Forfeiture: Stripping Criminals of Ill-Gotten Gains. Jason Wojdylo, CFE Association of Certified Fraud Examiners, Inc.

Transcription

1 Forfeiture: Stripping Criminals of Ill-Gotten Gains Jason Wojdylo, CFE 2015 Association of Certified Fraud Examiners, Inc.

2 ASSET FORFEITURE: STRIPPING CRIMINALS OF ILL-GOTTEN GAINS Jason Wojdylo Chief Inspector U.S. Marshals Service Jennifer Bickford Assistant Deputy Chief Asset Forfeiture and Money Laundering Section

3 LEARNING OBJECTIVES 3 Asset forfeiture defined Program participants Why do we use asset forfeiture Authority for asset forfeiture Methods for accomplishing asset forfeiture Why can we take people s stuff? Statutes What exactly can we take? Theories How do we actually do it? Types Victim case studies

4 ASSET FORFEITURE PROGRAM 4

5 ASSET FORFEITURE 5 The taking of property by the Government Without compensation Obtained in a manner contrary to law Derived from a crime Involved in a crime Used to make a crime easier to commit or harder to detect

6 DEPARTMENT OF JUSTICE ASSET FORFEITURE PROGRAM PARTICIPANTS 6 Asset Forfeiture and Money Laundering Section Asset Forfeiture Management Staff Bureau of Alcohol, Tobacco, Firearms and Explosives Defense Criminal Investigative Service Department of State, Bureau of Diplomatic Security Drug Enforcement Administration Federal Bureau of Investigation Food and Drug Administration U.S. Attorney s Offices U.S. Department of Agriculture, OIG U.S. Marshals Service U.S. Postal Inspection Service Assets Forfeiture Fund (28 U.S.C. 524(c))

7 DEPARTMENT OF TREASURY ASSET FORFEITURE PROGRAM PARTICIPANTS 7 Customs and Border Protection Internal Revenue Service Homeland Security Investigations U.S. Coast Guard Immigration and Customs Enforcement U.S. Secret Service Treasury Forfeiture Fund (31 USC 9705)

8 FORFEITURE STATISTICS 8 Total deposits into the Assets Forfeiture Fund have exceeded $1 billion in each of the past 6 years Total victim compensation since fiscal year 2002 exceeds $4 billion Upcoming distributions in Madoff case set to eclipse that amount

9 9 WHY SHOULD I BOTHER WITH ASSET FORFEITURE?

10 WHY DO FORFEITURE? 10 Because you drive this. Because a defendant on probation shouldn t pull up next to you at a red light driving this.

11 PURPOSE OF ASSET FORFEITURE LAW ENFORCEMENT Effective tool to fight crime and protect the community Strengthen cases Weaken criminal enterprises Return illegal proceeds to victims of crime 2. PUNISH THE CRIMINAL Beyond putting the criminal in prison, Government can take away proceeds of the crime so he cannot enjoy them once he is released Deter illegal activity If the criminal does not get to keep the money or assets from his crime, the next criminal may think twice before committing a crime

12 PURPOSE OF ASSET FORFEITURE DETER ILLEGAL ACTIVITY If the criminal does not get to keep the money or assets from his crime, the next criminal may think twice before committing a crime 4. REMOVE THE TOOLS OF THE TRADE Take property used by criminals to commit their crimes so the property cannot be used again 5. DISRUPT THE ORGANIZATION Taking money away from the criminal enterprise will disrupt and dismantle the organization s operation 6. PROTECT THE COMMUNITY Eliminate hazards to public health, safety and welfare

13 PURPOSE OF ASSET FORFEITURE RETURN ASSETS TO VICTIMS Compensate victims of underlying crimes

14 TIMELINE THROUGH HISTORY Congressional Act of 1789 Vessels and cargo for violations of customs laws 1986 Anti-drug Abuse Act 14 Late 1800s/early 1900s Prohibition Violators of laws on the manufacturing, sale and taxation of alcohol 1970 Controlled Substance Act Drug trafficking Racketeer Influenced and Corrupt Organizations (RICO) Act Organized crime 1978 Psychotropic Substances Act Drug proceeds 1984 Comprehensive Crime Control Act Facilitating a drug offense Established the Assets Forfeiture Fund 1988 Anti-drug Abuse Act 1989 Financial Institution Reform, Recovery and Enforcement Act Bank fraud and other crimes affecting financial institutions 1990 Crime Control Act 1994 Violent Crime Control and Law Enforcement Act 2000 Civil Asset Forfeiture Reform Act +250 crimes 2001 USA Patriot Act Global and domestic terrorism

15 AUTHORITY FOR ASSET FORFIETURE 15 Piecemeal collection of statutes enacted over time for different purposes No common law of forfeiture

16 STATUTORY BASIS FOR FORFEITURE 16 There must be a federal statute authorizing forfeiture of the property. Examples: 21 USC 853, 881 (Drug Forfeiture Statutes) 18 USC 981 (Money Laundering Forfeiture Statutes) 18 USC 924(d) (Firearms Forfeiture Statutes) 16 USC 1538 and 1540 (Endangered Species Act)

17 ENDANGERED SPECIES ACT FORFEITURE 17 Florida State Marine Mammal

18 THEORIES OF FORFEITURE: WHY WE CAN TAKE ASSETS? 18 Contraband Property unlawful to possess Proceeds Property acquired by or traceable to unlawful activity Facilitating Property Property used to commit crime Property Involved In Money Laundering Accounts that funds were moved through to conceal true nature and source Property affording a source of influence over RICO enterprise

19 FORFEITURE PYRAMID 19

20 CONTRABAND 20

21 PROCEEDS 21

22 FACILITATING PROPERTY 22 Property that makes the crime easier to do or harder to detect Examples: Marijuana grow operation inside a house Vehicle driven to a drug deal Weapon used during a bank robbery

23 COMMONLY FORFEITED ASSETS 23

24 UNIQUE FORFEITED ASSETS 24

25 UNIQUE FORFEITED ASSETS 25

26 TYPES OF FORFEITURE: HOW WE CAN TAKE ASSETS? 26 Civil in rem Administrative (non-judicial matter handled by the seizing agency; requires statutory authority) Judicial (court process) United States v. $1,500 in Bank Account XXXX United States v. Real Property at 1234 Any Street Criminal - in personam Requires a judicial action initiated by the USAO United States v. John Smith

27 ADMINISTRATIVE FORFEITURE 27

28 ADMINISTRATIVE FORFEITURE 28 Accounts for approximately 70% of all forfeitures by asset count because most forfeitures are uncontested, meaning no one files a claim However, the value of administrative forfeitures is not the majority of forfeiture value

29 ELIGIBLE PROPERTY: 19 U.S.C Monetary instruments of any value Personal/tangible property of $500,000 or less Bank accounts capped at $500,000 Drug conveyances Boat, car, plane, etc No maximum value Illegal merchandise Contraband, drugs Real property cannot be administratively forfeited

30 CRIMINAL FORFEITURE 30 Criminal forfeiture is part of the sentence in a criminal case. It is an in personam action, meaning it is against the person (defendant). It requires a charge that supports forfeiture and a conviction.

31 CIVIL FORFEITURE 31 Civil forfeiture is a civil action in rem against the property itself. Property must exist. The Government proves the property, not the person, was derived from or was used to commit a crime, or was involved in the crime.

32 WHAT DOES THE GOVERNMENT DO WITH FORFEITURE PROCEEDS? 32 Compensates victims Provides resources to state and local law enforcement Equitable sharing Joint law enforcement operations Supports federal asset forfeiture program and nationwide initiatives Task force and case support Money judgment follow-up Training

33 33

34 FORFEITURE VICTIM STATISTICS 34

35 RETURN ASSETS TO VICTIMS 35 A benefit of forfeiture is the ability to obtain money for victims Federal prosecutors are required to include asset forfeiture in indictments Forfeiture tools allow for early restraint of assets as opposed to post-sentencing recoveries available through FLU Almost every crime has a forfeiture provision allowing for forfeiture

36 VICTIM COMPENSATION IN THE NEWS 36

37 CASE EXAMPLES 37 Large securities fraud and Ponzi scheme orchestrated by Bernard Madoff through his investment company BLMIS Multiple criminal and civil cases ongoing to obtain assets for victim compensation Over 63,000 petitions received from victims in 135 countries Over $4 billion dollars will be returned to victims The majority of that obtained through the use of civil forfeiture

38 CASE EXAMPLES 38 Adelphia Communications went bankrupt in 2002 as a result of fraud committed by the principal owners, the Rigas family USAO SDNY entered into settlement agreements in 2005 that resulted in the forfeiture of over $728 million in cash, stock, and real property DOJ hired a special master to identify and notice victims Over 8,700 victims received payments in excess of $728 million

39 CASE EXAMPLES 39 Beginning in 1997, principals of Enron defrauded Enron s shareholders by using off-balance-sheet transactions with certain Special Purpose Entities (SPE) Enron s stock price dropped from more than $80 per share to less than $1 and Enron filed for bankruptcy in 2001 DOJ coordinated with the SEC fund administrator to transfer over $100 million from criminal and civil forfeitures to the Enron Victim Trust Over 128,000 victims received payments

40 CASE EXAMPLES 4 0 In 2011, the USAO SDNY filed suit against several poker companies for violations of the Unlawful Internet Gambling Enforcement Act Full Tilt Poker (FTP) did not have sufficient funds to credit player accounts due to fraudulent payments to FTP owners USAO coordinated a settlement in which PokerStars agreed to forfeit $527 million in exchange for the FTP assets DOJ hired a claims administrator to provide notice to over 1 million account holders First electronic remission submission process To date, over $100 million has been paid to 35,000 victims

41 CASE EXAMPLES 41 In 2012, MoneyGram International Inc. (MGI) agreed to the forfeiture of $100 million as part of a deferred prosecution agreement with the DOJ and USAO MDPA MGI admitted to criminally aiding and abetting wire fraud through mass marketing and consumer fraud phishing schemes perpetrated by corrupt MGI agents. $100 million was administratively forfeited by the U.S. Postal Inspection Service DOJ hired a claims administrator to provide notice to over 60,000 potential victims identified by MGI and several State Attorney Generals To date, over $62 million has been paid to 22,000 victims

42 RESOURCES: AFMLS PUBLIC WEBSITE 42 inal-afmls

43 QUESTIONS? 43

44 CONTACT 4 4 Jason Wojdylo Chief Inspector U.S. Marshals Service jason.wojdylo@usdoj. gov Jennifer Bickford Assistant Deputy Chief Asset Forfeiture and Money Laundering Section jennifer.bickford@usdoj. gov

45 Forfeiture: Stripping Criminals of Ill-Gotten Gains Jason Wojdylo, CFE 2015 Association of Certified Fraud Examiners, Inc.