The DOJ Now Has The One Of A Kind Wu Tang Album; But Don't Expect Jeff Sessions To Release The Album

from the not-how-it-works dept

Well, well, well. At the end of last year we wrote about the weird series of events that could possibly lead to the DOJ getting possession of a one-of-a-kind Wu Tang Clan album called Once Upon a Time in Shaolin. The short version: in 2014 Wu Tang decided to experiment with a different kind of business model: selling a single copy of an album to the highest bidder. Nearly two years later, just as the entire world was learning to absolutely loathe a pharma man-child named Martin Shkreli, it came out that Shkreli was the guy who forked over $2 million or so for the album.

Since then Shkreli has been arrested, and things haven't gone well for him. As you may have heard, a week or so ago, the court ruled that Shkreli caused a loss of $10.4 million for investors. And, yesterday, Judge Kiyo Matsumoto further ruled on the DOJ's asset forfeiture request, granting the request to seize a bunch of Shkreli assets... including Once Upon a Time in Shaolin. The order of forfeiture specifically lays out the following assets:

(a) $5 million in cash that is currently held in an E*Trade brokerage account ending in the digits “0258” as security for the defendant’s bond, pursuant to orders of the Court dated January 7, 2016, August 24, 2016 and October 19, 2017;
(b) Vyera Pharmaceuticals (formerly known as Turing Pharmaceuticals);
(c) the album “Once Upon A Time in Shaolin” by the Wu Tang Clan;
(d) the album “Tha Carter V” by Lil Wayne; and
(e) a Picasso painting.

Of course, don't think that this means that Jeff Sessions will now be releasing the album. I'm guessing he's not a huge fan of Wu Tang Clan, first of all. But, more importantly, it's likely that the DOJ will simply try to sell the album to get the cash value -- which will make for one hell of an interesting asset auction. But... it also means that some other rich dude might buy the album and keep it all to himself as well. Or, alternatively, someone else might try to buy it and release it. As Sarah Jeong wrote years ago (predicting all of this), it's still not clear what contractual obligations there are or if Wu Tang Clan retains the copyright:

The weird thing is that it's not clear what happens to the contract that Shkreli signed when he bought the album. Presumably, the contract allowed him to transfer his limited distribution rights if he ever sold the physical record to another person. But what happens if the record gets seized by the federal government as part of a criminal forfeiture?

Let's say the government seizes the record, sells it on GSA Auctions, and then I buy it and upload the whole thing onto the internet. If Shkreli had uploaded the whole album for free, Wu-Tang couldn't sue him—as per the terms of the contract. But if I do it, there's no contract preventing Wu-Tang from suing me, even though I'm now the rightful owner of the One True New Wu-Tang Album.

That is, unless the government manages to successfully seize Shkreli's intellectual property rights in the Wu-Tang album.

But, as per the order, the forfeiture order appears to only cover the physical album and not the associated copyright.

Filed Under: asset forfeiture, copyright, doj, martin shkreli, wu tang clan

Dutch Approach To Asset Forfeiture Will Literally Take The Clothes Off Pedestrians' Backs

from the take-'em-right-off dept

We've long complained about civil asset forfeiture in the United States. Law enforcement agencies, thanks to a series of perverse incentives, have grown to love taking people's property (usually cash) without charging them for crimes. The excuse is that lifting a few thousand dollars from some random person somehow chips away at drug cartels located overseas.

It would seem to be more crippling if criminal charges were pursued and suspects interrogated, jailed, and flipped. But law enforcement has no time for that, not when a pile of cash is only a few pieces of paperwork away from changing ownership.

They're taking asset forfeiture to a whole new level over in the Netherlands. Dutch cops will now be taking the clothes off people's back if they "suspect" the clothing might be out of the spending range of the person wearing it. (h/t Charles C.W. Cooke)

Police in the Dutch city of Rotterdam have launched a new pilot programme which will see them confiscating expensive clothing and jewellery from young people if they look too poor to own them.

Officers say the scheme will see them target younger men in designer clothes they seem unlikely to be able to afford legally – if it is not clear how the person paid for it, it will be confiscated.

The idea is to deter criminality by sending a signal that the men will not be able to hang onto their ill-gotten gains.

The police say they'll be able to make quick determinations about the legality of… um… clothing by accosting well-dressed youngsters. Presumably, no one will be carrying receipts. The police have used the term "undress" but swear they'll be focused on items that won't leave their former owners in a state of undress (watches are mentioned). Then again, the police also say they'll be packing clothes to hand out to people they've disrobed for dressing too richly, so it's obvious it won't just be watches being watched.

What's propelling this new spin on asset forfeiture? Apparently, it's some form of disrespect Dutch police want to shut down.

Police Chief said the young men targeted often have no income and are already in debt from fines for previous convictions but wearing expensive clothing.

This “undermines the rule of law” which sends “a completely false signal to local residents”, he explained.

The law already gives Dutch police permission to forfeit items procured with criminal funds. Over the last decade, the police have expanded these programs to go far beyond perceived kingpins to reach street hassle levels. Dutch law enforcement have been performing "Rolex checks" on young people for three years now, but the recent expansion into Rotterdam (it originated in Amsterdam), coupled with inflammatory "undress them on the street" comments from the Rotterdam police chief, has resulted in a new wave of backlash.

The police refuse to say how they'll determine rightful ownership of clothing/watches/jewelry they wish to seize. Obviously, the specifics would let "criminals" know what receipts to carry, but also suggests they're not entirely sure how they're going to carry this out either. Of course, the method matters less to the police. They don't have to prove anything. All they have to find is a lack of proof of legitimate ownership. The burden is completely upon those walking around wearing items cops subjectively feel they can't afford. Given the way this deck is stacked, citizens may as well just hand over "expensive" items the moment an officer approaches them. Why go through all the extra hassle if it's not going to change anything?

The police chief has responded to the backlash by blaming the media and the citizens for "rushing ahead" without knowing all the facts. This is a typical response, one that should be greeted with the obvious point that most of the facts came directly from from the police chief, i.e., the threat to "undress" people in public to rebuild "respect" for the "rule of law." Those facts are ugly and indisputable. And they're all attributable to Rotterdam Police Chief Frank Depauuw. He can't blame an extremely awful forfeiture program on all the people who won't be actively participating in it. The facts will continue to develop, but they're never going to reach the point where this program looks like anything but a gross misuse of power.

Filed Under: asset forfeiture, expensive clothing, law enforcement, netherlands

Judge Hands Back $92,000 Taken From Musician By Cops For Failing To Buckle His Seatbelt

from the more-of-this-please dept

Another awful story of civil asset forfeiture abuse comes to us via German Lopez at Vox. But at least this one has a happy ending. The beginning, however, is anything but happy. Musician Phil Parhamovich made the mistake of driving in Wyoming without his seatbelt buckled. A click-it ticket in Wyoming usually runs about $25. In Parhamovich's case, it cost him nearly $92,000.

Phil Parhamovich had been waiting for this moment for a long time. The 50-year-old had spent years restoring and selling houses, cars, and musical instruments, often clocking 12-hour workdays, to save up more than $91,000. And now it was all going to pay off: He would buy a music studio in Madison, Wisconsin, where Nirvana and the Smashing Pumpkins recorded songs — not just fulfilling a dream of owning a monument to grunge rock, but also giving him a space to work on his own career as a musician.

Then came the police stop this past March. By the time it was over, police in Wyoming would take all of Parhamovich’s money — the full $91,800. Parhamovich, who has no criminal record, was not accused of or charged with a serious crime; he only got a $25 ticket for improperly wearing his seat belt and a warning for “lane use.”

But Wyoming law enforcement officers found and eventually seized the $91,800 in cash, as it was hidden in a speaker cabinet — by getting Parhamovich, under what he claims was duress, to sign away his interest in the money through a waiver.

With all apologies to Parhamovich -- who got screwed by the civil asset forfeiture system -- Wyoming law enforcement couldn't have asked for a better mark to come passing through their state. Parhamovich disavowed ownership of the money and signed a waiver stating the same thing. That's a perfect storm of complicity.

But while we're still being fair, most Americans aren't aware law enforcement officers regularly engage in pretextual traffic stops for the sole purpose of warrantless searches and seizures. According to the musician, the cops made it sound like cash was just another form of illegal contraband.

At one point, the officer asked Parhamovich if he had a long list of items in his car — specific drugs, a weapon, a large amount of cash, and so on. With the way the question was phrased, Parhamovich said he was worried that answering “yes” would make things worse, since it could wrongfully imply he had illegal drugs in his car. He also became concerned, since he was questioned about cash and illegal drugs at the same time, that it was potentially against the law to carry so much cash at once. (It is not.)

Cops looking to directly profit from traffic stops rely on citizens being unfamiliar with local laws and their legal rights. (Perversely, they rely on not knowing the law when being sued for violating rights.) Hence the highway patrol tendency to pull over out-of-state drivers. The officer here went poaching. He even had a property waiver form written up and ready to go -- something that doesn't seem like it should be a part of day-to-day traffic law enforcement.

In the end, law enforcement took Parhamovich's $91,800 and wrote him a $25 ticket. Parhamovich -- with the assistance of the Institute for Justice took the state to court to get his money back. And Parhamovich has won, somewhat unexpectedly.

A Wyoming judge ordered the state Friday to return nearly $92,000 seized from a musician during a traffic stop that resulted in no criminal charges or even an arrest, according to the man’s attorney.

Attorney Dan Alban said Judge Peter Arnold ordered the state on Friday to return the full amount to Phil Parhamovich, an unexpected move in a case that began more than eight months ago. The First Judicial District Court in Wyoming confirmed the judge’s order.

The ruling hasn't been made available so it's unclear what the legal rationale for the release was -- other than possibly "this is bullshit." With a signed waiver and the disavowal of ownership, it should have been open and shut. Perhaps the state could find nothing to connect the money to illegal activity or screwed up somewhere procedurally. All that really matters to the victim of Wyoming's thieving cops is his money will be returned to him.

Filed Under: asset forfeiture, cash, civil asset forfeiture, phil parhamovich, wyoming

What Happens If The DOJ Ends Up With Martin Shkreli's Sole Copy Of The Wu Tang Clan Album?

from the questions-questions-questions dept

So, this story has been bouncing around the internet quite a bit today, but in case you somehow missed it, the Justice Department is seeking to get its hands on the only copy of the Wu Tang Clan album Once Upon a Time in Shaolin. In case you somehow missed this story, there are a few separate background pieces that are necessary to explain. First up, as a combination business model experiment/publicity stunt, back in 2014, Wu Tang Clan announced that it would be selling just a single copy of their latest album. It was an interesting attempt to bring some sort of scarcity back to music and see how the market would respond.

A year and a half later, a totally different story dominated the news. A story about a pharmaceutical company most people hadn't heard of, named Turing Pharmaceutical, buying up the rights to a drug called Daraprim, that many AIDS and cancer patients relied on... and jacking up the price on it from $13.50 per pill to $750 per pill. Soon after that, the young CEO of Turing, named Martin Shkreli, had his smirking face plastered all over the news for his trollish "I'm a villain, but so fucking what" response to all the hatred directed his way.

What does one story have to do with the other? Well, sometime after Martin Shkreli became everyone's favorite villain, it was revealed that he was the one who had purchased Once Upon a Time in Shaolin for $2 million. While Shkreli, at times, has hinted at releasing the music, or even reselling it, nothing much has come of it. At the very end of 2015, Shkreli was arrested -- not over jacking up drug prices, but for securities fraud.

Right after the arrest, Sarah Jeong wrote a fantastic article about how the arrest might lead to the album getting out. The 4th item on the list... asset forfeiture:

If Shkreli is convicted, the direct proceeds of his crimes will now belong to the government. This is what is known as criminal asset forfeiture. (The government has not sought civil asset forfeiture here, which is a slightly different form of seizure that does not require convicting a person of a crime.)

The United States has requested the forfeiture of "any property, real or personal, which constitutes or is derived from proceeds traceable" to the crimes in the indictment against Martin Shkreli. But when the US attorney said he did not know where the funds for the purchase of the Wu-Tang album came from, he was implying that the album would not be the subject of criminal asset forfeiture.

However, in our wild and improbable hypothetical, the album is implicated in the case and ends up being seized. If Shkreli is convicted, then the album might then become the subject of criminal forfeiture. The multi-million-dollar work of art would then end up on GSA Auctions, alongside dilapidated drug-running Chevrolets and extremely questionable lab equipment.

So... it's now two years later and that "wild and improbable hypothetical" has become fact. The government has filed for criminal forfeiture of Shkreli's assets. You may recall that he was convicted earlier this year and is in jail. As a quick side note: this is different than civil asset forfeiture -- the process we regularly complain about involving law enforcement taking money and assets from people without ever charging anyone for a crime. This is criminal asset forfeiture, after the person has been convicted of the crime, and where the government seeks to disgorge them of the profits from the criminal activity.

Here, the Justice Department notes that Shkreli owes them a lot of money. And it wants to get at his assets:

The Court should hold Shkreli financially accountable for his criminal conduct by requiring him to forfeit the amounts above, which total $7,360,450.00, and enter a forfeiture money judgment against him in that total amount. As set forth herein, this total amount represents a conservative computation of the proceeds Shkreli personally obtained as a result of his three different securities fraud crimes of conviction. Furthermore, pursuant to 21 U.S.C. § 853(p) and Fed. R. Crim. P. 32.2, the government seeks forfeiture of certain substitute assets of Shkreli in order to partially satisfy the forfeiture money judgment.

Got that last part? Basically, he should cough up this money, but if he can't we're going after his other assets... including:

Specifically, the following substitute assets owned by Shkreli have, to date, been identified and now that Shkreli has been convicted, the Court should direct that they be forfeited to the United States in partial satisfaction of his forfeiture money judgment: (a) $5 million in cash that is currently held in an E*Trade brokerage account ending in the digits “0258” as security for Shkreli’s bond, pursuant to orders of the Court dated January 7, 2016, August 24, 2016 and October 19, 2017; (b) Shkreli’s interest in and the monetary value of any and all shares held in an entity called Turing Pharmaceuticals; (c) the album “Once Upon a Time in Shaolin” by the Wu Tang Clan, as well as any proceeds derived from the sale of such album; (d) the album “The Carter V” by Lil Wayne, as well as any proceeds derived from the sale of such album; (e) an Enigma machine, as well as any proceeds derived from the sale of such machine; and (f) a Picasso painting, as well as any proceeds derived from the sale of such painting.

The other album listed, the Lil Wayne one, is another one that Shkreli claims he's the sole owner of. Except, of course, that one appears to have been a leak of some sort, and not through a Wu Tang style sale.

Of course, does this mean that once the US government gets it, the Wu Tang album can be released to the public? It would be a strange world if the US government were suddenly the record label for what would likely be a hugely popular album. But... that's unlikely to be how it works. Wu Tang Clan likely still holds the copyright (there was no indication that they also transferred the copyright with the album, though it's possible?). Jeong went through some of the scenarios in her post two years ago:

The weird thing is that it's not clear what happens to the contract that Shkreli signed when he bought the album. Presumably, the contract allowed him to transfer his limited distribution rights if he ever sold the physical record to another person. But what happens if the record gets seized by the federal government as part of a criminal forfeiture?

Let's say the government seizes the record, sells it on GSA Auctions, and then I buy it and upload the whole thing onto the internet. If Shkreli had uploaded the whole album for free, Wu-Tang couldn't sue him—as per the terms of the contract. But if I do it, there's no contract preventing Wu-Tang from suing me, even though I'm now the rightful owner of the One True New Wu-Tang Album.

That is, unless the government manages to successfully seize Shkreli's intellectual property rights in the Wu-Tang album.

Seizing the actual rights to the album would certainly be an odd move, but not unprecedented. In May, the federal government tried to seize the trademarks of the Mongol Nations motorcycle club after securing criminal convictions against many of its members, and then bringing a RICO indictment against the club itself. They ultimately failed—but not because trademark seizure isn't possible.

Still, the Mongol Nations forfeiture was likely targeted at suppressing future use of the trademark, rather than setting up a government-owned Mongol Nations swag shop. "I don't think the FBI will start a Wu-Tang imprint," said Parker Higgins, copyright activist at the Electronic Frontier Foundation.

And, of course, don't expect to FOIA it away from the government either. Attempts to get other copyright-covered works via FOIA haven't worked out so well.

Still, prying it out of Shkreli's hands, at least increases the possibility that wherever else it ends up may be more likely to figure out a way to get it out into the world...

Filed Under: asset forfeiture, copyright, criminal asset forfeiture, distribution, doj, martin shkreli, once upon a time in shaolin, wu tang clan

NYPD Tells Judge Its $25 Million Forfeiture Database Has No Backup

from the overpriced-by-at-least-$25-million dept

The NYPD is actively opposed to transparency. It does all it can to thwart outsiders from accessing any info about the department's inner workings. This has led to numerous lawsuits from public records requesters. It has also led to a long-running lawsuit featuring the Bronx Defenders, which has been trying to gain access to civil forfeiture documents for years.

The NYPD has repeatedly claimed it simply cannot provide the records the Bronx Defenders (as well as other records requesters) have requested. Not because it doesn't want to, even though it surely doesn't. But because it can't.

The department has spent $25 million on a forfeiture tracking system that can't even do the one thing it's supposed to do: track forfeitures. The Property and Evidence Tracking System (PETS) is apparently so complex and so badly constructed, the NYPD can't compile the records being sought.

Oddly enough, the Bronx Defenders has pieced together enough data from the NYPD's broken PETS (along with other public records) to at least point out the glaring discrepancy between what the department publicly claims it has in its forfeiture accounts and what the database says it does.

At the hearing, the NYPD claimed that it only legally forfeited $11,653 in currency last year — that is, gone to court and actually made a case as to why the NYPD should be taking this money.

[...]

In the accounting summaries which the Bronx Defenders submitted as part of its testimony, the NYPD reports that as of December 2013, its property clerk had almost $69 million in seized cash on hand. This amount had been carried over from previous years, showing an annual accumulation of seized cash that has reached an enormous amount. The documents also show that each month, the five property clerk’s offices across the city took in tens of thousands of dollars in cash, ultimately generating over $6 million in revenue for the department.

When pressed in court, NYPD experts claim the NYPD lacks the expertise to extract the sought data from its forfeiture database. These assertions are at odds with the NYPD's self-perception: that it is fastest and smartest law enforcement agency in the US (better than the FBI, in fact) and foreign governments should be grateful its officers and analysts are showing up uninvited at scenes of overseas terrorist attacks.

Somehow, these highly-trained officers are unable to extract data from a $25 million database. Maybe it's not the lack of talent. Maybe it's the lack of desire. Maybe the NYPD has zero interest in tracking this data because it doesn't want the public to see how much it has hoovered up or make it any easier for citizens to challenge forfeitures.

The lawsuit continues, with the NYPD continuing to top itself with each round of expert testimony. As Adam Klasfield reports for Courthouse News, the NYPD's $25 million database is worth even less than previously assumed.

New York City is one power surge away from losing all of the data police have on millions of dollars in unclaimed forfeitures, a city attorney admitted to a flabbergasted judge on Tuesday.

“That’s insane,” Manhattan Supreme Court Judge Arlene Bluth said repeatedly from the bench.

It is insane. There's no way around it. The assumption would be that a $25 million database has built-in redundancy. But of course it wouldn't. Not with the NYPD running it and not with its active disinterest in providing records to records requesters or having any accountability present in its forfeiture system.

And why should the NYPD fix it? From its perspective, this is fine. Data goes in and never comes out. If it all disappears because someone trips over the power cord, the NYPD suffers no negative consequences. Everything it has taken over the years defaults to the NYPD until proven otherwise by claimants. And that's going to be a lot tougher to do when the NYPD has no records related to the forfeiture.

The court is in no position to do anything about this. It can't order the NYPD to fix its system. All it can do is demand it comply with records requests and pay the legal fees of prevailing parties. But the NYPD can continue to run a useless system for the rest of whatever. The burden of proof in forfeiture cases is already shifted to claimants. A broken system places even more of a burden on those seeking return of their property, thanks to PETS being unable to confirm or deny existence of responsive records. It's GlomarDb and it makes a mockery of public records laws and due process simultaneously.

Filed Under: asset forfeiture, database, foia, nypd, transparency

Use A Landline To Talk About Criminal Activity? The Government Can Seize The House Around It

from the extreme-home-takeover dept

The Intercept has obtained a leaked asset forfeiture guide for seizures performed by ICE. (It has, unfortunately, chosen not to share the original document. Then again, the last non-Snowden leak it published appears to have helped out the document's source.)

For those familiar with the process of civil asset forfeiture, the contents of the guide are mostly unsurprising. Despite the document dating back to 2010, ICE did confirm the version seen by The Intercept is its most recent guidance. ICE is allowed to seize property without bringing charges or securing convictions -- something still permitted by federal law (your state laws may vary) and greatly encouraged by the new head of the DOJ, Jeff Sessions.

What is surprising about the document is how much emphasis is placed on the seizure of real estate. As Ryan Devereaux and Spencer Woodman point out, ICE's forfeiture teams are pretty much property flippers, albeit ones working with the undeniable advantage of making zero initial investment.

Much of the handbook is devoted to describing the process of seizing real estate — homes, farms, and businesses — and it is in these pages that the dual priorities of financial gain and law enforcement objectives become most apparent. While the handbook contains little discussion on how to utilize asset forfeiture to maximize crime-fighting outcomes, there is extensive discussion of how agents should painstakingly determine whether a property is valuable enough to make seizure worthwhile

[...]

More than a dozen pages of the document describe an important — if perhaps surprising — role of AIRG agents: as real estate appraisers. Using the example of “houses used to store narcotics or harbor illegal aliens,” the manual walks agents through a comprehensive process of assessing homes and landed properties to determine the financial appeal to ICE of acquiring such real estate.

If ICE can obtain a warrant to search the property it plans to seize, it will usually send a private real estate appraiser along during the search. AIRG [Asset Identification and Removal Group] agents apparently ballpark property values using public databases -- something that tells ICE whether or not it should move forward with the forfeiture.

As is the case in most civil forfeiture operations, the connecting tissue of criminal activity doesn't need to be much more than gossamer-thin.

The manual instructs agents seeking to seize a property to work with confidential informants, scour tax records, and even obtain an interception warrant to determine whether “a telephone located on the property was used to plan or discuss criminal activity” in order to justify seizing the property.

You would think the phone would be the "guilty" property -- at least as far as you can follow forfeiture's twisted logic. Apparently not. According to ICE's guidance, the entire house around the landline is equally culpable.

The handbook also points out civil forfeiture is preferable to criminal forfeiture, thanks to its general disdain for due process. The key factor is the conviction itself -- something you'd think a law enforcement agency would value over seized property. In criminal proceedings, seized property is generally returned if the charges don't stick. Not so with civil forfeiture. ICE's guidance says when in doubt, go civil. That way the agency may still keep something, even if the alleged perp goes free.

ICE is by far the biggest contributor to the DHS's total forfeiture take. This can be expected to grow with the new administration's intense focus on illegal immigration. As with any government program experiencing sudden growth, one can expect an exponential leap in abuse.

Filed Under: asset forfeiture, civil asset forfeiture, guidelines, ice, legalized theft, rules

Court Tells DEA To Stop Pushing Burden Of Proof Back On Claimants In Forfeiture Case

from the procedures-matter dept

The government has lost its claim to money lifted from two men by the DEA at the Cleveland airport. Despite agents being super-sure the money was either drug profits or intended for drug purchases, no charges were brought. But the DEA decided to keep the money -- $31,000 from one and $10,000 from the other -- for itself.

The Sixth Circuit Court of Appeals says not so fast. The decision [PDF] lets the government know it's jumping the gun on claiming sole ownership of this lifted cash. The opinion starts out with a brief description of how the cash-focused Drug Enforcement Agency starts each airport workday.

The parties dispute most of the facts underlying this action. We begin where they find common agreement, drawing these details from the pleadings. On February 24, 2016, Taiwan Wiggins and Dalante Allison (together, "claimants") were each at the Cleveland Hopkins International Airport for a flight to Orange County, California. The Drug Enforcement Administration (DEA) was aware of the claimants' itineraries and that each had previous felony drug convictions. The DEA observed them at the airport engaging in conversation before they walked together toward the security checkpoint.

As we've discussed before, the DEA takes great interest in certain travelers -- even going so far as to ask TSA agents to be on the lookout for cash during bag inspections and X-ray screenings. Here, the DEA appeared to hit the jackpot (in more ways than one): traveler with previous convictions and tickets to California. As the multiple law enforcement officers have sworn in multiple court statements, the only reason anyone travels to California is to buy drugs. (Conversely, the only reason to leave California is to go sell the drugs they just purchased.)

The DEA took the cash from the two men, ran a dog past it, and announced the dog said the DEA could keep the money. The government then filed for forfeiture under the theory the money was drug-related. Both men submitted affidavits stating the money was theirs and was seized illegally.

The court took the affidavits and set a date for discovery to see if the men could stake a legal claim to the seized cash; i.e. prove it was legally obtained. The DEA decided to do things out of order. It moved to strike the men's claims. The district court agreed, finding the men had made nothing but "naked assertions of ownership" -- far below the evidentiary standard needed to reclaim the seized cash.

Open-and-shut… or so the DEA thought. The men appealed and the Appeals Court finds the lower court also skipped a step when arriving at its conclusion. As it states during its long discussion of forfeiture proceedings, the lower court shifted the burden of proof to the wrong party at this early stage.

Rule G(5) requires claimants to do no more than identify themselves and state their interest in the property subject to forfeiture. The government, on the contrary, wants claimants to provide additional detail, a position that it attempts to justify as a means to ward off false claims and to give it a starting point to draft its special interrogatories pursuant to Rule G(6). Nowhere in the text of Rule G do we see any support for this approach, and our case law demonstrates why it is not necessary. First, the would-be claimant must demonstrate Article III standing, which, at the pleading stage, necessarily requires that the claimant allege the facts necessary to satisfy Lujan’s “irreducible constitutional minimum of standing.” See Lujan, 504 U.S. at 560. Second, a claimant’s ability to proceed under Rule G, which we have called “statutory standing,” is satisfied through mere compliance with the rule, see Real Props. & Premises, 521 F. App’x at 384, and we see no persuasive reason to import a heightened pleading standard that has no basis in the text. And third, we have held that Rule G’s verification requirement is a built-in preventative measure that limits the danger of false claims. One Men’s Rolex Pearl Master Watch, 357 F. App’x at 627.

As the appeals court points out, the government wants too much too soon, and when it doesn't get it, it wants to take the money and run. But so far, all the court has to work with are competing allegations about the legality of the cash, and the government doesn't get to pretend its claim has more value.

Here, where the government alleged that it took a bundle of cash from a claimant’s suitcase, and each claimant stated that he owned the cash, there is a clear allegation of ownership that satisfies Article III. And the claimant’s making of such a statement is what satisfies Rule G’s statutory standing requirement. Therefore, at least at this stage in the litigation, there was no basis on which the district court could strike the claim.

There is no sympathy for the DEA in the Sixth Circuit:

The government sings a sirens’ song about the value of high pleading standards and the benefits it will receive from forcing claimants to support their claims from the outset of a forfeiture proceeding. But all of the government’s arguments rest on flawed assumptions about the procedural rules governing in rem forfeiture cases.

And if the government doesn't like it, it's welcome to take it up with… the government.

If Congress wishes to add an additional layer of protection to the statutory requirements by having claimants state their interest with specificity, it may. But a panel of our court is not the proper body to do so.

To close things out, the court points out in detail the wrongness of the government's position. The government's assertions suggest inverting what little there is of due process in forfeiture proceedings.

Finally, we note our concern that the government's approach would turn the burden of proof in forfeiture actions on its head. Under the Civil Asset Forfeiture Reform Act of 2000 (CAFRA), the government bears the burden of proving by a preponderance of evidence that the subject of a civil forfeiture action is, in fact, forfeitable. Requiring a forfeiture claimant to explain the nature of his ownership at the pleading stage would be asking the claimant to satisfy the government's burden of proof, or at least go a long way toward doing so.

Back the case goes to the lower court with all the correct steps -- and a modicum of due process -- revived. The government may still be able to retain possession of the seized cash, but it needs to provide at least some evidence it wasn't legally obtained first.

Filed Under: 6th circuit, asset forfeiture, burden of proof, dea, forfeiture

Federal Judge Says Indiana's Vehicle Forfeiture Laws Are Unconstitutional

from the state-cops-earn-a-federal-permaban dept

More good news on the forfeiture front: Nick Sibilla of forfeiture watchdogs Institute for Justice reports a federal judge has declared one of Indiana's civil asset forfeiture laws unconstitutional.

In a major win for private property rights, a federal judge ruled that Indiana can no longer seize vehicles under its controversial civil forfeiture laws, which allow police to confiscate property without filing criminal charges. Judge Jane Magnus-Stinson ruled that Indiana's laws were unconstitutional because they failed to provide a timely hearing for the property owner to contest the seizure.

The case springs from an arrest and seizure made last September when the plaintiff was pulled over by Indianapolis law enforcement. Finding a small amount of marijuana on the driver, the Indy PD felt justified in claiming his entire vehicle as its own. Not content to be screwed out of a car for his personal use stash, Leroy Washington enlisted the help of defense lawyer Jeff Cardella. They filed a class action lawsuit challenging the state's forfeiture law on behalf of the hundreds of drivers whose cars have ended up in the possession of Indiana law enforcement -- all without being convicted of any criminal activity.

Seizing cars is something Indiana law enforcement does frequently. According to the stats quoted by the judge, the state seizes around 11 cars a week. Once the vehicles are in the law enforcement's possession, drivers are forbidden from seeking to regain their property until the state says it's OK to do so. And it's generally in no hurry to do so. It can hold the vehicle for six months before starting forfeiture proceedings, forcing car owners to find other transportation while their vehicles sit in impound lots.

As the judge notes in the decision [PDF], this law -- which locks car owners out of the loop for months -- poses significant problems for people who haven't been convicted of criminal activity.

Following a seizure, the government may hold a vehicle without taking any action for 180 days, or for 90 days after receiving written notice from the owner demanding the vehicle's return. Ind. Code § 34-24-1-3. During this timeframe, the owner of the property has no ability to challenge the seizure, because replevin is prohibited by the statute. Ind. Code § 34- 24-1-2(c) (“Property that is seized under subsection (a) … is not subject to replevin but is considered to be in the custody of the law enforcement agency making the seizure.”).

Therefore, three to six months may elapse, during which time the owner is deprived of the use of his vehicle, and the government is not required to take any action whatsoever regarding the seized property. It is particularly problematic that the statute specifically bars replevin. Absent another statutorily created mechanism to challenge the deprivation, replevin would provide a vehicle owner’s only recourse. But that avenue has been specifically foreclosed by the statute. During those months, if the owner has secured financing to purchase the vehicle, he is still required to make payments on that loan, lest he risk foreclosure and repossession. He is also required, of course, to make other arrangements for his transportation needs, which may include fundamental life activities such as transit to a job or school, visits to health care professionals, and caretaking for children or other family members. It is evident to this Court that a three- to six-month deprivation is a lengthy one, and could cause significant hardship to the individual whose vehicle is seized.

[...]

Second, unlike some states’ statutes, Indiana’s forfeiture provisions do not allow for interim relief during the pendency of proceedings. Such interim relief could include returning the seized vehicle subject to the posting of a surety bond or other adequate security. [...] The absence of an opportunity for interim relief particularly burdens individuals who lack the financial resources to secure another vehicle during the pendency of proceedings, or who are unable to access reliable public transportation.

As the court concludes, this process -- enabled by state law -- makes a mockery of Constitutional rights.

[I]ndiana Code Section 34-24-1-1(a)(1), as read in conjunction with the statutory provisions of the same chapter, violates the Due Process Clause of the Fifth and Fourteenth Amendments. The Court therefore permanently enjoins Defendants from enforcing that statutory provision.

This is exactly the conclusion Indiana's law enforcement didn't want the court to reach. In hopes of heading off the lawsuit (and this precedent), the state argued the return of Washington's vehicle rendered the case moot. The court doesn't care for this dodge, and points out it's exactly the sort of move anticipated both by Washington's earlier briefs and the court itself:

The Court concludes (as it did in its order denying Defendants’ Motion to Dismiss) that Washington has established that the inherently transitory doctrine applies here. First, it is uncertain that a claim will remain live for any individual who could be named as a plaintiff long enough for a court to certify the class. The statute itself limits the pre-forfeiture period to 180 days. As the procedural history of this case illustrates, despite a district court’s best efforts to provide prompt resolution to all pending matters, the realities of a district court’s docket and case load (along with the possibility that the parties may need additional time to conduct discovery related to class certification) may result in motions to certify being unresolved for longer than 180 days. In this case, Washington’s Motion to Certify a Class was filed on November 2, 2016—more than 180 days before the issuance of an order resolving it. [Filing No. 3.] And, as the State retains discretion to return the seized property to its owner at any time, it could attempt to moot any named plaintiff’s claim by simply returning the property after the plaintiff files a motion to certify.

It further points out mooting Washington wouldn't moot the class action, which includes everyone similarly situated -- both now and in the future.

Second, there will be a constant class of persons suffering the deprivation complained of in the Complaint. Defendants have not indicated any intention to cease enforcement of the statute, and Defendants do not dispute that at least 169 vehicles have been seized for forfeiture between November 2, 2016 and February 13, 2017.

The end result is a federal injunction preventing Indiana law enforcement from seizing vehicles without better recovery routes available for car owners. Since the adjoining clause walking all over the Constitution hasn't been rewritten yet, this pretty much means the end of vehicle seizures until that's addressed by the legislature. Considering state lawmakers were already considering forfeiture reforms, this might mark the permanent end of taking cars away from people without obtaining corresponding convictions.

Filed Under: asset forfeiture, civil asset forfeiture, forfeiture, indiana, legalized theft

House Passes Amendment Rolling Back Jeff Sessions' Civil Asset Forfeiture Expansion

from the LOAD-LAST-SAVE? dept

Trump's pick for attorney general unsurprisingly holds the same ideals as his boss. He also holds the same misconceptions and misplaced nostalgia for tough-on-crime policing that went out of vogue as soon as it became apparent it wasn't doing anything but filling up prisons.

Attorney General Jeff Sessions has been going hot and heavy on a 1980s-esque law enforcement policy revival. He booted the DOJ off the civil rights beat, telling states and cities to solve their own police misconduct problems -- something they were clearly unwilling to do on their own, hence the DOJ's intercession. He told cops they're getting back their access to war gear, rolling back the Obama administration's minimal 1033 program reforms.

He's been touting tougher policing and tougher sentencing, using a false narrative of a country under siege by drug dealers and criminal border-jumpers. In a time of historic lows -- both in violent criminal activity and violence towards police officers -- AG Sessions is acting like a street corner preacher, promising an impending apocalypse to anyone who will listen.

Sessions is also peeling away federal reforms to asset forfeiture. He's opened the federal safety valve for civil forfeitures, allowing local PDs to dodge state laws limiting the amount of property they can take from uncharged citizens.

Given the makeup of Congress, one would assume Sessions' ongoing effort to raise US law enforcement to "a law unto itself" level would ride on rails, at least up until midterm elections. Instead, Sessions is facing a literal House divided -- not against itself exactly -- but against him.

In a stunning move, the House of Representatives on Tuesday approved an amendment to the Make America Secure and Prosperous Appropriations Act that will roll back Attorney General Jeff Sessions’s expansion of asset forfeiture.

Amendment number 126 was sponsored by a bipartisan group of nine members, led by Michigan Republican Rep. Justin Amash. He was joined by Democratic Reps. Ro Khanna of California; Washington state’s Pramila Jayapal, a rising progressive star; and Hawaii’s Tulsi Gabbard.

If this passes the Senate untouched, the amendment will roll things back to 2015 -- once again prohibiting federal adoption of local forfeitures. It would make state and local agencies play by the rules set for them by their legislatures, rather than allow them to bypass protections put in place to discourage abuse of programs loaded with the most perverted of incentives.

Filed Under: asset forfeiture, civil asset forfeiture, congress, house, jeff sessions

Saying Someone Might Do Something Illegal With Cash Isn't Enough For Gov't To Seize It, Court Rules

from the by-any-means-unnecessary dept

The government loves taking people's money. It likes it so much it gets pretty weird about it. Even considering all we've covered here on the subject of forfeiture, the legal theory deployed by the government in this case is astounding. From the Ninth Circuit Court of Appeals decision [PDF]:

The panel reversed the district court's judgment of civil forfeiture of $11,500 under 21 U.S.C. § 881(a)(6) from claimant Charles Guerrero, and remanded for a new trial.

When Guerrero, through a friend, tried to post the $11,500 as bail for his wife, the government seized the cash. At trial, the government alleged two theories: that the money was proceeds from the claimant's drug deals, and that the claimant used or intended to use the money to facilitate drug transactions.

Charles Guerrero and his wife were no angels. But neither were they high-level drug dealers. Both apparently had crippling heroin addictions and engaged in a small amount of dealing to ensure the incoming flow of heroin.

But that's not enough to excuse the government nabbing bail money under the theory it probably came from drug dealing or -- more spuriously -- that it might have been used to purchase drugs if it hadn't been spent on bail.

Guerrero had his friend take the cash to pay the bail because Guerrero had no valid ID. Guerrero claims he had about $14,000 in cash in his home obtained from insurance settlements and the sale of a vehicle. The government made its own claims, based on the discovery of drugs in the vehicle Guerrero was sitting in, along with a dog that said, "Yes. That is drug money."

While Charles waited outside, Wood went to the MCDC’s bail window and told an officer he was there to post the cash to free Rosalie. Jail officials ran Wood’s records and discovered that he had a criminal history. Coupled with the fact that Wood was attempting to bail out a repeat drug offender with a wad of cash, this prompted jail officials to call Agent Guy Gino of the federal Department of Homeland Security. Agent Gino went to the MCDC, asked Wood a few questions regarding the origin of the $11,500, and requested permission to have a drug sniffing dog smell the currency. Wood agreed.

The dog (Nikko) alerted to a drug odor on the money. Agent Gino asked Wood if Nikko could sniff his car. Again, Wood agreed. On the way to the car, the group encountered Charles, who was waiting for Woods to come out of the jail. Charles objected to law enforcement searching the car but Wood nonetheless permitted Nikko to do so. Nikko alerted to a black bag in the vehicle—which, the officers later discovered, belonged to Charles—containing 3.6 grams of heroin. Officers also found an additional $2,971 in cash on Charles. Agent Gino arrested Charles and seized the drugs, the $2,971 found on Charles, and the $11,500 Wood had tried to post as bail.

The government seized it all. Guerrero challenged the seizure. The jury at the lower level let the government keep it. Guerrero appealed and the Ninth Circuit Court reversed on the issue of the $11,500. On remand, the government restated its assertions about the $11,500, claiming the Guerrero's had no proof the money had been obtained legally. Failing that, the government claimed the money -- even if obtained legitimately -- would only be used to purchase more controlled substances. Heads, I win. Tails, you lose. But not this time.

The Appeals Court will send this case back to the lower court a second time. As it noted during its first pass, there were genuine questions about the origin/destination of the $11,500, but it needed far more than the government's speculative assertions to make this call. Unfortunately, the lower court dismissed Guerrero's argument that the jury's split verdict allowed the government to punish him for thinking, rather than for what he actually did. The district court basically gave the government an unearned win, stating the money's origin was clean but its intended use wasn't.

This makes a mockery of due process, even more so than civil forfeiture already does. If someone socks away some cash intending to purchase drugs at some point, but then attempts to pay bills with it instead, the government could theoretically seize the cash before the bills are paid based on the person's arrest history, apparent drug dependency, etc. Given free reign, no one's money is safe, least of all those with criminal pasts.

Unsurprisingly, the court finds this theory of future "guilt" a violation the Eighth Amendment. Americans are supposed to be free of cruel and unusual punishments. Taking money from people because they might use it to commit a legal act in the future is cruel and unusual, especially when no actions have been taken indicating the cash is headed for an illegal destination. As the concurring opinion points out, the $11,500 was in process of being handed over to pay bail, making any illegal future use of that $11,500 impossible.

The court points out the law simply cannot be read the way government would like it to be. To do so would make any amount of cash seizable from anyone, simply because cash and the possibility for bad things to be done with it are both things that will always exist.

On its face... § 881(a)(6) contains no limiting principle and appears to apply whenever anyone, at any point in time, so much as thinks about using money to purchase drugs. One need not look any further than this case to realize how far the literal language of § 881(a)(6) could reach. The only evidence from which the jury could have concluded that the Guerreros intended to use the $11,500 for drugs shows that the couple were heavy heroin addicts who bought and sold drugs regularly. The government offered no specifics. Although it should surprise no one that an addict might think of spending whatever money he has to sustain his addiction, the Guerreros, so far as the evidence indicates, did not act on any such thoughts with respect to the $11,500. 4 In fact, at the time Agent Gino seized their money, the Guerreros had entrusted it to Virgil Wood, who was standing at a bail window in the MCDC asking to bail out Rosalie. Was there some possibility that, prior to Wood walking in the MCDC, the Guerreros intended to use the money for drug transactions? Of course. And is there a likelihood that if the Guerreros got the bail money back they would have used some part of it in the future for drugs? Again, it seems reasonable to answer “of course.” Does § 881(a)(6) reach either back in time to unrealized intentions or forward in time to speculative, inchoate plans? We think not.

Because the government's assertions came before the jury instructions, the forfeiture is being overturned on a procedural issue, rather than the governing statute being innately unconstitutional. The government will get a third chance to take $11,500 from the Guerreros, unfortunately. But it won't be able to argue quite as vehemently that a drug user's cash will only be spent on drugs.

Filed Under: 9th circuit, asset forfeiture, asset seizure, cash, charles guerrero, civil asset forfeiture