Revision of Regulations Governing the Remission or Mitigation of Civil and Criminal Forfeitures

DEPARTMENT OF JUSTICE

28 CFR Part 9

[AG ORDER No. 2064-96]

RIN 1105-AA23

Revision of Regulations Governing the Remission or Mitigation of

Civil and Criminal Forfeitures

AGENCY: Department of Justice.

ACTION: Final rule.

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SUMMARY: This order amends and adopts rules that govern the processing

of petitions for remission and mitigation of forfeitures by the

Criminal Division, the Drug Enforcement Administration, the Federal

Bureau of Investigation, the Immigration and Naturalization Service,

and the United States Marshals Service of the Department of Justice.

The amendments are made in an effort to ameliorate the harsh results in

individual forfeiture cases and to provide relief to innocent persons

whose property is used by others for criminal purposes.

EFFECTIVE DATE: February 3, 1997.

FOR FURTHER INFORMATION CONTACT:

Nancy L. Rider, Deputy Chief, Asset Forfeiture and Money Laundering

Section, Criminal Division, Department of Justice, Washington, DC

20530, telephone (202) 514-1263. This is not a toll-free number.

SUPPLEMENTARY INFORMATION:

Background

This order amends 28 CFR part 9 primarily so the Department can

transfer forfeited assets to victims of the offense or related offenses

underlying particular forfeiture actions. Under the current

regulations, standing to seek remission or mitigation is limited to

parties having a present legally cognizable interest in the forfeited

property (e.g., owners, lienholders), and unless a particular victim

has such an interest, forfeited assets cannot be used to restore

property to those victimized by the criminal conduct. The amendments

permit the Department to transfer certain forfeited assets to victims

of certain fraud-type offenses who lack a present ownership interest in

particular forfeited assets but who are victims of the offense

underlying the forfeiture or related offense where the applicable

statutes allow such a transfer. These regulations also clarify certain

ambiguities in the present regulations pertaining to who has standing

to file petitions for remission. The notice of proposed rulemaking for

these regulations was published in the Federal Register on June 29,

1994 (59 FR 33457).

Comments

The Department received five comments during the comment period

that ended July 29, 1994. Three of the comments pertained to issues

relating to the use of remission to transfer seized and forfeited

property to victims of the criminal or criminal conduct. Two of the

comments concerned the manner in which victims' interests are treated

under the new regulations. The purpose of remission is not to effect

restitution to all victims of crime, but rather to ameliorate the

hardship that may result from forfeiture to those who (i) have an

ownership interest in the property, and (ii) others who, even though

they do not have a cognizable interest in the property, have incurred a

monetary loss as a result of the same underlying or related criminal

offense and who are uninvolved in or unaware of the underlying criminal

activity that resulted in the forfeiture. Restitution, on the other

hand, a remedy that is often confused with remission, is available as

an equitable remedy designed to make parties whole and to prevent

unjust enrichment.

The Department believes the definition of victim for purposes of

the relevant statutes is included in the definition of an owner as

found at section 9.2(1), where the victim has a legally cognizable

interest in the forfeited property. Victims who do not

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have a legally cognizable interest in the property that has been seized

and forfeited, but have been victimized by the criminal from whom the

property was seized are non-owners and are, to the extent the

Department may recognize those interests, covered by section 9.8.

One of the two comments concerning victims suggested the

regulation's definition of the word victim be expanded to include an

owner-victim, whose ownership interest is based on the fact that the

forfeited property was acquired with property wrongfully taken from

him, but where the forfeiture was not based on an offense underlying

the victim's loss. The example cited was that of a thief who steals

money and buys a car that is subsequently forfeited for an offense

unrelated to the theft. The concern is that the person from whom the

thief stole the money would not be a victim covered under the

regulations if the forfeiture was based on an offense unrelated to the

theft. The commenter is mistaking remission for restitution. If the

government seized and forfeited the stolen money for a reason

unconnected to the theft, and the money was clearly taken in the theft,

the money would be restored to the individual from whom it had been

stolen as the rightful owner. If the thief used stolen money to

purchase a vehicle that was subsequently forfeited for a reason

unconnected to the theft, the government would not be able to restore

the stolen money, nor the vehicle purchased with stolen money, for many

practicable and evidentiary reasons, unless the victim clearly

established a legally cognizable interest in the forfeited property and

thus demonstrated his interest as that of an ``owner'' under section

9.2(1).

Another commenter stated that sections 9.2(v) and 9.8 are

inconsistent, in that section 9.2(v) only applies to victims of the

offense underlying a forfeiture and excludes or of [a] related offense,

which appears in section 9.8. The commenter was correct and the

distinction is purposeful. As noted, there is a difference between

section 9.2(v) and section 9.8 victims: section 9.2(v) covers owners,

who have been victimized by the criminal conduct that was the basis of

the forfeiture, while section 9.8 covers non-owners who have been

victimized by the criminal conduct that was the basis of the forfeiture

or related to the forfeiture. For example, section 9.8 would address

victims of a mail fraud scheme where the forfeiture is brought pursuant

to the RICO statute--18 U.S.C. Sec. 1963, where such a person would not

be covered by section 9.2(v).

Because the sections were drafted to address different types of

victims for the reasons previously given, the suggestion to align the

two definitions of ``victim'' would be inconsistent with the purpose

and intent of these regulations.

The third comment concerning victims issues maintained that the

regulations do not appear to have been drafted with an emphasis on

forfeiture cases that arise out of financial crimes, i.e., schemes to

defraud banks and individuals. The regulations implement federal laws,

and relate to the remission of forfeitures conducted pursuant to

statutes such as sections 981 and 982 of title 18, United States Code,

which permit the forfeiture of the proceeds of certain bank fraud

violations, as well as the criminal proceeds of other violations of

federal law predicated on schemes to defraud.

Another comment suggested that the regulations ignored forfeitures

under title 26, for failure to file Currency Transaction Reports

(CTRs), and title 31, for failure to file Currency and Monetary

Instrument Reports (CMIRs). It stated that since these statutes do not

contain innocent owner provisions, there is no avenue for remission or

mitigation for individuals who are affected by title 26 or title 31

forfeitures. The Department of Justice responds by pointing out that

section 9.5(a)(1)(ii) specifically provides that ``[i]f the applicable

civil forfeiture statute contains no innocent owner defense, the

innocent owner provisions applicable to 21 United States Code

Sec. 881(a)(4) shall apply.''

The last comment suggested that section 9.6(f)(1)(iii) be amended

to allow a judgment creditor to be recognized if he or she had no

knowledge of the acts giving rise to the forfeiture at the time of the

transaction upon which the judgment was based instead of requiring the

creditor to have no knowledge ``at the time the judgment became a lien

on the forfeited property.'' The Department responds that section

9.6(f)(1)(iii) is necessarily consistent with the time-of-knowledge

standard applicable to all petitioners pursuant to section 9.5. The

suggested amendment must be rejected as it would provide judgment

creditors with an unfair advantage over other petitioners in the

petition for remission process.

Recent changes in the Immigration and Naturalization Service

organizational structure have modified internal decision-making

authority. Accordingly, under section 9.1(b)(1), authority to grant

remission and mitigation is now delegated to the INS Regional

Directors.

The Department has deleted the last sentence of the definition of

the term ``owner'' in section 9.2(l), which provided that ``[t]he mere

existence of a community property interest without proof of financial

contribution to the purchase of the property will not be deemed

sufficient to support a petition.'' This provision was included to

guard against spouses of drug dealers and other criminals obtaining a

windfall from the proceeds of illegal activities where the petitioning

spouse made no financial contribution to the purchase of the property

at issue. Though this rationale remains a concern, the sweep of the

provision was unduly broad, possibly precluding meritorious petitions

by innocent spouses claiming an ownership interest under state

community property laws. Accordingly, the Department will review

petitions predicated upon state community property laws on a case-by-

case basis and may deny such petitions where the petitioning spouse

would be unjustly enriched by the proceeds of the offending spouse's

criminal wrongdoing.

The Department has made other technical changes in section 9.8

which do not require an additional notice and comment period.

Other Matters

In accordance with the Regulatory Flexibility Act (5 U.S.C.

605(b)), the Attorney General certifies that this rule does not have a

significant adverse economic impact on a substantial number of small

entities. This regulation will not have substantial direct effects on

the States, on the relationship between the national government and the

States, or on distribution of power and responsibilities among the

various levels of government. Therefore, in accordance with Executive

Order 12612, it is determined that this rule does not have sufficient

federalism implications to warrant the preparation of a Federalism

Assessment. This regulation has been drafted and reviewed in accordance

with Executive Order 12866, Sec. 1(b), Principles of Regulation. The

Department of Justice has determined that this rule is a ``significant

regulatory action'' under Executive Order 12866, Sec. 3(f), Regulatory

Planning and Review; accordingly, it has been reviewed by the Office of

Management and Budget.

List of Subjects in 28 CFR Part 9

Administrative practice and procedure, Crime, Seizures and

forfeitures.

By virtue of the authority vested in me as Attorney General by 28

U.S.C. 509 and 510, 28 CFR part 9 is revised to read as follows:

[[Page 316]]

PART 9--REGULATIONS GOVERNING THE REMISSION OR MITIGATION OF CIVIL

AND CRIMINAL FORFEITURES

Sec.

9.1 Authority, purpose, and scope.

9.2 Definitions.

9.3 Petitions in administrative forfeiture cases.

9.4 Petitions in judicial forfeiture cases.

9.5 Criteria governing administrative and judicial remission and

mitigation.

9.6 Special rules for specific petitioners.

9.7 Terms and conditions of remission and mitigation.

9.8 Provisions applicable to victims.

9.9 Miscellaneous provisions.

Authority: 28 U.S.C. 509, 510, 515-518, 524; 8 U.S.C. 1324; 15

U.S.C. 1177; 17 U.S.C. 509; 18 U.S.C. 512, 981, 982, 1467, 1955,

1963, 2253, 2254, 2513; 19 U.S.C. 1613, 1618; 21 U.S.C. 853, 881; 22

U.S.C. 401.

Sec. 9.1 Authority, purpose, and scope.

(a) Purpose. This part sets forth the procedures for agency

officials to follow when considering remission or mitigation of

administrative forfeitures under the jurisdiction of the agency, and

civil judicial and criminal judicial forfeitures under the jurisdiction

of the Criminal Division. The purpose of the regulations in this part

is to provide a basis for ameliorating the effects of forfeiture

through the partial or total remission of forfeiture for individuals

who have an interest in the forfeited property but who did not

participate in, or have knowledge of, the conduct that resulted in the

property being subject to forfeiture and, where required, took all

reasonable steps under the circumstances to ensure that such property

would not be used, acquired, or disposed of contrary to law.

Additionally, the regulations provide for partial or total mitigation

of the forfeiture and imposition of alternative conditions in

appropriate circumstances.

(b) Authority to grant remission and mitigation. (1) Remission and

mitigation functions in administrative forfeitures are performed by the

agency seizing the property. Within the Federal Bureau of

Investigation, authority to grant remission and mitigation is delegated

to the Forfeiture Counsel, who is the Unit Chief, Legal Forfeiture

Unit, Office of the General Counsel; within the Drug Enforcement

Administration, authority to grant remission and mitigation is

delegated to the Forfeiture Counsel, Office of Chief Counsel; and

within the Immigration and Naturalization Service, authority to grant

remission and mitigation is delegated to the INS Regional Directors.

(2) Remission and mitigation functions in judicial cases are

performed by the Criminal Division of the Department of Justice. Within

the Criminal Division, authority to grant remission and mitigation is

delegated to the Chief, Asset Forfeiture and Money Laundering Section,

Criminal Division.

(3) The powers and responsibilities delegated by these regulations

in this part may be redelegated to attorneys or managers working under

the supervision of the designated officials.

(c) The time periods and internal requirements established in this

part are designed to guide the orderly administration of the remission

and mitigation process and are not intended to create rights or

entitlements in favor of individuals seeking remission or mitigation.

The regulations will apply to all decisions on petitions for remission

or mitigation made on or after February 3, 1997. The regulations will

apply to decisions on requests for reconsideration of a denial of a

petition under Secs. 9.3(j) and 9.4(k) only if the initial decision on

the petition was made under the provisions of this part effective on

February 3, 1997.

(d) This part governs any petition for remission filed with the

Attorney General and supersedes any Department of Justice regulation

governing petitions for remission, to the extent such regulation is

inconsistent with this part. In particular, this part supersedes the

provisions of 21 CFR 1316.79 and 1316.80, which contain remission and

mitigation procedures for property seized for narcotics violations. The

provisions of 8 CFR 274.13 through 274.19 and 28 CFR 8.10, which

concern non-drug related forfeitures, are also superseded by this part

where those regulations relate to remission and mitigation.

Sec. 9.2 Definitions.

As used in this part:

(a) The term administrative forfeiture means the process by which

property may be forfeited by an investigative agency rather than

through judicial proceedings.

(b) The term appraised value means the estimated market value of an

asset at the time and place of seizure if such or similar property was

freely offered for sale between a willing seller and a willing buyer.

(c) The term Assets Forfeiture Fund means the Department of Justice

Assets Forfeiture Fund or Department of the Treasury Asset Forfeiture

Fund, depending upon the identity of the seizing agency.

(d) The term Attorney General means the Attorney General of the

United States or his or her designee.

(e) The term beneficial owner means a person with actual use of, as

well as an interest in, the property subject to forfeiture.

(f) The terms Chief, Asset Forfeiture and Money Laundering Section,

and Chief, refer to the Chief of the Asset Forfeiture and Money

Laundering Section, Criminal Division, United States Department of

Justice.

(g) The term general creditor means one whose claim or debt is not

secured by a specific right to obtain satisfaction against the

particular property subject to forfeiture.

(h) The term judgment creditor means one who has obtained a

judgment against the debtor but has not yet received full satisfaction

of the judgment.

(i) The term judicial forfeiture means either a civil or a criminal

proceeding in a United States District Court that may result in a final

judgment and order of forfeiture.

(j) The term lienholder means a creditor whose claim or debt is

secured by a specific right to obtain satisfaction against the

particular property subject to forfeiture. A lien creditor qualifies as

a lienholder if the lien:

(1) Was established by operation of law or contract;

(2) Was created as a result of an exchange of money, goods, or

services; and

(3) Is perfected against the specific property forfeited for which

remission or mitigation is sought (e.g., a real estate mortgage; a

mechanic's lien).

(k) The term net equity means the amount of a lienholder's monetary

interest in property subject to forfeiture. Net equity shall be

computed by determining the amount of unpaid principal and unpaid

interest at the time of seizure, and by adding to that sum unpaid

interest calculated from the date of seizure through the last full

month prior to the date of the decision on the petition. Where a rate

of interest is set forth in a security agreement, the rate of interest

to be used in this computation will be the annual percentage rate so

specified in the security agreement that is the basis of the

lienholder's interest. In this computation, however, there shall be no

allowances for attorneys' fees, accelerated or enhanced interest

charges, amounts set by contract as damages, unearned extended warranty

fees, insurance, service contract charges incurred after the date of

seizure, allowances for dealer's reserve, or any other similar charges.

(l) The term owner means the person in whom primary title is vested

or whose interest is manifested by the actual and beneficial use of the

property, even though the title is vested in another. A victim of an

offense, as

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defined in paragraph (v) of this section, may also be an owner if he or

she has a present legally cognizable ownership interest in the property

forfeited. A nominal owner of property will not be treated as its true

owner if he or she is not its beneficial owner.

(m) The term person means an individual, partnership, corporation,

joint business enterprise, estate, or other legal entity capable of

owning property.

(n) The term petition means a petition for remission or mitigation

of forfeiture under the regulations in this part. This definition

includes a petition for restoration of the proceeds of sale of

forfeited property and a petition for the value of forfeited property

placed into official use.

(o) The term petitioner means the person applying for remission,

mitigation, restoration of the proceeds of sale, or for the appraised

value of forfeited property, under the regulations in this part. A

petitioner may be an owner as defined in Sec. 9.2(l), a lienholder as

defined in Sec. 9.2(j), or a victim as defined in Sec. 9.2(v), subject

to the limitations of Sec. 9.8.

(p) The term property means real or personal property of any kind

capable of being owned or possessed.

(q) The term record means a series of arrests for related crimes,

unless the arrestee was acquitted or the charges were dismissed for

lack of evidence; a conviction for a related crime or completion of

sentence within ten years of the acquisition of the property subject to

forfeiture; or two convictions for a related crime at any time in the

past.

(r) The term related crime as used in Sec. 9.2(q) and Sec. 9.6(e)

means any crime similar in nature to that which gives rise to the

seizure of property for forfeiture. For example, where property is

seized for a violation of the federal laws relating to drugs, a related

crime would be any offense involving a violation of the federal laws

relating to drugs or the laws of any state or political subdivision

thereof relating to drugs.

(s) The term related offense as used in Sec. 9.8 means:

(1) Any predicate offense charged in a Federal Racketeer Influenced

and Corrupt Organizations Act (RICO) count for which forfeiture was

ordered; or

(2) An offense committed as part of the same scheme or design, or

pursuant to the same conspiracy, as was involved in the offense for

which forfeiture was ordered.

(t) The term Ruling Official means any official to whom decision

making authority has been delegated pursuant to Sec. 9.1(b).

(u) The term seizing agency means the federal agency that seized

the property or adopted the seizure of another agency for federal

forfeiture.

(v) The term victim means a person who has incurred a pecuniary

loss as a direct result of the commission of the offense underlying a

forfeiture. A drug user is not considered a victim of a drug

trafficking offense under this definition. A victim does not include

one who acquires a right to sue the perpetrator of the criminal offense

for any loss by assignment, subrogation inheritance, or otherwise form

the actual victim, unless that person has acquired an actual ownership

interest in the forfeited property.

(w) The term violator means the person whose use or acquisition of

the property in violation of the law subjected such property to seizure

for forfeiture.

Sec. 9.3 Petitions in administrative forfeiture cases.

(a) Notice of seizure. The notice of seizure and intent to forfeit

the property shall advise any persons who may have a present ownership

interest in the property to submit their petitions for remission or

mitigation within thirty (30) days of the date they receive the notice

in order to facilitate processing. Petitions shall be considered any

time after notice until the forfeited property is placed into official

use, sold, or otherwise disposed of according to law, except in cases

involving petitions to restore the proceeds from the sale of forfeited

property. A notice of seizure shall include the title of the seizing

agency, the Ruling Official, the mailing and street address of the

official to whom petitions should be sent, and an asset identifier

number.

(b) Persons who may file. A petition for remission or mitigation

must be filed by a petitioner as defined in Sec. 9.2(o) or as

prescribed in Secs. 9.9(g) and (h).

(c) Contents of petition. (1) All petitions must include the

following information in clear and concise terms:

(i) The name, address, and social security or other taxpayer

identification number of the person claiming an interest in the seized

property who is seeking remission or mitigation;

(ii) The name of the seizing agency, the asset identifier number,

and the date and place of seizure;

(iii) A complete description of the property, including make,

model, and serial numbers, if any; and

(iv) A description of the petitioner's interest in the property as

owner, lienholder, or otherwise, supported by original or certified

bills of sale, contracts, deeds, mortgages, or other documentary

evidence.

(2) Any factual recitation or documentation of any type in a

petition must be supported by a sworn affidavit.

(d) Releases. In addition to the contents of the petition for

remission or mitigation set forth in paragraph (c) of this section,

upon request, the petitioner shall also furnish the agency with an

instrument executed by the titled or registered owner and any other

known claimant of an interest in the property releasing interest in

such property.

(e) Filing petition with agency. (1) A petition for remission or

mitigation subject to administrative forfeiture shall be addressed to

the appropriate federal agency as follows:

(i) Drug Enforcement Administration, Office of Chief Counsel,

Street Address: 700 Army Navy Drive, Arlington, VA 22202

Mailing Address: P.O. Box 28356, Washington, D.C. 20038.

(ii) Federal Bureau of Investigation, Special Agent in Charge,

Field Office that seized the property.

(iii) Immigration and Naturalization Service District Director,

Chief Patrol Agent, or Regional Asset Forfeiture Office at location

with jurisdiction over the forfeiture proceeding.

(2) The petition is to be sent to the official address provided in

the notice of seizure and shall be sworn to by the petitioner or by the

petitioner's attorney upon information and belief, supported by the

client's sworn notice of representation pursuant to 28 U.S.C. 1746, as

set out in Sec. 9.9(g). The Chief of the Asset Forfeiture and Money

Laundering Section is delegated authority to amend the address of the

official to whom petitions may be sent from time to time, as necessary,

by publishing notice of the change of address in the Federal Register.

Failure to publish a notice of change of address in the Federal

Register shall not alter the authority of the Ruling Official to

determine petitions for remission or mitigation nor the obligation of a

petitioner to file a petition at the address provided in the notice of

seizure. Failure to publish a notice of change of address in the

Federal Register shall not be grounds for expanding the time for filing

a petition for remission or mitigation under the regulations in this

part.

(f) Agency investigation. Upon receipt of a petition, the seizing

agency shall investigate the merits of the petition and prepare a

written report containing the results of that investigation. This

report shall be submitted to the Ruling Official for review and

consideration.

(g) Ruling. Upon receipt of the petition and the agency report, the

Ruling Official for the seizing agency

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shall review the petition and the report, and shall rule on the merits

of the petition. No hearing shall be held.

(h) Petitions granted. If the Ruling Official grants a remission or

mitigation of the forfeiture, a copy of the decision shall be mailed to

the petitioner or, if represented by an attorney, to the petitioner's

attorney. A copy shall also be sent to the United States Marshals

Service or other property custodian. The written decision shall include

the terms and conditions, if any, upon which the remission or

mitigation is granted and the procedures the petitioner must follow to

obtain release of the property or the monetary interest therein.

(i) Petitions denied. If the Ruling Official denies a petition, a

copy of the decision shall be mailed to the petitioner or, if

represented by an attorney, to the petitioner's attorney of record. A

copy of the decision shall also be sent to the United States Marshals

Service or other property custodian. The decision shall specify the

reason that the petition was denied. The decision shall advise the

petitioner that a request for reconsideration of the denial of the

petition may be submitted to the Ruling Official in accordance with

paragraph (j) of this section.

(j) Request for reconsideration. (1) A request for reconsideration

of the denial of the petition shall be considered if:

(i) It is postmarked or received by the office of the Ruling

Official within ten (10) days from the receipt of the notice of denial

of the petition by the petitioner; and

(ii) The request is based on information or evidence not previously

considered that is material to the basis for the denial or presents a

basis clearly demonstrating that the denial was erroneous.

(2) In no event shall a request for reconsideration be decided by

the same Ruling Official who ruled on the original petition.

(3) Only one request for reconsideration of a denial of a petition

shall be considered.

(k) Restoration of proceeds from sale. (1) A petition for

restoration of the proceeds from the sale of forfeited property, or for

the appraised value of forfeited property when the forfeited property

has been retained by or delivered to a government agency for official

use, may be submitted by an owner or leinholder in cases in which the

petitioner:

(i) Did not know of the seizure prior to the entry of a declaration

of forfeiture; and

(ii) Could not reasonably have known of the seizure prior to the

entry of a declaration of forfeiture.

(2) Such a petition shall be submitted pursuant to paragraphs (b)

through (e) of this section within ninety (90) days of the date the

property is sold or otherwise disposed of.

Sec. 9.4 Petitions in judicial forfeiture cases.

(a) Notice of seizure. The notice of seizure and intent to forfeit

the property shall advise any persons who may have a present ownership

interest in the property to submit their petitions for remission or

mitigation within thirty (30) days of the date they receive the notice

in order to facilitate processing. Petitions shall be considered any

time after notice until such time as the forfeited property is placed

in official use, sold, or otherwise disposed of according to law,

except in cases involving petitions to restore property. A notice of

seizure shall include the title of the Ruling Official and the mailing

and street address of the official to whom petitions should be sent,

the name of the agency seizing the property, an asset identifier

number, and the district court docket number.

(b) Persons who may file. A petition for remission or mitigation

must be filed by a petitioner as defined in Sec. 9.2(o) or as

prescribed in Sec. Sec. 9.9 (g) and (h).

(c) Contents of petition. (1) All petitions must include the

following information in clear and concise terms:

(i) The name, address, and social security or other taxpayer

identification number of the person claiming an interest in the seized

property who is seeking remission or mitigation;

(ii) The name of the seizing agency, the asset identifier number,

and the date and place of seizure;

(iii) The district court docket number;

(iv) A complete description of the property, including the address

or legal description of real property, and make, model, and serial

numbers of personal property, if any; and

(v) A description of the petitioner's interest in the property as

owner, lienholder, or otherwise, supported by original or certified

bills of sale, contracts, mortgages, deeds, or other documentary

evidence.

(2) Any factual recitation or documentation of any type in a

petition must be supported by a sworn affidavit.

(d) Releases. In addition to the content of the petition for

remission or mitigation set forth in paragraph (c) of this section, the

petitioner, upon request, also shall furnish the agency with an

instrument executed by the titled or registered owner and any other

known claimant of an interest in the property releasing the interest in

such property.

(e) Filing petition with Department of Justice. A petition for

remission or mitigation of a judicial forfeiture shall be addressed to

the Attorney General; shall be sworn to by the petitioner or by the

petitioner's attorney upon information and belief, supported by the

client's sworn notice of representation pursuant to 28 U.S.C. 1746, as

set forth in Sec. 9.9(g); and shall be submitted to the United States

Attorney for the district in which the judicial forfeiture proceedings

are brought. A petitioner also shall submit a copy of the petition to

the seizing agency in the judicial district in which the seizure

occurred as specified in the notice of seizure, except in Drug

Enforcement Administration cases, where the copy shall be submitted to

Drug Enforcement Administration Headquarters, Office of Chief Counsel,

P.O. Box 28356, Washington, D.C. 20038, or 700 Army Navy Drive,

Arlington, VA 22202.

(f) Agency investigation and recommendation; United States

Attorney's recommendation. Upon receipt of a petition, the United

States Attorney shall direct the seizing agency to investigate the

merits of the petition based on the information provided by the

petitioner and the totality of the agency's investigation of the

underlying basis for forfeiture. The agency shall submit to the United

States Attorney a report of its investigation and its recommendation on

whether the petition should be granted or denied. Upon receipt of the

agency's report and recommendation, the United States Attorney shall

forward to the Chief, Asset Forfeiture and Money Laundering Section,

the petition, the seizing agency's report and recommendation, and the

United States Attorney's recommendation on whether the petition should

be granted or denied.

(g) Ruling. The Chief shall rule on the petition. No hearing shall

be held. The Chief shall not rule on any petition in any case in which

similar petition has been administratively denied by the seizing agency

prior to the referral of the case to the United States Attorney for the

institution of forfeiture proceedings.

(h) Petitons under Internal Revenue Service liquor laws. The Chief

shall accept and consider petitions submitted in judicial forfeiture

proceedings under the Internal Revenue Service liquor laws only prior

to the time a decree of forfeiture is entered. Thereafter, district

courts have exclusive jurisdiction.

(i) Petitions granted. If the Chief grants a remission or mitigates

the forfeiture, the Chief shall mail a copy of the decision to the

petitioner or, if represented by an attorney, to the petitioner's

attorney, the appropriate

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United States Attorney, the United States Marshals Service or other

property custodian, and the appropriate seizing agency. The written

decision shall include the terms and conditions, if any, upon which the

remission or mitigation is granted and the procedures the petitioner

must follow to obtain release of the property or the monetary interest

therein. The Chief shall advise the petitioner or the petitioner's

attorney to consult with the United States Attorney as to such terms

and conditions. The United States Attorney shall confer with the

seizing agency regarding the release and shall coordinate disposition

of the property with that office and the United States Marshals Service

or other property custodian.

(j) Petitions denied. If the Chief denies a petition, a copy of

that decision shall be mailed to the petitioner, or if represented by

an attorney, to the petitioner's attorney of record, to the appropriate

United States Attorney, the United States Marshals Service or other

property custodian, and to the appropriate seizing agency. The decision

shall specify the reason that the petition was denied. The decision

shall advise the petitioner that a request for reconsideration of the

denial of the petition may be submitted to the Chief at the address

provided in the decision, in accordance with paragraph (k) of this

section.

(k) Request for reconsideration. (1) A request for reconsideration

of the denial shall be considered if:

(i) It is postmarked or received by the Asset Forfeiture and Money

Laundering Section at the address contained in the decision denying the

petition within ten (10) days from the receipt of the notice of denial

of the petition by the petitioner; and

(ii) The request is based on information or evidence not previously

considered that is material to the basis for the denial or presents a

basis clearly demonstrating that the denial was erroneous. A copy of

the request must be received by the appropriate United States Attorney

within ten (10) days of the receipt of the denial by the petitioner.

(2) In no event shall a request for reconsideration be decided by

the Ruling Official who ruled on the original petition.

(3) Only one request for reconsideration of a denial of a petition

shall be considered.

(4) Upon receipt of the request for reconsideration of the denial

of a petition, disposition of the property will be delayed pending

notice of the decision at the request of the Chief. If the United

States Attorney does not receive a copy of the request for

reconsideration within the prescribed period, the deposition of the

property may proceed.

(1) Restoration of Proceeds from sale. (1) A petition for

restoration of the proceeds from the sale of forfeited property, or for

the appraised value of forfeited property when the forfeited property

has been retained by or delivered to a government agency for official

use, may be submitted by an owner or lienholder in cases in which the

petitioner:

(i) Did not know of the seizure prior to the entry of a final order

of forfeiture; and

(ii) Could not reasonably have known of the seizure prior to the

entry of a final order of forfeiture.

(2) Such a petition must be submitted pursuant to paragraphs (b)

through (e) of this section within ninety (90) days of the date the

property was sold or otherwise disposed of.

Sec. 9.5 Criteria governing administrative and judicial remission and

mitigation.

(a) Remission. (1) The Ruling Official shall not grant remission of

a forfeiture unless the petitioner establishes that:

(i) The petitioner has a valid, good faith, and legally cognizable

interest in the seized property as owner or lienholder as defined in

this part; and

(ii) The petitioner is innocent within the meaning of the innocent

owner provisions of the applicable civil forfeiture statute, is a bona

fide purchaser for value without cause to believe that the property was

subject to forfeiture at the time of the purchase, or is one who held a

legally cognizable interest in the seized property at the time of the

violation underlying the forfeiture superior to that of the defendant

within the meaning of the applicable criminal forfeiture statute, and

is thereby entitled to recover his or her interest in the forfeited

property by statute. (If the applicable civil forfeiture statute

contains no innocent owner defense, the innocent owner provisions

applicable to 21 U.S.C. 881(a)(4) shall apply.) Unless otherwise

provided by statute, in the case of petitioners who acquired their

interest in the property after the time of the violation underlying the

forfeiture, the question of whether the petitioner had knowledge of the

violation shall be determined as of the point in time when the interest

in the property was acquired.

(2) The knowledge and responsibilities of petitioner's

representative, agent, or employee in paragraph (a)(1)(ii) of this

section are imputed to the petitioner where the representative, agent,

or employee was acting in the course of his or her employment and in

furtherance of the petitioner's business.

(3) The petitioner has the burden of establishing the basis for

granting a petition for remission or mitigation of forfeited property,

a restoration of proceeds of sale or appraised value of forfeited

property, or a reconsideration of a denial of such a petition. Failure

to provide information or documents and to submit to interviews, as

requested, may result in a denial of the petition.

(4) The Ruling Official shall presume a valid forfeiture and shall

not consider whether the evidence is sufficient to support the

forfeiture.

(5) Willful, materially-false statements or information, made or

furnished by the petitioner in support of a petition for remission or

mitigation of forfeited property, the restoration of proceeds or

appraised value of forfeited property, or the reconsideration of a

denial of any such petition, shall be grounds for denial of such

petition and possible prosecution for the filing of false statements.

(b) Mitigation. (1) The Ruling Official may grant mitigation to a

party not involved in the commission of the offense underlying

forfeiture:

(i) Where the petitioner has not met the minimum conditions for

remission, but the Ruling Official finds that some relief should be

granted to avoid extreme hardship, and that return of the property

combined with imposition of monetary and/or other conditions of

mitigation in lieu of a complete forfeiture will promote the interest

of justice and will not diminish the deterrent effect of the law.

Extenuating circumstances justifying such a finding include those

circumstances that reduce the responsibility of the petitioner for

knowledge of the illegal activity, knowledge of the criminal record of

a user of the property, or failure to take reasonable steps to prevent

the illegal use or acquisition by another for some reason, such as a

reasonable fear of reprisal; or

(ii) Where the minimum standards for remission have been satisfied

but the overall circumstances are such that, in the opinion of the

Ruling Official, complete relief is not warranted.

(2) The Ruling Officials may in his or her discretion grant

mitigation to a party involved in the commission of the offense

underlying the forfeiture where certain mitigating factors exist,

including, but not limited to: the lack of a prior record or evidence

of similar criminal conduct; if the violation does not include drug

distribution,

[[Page 320]]

manufacturing, or importation, the fact that the violator has taken

steps, such as drug treatment, to prevent further criminal conduct; the

fact that the violation was minimal and was not part of a larger

criminal scheme; the fact that the violator has cooperated with

federal, state, or local investigations relating to the criminal

conduct underlying the forfeiture; or the fact that complete forfeiture

of an asset is not necessary to achieve the legitimate purposes of

forfeiture.

(3) Mitigation may take the form of a monetary condition or the

imposition of other conditions relating to the continued use of the

property, and the return of the property, in addition to the imposition

of any other costs that would be chargeable as a condition to

remission. This monetary condition is considered as an item of cost

payable by the petitioner, and shall be deposited into the Assets

Forfeiture Fund as an amount realized from forfeiture in accordance

with the applicable statute. If the petitioner fails to accept the

Ruling Official's mitigation decision or any of its conditions, or

fails to pay the monetary amount within twenty (20) days of the receipt

of the decision, the property shall be sold, and the monetary amount

imposed and other costs chargeable as a condition to mitigation shall

be subtracted from the proceeds of the sale before transmitting the

remainder to the petitioner.

Sec. 9.6 Special rules for specific petitioners.

(a) General creditors. A general creditor may not be granted

remission or mitigation of forfeiture unless he or she otherwise

qualifies as petitioner under this part.

(b) Rival claimants. If the beneficial owner of the forfeited

property and the owner of a security interest in the same property each

files a petition, and if both petitions are found to be meritorious,

the claims of the beneficial owner shall take precedence.

(c) Voluntary bailments. A petitioner who allows another to use his

or her property without cost, and who is not in the business of lending

money secured by property or of leasing or renting property for profit,

shall be granted remission or mitigation of forfeiture in accordance

with the provisions of Sec. 9.5.

(d) Lessors. A person engaged in the business of leasing or renting

real or personal property on a long-term basis with the right to

sublease shall not be entitled to remission or mitigation of a

forfeiture of such property unless the lessor can demonstrate

compliance with all the requirements of Sec. 9.5.

(e) Straw owners. A petition by any person who has acquired a

property interest recognizable under this part, and who knew or had

reason to believe that the interest was conveyed by the previous owner

for the purpose of circumventing seizure, forfeiture, or the

regulations in this part, shall be denied. A petition by a person who

purchases or owns property for another who has a record for related

crimes as defined in Sec. 9.2(r), or a petition by a lienholder who

knows or has reason to believe that the purchaser or owner of record is

not the real purchaser or owner, shall be denied unless both the

purchaser of record and the real purchaser or owner meet the

requirements of Sec. 9.5.

(f) Judgment creditors. (1) A judgment creditor will be recognized

as a lienholder if:

(i) The judgment was duly recorded before the seizure of the

property for forfeiture;

(ii) Under applicable state or other local law, the judgment

constitutes a valid lien on the property that attached to it before the

seizure of the property for forfeiture; and

(iii) The petitioner had no knowledge of the commission of any act

or acts giving rise to the forfeiture at the time the judgment became a

lien on the forfeited property.

(2) A judgment creditor will not be recognized as a lienholder if

the property in question is not property of which the judgment debtor

is entitled to claim ownership under applicable state or other local

law (e.g., stolen property). A judgment creditor is entitled under this

part to no more than the amount of the judgment, exclusive of any

interest, costs, or other fees including attorney's fees associated

with the action that led to the judgment or its collection.

(3) A judgment creditor's lien must be registered in the district

where the property is located if the judgment was obtained outside the

district.

Sec. 9.7 Terms and conditions of remission and mitigation.

(a) Owners. (1) An owner's interest in property that has been

forfeited is represented by the property itself or by a monetary

interest equivalent to that interest at the time of seizure. Whether

the property or a monetary equivalent will be remitted to an owner

shall be determined at the discretion of the Ruling Official.

(2) If a civil judicial forfeiture action against the property is

pending, release of the property must await an appropriate court order.

(3) Where the government sells or disposes of the property prior to

the grant of the remission, the owner shall receive the proceeds of

that sale, less any costs incurred by the government in the sale. The

Ruling Official, at his or her discretion, may waive the deduction of

costs and expenses incident to the forfeiture.

(4) Where the owner does not comply with the conditions imposed

upon release of the property by the Ruling Official, the property shall

be sold. Following the sale, the proceeds shall be used to pay all

costs of the forfeiture and disposition of the property, in addition to

any monetary conditions imposed. The remaining balance shall be paid to

the owner.

(b) Lienholders. (1) When the forfeited property is to be retained

for official use or transferred to a state or local law enforcement

agency or foreign government pursuant to law, and remission or

mitigation has been granted to a lienholder, the recipient of the

property shall assure that:

(i) In the case of remission, the lien is satisfied as determined

through the petition process; or

(ii) In the case of mitigation, an amount equal to the net equity,

less any monetary conditions imposed, is paid to the lienholder prior

to the release of the property to the recipient agency of foreign

government.

(2) When the forfeited property is not retained for official use or

transferred to another agency or foreign government pursuant to law,

the lienholder shall be notified by the Ruling Official of the right to

select either of the following alternatives:

(i) Return of property. The lienholder may obtain possession of the

property after paying the United States, through the Ruling Official,

the costs and expenses incident to the forfeiture, the amount, if any,

by which the appraised value of the property exceeds the lienholder's

net equity in the property, and any amount specified in the Ruling

Official's decision as a condition to remit the property. The Ruling

Official, at his or her discretion, may waive costs and expenses

incident to the forfeiture. The Ruling Official shall forward a copy of

the decision, a memorandum of disposition, and the original releases to

the United States Marshals Service or other property custodian who

shall thereafter release the property to the lienholder; or

(ii) Sale of Property and Payment to Lienholder. Subject to the

provisions of Sec. 9.9(a), upon sale of the property, the lienholder

may receive the payment of a monetary amount up to the sum of the

lienholder's net equity, less the expenses and costs incident to the

forfeiture and sale of the property, and any other monetary conditions

imposed. The Ruling Official, at his or her

[[Page 321]]

discretion, may waive costs and expenses incident to the forfeiture.

(3) If the lienholder does not notify the Ruling Official of the

selection of one of the two options set forth in paragraph (b)(2) of

this section within twenty (20) days of the receipt of notification,

the Ruling Official shall direct the United States Marshal or other

property custodian to sell the property and pay the lienholder an

amount up to the net equity, less the costs and expenses incurred

incident to the forfeiture and sale, and any monetary conditions

imposed. In the event a lienholder subsequently receives a payment of

any kind on the debt owed for which he or she received payment as a

result of the granting of remission or mitigation, the lienholder shall

reimburse the Assets Forfeiture Fund to the extent of the payment

received.

(4) Where the lienholder does not comply with the conditions

imposed upon the release of the property, the property shall be sold

after forfeiture. From the proceeds of the sale, all costs incident to

the forfeiture and sale shall first be deducted, and the balance up to

the net equity, less any monetary conditions, shall be paid to the

lienholder.

Sec. 9.8 Provisions applicable to victims.

The provisions of this section apply to victims of an offense

underlying the forfeiture of property, or of a related offense, who do

not have a present ownership interest in the forfeited property (or, in

the case of multiple victims of an offense, who do not have a present

ownership interest in the forfeited property that is clearly superior

to that of other petitioner victims). The provisions of this section

apply only with respect to property forfeited pursuant to statutes that

explicitly authorize restoration or remission of forfeited property to

victims. Victims who have a superior present legally cognizable

ownership interest in forfeited property may file petitions, as other

owners, subject to the regulations set forth in Sec. 9.7(a). The claims

of such owner victims, like those of any other owners, shall have

priority over the claims of any non-owner victims whose claims are

recognized pursuant to this section.

(a) Qualification to file. A victim, as defined in Sec. 9.2(v), of

an offense that was the underlying basis for the criminal, civil, or

administrative forfeiture of specific property, or a victim of a

related offense, may be granted remission of the forfeiture of that

property, if in addition to complying with the other applicable

provisions of Sec. 9.8, the victim satisfactorily demonstrates that:

(1) A pecuniary loss of a specific amount has been directly caused

by the criminal offense, or related offense, that was the underlying

basis for the forfeiture, and that the loss is supported by documentary

evidence including invoices and receipts;

(2) The pecuniary loss is the direct result of the illegal acts and

is not the result of otherwise lawful acts that were committed in the

course of a criminal offense;

(3) The victim did not knowingly contribute to, participate in,

benefit from, or act in a willfully blind manner towards the commission

of the offense, or related offense, that was the underlying basis of

the forfeiture;

(4) The victim has not in fact been compensated for the wrongful

loss of the property by the perpetrator or others; and

(5) The victim does not have recourse reasonably available to other

assets from which to obtain compensation for the wrongful loss of the

property.

(b) Pecuniary loss. The amount of the pecuniary loss suffered by a

victim for which remission may be granted is limited to the fair market

value of the property of which the victim was deprived as of the date

of the occurrence of the loss. No allowance shall be made for interest

foregone or for collateral expenses incurred to recover lost property

or to seek other recompense.

(c) Torts. A tort associated with illegal activity that formed the

basis for the forfeiture shall not be a basis for remission, unless it

constitutes the illegal activity itself, nor shall remission be granted

for physical injuries to a petitioner or for damage to a petitioner's

property.

(d) Denial of petition. In the exercise of his or her discretion,

the Ruling Official may decline to grant remission where:

(1) There is substantial difficulty in calculating the pecuniary

loss incurred by the victim or victims;

(2) The amount of the remission, if granted, would be small

compared with the amount of expenses incurred by the government in

determining whether to grant remission; or

(3) The total number of victims is large and the monetary amount of

the remission so small as to make its granting impractical.

(e) Pro rata basis. In granting remission to multiple victims

pursuant to this section, the Ruling Official should generally grant

remission on a pro rata basis to recognized victims when petitions

cannot be granted in full due to the limited value of the forfeited

property. However, the Ruling Official may consider, among others, the

following factors in establishing appropriate priorities in individual

cases:

(1) The specificity and reliability of the evidence establishing a

loss;

(2) The fact that a particular victim is suffering an extreme

financial hardship;

(3) The fact that a particular victim has cooperated with the

government in the investigation related to the forfeiture or to a

related persecution or civil action; and

(4) In the case of petitions filed by multiple victims of related

offenses, the fact that a particular victim is a victim of the offense

underlying the forfeiture.

(f) Reimbursement. Any petitioner granted remission pursuant to

this part shall reimburse the Assets Forfeiture Fund for the amount

received to the extent the individual later receives compensation for

the loss of the property from any other source. The petitioner shall

surrender the reimbursement upon payment from any secondary source.

(g) Claims of financial institution regulatory agencies. In cases

involving property forfeitable under 18 U.S.C. 981(a)(1)(C) or

(a)(1)(D), the Ruling Official may decline to grant a petition filed by

a petitioner in whole or in part due to the lack of sufficient

forfeitable funds to satisfy both the petition and claims of the

financial institution regulatory agencies pursuant to 18 U.S.C.

981(e)(3) or (7). Generally, claims of financial institution regulatory

agencies pursuant to 18 U.S.C. 981(e)(3) or (7) shall take priority

over claims of victims.

Sec. 9.9 Miscellaneous Provisions.

(a) Priority of payment. Except where otherwise provided in this

part, costs incurred by the United States Marshals Service and other

agencies participating in the forfeiture that were incident to the

forfeiture, sale, or other disposition of the property shall be

deducted from the amount available for remission or mitigation. Such

costs include, but are not limited to, court costs, storage costs,

brokerage and other sales-related costs, the amount of any liens and

associated costs paid by the government on the property, costs incurred

in paying the ordinary and necessary expenses of a business seized for

forfeiture, awards for information as authorized by statute, expenses

of trustees or other assistants pursuant to paragraph (c) of this

section, investigative or prosecutive costs specially incurred incident

to the particular forfeiture, and costs incurred incident to the

processing of the petition(s) for remission or mitigation.

[[Page 322]]

The remaining balance shall be available for remission or mitigation.

The Ruling Official shall direct the distribution of the remaining

balance in the following order or priority, except that the Ruling

Official may exercise discretion in determining the priority between

petitioners belonging to classes described in paragraphs (a)(3) and (4)

of this section in exceptional circumstances:

(1) Owners;

(2) Lienholders;

(3) Federal financial institution regulatory agencies (pursuant to

paragraph (e) of this section), not constituting owners or lienholders;

and

(4) Victims not constituting owners or lienholders (pursuant to

Sec. 9.8).

(b) Sale or disposition of property prior to ruling. If forfeited

property has been sold or otherwise disposed of prior to a ruling, the

Ruling Official may grant relief in the form of a monetary amount. The

amount realized by the sale of the property is presumed to be the value

of the property. Monetary relief shall not be greater than the

appraised value of the property at the time of seizure and shall not

exceed the amount realized from the sale or other disposition. The

proceeds of the sale shall be distributed as follows:

(1) Payment of the government's expenses incurred incident to the

forfeiture and sale, including court costs and storage charges, if any;

(2) Payment to the petitioner of an amount up to his or her

interest in the property;

(3) Payment to the Assets Forfeiture Fund of all other costs and

expenses incident to the forfeiture;

(4) In the case of victims, payment of any amount up to the amount

of his or her loss; and

(5) Payment of the balance remaining, if any, to the Assets

Forfeiture Fund.

(c) Trustees and other assistants. In the exercise of his or her

discretion, the Ruling Official, with the approval of the Asset

Forfeiture and Money Laundering Section, may use the services of a

trustee, other government official, or appointed contractors to notify

potential petitioners, process petitions, and make recommendations to

the Ruling Official on the distribution of property to petitioners. The

expense for such assistance shall be paid out of the forfeited funds.

(d) Other agencies of the United States. Where another agency of

the United States is entitled to remission or mitigation of forfeited

assets because of an interest that is recognizable under this part or

is eligible for such transfer pursuant to 18 U.S.C. 981(e)(6), such

agency shall request the transfer in writing, in addition to complying

with any applicable provisions of Secs. 9.3 through 9.5. The decision

to make such transfer shall be made in writing by the Ruling Official.

(e) Financial institution regulatory agencies. A Ruling Official

may direct the transfer of property under 18 U.S.C. 981(e) to certain

federal financial institution regulatory agencies or an entity acting

in their behalf, upon receipt of a written request, in lieu of ruling

on a petition for remission or mitigation.

(f) Transfers to foreign governments. A Ruling Official may decline

to grant remission to any petitioner other than an owner or lienholder

so that forfeited assets may be transferred to a foreign government

pursuant to 18 U.S.C. 981(i)(1), 19 U.S.C. 1616a(c)(2), or 21 U.S.C.

881(e)(1)(E).

(g) Filing by attorneys. (1) A petition for remission or mitigation

may be filed by a petitioner or by his or her attorney or legal

guardian. If an attorney files on behalf of the petitioner, the

petition must include a signed and sworn statement by the client-

petitioner stating that:

(i) The attorney has the authority to represent the petitioner in

this proceeding;

(ii) The petitioner has fully reviewed the petition; and

(iii) The petition is truthful and accurate in every respect.

(2) Verbal notification of representation is not acceptable.

Responses and notification of rulings shall not be sent to an attorney

claiming to represent a petitioner unless a written notice of

representation is filed. No extensions of time shall be granted due to

delays in submission of the notice of representation.

(h) Consolidated petitions. At the discretion of the Ruling

Official in individual cases, a petition may be filed by one petitioner

on behalf of other petitioners, provided the petitions are based on

similar underlying facts, and the petitioner who files the petition has

written authority to do so on behalf of the other petitioners. This

authority must be either expressed in documents giving the petitioner

the authority to file petitions for remission, or reasonably implied

from documents giving the petitioner express authority to file claims

or lawsuits related to the course of conduct in question on behalf of

these petitioners. An insurer or an administrator of an employee

benefit plan, for example, which itself has standing to file a petition

as a ``victim'' within the meaning of Sec. 9.2(v), may also file a

petition on behalf of its insured or plan beneficiaries for any claims

they may have based on co-payments made to the perpetrator of the

offense underlying the forfeiture or the perpetrator of a ``related

offense'' within the meaning of Sec. 9.2(s), if the authority to file

claims or lawsuits is contained in the document or documents

establishing the plan. Where such a petition is filed, any amounts

granted as a remission must be transferred to the other petitioners,

not the party filing the petition; although, in his or her discretion,

the Ruling Official may use the actual petitioner as an intermediary

for transferring the amounts authorized as a remission to the other

petitioners.

Dated: December 19, 1996.

Janet Reno,

Attorney General.

[FR Doc. 97-117 Filed 1-2-97; 8:45 am]

BILLING CODE 4410-14-M