Pubdate: Mon, 10 Jul 2000
Source: U.S. News and World Report (US)
Copyright: 2000 U.S. News & World Report
Contact:  1050 Thomas Jefferson Street, N.W., Washington, DC 20007-3871
Fax: (202) 955-2685
Author: David E. Kaplan


A 'Model' Drug Task Force Comes Under Fire

Clay Waterman was dumbfounded. Authorities in Miami had seized his 
company's checking account, bank officials told him last June, for reasons 

Waterman was the manager of Penn Industries, a family-run supplier of auto 
accessories in Oklahoma City, and neither he nor the company had ever had 
trouble with the law before.

Behind the seizure, Waterman soon learned, was a police task force known as 
South Florida Impact. The task force, it turned out, had grown suspicious 
when Penn's only Colombian client had used a money exchanger to make cash 
deposits of $2,500 into Penn's Florida account. Impact claimed the deposits 
were profits from illegal drug deals.

So it seized Penn's entire account­some $78,000, including its payroll and 
operating accounts.

Facing bankruptcy, Penn's owner cashed in his retirement funds and took out 
a mortgage on his home. It was only after two months of negotiation­and 
$13,000 in legal fees­that Impact released all but $3,000 of the money. 
"There was no due process," says Waterman. "Whatever happened to innocent 
until proven guilty?"

You might say it fell victim to America's drug wars. To help break the back 
of the nation's $50 billion narcotics trade, law enforcement has 
increasingly turned to asset forfeiture, a process allowing the government 
to seize cash, cars, homes, and other property it claims is the result of 
criminal activity.

Forfeiture abuse has grown so common in recent years that Congress passed a 
law in April raising the burden of proof required before federal agents can 
take action. Significantly, though, the new law affects only federal seizures.

And as Clay Waterman can attest, many of the worst abuses occur at the 
local level.

Operating under a patchwork of state laws, local police departments have 
turned forfeiture into a cash cow that pays for new buildings, squad cars, 
and equipment.

Police along interstates in the South are notorious for stopping drivers 
and relieving them of "suspect" cash. And cops in Missouri last year 
outraged citizens by circumventing a state law directing forfeited funds to 
education: The cops simply turned over their seizures to federal agents, 
who kicked back up to 80 percent to local police. "The focus is on 
short-term, easy money, not detective work," laments Bill Gately, a former 
U.S. customs money-laundering expert. "When I went to police chiefs on big 
cases, I had to show what the [financial] return was."

Policing for profit may have reached its highest form in Florida­where 
billions in drug money wash through the state each year­and, in particular, 
with Impact. A force of some 50 officers backed by nearly a dozen police 
agencies, Impact funds itself entirely through asset seizures, and it doles 
out millions more dollars to area police departments. It has helped seize 
no less than $140 million in suspected drug money since 1994, while 
confiscating over 30 tons of cocaine and nearly 7 tons of marijuana.

And its work has resulted in 532 arrests and 71 deportations. Barry 
McCaffrey, the nation's drug czar, has cited Impact as a model of effective 
law enforcement. But to others, Impact is a case study in what has gone 
wrong with the headlong pursuit of criminal money: a record, they say, of 
unwarranted seizures, poor accountability, and cops more intent on grabbing 
cash than crooks.

A good deal. Impact was the brainchild of two retired federal agents, Woody 
Kirk of the U.S. Customs Service and Mike Wald of the Federal Bureau of 
Investigation. Wald gained national attention posing as a Saudi sheik's 
assistant in the 1970s Abscam sting.

In 1993, the two men pitched a novel idea to Miami-area police chiefs: a 
self-sustaining task force on money laundering that would split all seized 
assets among participating police departments.

Unlike Wald, who joined Impact as a Coral Gables police commander, Kirk 
became a full-time consultant to the group.

Along with his expertise in money laundering, he brought a gold mine of 
informants from whom he hoped to profit.

And profit he did. In a move that angered many in law-enforcement circles, 
Kirk fashioned an unusual deal in which Impact paid him 25 percent of all 
assets he helped seize. In just the first year, according to a state audit, 
Kirk earned $625,000. "It was," Kirk said, "a very good deal."

Too good, perhaps.

On learning of Kirk's commissions, the U.S. Justice Department threatened 
to cut off all cooperation unless the commissions stopped.

Impact complied, putting Kirk on a retainer that pays him $10,666 each month.

But Kirk's deals with informants continued. In an interview, Kirk confirmed 
that, as the commissions ended, he asked two of his informants to sign 
contracts pledging him a share of the 15 percent they received as a reward 
from asset seizures. One agreement, obtained by U.S. News, reveals that 
Kirk lent the man $50,000 and, in return, was to receive 60 percent of the 
informant's reward money.

Kirk admits lending another informant $115,000, also an advance on reward 

Kirk says these contracts were meant only as "an insurance policy" in case 
he left Impact, and he insists he personally never made money from them. 
But veteran law-enforcement officials say such deals, even if not illegal, 
undermine the integrity of police work and create conflicts of interest.

Former customs agent Bill Gately calls the commissions "abhorrent. . . . It 
just grates on the nerves of a lot of cops who did the work Kirk has done." 
Says John Moynihan, a former DEA specialist in dirty cash: "In 
money-laundering investigations, there can be no room for personal interest 
in any transaction." Impact officials also expressed surprise at Kirk's 
side deals and said that the matter is now under review.

Small comfort.

Of broader concern is Impact's dependence on forfeitures for its entire 
budget, which has fueled charges that it is overaggressive in seizing property.

Wald says that 95 percent of Impact's seizures go uncontested, but that's 
small comfort to Hernon Manufacturing. In 1998, the Orlando-based epoxy 
maker found its main bank account frozen after Impact traced a deposit back 
to its lone Colombian client.

Agents seized over $30,000, including Hernon's payroll; months later, most 
of the money was released. (Officials kept $6,000 for "legal fees.") 
Another 1998 case nearly bankrupted Omega Medical Electronics, a 
three-person supplier of medical instruments in Wilmington, N.C. Impact 
seized its entire account after tracing cash deposits from a Colombian 
client to a Miami branch of Omega's bank. Almost two years later, officials 
agreed to return nearly all of the funds.

Critics also say Impact is overreaching as it runs far-flung cases overseas 
and engages in money laundering on a scale virtually unheard of for a local 

The task force performs undercover "stings" to catch real money launderers, 
but the practice is controversial. To create a convincing front, Impact 
itself has washed more than $120 million since 1994, and that money has 
largely recycled back to drug dealers. These funds should be offset by the 
$140 million Impact has helped seize, but that is not enough of a return 
for some laundering experts. "You want to seize at least twice what you 
launder," argues ex-DEA analyst Moynihan. "If not, you're creating as much 
crime as you're solving." Accountability is also a concern.

When the DEA and FBI run undercover laundering cases, they must prepare 
inch-thick plans that are approved by the attorney general herself, with 
frequent reviews by special auditors.

By contrast, Impact's oversight comes from a steering committee of state 
and local officials, with audits by the city of Coral Gables. "We've never 
missed a nickel," says director James Butler.

Butler attributes all the flack against Impact largely to turf battles 
among rival agencies. "Nearly all the criticism is professional jealousy," 
he says. Still, concerns have mounted to the point where the DEA and 
Customs Service in Miami will no longer work with Impact, and the Justice 
Department is conducting a review.

Depending on the outcome, the inquiry could halt federal participation with 
the group entirely. Such a move, critics say, could send an overdue message 
to hundreds of local police agencies now hooked on money from asset seizures.
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