part9-39

The primary determination to be made before seizing
property for forfeiture is whether the United States is likely to prevail
in the ensuing forfeiture action. To make this determination, Criminal Tax
(CT) Counsel and the local forfeiture AUSA should be consulted to assure there
is sufficient evidence to show probable cause for the seizure and proof of
forfeitability by a preponderance of the evidence at trial. The determination
of evidentiary sufficiency should also include a realistic assessment of the
validity of potential defenses that could ultimately defeat the forfeiture.

When determining whether to seize property that
is subject to forfeiture, the type of property involved and its value should
be considered and analyzed. The analysis should be a realistic estimate of
the condition and value of the property, the extent of the violators interest,
and the potential validity of third-party claims.

The seized property contractor should be consulted
to discuss possible problems with the propertys storage and preservation
during the forfeiture proceeding. The Warrants and Forfeitures Section and
the Executive Office for Asset Forfeiture (EOAF) should also be contacted
when particularly difficult problems of business management, maintenance,
and/or eventual disposition are presented.

If it is likely that third parties, such as lienholders
or victims, will be entitled to relief from the forfeiture, or if the costs
and difficulties of storage, preservation, and disposition will be unduly
burdensome, it may be ill-advised or wasteful to seize the property and attempt
to forfeit it. The same is true if the target property has a low monetary
value or is in poor condition.

The EOAF Directive Number 20, Net Equity Requirements
for Seized Property, provides policy for the net equity requirements of seizures
by Treasury law enforcement agencies. Minimum net equity is the difference
between current market value/appraised value of the property less innocent
third party liens/motgage(s) and estimated disposition expenses.

Criminal Investigation has established higher
net equity requirements than those contained in Directive Number 20. The minimum
net equity requirements established by CI on individual assets are as follows:

The minimum net equity requirements may be waived
in individual investigations to serve an overriding law enforcement objective
such as:

The aggregate net equity is the total value of
all the property seized from a common owner where the property is subject
to forfeiture under the same statutory authority and on the same factual basis.

Pursuant to CIs Law Enforcement Manual (LEM)
9.14, the aggregate net equity for property to be forfeited under 18 USC §981
should be more than $25,000. Exception to the $25,000 limit will be allowed
in the instance of compelling local compliance needs such as:

The SAC must approve any downward departure, in
writing, from either an individual assets net equity requirement or the $25,000.
The explanation for the departure will be documented in the seizure/forfeiture
file.

The purpose of forfeiture is not to make a profit
for the United States, but to provide a remedial device to impose liability
on persons who knowingly or consensually acquiesce in the illegal use of their
property, or in the acquisition of criminally derived property. Therefore,
even if the property has little value, its forfeiture may serve legitimate
and overriding law enforcement objectives by depriving the violator or persons
in concert with the violator, of its use and availability.

When the proposed seizure and forfeiture involves
identifiable victims other than the government, and such identifiable victims
have an interest in the seized property which will likely result in mitigation
in favor of the victims, consideration should be given to not pursuing the
forfeiture. Criminal Investigation should pursue forfeiture if it appears
the assets may be sold, disposed of, concealed or otherwise depleted before
distribution to victims. Criminal Investigation should weigh public perception
relative to forfeiture action where assets can only be protected by seizure
by the government for eventual distribution to the victims, versus the cost
of distributing said assets to victims through the forfeiture process. Factors
weighing against pursuing the forfeiture include injunctions to prevent disposition
or encumbrance of the property, or the likelihood that other circumstances,
including existing law suits, liens, etc., will allow distribution of assets
to the victims.

It is the general practice of Criminal Investigation
that Title 18 seizure/forfeiture authority will not be used in tax or tax-related
investigations. However, there may be instances where Title 18 seizure/forfeiture
provisions are appropriate in tax or tax-related investigations. Pre-seizure
reviews and approvals are needed in these cases.

The use of such forfeitures in tax and tax-related
investigations require approval by the Department of Justice Tax Division
pursuant to the provisions of Tax Division Directive 99. Forfeitures in tax
or tax-related investigations must be reviewed by Area Counsel, have the concurrence
of the Director, Field Operations, and be approved by the Chief, Criminal
Investigation (CI). If approved, the Chief, CI will then refer the matter
to Tax Division for authorization to pursue the forfeiture action pursuant
to Directive 99.

The use of Title 18 forfeiture provisions in tax
or tax-related investigations must be limited to egregious circumstances where:

The Civil Asset Forfeiture Reform Act of 2000
(CAFRA) amended 18 USC §3322, Disclosure of Certain Matters Occurring
Before Grand Jury, to allow a person who is privy to grand jury information
received in the course of duty as an attorney for the government, or disclosed
under the Federal Rules of Criminal Procedure (FRCrP) Rule 6(e), to disclose
that information to an “attorney for the government” for use in connection
with any civil forfeiture provision of federal law.

Because the definition of
“attorneys
for the government”
may vary between districts, the local AUSA should
be consulted before grand jury information, not made public through an indictment
or application and affidavit for search or seizure warrant, is disclosed to
CT Counsel where their assistance is needed to prepare a law and fact memorandum.

Because the rules and definitions of grand jury
information may also vary between circuits and districts, the local AUSA should
be consulted regarding the disclosure of grand jury information in connection
with civil forfeiture actions.

An ex parte order is the only method that allows
a special agent to utilize tax return and return information in an affidavit
for a seizure warrant or in a complaint for civil forfeiture (in non-tax investigations)
and in subsequent litigation.

Pursuant to 26 USC §6103(i)(1), for non-tax criminal investigations or 26 USC §6103(i)(4), for non-tax
civil investigations, a Federal district court judge or magistrate may grant
an ex parte order for the disclosure of tax return and return information:

If an ex parte order has been granted solely pursuant
to 26 USC §6103(i)(1), a second ex parte order pursuant to 26 USC §6103(i)(4)(A)
must be obtained prior to use in a related civil forfeiture (in non-tax criminal
investigations).

If tax return and return information has been
accessed through the authorization of a tax grand jury investigation, an ex
parte order pursuant to 26 USC §6103(i)(4)(A) must be obtained to utilize
tax return and return information in a related civil forfeiture action (in
non-tax criminal investigations).

In a non-tax criminal investigation, an ex parte
order obtained pursuant to 26 USC §6103(i)(1) and (i)(4) is the preferable
method to access and utilize tax return and return information in a related
civil forfeiture.

The security, budgetary, and accounting problems
associated with the seizure and retention of large amounts of cash creates
great concern within CI, the Department of the Treasury, and Congress, and
raises both financial management and internal control issues.

Criminal Investigation policy mandates that domestic
and foreign currency seized for forfeiture, except where it is to be used
as evidence or held as a
“collectible asset”
, must be
expeditiously counted, processed, and deposited to the Customs Suspense Account
within 5 days of seizure. The use of safe deposit boxes or other secure methods
of storing seized currency temporarily is acceptable when necessary.

The EOAF Directive Number 4, Seized Cash Management
Policy, establishes policy on the management of seized cash, including levels
of approval to hold seized currency for evidentiary purposes.

Because the value of financial instruments can
be lost or diminished if proper procedures are not followed, EOAF issued Directive
Number 2, Seizures of Financial Instruments. The following financial instruments
seized for forfeiture are to be handled in accordance with the procedures
in Directive Number 2:

If feasible, title and lien searches should be
considered prior to the seizure of certain conveyances for forfeiture. State
motor vehicle agencies, the Federal Aviation Administration, and the US Coast
Guard keep records of ownership and certain security interests which can be
indispensable in deciding whether to pursue forfeiture.

The seized property contractor should be consulted
about the marketability of certain conveyances to be seized and the possible
need for a prompt interlocutory sale of the property to prevent deterioration
or damage and to avoid excessive storage and maintenance costs.

The EOAF Directive Number 33, Seizure of Motor
Vehicles, Payment of Leins and Official Use Requirements, directs seizing
agencies and the seized property contractor to use the National Automobile
Dealers Association (N.A.D.A.) Official Used Car Guide as the standard source
for assigning
“appraised”
or
“fair market
”
values of seized vehicles.

Seizing perishable goods poses the immediate problem
of needing to maintain the condition of the asset at time of seizure. It is
extremely important to involve the seized property contractor in pre-seizure
discussions since the value of the asset can deteriorate rapidly if appropriate
measures are not taken.

The seized property contractor provides pre-seizure
and post-seizure assistance and property management services for both residential
and commercial properties. These services are detailed in the seized property
contractors Statement of Work, which completely describes the seized property
contractors work requirements.

At a minimum during pre-seizure planning, the
AFC/Contracting Officers Technical Representative (COTR) will prepare a Disposition
Order. The order instructs the seized property contractor to obtain a title
report (to determine the legal owner of the property and identify all recorded
mortgages, liens, easements, etc.) and prepare a limited or
”
drive-by”
appraisal of real property and/or a business and, in the case
of an ongoing business, a business operation analysis and business operations
plan. The seized property contractor can also be instructed to provide a net
equity and cost benefit analysis to assist in pre-seizure planning.

The seized property contractor is required to
immediately notify the AFC/COTR upon finding any lead-based paint or other
environmental issues during pre-seizure analysis and provide their management
recommendations. These issues are especially critical in evaluating whether
or not to proceed with the forfeiture of certain real property and/or ongoing
businesses. Environmental issues and lead-based paint are covered in subsections
below.

It is the policy of both the Department of the
Treasury and the Department of Justice that contaminated real property, or
potentially contaminated with hazardous substances may, in the exercise of
discretion, be seized and forfeited upon a determination by the United States
Attorney in the district where the property is located. The determination
is made in consultation with the seizing agency and the seized property contractor.
The United States Attorney may delegate this authority to an AUSA, with a
provision for review by a supervisor.

The Department of the Treasury policy is contained
in EOAF Directive Number 7, Seizure and Forfeiture of Real Property That is
Potentially Contaminated, or is Contaminated, with Hazardous Substances.

This policy is applicable regardless of the type
or source of the hazardous substance(s).

This policy is based on the ability of the United
States to invoke an
“innocent owner”
defense from liability
for hazardous substance contamination found on real property, if such contamination
resulted from a prior owners activities.

However, if the real property becomes contaminated
with a hazardous substance after the United States becomes the owner, then
the
“innocent owner”
defense is inapplicable to that contamination.
This situation normally will arise when the United States operates a business
or activity on the property that results in the storage, release or disposal
of hazardous substance (e.g., gasoline station, metal plating shops, dry cleaners,
printers, etc.).

This policy envisions United States Attorneys
exercising discretion in the seizure and forfeiture of real property that
is contaminated or potentially contaminated with hazardous substances. Normally,
such properties should not be forfeited unless there is at least $30,000 in
net equity. Furthermore, such properties should not be forfeited when there
is reason to believe that property is substantially contaminated with hazardous
substances and that such contamination would render the property unmarketable.
Clean-up costs can be considerable particularly when the water table is involved.
In making this determination an environmental assessment may be ordered, which
will be paid by the Treasury Forfeiture Fund.

The Department of Housing and Urban Development
(HUD) first promulgated regulations in 1978 regarding the use and disposal
of residential property that may have lead-based paints. The regulations require
Federal agencies to:

The EOAF issued Directive Number 30, Interim Guidelines
re: Lead-Based Paint in Residential Property Built Prior to 1987, to set policy
with regard to the following:

If the decision is made to progress to seizure/forfeiture
of a residential real property found to be contaminated with lead-based paints,
or it is assumed that a residential real property is contaminated with lead-based
paints based solely on the fact that the property was constructed prior to
1978, the AFC must obtain written concurrence from EOAF. The written request
will be made by memorandum from the SAC to the Director, Executive Office
for Asset Forfeiture, through the Director, Operations Policy and Support.
Directive Number 30 sets forth what information that should be included in
the written request.

The seized property contractor has been instructed
not to take real property subject to Directive Number 30 into custody without
the required written concurrence of the Director, Executive Office for Asset
Forfeiture.

In 1966, Congress passed the National Historic
Preservation Act (NHPA) to preserve irreplaceable parts of the American heritage
to allow future generations of Americans to benefit from the cultural, educational,
and aesthetic qualities of these historic places.

The NHPA not only applies to Federal buildings
and land managed by Federal agencies, but it also applies to all other historic
properties, which may be seized, and subject to forfeiture. The EOAF issued
Directive Number 25, Department Policy Regarding the Seizure and Forfeiture
of Real Property That is Included in or Eligible for the National Register
of Historic Places, to set policy for Treasury law enforcement agencies seizing
and forfeiting these properties to ensure that these properties are managed
in such a way that prevents the loss of their historic integrity and protects
national interests.

The EOAF Directive Number 3, Seizure of Occupied
Real Property, sets forth policy regarding the seizure of occupied real property.
Except as provided in 18 USC §985, real property that is the subject
of a civil forfeiture action cannot be seized before entry of an order of
forfeiture. Real property that is subject to criminal forfeiture generally
cannot be seized prior to entry of a preliminary order of forfeiture.

Directive Number 13, Occupancy Agreements, was
developed by EOAF to reclassify leases subject to state landlord/tenant laws
and establish that the agreement is a license. This will enhance the United
States position in evicting occupants when necessary.

Directive Number 3 and Directive Number 13 also
apply to occupied real property after the entry of an order of forfeiture.

Concurrence by Headquarters CI, is required before
real property and businesses are seized and taken into custody. Headquarters
concurrence is not required prior to the filing of a complaint or lis pendens,
a post and walk, or the indictment of real property or businesses. However,
concurrence of Headquarters CI, must be obtained prior to the physical seizure
of real property and businesses through a final judgment/order of forfeiture
(civil) or preliminary order of forfeiture (criminal).

Headquarters concurrence should be obtained by
memorandum, prepared by the AFC, from the SAC to the Director, Warrants and
Forfeiture Section (CI:OPS:WF), as early as possible in order to assist field
offices in ensuring that the contemplated enforcement action complies with
the strategic goals of the agency and EOAF. The memorandum should concisely
state the economic as well as law enforcement value of the seizure. The memorandum
should also address any sensitive issues, possible adverse publicity, and
risks associated with the seizure.

The field office must perform a thorough pre-seizure
analysis of each real property and business to be seized. The AFC/COTR should
task the seized property contractor with assisting in a pre-seizure analysis
that includes the following:

The results of the pre-seizure analysis with reference
to the steps listed above and the date they were performed by the seized property
contractor should be included in the memorandum requesting HQ concurrence
to seize real property or ongoing businesses. The Real Property/Business Pre-Seizure
Checklist and Net Equity Worksheet forms located in Document Manager should
be completed and attached to the memorandum. An approval signature line should
be included at the end of the memorandum.

Personal Property and Real Property/Business Pre-Seizure
Checklists and Net Equity Worksheet forms are located in Document Manager
and should be prepared prior to the seizure of property. Any pre-seizure analyses
requested from the seized property contractor will be documented in the seizure/forfeiture
file. An explanation for any downward departure from either an individual
asset net equity requirement or the $25,000 aggregate will be documented in
the seizure/forfeiture file.

Section 1203(b)(1) of the IRS Restructuring and
Reform Act of 1998, P.L. 105-206, establishes a number of actions which, if
committed by IRS employees in the course of their official duties, will require
termination of employment. Section 1203(b)(1) prohibits
“willful
failure to obtain the required approval signatures on documents authorizing
the seizure of a taxpayers home, personal belongings, or business assets.
”
While the legislative history of the Restructuring and Reform Act
suggests that this provision was primarily meant to apply to collection activities,
it is considered to apply to CI seizures for evidentiary and forfeiture purposes.

Section 1203(b)(1) was determined by Division
Counsel/Associate Chief Counsel (Criminal Tax), to apply to CI seizures of
a taxpayers home, personal belongings, or business assets, both for 26 USC
§7301 and 7302 seizures, as well as seizures under 18 USC §981 and
982.

Prior to the seizure of any property, both for
26 USC §7301 and 7302 seizures, and seizures under 18 USC §981 and
982, an Enforcement Action Review Form must be prepared and the required approval
signatures obtained. The Enforcement Action Review Form is located in Document
Manager.

The Risk Assessment Guide and Post Enforcement
Operation Summary Form may also be required in an enforcement operation involving
the seizure of property depending on the nature of the action and the local
field office policy. These documents are also located in Document Manager.