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Deficiencies Found in U.S. Oversight of Seized Assets

By Seth Stern -

(Corrects second paragraph in story that ran Sept. 13 to show that the Marshals Service held $3.8 billion in assets.)

“Significant deficiencies” in the U.S. Marshals Service’s oversight of seized property led to a “loss of confidence” among federal prosecutors in the Bernard Madoff case, according to the Justice Department’s inspector general.

The marshals’ Complex Asset Team didn’t consistently track and record how property was managed and appraised, the inspector general’s office said in a report today. The Marshals Service held more than $3.8 billion in seized assets as of March 2011, according to the report.

The asset team, which handles property requiring specialized expertise, didn’t have procedures to prevent the same employee from valuing and selling the same asset, according to the report. A lack of “transparent procedures” and oversight caused a New York prosecutor to lose confidence in the team’s ability to sell two assets from the Madoff criminal case, the inspector general found.

Madoff pleaded guilty in 2009 to orchestrating what has been called the biggest Ponzi scheme in history, using money from new clients to pay earlier investors. He is serving a 150- year sentence in federal prison.

“We believe that the Complex Asset Team’s informal approach to the valuation and disposal of assets undermined its perceived competency among DOJ Asset Forfeiture Program partners,” the report said.

$130 Million

Since 2005, the asset team has had a staff of two to four people and has disposed of more than $130 million in assets, including business and financial interests. The Justice Department can seize and force the forfeiture of assets used in illegal activities.

The Marshals Service has been “working aggressively” to adopt the inspector general’s recommendations, said Lynzey Donahue, an agency spokeswoman.

“We take our asset forfeiture responsibilities seriously and have taken aggressive actions to increase the management and oversight of the complex assets within the Asset Forfeiture Fund,” Donahue said in a statement.

To contact the reporter on this story: Seth Stern in Washington at sstern14@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net