FUND GOVERNMENT WITH DIRTY MONEY

FEDERAL prosecutors last week persuaded a judge to stop a group of
Bernard L. Madoff's victims from using an involuntary bankruptcy
filing to claim more than $100 million of his personal assets. The
prosecutors' argument was simple: preserving Mr. Madoff's assets for
eventual forfeiture to the government is the best way to ensure as
much money as possible is returned to the victims of his Ponzi scheme
in an equitable manner.

Most people would assume that this is business as usual, that the
government routinely seizes the assets of criminals and returns them
to victims. After all, criminals should not have ill-gotten houses,
cars and yachts waiting for them when they finish their sentences. But
the reality is that the government's focus on seizing Mr. Madoff's
assets for restitution is unusual. Lawbreakers are rarely forced to
give up the proceeds of their crimes.

To take just one example: Between stints in prison over the past
decade, John A. Gotti, the former Gambino crime family boss, was able
to return to his luxurious house in Oyster Bay Cove, on Long Island,
where the median house value in 2007 was more than $2 million. Does
anyone believe the money that Mr. Gotti bought it with was
legitimately earned?

Every year in the United States, criminals amass hundreds of billions
of dollars in cash and goods from illegal activities -- mortgage
fraud, extortion, embezzlement, illegal gambling, bank fraud, public
corruption, human trafficking, identity theft, securities violations,
insurance fraud, intellectual property piracy and bankruptcy fraud --
though it's impossible to gauge the total take precisely. Drug
trafficking alone brings in an estimated $18 billion to $64 billion a
year, while estimates of Medicare fraud earnings are $35 billion to
more than $70 billion a year. The part of that loot that is seized by
federal, state and local governments amounts to a few billion dollars
at most. Here again, it is difficult to assess the exact value because
so many different government entities are involved in collecting it,
and no one agency adds it all up.

Even when criminals are behind bars, their profits gather interest in
bank and securities accounts, or are held in real estate, cars,
aircraft, yachts, art, jewelry, racehorses and countless other assets.
If they were routinely seized, it would bring in tens of billions to
compensate victims or finance law enforcement, break the backs of
criminal organizations and deter future crimes.

The problem is not that the government lacks the authority to
confiscate criminal assets. The very first Congress, in 1789,
authorized the federal government to seize criminal assets -- as a way
of taking illegal goods away from smugglers. Today, some 200 federal
criminal and drug control laws include provisions for asset
forfeiture. And the 50 states and the District of Columbia all have
forfeiture provisions of their own.

The problem is that governments -- national, state and local -- fail
to exercise this power fully. Eric Holder, the attorney general, has
already expressed his support for doing so. Back in 1999, when he was
the deputy attorney general, he told the Senate Judiciary Committee,
"From telemarketing to terrorism to counterfeiting to violation of the
food and drug laws, the remedy of asset forfeiture should be applied."

Now Mr. Holder is in a position to order that all federal law
enforcement agents and prosecutors be trained to pursue the financial
aspects of every case from the start, with an eye toward forfeiture of
the criminal's assets. Modern asset forfeiture laws rest on the notion
that it is not enough to incarcerate people involved in criminal
activity. Equal attention must be given to attacking and dismantling
the economic base of the criminal organization.

For this to happen, the Department of Justice has to overcome a
culture in which prosecutors focus on the arrest and conviction of
individuals to the exclusion of the broader targets, entire criminal
organizations.

Congress must also close a gaping hole in the victim restitution laws,
which provide no authority for the pretrial restraint of assets of
those accused of orchestrating frauds. Too often, dirty money simply
disappears into shell companies and impenetrable offshore havens
before the trial even begins.

But upon a showing that fraud was probably committed, a prosecutor
should be authorized to restrain all of the suspect's assets; the
question of who gets them would be resolved after the criminal justice
system has finished its work. The British already do not differentiate
between asset forfeiture and restitution. They merge the two concepts
and call it asset recovery. We should borrow a page from them.

The Justice Department must also make sure that its state and local
counterparts in law enforcement get the training and resources to
manage asset forfeitures of their own.

For too long government has been unwilling to take back the wealth
that criminals have stolen from taxpayers. We can no longer afford to
ignore the opportunities offered by our under-enforced asset
forfeiture laws.

Charles A. Intriago, a former federal prosecutor, publishes a Web site
for law enforcement officials about asset forfeiture. Robert A.
Butterworth, a former attorney general of Florida, is a lawyer.