Whistleblower Sues U.S. Marshals Alleging Forfeiture Misconduct

Federal forfeitures are handled by the U.S. Marshals Service. It's a huge business, involving $2 billion in seized and forfeited assets. Among their duties:

The U.S. Marshals manage and dispose of all assets seized for forfeiture by utilizing successful procedures employed by the private sector. The agency contracts with qualified vendors that minimize the amount of time an asset remains in inventory and maximize the net return to the government.

Forfeiture Support Associates LLC (FSA) has a $613 million contract with the Marshals Service to help administer the asset forfeiture program. Brian Aryani is a former former federal agent and CPA who worked for FSA and the Marshals Service in the Complex Assets Group of the Asset Forfeiture Program. (He says he was employed by both, although it's not clear if his contract was only with FSA.) He has filed a whistleblower and civil rights lawsuit alleging fraud by the former head of the Complex Assets Group, Leonard Brisksman and retaliation by FSA, the Marshals Service and its Assistant Director, Eben Morales, for bringing it to light. [More...]

[The lawsuit] says that assets were sold without public notice or competitive bidding, and that Mr. Briskman assessed the value of certain assets, found buyers through his “business contacts,” and kept a secret bank account to which government auditors had no access.

Aryai claims when he reported the fraud to FSA and the Marshals Service, they retaliated by firing him. The lawsuit doesn't name Briskman, just Morales, who allegedly got mad at Aryai for taking his complaint to the U.S. Attorney's office, which referred the matter to the Inspector General's office, instead of to him and keeping it within the Marshal's Service.

According to Aryai's complaint(available on PACER), he discovered that Briskman had his own company dealing with forfeited assets, and that some of the properties his company listed as examples of its experience in the field "appeared shockingly similar" to assets that had been entrusted to the Asset Forfeiture Program, which he says is a clear conflict of interest. He also alleges that Briskman didn't use the open market to secure multiple bids on certain complex assets and just randomly assigned values to them and then sold them to selected business contacts. When he asked Briskman about it, Briskman said there is no public notice mechanism in the Complex Asset Group for selling minority ownership interests in privately held companies.

His point seems to be that without an independent evaluation by someone like him, and clear rules as to how the properties are to be marketed and to whom, it's possible Briskman undersold the assets, which would mean crime victims didn't get as much as they should have. He doesn't allege Briskman pocketed any money, only that there's some bank account out there held by Briskman in his official capacity to which the Asset Fofeiture Program's external auditors do not have access. He alleges that "upon information and belief" the account contains transactions "that have not been subjected to scrutiny and analysis."

Aryai began working for the contractor in October, 2009 as a senior forfeiture financial specialist. He was assigned to the Marshals Service office in Manhattan. From the Times article linked above:

His job was to provide financial expertise for the forfeiture program on complex assets and help improve internal controls...the group handled tens of millions of dollars in assets forfeited in a number of high-profile criminal cases, including that of Marc S. Drier, a lawyer; Samuel Israel III, the Bayou hedge fund founder; and Hassan Nemazee, the Democratic fund-raiser.

It also handled the sale of the Delta Fund held by Ruth Madoff.

“During the sale, it became evident that the sale price did not have a corresponding valuation by an independent qualified professional, and that it was patently discounted sharply below fair market value,” the lawsuit alleged. “Upon discussion, it also became clear that Briskman had not sought multiple prospective buyers in the open market for this asset.”

Aryai got transferred to Newark, which he says was inconvenient, and then got fired, even though he says his work was exemplary.

The fraud allegations involving Briskman seem pretty thin to me, and it doesn't seem like there's any greater issue pertaining to systemic misconduct in the Asset Forfeiture Program. It's really about whether Aryai was improperly terminated for voicing his concerns about Briskman's potential conflict of interest.

Here's what the Marshals are currently listing for sale. If you'd like to bid at an auction, go here.

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  • Display: Sort:
    Asset forfeiture.... (none / 0) (#1)
    by kdog on Mon Dec 27, 2010 at 03:45:42 PM EST
    aka legal theft, a long running stain on our justice system, as practiced...and it's shadier than we thought if these most believable allegations are true...this kinda license to steal has gotta corrupt, as all power corrupts.

    I'd be careful bidding on that stuff, posession of stolen property is a crime, and the Marshals are protected under the "different rules different fools" clause...not civilians.  

    jeralyn, (none / 0) (#2)
    by cpinva on Tue Dec 28, 2010 at 10:36:57 AM EST
    this is well beyond a simple "conflict of interest", it borders on fraud and embezzlement. seized assets, apparently undervalued, sold privately, and the proceeds safely tucked away in a secret bank account, not subject to audit. this would be mr. brinkman's own private piggy bank.

    as well, i expect this revenue isn't being reported for tax purposes either. at minimum, we potentially have three criminal cases:

    1. defrauding the government: using a non-contracted for entity to privately dispose of seized assets, and secreting the revenues in a hidden account.

    2. embezzlement: secreting revenues legally owned by FSA into a bank account wholly controlled by mr. brinkman.

    3. tax fraud: (most likely)intentionally failing to report the taxable income on federal and/or state returns.

    or, it's all innocent, and completely legal.

    were i the auditing cpa, and i discovered this, i'd be required to report it to the board of directors.

    were i a revenue agent, auditing FSA's return, and discovered this, i would be putting together a criminal tax fraud case.