Asset Forfeiture

The term “asset forfeiture” refers to the property the state confiscates from a defendant after a criminal or civil conviction. For example, asset forfeiture occurs when the state confiscates an expensive car from a drug dealer. The state then puts these items up for auction and uses the proceeds to both repay the victims of the crime and to fund law enforcement activities. To explore this concept, consider the following Asset Forfeiture definition.

Definition of Asset Forfeiture

Noun

  1. The state’s act of confiscating property from a defendant in a civil or criminal case.

Origin

1300 – 1350      Middle English  (forfeiture, forfeiture)

What is the Meaning of Asset Forfeiture?

Another name for “asset forfeiture” is “confiscation.” This is because asset forfeiture refers to the state “confiscating” the property of a defendant as the result of a civil judgment, or criminal proceeding.

Interestingly, when the government begins an asset forfeiture proceeding, the proceeding names the property itself, rather than the property’s owner. The government does not need to charge the property owner with a crime to confiscate the property. All the government must do is show that they have a legal entitlement to take the property.

After the government seizes the property, the burden of proof to reclaim the property shifts to the owner. The owner must then make his case as to why the government should not seize his property. In other words, the defendant must be able to show that his property was not involved in any criminal activity in order to take back ownership of the property.

History of Asset Forfeiture Laws

Since the early 1970s, Congress has continued to give the government more power with regard to gutting criminal activities, like money laundering. But the history of asset forfeiture laws has roots of the early going back thousands of years.

More recently, organizations like the American Civil Liberties Union (ACLU) have announced their intentions to reduce the level of asset forfeiture in the U.S. The reason for this is because such a practice places what these organizations claim to be an “unfair penalty” on defendants by depriving them of the majority of their capital.

Types of Forfeiture

Federal law recognizes three distinct types of forfeiture: criminal forfeiture, civil judicial forfeiture, and administrative forfeiture. What follows are more detailed explanations for these different examples of asset forfeiture.

Criminal Forfeiture

Criminal forfeiture comes as part of a criminal action against a defendant. As far as asset forfeiture examples go, criminal forfeiture is different from other types of forfeiture in that the government files the action against the defendant himself, rather than the property in question. In a criminal forfeiture action, the defendant has the right to contest the matter by bringing it to trial.

Civil Judicial Forfeiture

Civil judicial forfeiture does not require a defendant to receive a criminal conviction for the government to seize the property. This is one of those types of forfeiture actions wherein the government files against the property itself, rather than the defendant. Like criminal forfeiture, a defendant can contest the seizure of his property in a civil judicial forfeiture action by taking the matter to trial.

This type of forfeiture may take place when the government suspects that the property is connected with illegal manufacture, transportation, or sale of drugs. This commonly includes the following:

  • Controlled substances (drugs)
  • Raw materials and chemicals needed to make illegal drugs
  • Machines for making capsules and tablets
  • Containers used to hold drugs
  • Vehicles used to transport drugs
  • Information used in the manufacture and distribution of drugs, such as books, records, and formulas
  • Money and other valuables “used or intended to be used” to buy all of these things
  • Property facilitating illegal transactions (such as vehicles, or real property)
  • Drug paraphernalia
  • Firearms

Administrative Forfeiture

Administrative forfeiture is different from the other types of forfeiture cases in that the government seizes the property, but no one comes around to claim it. Administrative forfeiture concerns property like paraphernalia associated with the transportation and storage of controlled substances, money, or other kinds of property that do not exceed $500,000 in value. In other words, administrative forfeiture cannot apply to assets related to homes or other types of real estate.

Forfeiture of Terrorist Finances

When it comes to the forfeiture of terrorist finances, such funds often prove difficult for authorities to track and disrupt. This is because terrorist finances can come from a number of different sources, including other countries, other businesses that are actually legal, and even from sympathizers who support the organization. The types of crimes a terrorist can profit from are just as numerous as his sources, including blackmail, fraud, and drug trafficking.

Once the authorities discover and are able to prove that assets are the result of terrorist activities, they can then proceed with the forfeiture of terrorist finances. There are three classifications that define what terrorist property truly is, and they are:

  • Property or monies likely planned for use in terrorist activities
  • Proceeds from the commission of an act of terrorism
  • Proceeds from acts carried out supporting the purposes of terrorism

So long as the property falls into one or more of these categories, the government may proceed with the forfeiture of terrorist finances.

Use of Forfeited Funds

Through the history of asset forfeiture laws, there has been controversy over the use of forfeited funds. This all boils down to the types of funds they are. For instance, the law permits the Attorney General to retain or transfer forfeited property for the use by a federal agency. More simply, the federal government may put confiscated monies toward federal program funding. Another potential use of forfeited funds is a real property transfer. Specifically, the Attorney General can, by law, re-appropriate a parcel of real estate as federal property for federal use.

Notable Forfeiture Examples

There are several asset forfeiture examples that serve as rather notable forfeitures. Take, for instance, the case of USA v. $124,700 from 1996 (yes, that is an actual case name). In this case, the Eighth Circuit Court ordered the forfeiture of $124,700 after a Nebraska state trooper found the money in the defendant’s car during a traffic stop. The state trooper had pulled the defendant over for speeding and suspected him of driving while intoxicated. Upon receiving consent to search the vehicle, he came up with the money in bundles in a cooler in the backseat.

Additional notable forfeitures include cases wherein a bank forfeited millions of dollars after violating the Trading with the Enemy Act. Such banks included Barclays Bank and ABN Amro Bank, to name a few. Still another of the notable forfeiture examples, and perhaps one of the most recognizable, involved disgraced investor Bernie Madoff, whom the court ordered to forfeit $170 billion. He was unable to produce an amount that high, so his wife forfeited about $80 million in assets despite not being a co-defendant in the case.

Abuse of Asset Forfeiture

As mentioned earlier, the ACLU, among other organizations, is working to stamp out potential abuse of asset forfeiture. They argue that the very practice of civil forfeiture leads to the abuse of asset forfeiture because the law allows police to confiscate any property they say relates to a crime, and they can then keep or sell that property. Where the abuse of asset forfeiture comes into play is that the police do not even need to arrest the person who owns the property or charge him with a crime for the government to take his assets away, including his own home.

Asset Forfeiture Example In Spending Inheritance Monies

A recent example of asset forfeiture to come before the U.S. Supreme Court is the matter of Timbs v. Indiana (2019). In this case, Tyson Timbs received an inheritance from his father’s life insurance company after his father died in early 2012. Timbs used a little over $40,000 to buy himself a Land Rover. However, Timbs was a former drug addict, and following his father’s death he went back to his old habit, spending much of his remaining inheritance on illegal drugs. He also partook in the selling of drugs to support his habit.

After selling drugs to undercover police officers in November of 2013, the officers arrested Timbs. Timbs plead guilty and received a sentence of one year of house arrest, along with five years’ probation and over $1,000 in fines. The state then confiscated his Land Rover in a civil forfeiture action, saying that Timbs had used the vehicle to transport the drugs he intended to sell. After his year of house arrest was over, Timbs had trouble finding a job without a car, ultimately borrowing his neighbor’s car when he finally found a job that accepted him despite his criminal history.

Lawsuit and Appeal

With the Institute for Justice behind him, Timbs sued the state for violating the Eighth Amendment of the Constitution – specifically, that which related to the prohibition of placing excessive fines on an individual.

The Grant County Superior Court sided with Timbs, finding that the “fine” the government took in the form of the Land Rover was excessive. This was because the Land Rover’s value was four times higher than the maximum penalty the state could have levied against Timbs, and that it was thirty times higher than the fines Timbs actually paid.

The Supreme Court of Indiana, however, reversed the lower Court, arguing that the Eighth Amendment only applies to federal actions. Therefore, the Court argued, it did not prohibit state or local laws from imposing what might be considered excessive fines on defendants.

U.S. Supreme Court

Timbs petitioned the U.S. Supreme Court to hear his case, and the Court agreed. Ultimately, the Court unanimously decided that the Eighth Amendment’s ban on excessive fines applied to the states as well. The Court ultimately vacated the lower court’s decision and remanded the case. Said the Court:

“The right against excessive fines traces its lineage back in English law nearly a millennium, and from the founding of our country, it has been consistently recognized as a core right worthy of constitutional protection. As a constitutionally enumerated right understood to be a privilege of American citizenship, the Eighth Amendment’s prohibition on excessive fines applies in full to the States.”

Related Legal Terms and Issues

  • Conviction – The formal declaration that a defendant is guilty of a crime, made by either the jury or the judge in a court of law.
  • Defendant – A party against whom a person has filed a lawsuit in civil court, or who stands accused of, or charged with, a crime or offense.

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