Government Confiscated Property

The NY Times recently ran an interesting Op-Ed piece on the seizure of personal property from Bernard Madoff. A group of victims were attempting to pursue an involuntary bankruptcy in order to seize the personal property from Madoff. Federal prosecutors persuaded the Judge to stop the involuntary bankruptcy and allow the assets to be collected by the government for restitution to the victims of the Ponzi scheme. The problem is the Op Ed piece states it is highly unusual that government confiscated property is returned to the owners or victims. It is an interesting article and sheds some light on the government process of the confiscation of property. We as appraisers typically here of government sales of seized property, some of us even work for the government in appraising these items. The unfortunate part is that after the confiscation, little of the proceeds appear to find their way back to the victims.

The Op-Ed peice states Most people would assume that this is business as usual, that the government routinely seizes the assets of criminals and returns them to victims. After all, criminals should not have ill-gotten houses, cars and yachts waiting for them when they finish their sentences. But the reality is that the government’s focus on seizing Mr. Madoff’s assets for restitution is unusual. Lawbreakers are rarely forced to give up the proceeds of their crimes. To take just one example: Between stints in prison over the past decade, John A. Gotti, the former Gambino crime family boss, was able to return to his luxurious house in Oyster Bay Cove, on Long Island, where the median house value in 2007 was more than $2 million. Does anyone believe the money that Mr. Gotti bought it with was legitimately earned?

The Op Ed piece continues Congress must also close a gaping hole in the victim restitution laws, which provide no authority for the pretrial restraint of assets of those accused of orchestrating frauds. Too often, dirty money simply disappears into shell companies and impenetrable offshore havens before the trial even begins.

But upon a showing that fraud was probably committed, a prosecutor should be authorized to restrain all of the suspect’s assets; the question of who gets them would be resolved after the criminal justice system has finished its work. The British already do not differentiate between asset forfeiture and restitution. They merge the two concepts and call it asset recovery. We should borrow a page from them.

The Justice Department must also make sure that its state and local counterparts in law enforcement get the training and resources to manage asset forfeitures of their own.

For too long government has been unwilling to take back the wealth that criminals have stolen from taxpayers. We can no longer afford to ignore the opportunities offered by our under-enforced asset forfeiture laws.

To read the full NY Times Op Ed article, click HERE.