Bernie Madoff and the Case for Civil Asset Forfeiture
We’re returning $3.9 billion to victims of his Ponzi scheme.
By Rod J. Rosenstein
Thanks to civil asset forfeiture, the Department of Justice is announcing today the record-setting distribution of restitution to victims of Bernard Madoff’s notorious investment fraud scheme. We have recovered $3.9 billion from third parties—not Mr. Madoff—and are now returning that money to more than 35,000 victims. This is the largest restoration of forfeited property in history. Civil forfeiture has allowed the government to seize those illicit proceeds and return them to Mr. Madoff’s victims.
Why use civil forfeiture instead of prosecution? Not everyone who possesses illegal proceeds can or should be criminally prosecuted. Many criminals transfer ill-gotten gains to relatives or friends, and others use couriers to transport cash. In such cases, civil forfeiture enables the government to recover property when prosecuting the person caught holding it may not be appropriate or feasible.
When the government can establish by a preponderance of the evidence—the same standard that applies to all civil disputes about property—that the assets were obtained through criminal activity, then they may be forfeited.
Asset forfeiture deters illegal activity by depriving criminals of the financial benefits of their wrongdoing. Perhaps more important, the process allows law enforcement to return proceeds to victims. Since 2000, forfeiture has allowed the Justice Department to return more than $4.4 billion of assets to victims. Almost half that was recovered through civil forfeiture, the remainder through criminal forfeiture.
Civil forfeiture is used in a wide range of cases, not just in conjunction with large fraud prosecutions like Mr. Madoff’s. In a recent case, three brothers allegedly stole $110 million from Medicare and then fled to Cuba. They cannot be prosecuted unless they return. But the government used civil asset forfeiture to recover millions of dollars of property they had purchased with the criminal proceeds, which can now be returned to taxpayers.
When no specific victim is identified, the proceeds can be used to fight crime. We recently used civil asset forfeiture to recover more than $48 million from the operators of the Silk Road website, which criminals had used to distribute fentanyl and other deadly drugs. Those funds will go toward efforts to combat crime. In certain circumstances the Justice Department is authorized to transfer forfeited proceeds to local police forces. Money that otherwise would fund more crime is instead used to protect communities.
Some critics claim that civil asset forfeiture fails to protect property rights or provide due process. The truth is that there are multiple levels of judicial protection, as well as administrative safeguards.
First, money or property cannot be seized without a lawful reason. The evidence must be sufficient to establish probable cause to believe a crime was committed. That is the same standard needed to justify an arrest.
Second, if anyone claims ownership of the property, it may be forfeited only if the government presents enough evidence in court to establish by a preponderance of the evidence it was the proceeds of crime, or was used to commit a crime.
Courts apply the “beyond a reasonable doubt” standard only in criminal cases. That high threshold of proof is appropriate when the stakes involve a person’s criminal record and potential imprisonment. But all other lawsuits, no matter how much money is at issue, use the normal civil standard. There is no logical reason to demand the elevated criminal standard in a lawsuit about illicit proceeds.
A third level of judicial protection is that even after the government proves the property is subject to forfeiture, a claimant can get it back by showing that he is an “innocent owner” who did not know about the criminal activity.
About 80% of the time, nobody even tries to claim the seized assets. Most cases are indisputable. When the police find $100,000 in shrink-wrapped $20 bills hidden in a suitcase, usually there is no innocent explanation. In the majority of cases, seized cash is drug money. If police were to return criminal proceeds to a drug courier, criminals could invest in more drugs and create more death and destruction. Civil asset forfeiture saves lives.
To be sure, law-enforcement officers sometimes make mistakes. Accordingly, this summer the Justice Department announced new protections for adoptive seizures, which occur when a federal agency forfeits property originally seized by a state or local authority.
The changes include moving twice as quickly as required by law—within 45 days instead of the mandated 90—to provide notice and opportunity for property owners to challenge seizures. State and local law enforcement will also be provided additional training on the ethics and legal requirements of forfeiture. In addition, attorneys at the federal agencies adopting the seizures must now review each one for compliance with the law. Seizures without a warrant get special scrutiny, just like arrests without a warrant.
As an additional safeguard, Attorney General Jeff Sessions announced last month that the Justice Department will appoint a director of asset forfeiture accountability, who will monitor forfeitures and ensure appropriate protection for property rights.
Civil asset forfeiture is a powerful tool to make victims whole and prevent crime. The Department of Justice will work with local, state and federal law enforcement agencies to use it responsibly. That will allow us to save lives and reimburse victims, while protecting the rights of innocent property owners.
Mr. Rosenstein is U.S. deputy attorney general.
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