Richard Fiano, Chief of Operations
Senate Judiciary Committee, Subcommittee on Criminal Justice Oversight
July 21, 1999
Note: This document may not reflect changes made in actual delivery.
Chairman Thurmond and members of the Committee, thank you for the opportunity to testify today on the subject of asset forfeiture. Asset forfeiture is one of the most important tools in DEA's fight against drug traffickers. There is legislation pending before the Congress which will, quite simply, undercut the ability of law enforcement to forfeit illegally gained property, or property used to facilitate a crime, from drug dealers, terrorists, alien smugglers, and other criminals. While other witnesses on the panel can speak on the details of the pending legislation, my testimony will focus on the central role asset forfeiture plays in drug law enforcement. Asset seizures and forfeitures under Title 21, U.S. Code, the vast majority of which are generated from drug cases, give DEA the largest share of asset forfeitures among all the Federal law enforcement agencies.
Most Americans agree that criminals, including drug dealers, should not be allowed to benefit financially from their illegal acts. Federal law provides that the profits and proceeds of designated crimes, as well as property used to facilitate certain crimes, are subject to forfeiture to the government. Asset forfeiture is one of law enforcement's most effective weapons against drug trafficking -- because it takes the profit out of crime. Not only are the profits of crime taken away from the criminals, but the money is put into the Asset Forfeiture Fund, which is used to help the victims and to fund law enforcement programs to further combat crime.
Asset forfeiture has been a part of the American legal system jurisprudence since the founding of the nation. Current Federal law contains numerous protections against possible abuse. Property is not seized unless the government meets the standard of "probable cause." This is the same standard of proof required to arrest a person or to obtain a search warrant from a federal judge. If a claim to the property is made it is not forfeited unless the government meets the standard of preponderance of evidence. There are protections against the seizure of innocent property. The process provides for the protection of innocent parties whose property may have been seized, including banks and financial institutions that may have an interest in the seized property. Such parties may elect to have the courts consider their interests, or they may seek administrative relief without the need to go to court.
I. DRUG ASSET FORFEITURE AND INTERNATIONAL ORGANIZED CRIME
Powerful international drug syndicates operate around the world, supplying drugs to American communities, employing thousands of individuals to transport and distribute drugs to American youth. They smuggle tons of cocaine and heroin into the United States and distribute and sell it in communities across the country. As a result of selling their poison, these organizations generate millions -- possibly billions of dollars of U.S. currency as profit. They need to return this profit somehow to Colombia and Mexico. The drug traffickers take money from American citizens who become hooked on drugs. They drain this currency from the American economy and divert it to the personal consumption of a few individuals living outside of the country. United States that forfeiture can be employed as an effective weapon against drug trafficking.
Where, in the past, seizures of currency involved in drug cases might have been in the thousands or tens of thousands of dollars, now, seizures of bulk amounts of U.S. currency are in the millions and tens of millions of dollars. In the nature of the international drug trade, because of currency transaction reporting requirements, to a large degree illicit profits are no longer laundered through banks, but are smuggled in vast amounts out of the U.S. and into foreign hands. Many of DEA's cases involve seizing these shipments of bulk cash being smuggled outside of the United States. The international traffickers isolate themselves from the monies, and have the money transported separately from the drugs, oftentimes by couriers who are well paid for their services. In many of these cases, nobody claims ownership of this ill-gotten cash -- to do so would be to run the risk of criminal prosecution -- so the monies are administratively forfeited.
There are large dollar amounts connected with drug asset forfeiture, because of the nature of the drug trade. One example from just one case will illustrate this point. During 1998, in numerous investigations within the United States, DEA worked with other Federal, state and local law enforcement partners to arrest members of an international drug trafficking syndicate who were operating on U.S. soil. Resulting from a series of cooperative investigations which linked trafficking organizations in Mexico, Colombia and the Dominican Republic to their operatives in New York, Los Angeles, Atlanta, and a variety of other U.S. locations, over 1,200 individuals were arrested; almost 13 tons of cocaine, two and a half tons of methamphetamine, 127 pounds of heroin, and almost $60 million in U.S. currency were seized and subject to criminal forfeiture.
Asset forfeiture, both civil and criminal, is one of DEA's most powerful weapons against narcotics traffickers. There are several circumstances where civil asset forfeiture, pursuant to 21 U.S.C. Section 881, is the most effective method of removing the instrumentalities and profits from narcotics trafficking. Since criminal forfeiture requires the conviction of the violator, it is not available in cases where the drug trafficker is a fugitive, deceased or resides outside the reach of U.S. extradition laws.
In instances where law enforcement intercepts an illegal money courier with bulk amounts of cash, civil asset forfeiture law enables the DEA to seize and forfeit these illegally obtained assets. In such cases, criminal charges are rarely brought against the couriers. The couriers, who either know little about the underlying illegal activity or are told not to ask questions, are paid generously for their services. Couriers are frequently chosen because they lack a criminal drug history and are purposefully isolated from the underlying illegal activity through an intricate system of cells which make up the structure of the drug trafficking organization. In many cases, the courier denies any knowledge of illegal activity, disavows any ownership interest in the currency, may not be arrested, and is free to leave throughout the encounter. Therefore, criminal forfeiture is not an option. However, as a result of the investigation, DEA would be able to forfeit that currency after proving, by a preponderance of the evidence, that the currency either represents the proceeds of the narcotics trafficking or was intended as a payment for narcotics.
Today's international organized criminal groups are strong, sophisticated, and destructive organizations operating on a global scale. They are shadowy figures who send thousands of workers into the United States who answer to them via daily faxes, cellular phones, or pagers. These syndicate bosses have at their disposal airplanes, vessels, vehicles, radar, communications equipment, and weapons in quantities which rival the capabilities of some legitimate governments. Whereas previous organized crime leaders were millionaires, the Cali drug traffickers and their counterparts from Mexico are billionaires. These enormously wealthy criminals should not be allowed to enjoy the profits of their crimes. Drug trafficking is a crime of greed and is profit motivated. Asset forfeiture is a vital tool in striking blows at the drug trade at one of its most vulnerable spots, the money. Law enforcement must be able to take the profit out of drug trafficking.
One way in which these international drug traffickers use their vast wealth is to purchase the very best, state-of-the-art telecommunications equipment. They use this sophisticated technology to carry out command and control their operations. Money is no object. They have been purchasing and using some of the best available encryption technology in an effort to secure their communications from law enforcement. The drug lords now routinely turn on encryption devices in the middle of their conversations with surrogates in the United States. The content of these conversations could contain details of shipments, storage of loads, the return of millions of dollars in profits, the bribing of government or law enforcement officials, or the murder of associates, rivals, or political or police officials who stand in their way. Using court ordered wiretaps, law enforcement intercepts these communications in order to build cases leading to the criminals' arrests and to the seizure and forfeiting of their property.
II. ASSET FORFEITURE: DEA INVESTIGATIONS AND OPERATIONS
Allow me to turn to some examples of how DEA has used asset forfeiture in our money laundering investigations and enforcement operations. Financial and asset forfeiture investigative activity is an integral part of DEA investigations today. The Asset Forfeiture Section oversees the asset forfeiture program within DEA. No property is forfeited unless it is determined to be a tool for, or the proceeds of, illegal activities such as drug trafficking, organized crime, and money laundering.
In most drug law enforcement cases, it is more than clear that the individuals involved are engaged in criminal activity, and their assets are properly subject to forfeiture. On November 25, 1998, an investigator for the Special Narcotics Prosecutor's Office in New York City, acting in an undercover capacity, was to meet a currency counterfeiter at a prearranged location. While the undercover officer was waiting, an unknown male driving a Toyota stopped and motioned for the officer to approach his car, asking if he was "code 31", then asked the officer if he was there to pick up the two percent at 11:30. The officer agreed, knowing that the term "two percent" referred to the money launderer's commission, and that the male was advising him that the two percent commission was with the money to be laundered.
The driver then opened the rear storage area of the Toyota from inside the vehicle and told the officer that the money was inside the compartment. The undercover officer then removed a black bag from the storage compartment. The driver of the Toyota then drove away.
The black bag was found to contain in excess of $200,000 in United States currency. There was no way to ascertain the "owner" of this cash, and no one ever came forward to claim it. The money was, therefore, administratively forfeited.
The DEA has asset forfeiture investigative groups in nearly all of its field divisions, and provides asset forfeiture training to thousands of drug law enforcement officers, both domestic and international. DEA's asset forfeiture program was responsible in FY 97, in over 7,500 cases, for seizure of over $382 million. In FY 98, there were more than 7,700 DEA cases, in which over $ 337 million was seized. As part of over 6,000 cases so far in FY 99, more than $ 451 million has been seized.
When assets are forfeited, they are put into an Asset Forfeiture Fund, which is used to help the victims of crime. One example of how these activities play a key role in the war on drugs, and often result in substantial benefit to the community can be found in a recent case in Philadelphia. Two federally forfeited properties were transferred to community action groups for use in anti-drug and educational activities. The properties were formerly used as "stash" houses by drug organizations operating in the neighborhoods or purchased by the drug dealer using drug proceeds. The two properties were seized pursuant to two federal narcotics investigations involving two organizations responsible for the distribution of significant quantities of cocaine and heroin in local Philadelphia neighborhoods. Thirteen defendants were arrested and convicted as a result of these investigations and received sentences of up to fifteen years.
The groups to which the properties were transferred, United Neighbors Against Drugs and Community United Neighbors Against Drugs are using the properties, which were rehabilitated by government employees and citizen volunteers, to expand programs which provide a safe haven for neighborhood children. Sister Carol Kreck, who accepted the title to one of the properties on behalf of the United Neighbors Against Drugs, stated that the property will serve as a community center for drug abuse prevention, job skills training programs and "safe haven" educational programs for neighborhood children.
DEA carries out many of its activities in partnership with State and Local police. One example is the nation's most effective drug interdiction programs which has been carried out on its highways for over a decade, and has been responsible for seizures that match or exceed those of other, more costly programs. The Highway Interdiction program is led by State and Local agencies, and is supported by DEA's El Paso Intelligence Center [EPIC]. Through EPIC, state and local agencies can share real-time information on arrests and seizures with other agencies, obtain immediate results to record check requests, and receive detailed analysis of drug seizures to support investigations.
The interdiction program is active along the highways and interstates most often used by drug organizations to move illicit drugs money. Since the initiation of this program in 1986, the following seizures were made on the Nation's highways: $ 510,000,000 in U.S. currency; 872,777 kilograms of marijuana; 116,188 kilograms of cocaine; 748 kilograms of crack cocaine; 369 kilograms of heroin, and 3,274 kilograms of methamphetamine. In the last calender year alone, from January 1998 through December 1998, Pipeline Seizures totaled: $86,189,860 in U.S. currency; 121,587 kilograms of marijuana; 14,860 kilograms of cocaine; 80 kilograms of crack cocaine; 75 kilograms of heroin; and 979 kilograms of methamphetamine. These results dramatically show the high value of this interdiction program and the importance of seizing and forfeiting drug related assets.
DEA Agents across the country, together with State and Local partners, carry out controlled deliveries of the drug shipments they seize. Our operations do not stop with intercepting the drugs or cash, they are used to develop information on the trafficking organizations. We follow the cash because it forms a trail to the criminals who transport the drugs. By identifying and arresting members of the transportation cells of drug trafficking organizations, along with the U.S. customers, law enforcement authorities are better positioned to target the command, control, and communication of a criminal organization, and arrest its leadership.
Many of our investigations and enforcement operations point to the connection between domestic law enforcement in the United States and the problems posed by international drug trafficking organizations in Mexico. These operations show, as do most of our investigations, that arresting the leaders of international organized crime rings often ultimately begins with a seemingly routine event in the United States. For example, on October 30, 1996, two troopers from the Texas Department of Public Safety performed a traffic violation stop (failure to drive in a single, marked lane) on a van with New York plates on Interstate 30. They became suspicious when they learned that one man was from New York while the other was from El Paso, and they were not well acquainted. Neither man owned the van and their stories conflicted regarding where they were going and where they had been. The driver and passenger consented to a search, and the troopers found 99 bundles of money hidden in the vehicle's walls. It took three hours to count the $1.3 million concealed in the van. As the officers continued their search, they discovered another $700,000, bringing the total to $2 million.
On December 3, 1996, after receiving an anonymous call, the Tucson Police Department and drug task force officers raided a warehouse containing 5.3 tons of cocaine. On December 13, 1996, the same Texas troopers stopped a northbound tractor trailer and seized 2,700 pounds of marijuana. Follow-up investigation connected this interdiction to their previous seizure of money, to the cocaine warehouse in Tucson, and to ongoing investigations in Texas, Arizona, Illinois, Michigan, and New York.
These investigations would not be as successful as they were, if we did not have asset forfeiture authority. All of these investigations provided our Special Agents and federal prosecutors with the key to uncover the operations of the Amado Carrillo-Fuentes organization. This powerful Mexican syndicate was apparently using U.S. trucks and employees to transport huge amounts of cocaine to various U.S. destinations. The resulting investigation, Operation RECIPROCITY, resulted in the seizure of more than 7.4 metric tons of cocaine, 2,800 pounds of marijuana, $11.2 million in cash, and 53 arrests. RECIPROCITY showed that just one Juarez-based organized crime cell shipped over 30 tons of cocaine into American communities and returned over $100 million in profits to Mexico in less than two years. Distribution of multi-ton quantities of cocaine, once dominated by the Cali-based drug traffickers, was now controlled from Mexico in cities such as Chicago, Dallas, Denver, Houston, Los Angeles, Phoenix, San Diego, San Francisco, and Seattle. The Carrillo-Fuentes organization was also beginning to make inroads into the distribution of cocaine in the East Coast, particularly New York City, the traditional stronghold of the Cali drug cartel.
A parallel investigation, Operation LIMELIGHT, secured 48 arrests, the seizure of $7.3 million in cash, 4,102 kilograms of cocaine and 10,846 pounds of marijuana -- keeping this poison off the streets of America.
Asset forfeiture plays a key role in our most complex investigations, some of which could not take place successfully without this vital tool. The 22 separate DEA, FBI, and U.S. Customs investigations in 8 different judicial districts from August 1997 to July 1998 came under the name of OPERATION RIO BLANCO. These investigations led to the identification of the top leaders of the trafficking group operating in the United States, 90 arrests, and the seizure of 3,500 kilograms of cocaine and $ 15 million in U.S. currency. Working within current legal restrictions, operations such as RIO BLANCO can inflict significant damage on drug trafficking organizations.
During OPERATION RIO BLANCO, drug assets were seized as a result of information obtained through wire intercepts of command and control communication devices. Some 30 court ordered wiretaps produced 5,000 intercepted phone calls -- 361 of which were encrypted. The seizure of the drugs and drug-related profits allowed law enforcement to identify members of the organization, trafficking routes and smuggling methods. Public notice of the seizure of the assets would certainly have resulted in the early culmination of the wire intercept investigation prior to the acquisition of sufficient evidence to prosecute the leaders of the organization. Details of ongoing investigations are routinely included in seizure reports which will be given to defense attorneys and their clients as part of the discovery process at the conclusion of the case.
Legislation now pending before the Congress would require that notice of such seizures be given within 60 days of the seizure ---no exceptions without an order of the court. If this provision becomes law, operations like RIO BLANCO will be severely hindered. We want to see a compromise, allowing DEA to approve a delay in the 60 day notification requirement in situations involving long term undercover or wire intercept investigations. Without these exceptions, many investigations would be severely hindered or compromised upon notification of the seizure of the assets.
Aside from criminal investigations, asset forfeiture plays a key role in money laundering investigations. Money laundering takes place because the drug lords need to insulate themselves from the drug smuggling, in an attempt to avoid criminal prosecution. The traffickers will attempt to obscure the drug profits, making it appear that the money is legitimately gained wealth. DEA's strategy in money laundering investigations is to direct law enforcement actions not only at the arrest of the violators and the seizure of their contraband, but also towards the seizure of their illegally obtained and laundered assets. Asset forfeiture takes the profit out of drug trafficking by seizing laundered money that can be tied to trafficking. There are several examples of successful DEA investigations and operations that have resulted in such seizures.
Operation DINERO was a long term DEA and IRS money laundering undercover program initiated by the Atlanta Field Division in 1994. During the first phase of DINERO, cash transactions and money pickups, were used to connect drug trafficking and drug cell money groups in the United States. These pickups were necessary in order for undercover agents to gain greater credibility with the drug trafficking organizations' hierarchy and to establish the traffickers trust in them to handle large financial transactions.
The establishment of a Class B bank was designed to serve as the vehicle for providing what appeared to be a legitimate channel for the laundering of drug proceeds. The pick-ups were also necessary in order that, in subsequent pick-ups of cash, the services of the undercover bank could be offered. This was the first time that DEA established and operated a fictitious bank. The bank was incorporated in the British West Indies on the island of Anguilla with the cooperation of the British government.
Phase two of this operation targeted major drug trafficker accounts and assets. Undercover "shell" corporations and bank accounts were established in several key cities throughout the United States. These corporations were multi-purpose "front" businesses established for the purpose of supplying "money laundering services. These front businesses not only gave undercover agents access to information on the financial dealing of the trafficking organization, but also assisted them in identifying distribution cells, which could be dismantled without affecting the undercover operation.
Operation DINERO was concluded with worldwide impact with the following results. Eight-eight individuals were arrested, nine tons of cocaine was seized, and $82 million dollars in cash and property was seized. These results occurred in the United States, Canada, Spain, and Italy. The operation clearly showed that these assets were, in fact, profits of drug trafficking. Not only was a significant portion of the international drug trafficking organization crippled by the arrests, but a small fortune was denied for those members of the organization who remained at large.
In a series of investigations in New York called Operation BOOKENDS, we used selective money pick-ups from cell organizations and offered money laundering service on a very limited and select basis to the trafficking organization. One of these investigations had an unique aspect, in that, one of the defendants in the 1982 case sold a DEA undercover agent 28.5 grams of cocaine, was convicted, and sentenced to 2 years probation to be served concurrently with another conviction. In November 1997, he negotiated with an undercover agent to launder narcotic proceeds, and in December 1997, he was arrested for money laundering and $9000 was seized. The story does not end there.
In December 1997, DEA negotiated with the president of a company associated with money laundering. During a nine-day period DEA was hand delivered approximately $972,000 by the president of the company and the previously mentioned convicted felon. There is no doubt these individuals were in possession of money from gotten from illegal activities. The two were arrested for money laundering charges in violation of 18 U. S. C. 1956. At the time of their arrests additional currency was seized, which totaled in excess of $700,000.
Another example is Operation SKYLINE, a money laundering operation directed towards the identification and arrest of members of the Cali Mafia. In 1995, negotiations for money laundering services had been established, and three cash pick-ups totaling approximately $250,000 were made. Two of the negotiators stated that they were to organize the laundering of $1.2 million dollars of cocaine proceeds. These negotiators were arrested and $540,000 in cash was seized at the time of arrest. A subsequent search of a hotel room resulted in the additional seizure of another $ 60,000 in cash.
In a separate investigation under Operation SKYLINE, a DEA undercover agent in Houston, Texas had been in extensive telephonic negotiations with a suspect to provide money-laundering services. The currency was in a parked vehicle and the undercover agent was provided with a description of the vehicle and the license of the vehicle. During these negotiations, the surveillance agents were able to locate the suspect and the "stash" vehicle. The undercover agent ultimately refused to take receipt of the money. Uniformed officers stopped the vehicle on a pretext, and recovered approximately $600,000 of U.S. Currency that was wrapped in Christmas paper in the trunk of the vehicle. Both suspects denied knowledge or ownership of the money. Upon the culmination of Operation Skyline over $2,700,000 was seized administratively along with 85 kilograms of cocaine, and twenty-one people were arrested.
These examples show how we use asset forfeiture to take the profit out of drug trafficking. We are sure that most Americans agree that criminals, including drug dealers, should not be allowed to benefit financially from their illegal acts. We can work within current Federal law. Current law provides that the profits and proceeds of designated crimes, as well as property used to facilitate certain crimes, are subject to forfeiture to the government. Asset forfeiture, operating within the strict requirement of the law, is one of law enforcement's most effective weapons against drug trafficking. If asset forfeiture law is unduly weakened, it would severely cripple law enforcement's ability to strike the kind of blows against drug trafficking illustrated in these examples.
In conclusion, let me again emphasize that DEA's asset forfeiture actions all take place within a legal framework with built-in protections for the innocent. As the illustrations in my testimony show, we conduct asset seizures against real criminals, and these actions are a vital part of DEA's efforts to combat drug crime.
Still, we are deeply concerned with the efforts now underway to weaken current law, making it much more difficult for law enforcement to forfeit drug related and other criminally derived seized property. We believe that weakening asset forfeiture laws will directly benefit drug dealers and their criminal associates. On the other hand, we support reforming asset forfeiture law. The DEA is working with the Department of Justice and other Federal agencies to craft legislation which can strike a balance between the needs of law enforcement and the rights of innocent individuals. We hope you will give the most careful consideration to the department's legislation, and will not support legislation which may have potentially crippling effects on drug law enforcement.
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