It’s Wrong to Steal…Even When the Government Does It Using Asset Forfeiture

As a grumpy libertarian, I routinely get agitated about taxes, spending, and regulation. As far as I’m concerned, much of government is a racket that uses coercion to reward interest groups with unearned wealth.

But there are degrees of evil. So if you asked me to pick the most reprehensible thing that government does,  “asset forfeiture” might be in second place (hurting poor people to benefit rich people is at the top of my list).

Asset forfeiture occurs when government seizes property that is associated with a crime. That sounds reasonable – and it is reasonable if someone is convicted of, say, bank robbery and the government confiscates the stolen cash and any loot purchased with that money.

But it is not reasonable (or moral, or just, or appropriate) when government seizes assets without a conviction. And it is downright disgusting when the government steals (and I use that word deliberately) the assets of innocent parties.

I’ve already written about this issue (including an example from my county) and highlighted how asset forfeiture gives government bureaucracies a perverse incentive to steal.

Now we have a story from the Wall Street Journal that confirms our worst fears.

New York businessman James Lieto was an innocent bystander in a fraud investigation last year. Federal agents seized $392,000 of his cash anyway. An armored-car firm hired by Mr. Lieto to carry money for his check-cashing company got ensnared in the FBI probe. Agents seized about $19 million—including Mr. Lieto’s money—from vaults belonging to the armored-car firm’s parent company. He is one among thousands of Americans in recent decades who have had a jarring introduction to the federal system of asset seizure. Some 400 federal statutes—a near-doubling, by one count, since the 1990s—empower the government to take assets from convicted criminals as well as people never charged with a crime. …The forfeiture system has opponents across the political spectrum, including representatives of groups such as the American Civil Liberties Union on the left and the Heritage Foundation on the right. They argue it represents a widening threat to innocent people. “We are paying assistant U.S. attorneys to carry out the theft of property from often the most defenseless citizens,” given that people sometimes have limited resources to fight a seizure after their assets are taken, says David Smith, a former Justice Department forfeiture official and now a forfeiture lawyer in Alexandria, Va.

What’s really amazing is that government officials want to expand this reprehensible practice. The use of “civil forfeiture” is particularly worrisome, as illustrated by this passage.

Top federal officials are also pushing for greater use of civil-forfeiture proceedings, in which assets can be taken without criminal charges being filed against the owner. In a civil forfeiture, the asset itself—not the owner of the asset—is technically the defendant. In such a case, the government must show by a preponderance of evidence that the property was connected to illegal activity. In a criminal forfeiture, the government must first win a conviction against an individual, where the burden of proof is higher.

Here’s a really disgusting example.

Raul Stio, a New Jersey businessman, is caught up in the civil-forfeiture world. Last October, the Internal Revenue Service, suspicious of Mr. Stio’s bank deposits, seized more than $157,000 from his account. Mr. Stio hasn’t been charged with a crime. In a court filing in his pending civil case, the Justice Department alleges that Mr. Stio’s deposits were structured to illegally avoid an anti-money-laundering rule that requires a cash transaction of more than $10,000 to be reported to federal authorities. Mr. Stio made 21 deposits over a four-month period, each $10,000 or less, the filing said. Steven L. Kessler, Mr. Stio’s attorney, says there was no attempt to evade the law and that the deposits merely reflected the amount of cash his client’s businesses, a security firm and bar, had produced. Mr. Stio was saving to buy a house, he says.

I have no idea whether Mr. Stio is a good guy or a crook. But I know that the government shouldn’t be allowed to grab his money without convicting him of a crime. Especially for a supposed offense against absurdly foolish and ill-conceived anti-money laundering laws.

Our Founding Fathers gave us a presumption of innocence and no bureaucrat or politician should be allowed to cancel our constitutional rights.

Asset forfeiture should apply to people like Bernie Madoff. He’s been convicted of operating a Ponzi scheme, so by all means grab every penny he accumulated. But government should follow a simple rule: Convict first, seize second.

And here’s one final section from the story, highlighting how bureaucracies “earn” a profit by abusing forfeiture laws.

Part of the debate over seizures involves a potential conflict of interest: Under a 1984 federal law, state and local law-enforcement agencies that work with Uncle Sam on seizures get to keep up to 80% of the proceeds. Last year, under this “equitable-sharing” program, the federal government paid out more than $500 million, up about 75% from a decade ago. The payments give authorities an “improper profit incentive” to seize assets, says Scott Bullock of the Institute for Justice, a libertarian public-interest law firm in Arlington, Va. It’s a particular concern amid current state and local government budget problems, he contends. …Seeming abuses occasionally emerge. In 2008, federal Judge Joseph Bataillon ordered the return of $20,000 taken from a man during a traffic stop in Douglas County, Neb. Judge Battaillon quoted from a recording of the seizure, in which a sheriff’s deputy complained about the man’s attitude and suggested “we take his money and, um, count it as a drug seizure.” The judge’s order said the case produced “overwhelming evidence” that the funds were clean.