HOLGER JENSEN October 23 1989



HOLGER JENSEN October 23 1989




Since 1984, the U.S. marshal’s office in Miami has been the reluctant owner of a 50-per-cent interest in a partnership that owns Fudruckers, a popular hamburger outlet just south of the city on South Dixie Highway, that is worth an estimated $1 million. It cannot sell the restaurant. Although a federal judge ordered half the business to be seized five years ago because it was financed by money earned through the sale of drugs, the financing of the other half was found to be legitimate, and the judge also ruled that it would have been unfair to deprive those partners of a livelihood. “We are still waiting for a ruling on whether it’s a general partnership, which makes our share worth half a million dollars, or a limited partnership worth $20,000,” said Marshal Dan Horgan. Meanwhile, since he and his men know nothing about selling hamburgers, the other partners, who

are local businessmen, continue to operate the business and enjoy their profits.

The Fudruckers case typifies the growing and complicated problem faced by American law enforcement agencies in administering a vast storehouse of drug assets seized in their ambitious drive against money launderers. While Canadian law enforcement officials have yet to be confronted by warehouses brimming with seized assets, the problem looms on the horizon. Indeed, Bill C-61, Canada’s new socalled freeze-and-seize statute that went on the books last January, raises a host of assetmanagement and liability concerns that law enforcement officials have only begun to address. Said Insp. Bruce Bowie of the RCMP’s 60person Anti-Drug Profiteering Section: “Ideally, it would be nice to liquidate everything and just take the cash. But the American experience has shown this cannot always be done.”

For their part, American lawmen complain that tracking down drug traffickers and their ill-gotten gains is hard enough without being forced to do what they have no training for. Said Horgan: “I spend half my time worrying about cars, planes and real estate, the other half doing what I signed up for.” To help him out, the marshal’s office of Miami, the busiest district in the United States in terms of asset seizures, has doubled its staff to 16 clerical workers and 65 deputies—one of them a full-time asset-management supervisor—from 30 deputies and five clerical workers in 1984.

Sting: Before the United States started going after major drug barons and their illegal profits in a well-financed and determined campaign, the marshals were re| sponsible mainly for the > security of the federal courts, g the transportation of federal t; prisoners and the witness u protection program. Now, Horgan administers all assets seized in nine South Florida counties by the Drug Enforcement Administration (DEA), the immigration and naturalization service, the border patrol and the FBI. The agencies get to use what they need from the seized assets for official sting operations: seized money for drug buys, or a confiscated Ferrari for an agent posing as a drug dealer.

This year alone, Horgan says, his office has received $100 million worth of property and goods along with $48 million in cash. In a variety of ways, he has managed to dispose of $70 million worth of the property, but still holds $166 million in various assets while 1,218 separate cases wend their way through the courts. His inventory includes 404 pieces of real estate valued at $113.2 million, 55 boats worth $8.6 million, 336 cars worth $6.6 million, 27 aircraft worth $3.4 million, more than $1 million worth of jewelry and $83,000 in electronic equipment. As well, the marshals have confiscated certificates of deposit and other financial instruments such as bonds that amount to more than $2 million.

Cadillac: The $48 million in cash that has been seized is simply turned over to the U.S. Treasury, but the real estate and other seized assets are not so easily disposed of and must be managed in such a way that their value does not deteriorate. Horgan cited the case of a seized Cadillac that was put into government use and driven 25,000 km over a 14-month period. Subsequently, an Appeal Court found that the judge had erred in ordering seizure of the car, and it had to be returned to its original owner. But the owner no longer wanted a car with extra mileage. “We had to look up the original


book value and pay him what it was worth at the time of seizure,” said Horgan.

Growth: Still, the marshal’s office is not worried about court reversals that could force it to compensate suspected criminals.

The U.S. government maintains a floating seized asset fund of $24 million to take care of such contingencies.

And, given the expanding rate of seizures, Horgan said that there appears to be a steady stream of money coming into the marshal’s office.

Said Horgan: “We have to protect the integrity of our seizure laws or they will be watered down. Also, I have to get top dollar for what’s forfeited.” He is currently trying to sell an $ 11-million seaside condominium complex in Pembroke Pines, north of Miami, that once belonged to drug boss Pablo Escobar, head of the notorious Medellin cartel, which is operated out of Colombia. Last week,

he managed to unload—for -

$5 million—the Fort Apache Marina, confiscated from Ben Kramer, winner of the 1986 U.S. open class offshore powerboat championship, and a well-known sports figure in Miami. A year ago, Kramer was convicted in Illinois federal court of involvement in a smuggling ring that distributed more than 500,000 lb. of marijuana across the U.S. between 1980 and 1987. _

Such gigantic seizures have led to a sudden growth industry for the marshal’s office—real estate and property management. Horgan maintains contracts with more than 30 real estate brokers who, in addition to trying to sell the property, must collect rents and arrange for maintenance such as grass cutting and pool cleaning. But the government no longer seizes liabilities: properties with liens, run-down properties or those charged with Environmental Protection Act violations. “Why expose the taxpayer to liability when you can expose the criminal to it,” said Horgan. And the marshals rarely seize the contents of a home because, explains Horgan, “it’s not worth

the trouble to go after washing machines.” On the other hand, Horgan added, “Louis XIV furniture, we’d definitely go after.” Once for-

feited, the properties are sold either by brokers, who get the same commission as in a private sale, or by sealed bid.

Luxury: Horgan also employs private contractors to store and maintain cars, planes, boats and perishable assets. Most of the cars are sold at a monthly auction of government surplus vehicles. The planes are handled by a

national sales broker, and the boats are sold off in Miami-area marinas. Unique, high-value items, such as a 1935 Hudson Terraplane antique car, a 50-foot luxury yacht and a surplus air-force tanker plane that was found loaded with marijuana drugs, are advertised separately in specialty magazines and sold by the marshal himself.

A marshal does not have the authority to sell an item or property for less than 90 per cent of

its appraised value. But he is allowed to exercise a certain amount of discretion. Earlier this year, Horgan distributed food from a grocery store, seized by the DEA as a front for distributing heroin. The goods went to needy people through churches in Overtown, a Miami slum rocked by two serious race riots in recent years. He explained: “By the time that

_ case came to court, the food

would have gone bad anyway. So I decided to do some good with it. It was a calculated risk that, as a property manager, I sometimes have to take.”

Booty: It is a risk that Canadian law enforcement officers now will also have to take. While the $30 million in drug assets they have seized this year is minuscule in comparison to U.S. figures, it is half of the total taken over the past eight years in Canada. And, as they become more comfortable with C-61, the booty will increase, and they too will find themselves 5 becoming asset managers as z well as law enforcement i officers.