US: Carving up forfeited assets

A defendant was made subject to a USD2 million plus forfeiture order relating to 71 charges of organising illegal gambling and laundering the proceeds.

That's the kind of money that helps reduce taxes. Or perhaps not.

It's a case that screams for an overhaul of systems that are designed to facilitate favour and corruption.

In the USA, seized funds are partly paid out to those who aided in the recovery.

Of those recovered funds, the first 35% id to be divided between two enforcement offices: the Indiana Alcohol and Tobacco Commission and its investigations division, the Indiana Excise Police. That supports their budget by a healthy sum - just over USD700,000.

The next 30% is to be paid to J. Gregory Garrison, a lawyer. Garrison was engaged by "Special Prosecutor" Kit Crane to deal with the civil forfeiture aspects of the recovery. For his work, he will collect a little more than USD625,000.

We do not suggest or imply that Garrison has done anything wrong: in a system that operates on contingency fees, substantial fees are commonplace for the winners.

But we do question whether the system is right: surely a prosecution office has at least one civil litigator on its staff? And why are such terms seemingly approved by one person? Again, we do not suggest that either Garrison or Crane have done anything wrong: we question the system that seems to afford the opportunity for abuse and corruption.

What is worse is that the forfeited amount was, in any case, negotiated - and allowed the defendant to keep very substantial assets.

John L. Neal, a former union leader, was charged in 2006. His charges have not yet come to trial. Even though he has not been convicted, confiscation action was taken. And for two and a half years, Neal and the state have argued about how much he will be allowed to keep.

At the beginning of April, he found out: he will lose 10 vehicles and 11 licensed premises, described in Indiana as "taverns."

But he gets to keep a motorhome, eight other vehicles and 10 of those "taverns." And his house in the expensive district of Yorktown.

The bulk of the value seized was, in fact, in cash found at Neal's home, the homes of family and business premises. The value of the properties and cars has yet to be fully assessed - but in the current climate, selling them may not be easy.

The prosecutors argued that the premises and vehicles were, in effect, tools used in the commission of a crime and therefore subject to forfeit. This is settled law in a number of US states. But protracted proceedings ended in a deal, again questioning the legitimacy and transparency of the process.