cmr cAUSE

ACTION
-

Advocates for Government Accountability

A 501(c)(3) Nonprofit Corporation

January 29, 2015

VIA CERTIFIED MAIL

Michael E. Horowitz, Esq.
Inspector General
U.S. Department of Justice
Office of the Inspector General
950 Pennsylvania Avenue, N.W.,
Suite 4706
Washington, D.C. 20530-0001

Re:

Request for Audit or Review

Dear Inspector General Horowitz:

Cause of Action is a nonprofit, nonpartisan government oversight group that protects
economic liberty by promoting executive branch transparency. We write to request that the
Office oflnspector General ("OIG") initiate an audit or review of the Department of Justice's
("DOJ") forfeiture programs.

Introduction
As you are well aware, on January 16, 2015, Attorney General Eric Holder issued an
order titled "Prohibition on Certain Federal Adoptions of Seizures by State and Local Law
Enforcement Agencies," (the "Order") prohibiting federal agencies from taking property seized
by state or local law enforcement under state law (except for property that directly relates to
public safety concerns, including firearms, ammunition, explosives and property associated with
child pornography) and then forfeiting it under federal law using a practice known as
"adoption." 1 State and local authorities can retain up to 80 percent of the proceeds stemming
from such adoptions. 2 Also, state and local law enforcement agencies that participate in joint
investigations with DOJ's law enforcement agencies can receive a portion of the proceeds of
1
Press Release, U.S. Dep't of Justice, Office of Pub. Affairs, Attorney General Prohibits Federal Agency Adoptions
ofAssets Seized by State and Local Law Enforcement Agencies Except Where Need to Protect Public Safety, (Jan.
16, 2015), available at http://www.justice.gov/opa/pr/attomey-general-prohibits-federal-agency-adoptions-assetsseized-state-and-local-law (the "Press Release"). The Order's prohibition on federal agency adoption includes, but is
not limited to, seizures by state or local law enforcement of vehicles, valuables, cash and other monetary
instruments.
2
See U.S. Dep't of Justice, Criminal Div., Asset Forfeiture and Money Laundering Section, Guide to Equitable
Sharing for State and Local Law Enforcement Agencies (2009), available at
http://www.justice.gov/usao/ri/projects/esguidelines.pdf (the "Guides").

~'Wi,CauseOfAction :

1919 Pennsylvania Ave, NW

Suite 650
Washington, DC 20006

Mr. Michael E. Horowitz

January 29, 2015
Page 2
forfeited assets resulting from these investigations in the form of cash or property through DOJ's
"equitable sharing" program. 3
The Order has been praised as a "major reform" of federal asset forfeiture policy. 4 The
Washington Post described it as "the most sweeping check on police power to confiscate
personal property since the seizures began three decades ago as part of the war on drugs. " 5 Even
the Attorney General's critics have hailed the order, with Senator Charles E. Grassley (R-IA)
stating, "[w]e're going to have a fairer justice system because of it[.]" 6
While the Order purports to safeguard civil liberties by ending federal adoption, it
actually does not have a significant impact on the government's overall use of asset forfeitures. 7
In the analysis that follows, we show that the majority of asset forfeitures involve administrative
forfeitures, which the Order does not restrict. Therefore, if the DOJ in fact believes that
inappropriate asset forfeitures pose systemic risks to our civil liberties, then your office should
immediately audit or review the entire Asset Forfeiture Program.

Discussion
A. The Order fails to address the majority of federal seizures, which occur
administratively and not through civil or criminal forfeiture.
DOJ's authority to conduct asset forfeitures is generally derived from 18 U.S.C. 981
(civil forfeiture), 18 U.S.C. 982 (criminal forfeiture), and 19 U.S.C. 1607 (administrative
forfeiture). 8 Civil forfeitures result when the government files a court action against property (in
rem). Criminal forfeitures result from the criminal prosecution of a person (in personam). The
government must "indict" the property used or derived from a crime and if the jury finds the
property forfeitable, then the court issues an order of forfeiture. 9 However, "administrative
forfeitures," an in rem action through which the government takes property without judicial
involvement, 10 are used most often. 11
3

21 U.S.C. 881(e)(l)(A) and (e)(3), and 18 U.S.C. 981(e)(2) each authorize the Attorney General to share
federally forfeited property with participating state and local law enforcement agencies.
4 Charlotte Alter, Feds Limit Law that Lets Cops Seize Your Stuff, TIME (Jan. 16, 2015), available at
http://time.com/3 672140/civil-forfeiture-assets-ho Ider/.
5 Robert O' Harrow Jr., Sari Horwitz, & Steven Rich, Holder Limits Seized-Asset Sharing Process That Split
Billions with Local, State Police, WASH. POST (Jan. 16, 2015), available at
http://www.washingtonpost.com/investigations/ho lder-ends-seized-asset-sharing-process-that-sp lit-bi! lions-withlocal-state-police/2015/01/16/0e7ca058-99d4-11 e4-bcfb-059ec7a93ddc_story.html
6 Id.
7
See, e.g. Radley Balko, How much civil asset fo1feiture will Holder's new policy actually prevent? WASH. POST
(Jan. 20, 2015), available athttp://www.washingtonpost.com/news/the-watch/wp/2015/01/20/how-much-civil-assetforfeiture-will-holders-new-policy-actually-prevent/.
8 U.S. Dep't of Justice, Types of Federal Forfeiture, (December 2014), available at
http://www.justice.gov/jmd/afp/07federalforfeiture/
9
Id.
10 Id.
11
See infra note 21.

Mr. Michael E. Horowitz

January 29, 2015
Page 3
Through administrative forfeiture, and without judicial involvement, 12 the government
may seize monetary instruments; "conveyances" used to import, transport or store a controlled
substance; and other property with a value of up to $500,000. 13
Maximum Administrative Forfeiture Thresholds

Monetary Instruments

(e.g., cash, checks, stocks, bonds)

Unlimited Value

Hauling Conveyances

(e.g., vehicles, vessels, and aircraft

used to transport illegal drugs)

Unlimited Value

Other Property

(e.g., bank accounts, jewelry, etc.)

$500,000 or less

As noted, the law concerning administrative forfeitures is in stark contrast to the law governing
civil or criminal forfeitures, which, respectively, require either a civil complaint or criminal
indictment, both of which must be filed in court. 14
The adoption and equitable sharing programs apply to civil, criminal and administrative
forfeitures. 15 By its own terms, the Order is limited to adoptions. Public records, however,
reflect that adoptions are the least-used method of asset forfeiture in DOJ's Asset Forfeiture
Program. 16
According to a 2012 report from the Government Accountability Office ("GAO"), "[i]n
2003, adoptions made up about 23 percent of all equitable sharing payments, while in 2010,
adoptions made up about 17 percent of all equitable sharing payments." 17 Therefore, GAO's
study suggests the Order's focus on adoptions may ignore the areas where the most significant
civil liberties violations occur. According to DOJ "as more states have established their own
forfeiture laws, they may rely less on DOJ to adopt forfeiture cases and may instead pursue
12

19 U.S.C. 1607.
Guides, supra note 2 at 8.
14 18 u.s.c. 981, 982.
15
Guides, supra note 2 at 1.
16
The DOJ Administrative Forfeiture Program includes the Asset Forfeiture and Money Laundering Section;
Bureau of Alcohol Tobacco and Firearms; Drug Enforcement Agency; Federal Bureau oflnvestigation; U.S.
Marshals Service; U.S. Attorney's Office; Asset Forfeiture Management Staff; U.S. Postal Inspection Service; Food
and Drug Administration; U.S. Department of Agriculture, U.S. Department of Agriculture Office oflnspector
General; Department of State, Bureau of Diplomatic Security; and Defense Criminal and Investigative Services. See
WEBSITE, UNITED STATES DEPARTMENT OF JUSTICE, ASSET FORFEITURE PROGRAM, PARTICIPANTS AND ROLES,
available at http://www.justice.gov/jmd/afp/05participants/index.htm.
17
U.S. GOV'T ACCOUNTABILITY OFFICE, Justice Assets Fo1feiture Fund: Transparency of Balances and Controls
over Equitable Sharing Should be Improved, REPORT GA0-12-736 (July 2012) at 43, available at
http://www.gao.gov/assets/600/592349.pdf.
13

Mr. Michael E. Horowitz

January 29, 2015
Page4
forfeitures under state law when appropriate." 18 Furthermore, the DOJ has admitted adoptions
"accounted for roughly 3 percent of the value of forfeitures in the Department of Justice Asset
Forfeiture Program." 19

B. Adoptions still occur through administrative forfeiture and are growing at an

alarming rate.
Prompted by concerns about civil liberties violations in civil and administrative
forfeitures, Cause of Action submitted a Freedom oflnformation Act request to the DOJ on July
2, 2012 seeking relevant records. 20 On August 6, 2012, DOJ produced documents revealing that

18
/d. One possible explanation for the DOJ's decision to decrease its use of adoptions while increasing its use of
administrative forfeiture may relate to a program called "Operation Choke Point." Under Operation Choke Point,
the DOJ can use warning letters to banks to effectively force those banks to cut lending to "money service
businesses and lenders." See Staff Report, U.S. H. Rep., Comm. on Oversight & Gov't Reform, The Department of
Justice's 'Operation Choke Point': Illegally Choking Off Legitimate Business? at 6 (May 29, 2014), available at
http://oversight.house.gov/wp-content/uploads/2014/05/Staff-Report-Operation-Choke-Point1. pdf ("Operation
Choke Point is having its desired effect -legitimate merchants in legal industries are being choked-off from the
financial system. In a statement to the House Committee on Financial Services, a trade group of licensed money
service businesses and lenders submitted recent account termination letters in which the bank explicitly attributed
the termination to Operation Choke Point"). Money service businesses are considered "high risk" by the DOJ. See
Kelsey Harkness, Meet Four Business Owners Squeezed by Operation Choke Point, THE DAILY SIGNAL (Aug. 12,
2014), available at http://dailysignal.com/2014/08/ 12/meet-four-business-owners-squeezed-by-operation-chokepoint. Because of Operation Choke Point's success, DOJ may have determined to rely less on traditional asset
forfeiture programs for targeting money service businesses through adoption or equitable sharing. See U.S. Dep't of
Justice, National Asset Forfeiture Strategic Plan, 2008-2012, at 50, available at
http://www.justice.gov/criminal/afmls/pubs/pdf/strategicplan.pdf ("As the law enforcement community has
developed partnerships with the banking industry, criminals and their syndicates have become increasingly reluctant
to place their money in financial institutions where there is greater scrutiny and tracking capabilities. Criminal
organizations are increasingly exploiting the products offered by money service businesses and are laundering
money through legal entities such as casinos, the insurance industry, and automobile dealers. The Program must
work with the Financial Crimes Enforcement Network (FinCEN) and the law enforcement community to develop
policies and regulations that combat new money laundering methods. The Program must also support
implementation of the 2007 National Money Laundering Strategy and initiatives that pursue the forfeiture of monies
involved in bulk cash smuggling"). In fact, seizure of cash by states under the "adoption" policy represents the most
common asset seized valued at above $1 million. See U.S. Dep't of Justice, FY 2013 Seized Property Inventory
Valued Over One Million Dollars as of September 20, 2013, available at
http://www.justice.gov/jmd/afp/02fundreport/2013affr/report7.htm. Recent statements by FinCEN reflect the degree
to which Operation Choke Point is the primary mechanism for the federal government's targeting money service
businesses - not civil, criminal, or even administrative forfeitures. See FinCEN Statement, FinCEN Statement on
Providing Banking Services to Money Services Business, (Nov. 10, 2014), available at
http://www.fincen.gov/news_room/nr/pd'20141110. pdf.
19
Jacob Sullum, 'Policing for profit' seizes onward, N.Y. POST (Jan 20, 2015), available at
http://nypost.com/2015/01 /20/policing-for-profit-seizes-onward/
20
See Letter from Cause of Action to Karen McFadden, FOIA Contact, Justice Mgmt. Div., U.S. Dep't of Justice
(July 2, 2012), available at http://causeofaction.org/assets/uploads/2014/10/2012-7-2-DOJ-JMD-FOIA-Request-reAsset-Forfeiture-Program.pdf

Mr. Michael E. Horowitz

January 29, 2015
Page 5
administrative forfeitures constitute the vast majority of all asset forfeitures, are increasing, and
are the government's preferred form of asset forfeiture. 21
Critically, although the Order states that it "applies prospectively to all federal
adoptions," DOJ's own guidelines suggest that, in practice, the reality is otherwise:
A Guide to Equitable Sharing for State and Local Law Enforcement Agencies
applies only to the sharing of assets that were seized by Department of Justice
investigative agencies and federal agencies participating in the Department of
Justice Asset Forfeiture Program and that were forfeited judicially or
administratively to the United States by the United States Attorney's Offices or
Forfeiture Program participants. 22

Documents produced to Cause of Action show, in just the first seven months of 2012,
DOJ reported nearly 10,000 administrative forfeiture cases while the same period reflected not
even 3,300 cases between civil and criminal forfeitures combined: 23
FORFEITURE SUMMARY REPORT BY FORFEITURE TYPE
Forfeiture Activity BelwHn 1/112007 and 713012012
D1ll 11 of July 30, 20t2

FlacaJ Year: 2012

Admlnlslrative
CMUJudlcial
Criminal

2012 Total1:

9.808
1,010

20,300:
e,773

2.281

.. -~~84,_ ...

13,099

40,757.

..

453.
886
--- -
1,319
. ..

964'

2~

3,234

Furthermore, records reviewed by Cause of Action reflect that since 2007, administrative
forfeitures have been steadily increasing every year: 24

21

See Letter from Robert Marca, Deputy Director, U.S. Dep't of Justice, Asset Management Forfeiture Staff to
Cause of Action, (Aug. 6, 2012), available at http://causeofaction.org/assets/uploads/2014/10/2012-8-6-DOJ-JMDProduction-2526319.pdf (the "Marca Letter").
22
Guides, supra note 2 at 1 (emphasis added).
23
Marca Letter, supra note 21.
24

Id.

Mr. Michael E. Horowitz

January 29, 2015
Page 6
FORFEITURE SUMMARY REPORT BY FORFEITURE TYPE
Forfeiture Activity Between 111/2007 and 7130/2012
Data aa of July 30, 2012

Fiscal Year: 2007

AdmlnlttraUve
CiviUJudlcisl
Criminal

7,541

..1.~2
1,?76

2007 Totals:

36,624
1,777
4,043

0
367
497

1.~09.

864 ._

1,995

10,179

42,444

9,~9

2~.~22;

1,384
2,168

2,990
6,143

383 . .

0
686

Fiscal Year: 2008

AdmlnlslraUve
- .... - ..
Clvll/Judlclal
Criminal

. ....

2008 Totals:

0
815

759

1,676

1,142

2,491

12,801

33,oss

10,447
1,487
2,820

31,728
4,281
8,713

526
888

973
2,389

14,554

44,722

1,394

3,342

9,421

34,054
3,472
7,881

o.

486
1,034

848
2,804

Fiscal Year: 2009

AdmlnlstraUve
CivillJudiclal
Criminal
2009 Totals:

Fiscal Year: 2010

Administrative
ClvlllJudlclal
Criminal

1,371
2,819

Mr. Michael E. Horowitz

January 29, 2015
Page 7

2010 Tolals:

13,811

45,387

1,620

12,750
1,379
3,047

39,393
2,545
8,729

480

1,205

1.045

17,176

50,667

1,525

3,807
5,012

3,652

Fiscal Year: 2011

Admln18trauve
Civll/Judlclal
Criminal

2011 Totals:

Finally, a 2012 report from your office revealed that from 2001-2011 , 70% of all seized
assets were processed as administrative forfeitures: 25
Exhibit 3: FYs 2001 Through 2011 Seized Assets
t>Y Type of Forfeiture 9
Number of Assets
by Type of Forfeiture
Administrative

Civil

Criminal

Asset Value (in millions)

by Type of Forfeiture
Adm nlstrative

CMI

Crlmi n~I

_J

Source: DOJ's Consolidated Assets Tracking System

These data reflect the degree to which inappropriate property seizures may continue, if
not worsen, over time, as the Order neither ends equitable sharing nor addresses the majority of
asset forfeitures. 26

25 OFFICE OF INSPECTOR GENERAL,

U.S. DEP'T OF JUSTICE, Audit of the Drug Enforcement Administration's

Adoptive Seizure Process and Status of Related Equitable Sharing Requests, at 6, available at
http://www.justice.gov/oig/reports/2012/al240.pdf(while the OIG report focuses on one component of the Asset
Forfeiture Program, Exhibit 3 "includes adoptive and joint seizures processed by the DEA and other federal
agencies" see id., n.9).

Mr. Michael E. Horowitz

January 29, 2015
Page 8

C. Asset Forfeiture Program participant contractors may pose increasing risks to civil
liberties.
The civil liberties violations caused by inappropriate asset forfeitures may be
symptomatic of the harm that results when taxpayer-subsidized entities are incentivized by the
financial payoffs of aggressive state and local police tactics.
Public documents suggest that state and local asset seizures under the adoption program
were facilitated by a federally funded entity, Desert Snow LLC ("Desert Snow"). A September
7, 2014 Washington Post article detailed how Desert Snow, run by former California state
highway patrol officer Joe David, received millions of dollars in federal contracts and grants
from Asset Forfeiture Program participants, including the DOJ and the Department of Homeland
Security ("DHS"), in order to teach state and local police offices "aggressive methods for
highway interdiction." 27 Desert Snow started a private intelligence network for police known as
the Black Asphalt Electronic Network & Notification System ("Black Asphalt"), which enabled
more than 25,000 officers and federal authorities throughout the country to share reports about
American motorists, many of whom had not been charged with any crimes. 28
The federal government's investment in Desert Snow has been a financial windfall to
state and local police. The Washington Post found that the Desert Snow training "has helped
fuel a rise in cash seizures in the Justice Department's main asset forfeiture program."29
According to the Post, "Desert Snow-trained officers reported taking $427 million during
highway encounters." Although officials at DOJ and the Drug Enforcement Agency ("DEA")
are reportedly reviewing their use of Black Asphalt, records reviewed by the Post continue to
identify officials at DOJ, DEA, OHS, Customs and Border Protection, and Immigration &
Customs Enforcement as members of Black Asphalt.
Taxpayer subsidies and seized property-funded educational training can be highly
profitable. For example, a brochure of Desert Snow's General Services Administration-approved
courses show fees ranging from a few thousand dollars to $145,000 for a three-day workshop. 30
These sources of revenue allowed Joe David, who founded Black Asphalt, to purchase a yacht

26

ln addition to the failure to include administrative forfeitures, other aspects of the new policy indicate the very
modest nature of these reforms. According to reports, adoption seizures account only for approximately 14% of all
equitable sharing, while the overwhelming majority comes from occasions when federal and local authorities are
collaborating on enforcement matters. Such "collaborations," however, are exempt from the new policy. See Jacob
Sullum, How the Press Exaggerated Holder's Forfeiture Reform, REASON.COM (Jan. 19, 2015), available at
http://reason.com/blog/2015/01I19/how-the-press-exaggerated-holders-forfei.
27
Robert O'Harrow Jr. & Michael Sallah, Police intelligence targets cash, WASH. POST (Sept. 7, 2014), available at
http://www.washingtonpost.com/sf/investigative/2014/09/07/police-intelligence-targets-cash/ ("States and localities
also have used homeland security grants and seized cash to pay for classes from Desert Snow and its competitors")
(the "O'Harrow Article").
2s Id.
29 Id.
30
Price List, Desert Snow, LLC, available at http://goo.gl/sve4po.

Mr. Michael E. Horowitz

January 29, 2015
Page 9
and a condominium in Caho San Lucas, Mexico. 31 In Washington, subsidy addictions are
supported by lobbying habits, so Joe David hired lobbying firm Brandon Associates to further
secure taxpayer dollars for his growing business. 32
And when there is cronyism, corruption persists. In September, 2014, the American Civil
Liberties Union sued Logan County, Oklahoma for access to Black Asphalt, which is now
government-run, after discovering Desert Snow employees were "impersonating police officers .
. . 'as part of a scheme with the local district attorney to make traffic stops, seize cash and
property from citizens, and funnel it into local coffers in exchange for a percentage of the
profits. "' 33 Reports from USASpending.gov reflect that Desert Snow continues to receive
federal funds, including funding from DOJ. 34 The Asset Forfeiture Program's relationship with
contractors like Desert Snow should be audited and reviewed.
Conclusion
In his press statement on the Order, the Attorney General stated, "[t]his is the first step in
a comprehensive review that we have launched of the federal asset forfeiture program."35 We
believe a "comprehensive review" requires the DOJ OIG to examine all relevant program
procurement, implementation, efficiency and costs, including with respect to administrative
forfeitures. Furthermore, as the analysis in footnote 18 of this letter indicates, we are concerned
that programs like Operation Choke Point will allow DOJ to target certain businesses that were
otherwise pursued under adoption, thereby circumventing the Order and rendering it even less
significant. Finally, we suggest that your office must meaningfully participate in DOJ's broader
review to ensure objectivity, fairness and accountability.

31

O'Harrow Article, supra note 27.

Id. See also U.S. Senate, Lobbying Disclosure Act Database, available at
http://soprweb.senate.gov/index.cfm?event=processSearchCriteria (search "Desert Snow" under "client name").
33
David Lee, Sheriff Accused of Keeping Secret Database, COURTHOUSE NEWS SERV. (Sept. 15, 2014), available at
http://www.courthousenews.com/2014/09/15/71368.htm.
34
USASPENDING.GOV, PRIME AWARD SPENDING DATA, available at
http://www.usaspending.gov/explore?tab=By+Prime+Awardee&frompage=contracts&contractorid=859675329&co
ntractomame=DESERT+SNOW+LLC&fiscal_year=all&typeofview=complete (search "Desert Snow LLC" in
"Contractor").
35
Press Release, supra note 1.

32

Mr. Michael E. Horowitz

January 29, 2015
Page 10
Thank you for your attention to this matter.

DANIEL Z. EPSTEIN
CAUSE OF ACTION

cc:

Attorney General Eric H. Holder, Jr., U.S. Department of Justice

Senator Charles E. Grassley, Chairman, Senate Committee on the Judiciary
Senator Patrick J. Leahy, Ranking Member, Senate Committee on the Judiciary
Representative Bob Goodlatte, Chairman, House Committee on the Judiciary
Representative John Conyers, Jr., Ranking Member, House Committee on the Judiciary