned that the Equal Access to Justice Act, which would have provided an avenue for fees, was pre-empted by the rules laid down for attorney fees in the civil asset forfeiture law.

While Weinstein noted that the attorneys had acted "ethically and properly," he said the "claimants choice of a surreptitious method for sending their money ... led to this costly litigation."

The 2nd Circuit last week affirmed Weinstein in U.S. v. $293,316 in United States Currency, 05-6522-cv, with Judges John Walker, Chester Straub and Barrington Parker deciding the appeal. Walker wrote for the panel.

He began the analysis by saying that, in passing the Civil Asset Forfeiture Reform Act, "Congress was reacting to public outcry over the government's too-zealous pursuit of civil and criminal forfeiture.

"As part and parcel of this effort to deter government overreaching, Congress provided for the payment of 'reasonable attorney fees and other litigation costs' to claimants who 'substantially prevail' in a 'civil proceeding to forfeit property,'" he said.

But the act also says the government does not have to pay attorney fees where there are multiple claims to the same property and four criteria are met by the government, including the prompt recognition of the claim and the prompt return of the property.

The appellants argued that the cash seized was not the "same property" because the dollars were discrete pieces of property. They also argued that the government failed to meet all four of the criteria needed to establish the "multiple claims" exception.

The circuit disagreed.

The "claims need not be 'competing,' viz. mutually exclusive, as appellants apparently believe, in order for the claims to relate 'to the same property,'" Walker said. "Indeed, were we to read the statute as appellants do, we would nullify the second clause of §2465(b)(2)(C), which affords the government leeway to return property more slowly if there are 'competing claims.'"

And while the appellants read the statute to say the multiple claims exception applies to currency only where the claims exceed the value of the money, Walker said, "We read the statute more broadly; we see situations involving severally, mutually exclusive claims to the same currency as just one of many situations covered by the multiple claims exception."

PACE OF PROCEDURE

The circuit went on to reject the appellants' arguments that the government did not move promptly as required by the statute.

"The government, and the district court, gave appellants every opportunity to file verified claims ... (seeking the return of) ... the seized currency, as they were required to do ... " he said. "Appellants did so only belatedly; moreover, since one contributor claimant filed false claims and one convicted claimant modified the amount he claimed downward on the eve of the hearing, the government's careful pace was certainly understandable."

The circuit went on to uphold Weinstein's finding that the attorneys were not entitled to fees under the Civil Asset Forfeiture Act, which Walker said was "exclusive of all other remedies."

Smith of English & Smith in Alexandria, Va., and Donahue, of Kittredge, Donley, Elson, Fullem & Emblick in Philadelphia, represented themselves on the appeal.

Assistant U.S. Attorneys Laura Mantell, Steven Kim and Kathleen Nandan represented the government.

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2nd Circuit denies fees for attorneys who recovered money seized from multiple innocent claimants under USA PATRIOT Act

Official won't sign sheriff's report

A commissioner wants to know how he spent seized drug money.

Official won't sign Camden sheriff's drug money report

A commissioner wants to know how he spent seized drug money.

KINGSLAND - For years, Camden County officials have rubber-stamped an annual summary they and the sheriff are required to submit to federal authorities concerning the use of confiscated drug money returned to the county.

Not this year.

Commission Chairman Preston Rhodes refused to sign the annual certification report Tuesday without a full accounting of how Sheriff Bill Smith spent the money last year. Rhodes said in a letter to Smith he wants dates, amounts, who was paid and what it was for before certifying the document.

The form requires his and the sheriff's signatures and is due Friday.

Rhodes also declined to sign a form requesting shared assets money this year.

Other commissioners said they back his decision.

Rhodes said the ramifications of not submitting the certification form are unclear. A U.S. Treasury Department spokesman said Wednesday afternoon he was still trying to get an answer to that question.

Lt. William Terrell, a Sheriff's Office spokesman, said the report was never questioned and was always signed in years past.

But this year, the seized assets account is the subject of a lawsuit by county commissioners against the sheriff. Commissioners are seeking to wrest control of the account from Smith, and they have asked a judge to prohibit him from spending any money from the account until the matter is resolved. The lawsuit calls his spending from the account "unlawful."

Treasury Department guidelines say asset forfeiture money returned to local police is to be used for law enforcement purposes, such as jails, training and drug education.

Spending questioned

The commissioners' Aug. 10 lawsuit followed Times-Union reports that showed Smith spent thousands of dollars from the federal seized assets account to pay criminals, including a convicted methamphetamine manufacturer, and to support his favorite charities. They include a nonprofit spinal cord center in Atlanta and his college alma mater in South Carolina. Other payments from the accounts have gone to Smith's lawyer and to reimburse a department employee for getting a nursing license, according to auditing documents the newspaper received under Georgia's Open Records Act.

Smith has refused a Times-Union request to review checks and books for the accounts. A lawyer representing him in the commissioners' lawsuit didn't return calls Wednesday to his Brunswick office.

The sheriff has called questions about his spending politically motivated. His department is being probed by the Georgia Bureau of Investigation.

No explanation for expenses

On Monday, Smith's chief deputy, Charlie Easterling, faxed the shared asset forms to county offices with a note to sign and date them. The handwritten certification form showed the Sheriff's Office received about $740,000 back from the federal government and spent about $475,000, more than 80 percent in the catch-all category of "other law enforcement expenses."

According to Treasury Department instructions for completing the form, the Sheriff's Office was supposed to attach an explanation of what those expenses were. There was no attachment.

"There was not a clear indication to me of what was actually there," Rhodes said Wednesday. He said the sheriff hasn't responded to his letter requesting additional information about how the money was spent.

Commissioner David Rainer, who preceded Rhodes as chairman, said he always signed the forms as a matter of routine under the advice of County Attorney Brent Green because there were no concerns about how the money was being spent. But Rainer said in light of the lawsuit and questions raised about the account, Rhodes did the right thing by demanding more accountability.

"I might take the same step now," Rainer said.

Commissioner Katherine Zell said she also supported Rhodes' decision.

"Preston is trying very hard to do the right thing for the people of Camden County," Zell said. "He doesn't want to do anything without having all the information."

Times-Union writer Gordon Jackson contributed to this report.

paul.pinkham@jacksonville.com,

(904) 359-4107

10th Circuit rules “substitute assets” are not subject to pre-trial restraint: Government may not use lis pendens statute for pre-trial restraint of property that neither comprises the fruits of, nor is connected to, the defendant’s alleged crime.