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Obscure asset seizure fund in limelight as border battle rages

President Trump wants his wall. That’s where all these seized boats, homes and airplanes come in

Congress has remained largely on the sidelines as President Donald Trump and Beijing wage their tariff battle. A U.S. delegation is in China this week. (Win McNamee/Getty Images file photo)
Congress has remained largely on the sidelines as President Donald Trump and Beijing wage their tariff battle. A U.S. delegation is in China this week. (Win McNamee/Getty Images file photo)

Pity the poor Treasury Forfeiture Fund, which has been shredded by congressional appropriators using it as a piggy bank for so long that the program’s managers have been crying uncle.

Now, along comes President Donald Trump with his creative use of statutory authorities to top up the nearly $1.4 billion Congress appropriated in fiscal 2019 for his southern border wall project, including an extra $601 million in Treasury asset seizure revenues.

Never mind that Homeland Security appropriators already in the fiscal 2019 law grabbed $200 million from the same pot of money to offset other priorities within the agency, including the wall. Treasury would have lost another $175 million in the Financial Services title of a measure proposed by House Democrats, though that rescission was dropped in the final omnibus bargaining.

Such is life for the obscure Treasury forfeiture account, which collects assets seized in criminal investigations by federal agencies, including DHS, auctions them for cash and shares the proceeds with federal, state and local law enforcement bureaus. Forfeiture funds are also spent on payments to crime victims, investigation and litigation expenses. Typically, the program has gotten by spending between $500 million and $600 million each year — despite profligate poaching of the fund by Congress.

Over the past decade, lawmakers have raided the Treasury account to the tune of $12.3 billion, for use mainly as offsets for other spending in Financial Services and Homeland Security bills, a Roll Call review found. That figure also includes $867 million tapped as a general offset for a two-year budget deal in 2013, which went toward raising discretionary spending caps.

Another $1 billion or so has been lopped off by the automatic cuts to “mandatory” spending known as a sequester, which first triggered in fiscal 2013 and are set to continue through fiscal 2027.

Complaints having an impact?

Lawmakers were relatively restrained in the fiscal 2019 omnibus, rescinding the least amount since fiscal 2010. That’s perhaps because some of the criticisms from Treasury might have had an impact.

“Recently-enacted large rescissions have had a severe negative impact on the participating member agencies’ investigations,” Treasury officials wrote in their fiscal 2019 budget request last February, just before Congress grabbed another $1.07 billion out of the fund in the March omnibus bill for fiscal 2018. “Insufficient and inconsistent funding support, uncertainty about future funding, investigations disrupted by cash flow problems, and inability to obtain necessary technology/infrastructure … all undermine both current and future financial investigations and forfeitures.”

Despite such warnings, the White House proposed permanently canceling another $400 million in fiscal 2019. They also proposed in May to rescind another $53 million, as part of a larger cuts package that died in the Senate.

The permanent nature of recent rescissions means the money won’t ever return to the fund; at least in previous years, lawmakers made a habit of temporarily preventing the money from being spent — only to make it available again the next year, including for them to grab as offsets.

According to the latest outside audit of the Treasury fund, at the end of fiscal 2018 it had a balance of $825 million; minus the latest rescission, fund balances are likely around $625 million, or slightly below where they were at the end of fiscal 2017. Of that balance, Trump wants to take out $242 million at first to build his wall. Another $359 million would come from future asset seizures, which are unknown and can be lumpy.

But they have plenty of time in which to let the fund build back up, as the White House plan is to first spend the $1.375 billion appropriated for the wall in fiscal 2019, which could take years.

Fiscal 2018 was a bumper crop for the agency, with $1.3 billion brought in through asset seizures, more than 2.5 times Treasury’s initial estimate. Just days before the budget request last year, too late to incorporate in the official documents, Treasury collected almost $319 million in a single settlement with Rabobank NA, after the Dutch company pleaded guilty to violations of bank secrecy and anti-money-laundering laws.

For this fiscal year, Treasury is estimating a smaller $438 million revenue gain, though again it’s possible those figures are too pessimistic. The lowest the fund has brought in since fiscal 2008 has been $516 million, according to Treasury data.

And in some cases, there’s a rare bonanza — such as the massive $3.84 billion infusion in fiscal 2015 out of a $8.9 billion settlement with BNP Paribas SA, a French bank, for violating sanctions against Cuba, Iran and Sudan. Congress promptly grabbed $3.8 billion of that money in the following year’s omnibus spending law for a new fund designed to compensate victims of state-sponsored terrorism.

Turning it around

Treasury officials have been warning appropriators for years that draining the fund would have consequences, said New York Democratic Rep. José E. Serrano, a former chairman and ranking member on Financial Services appropriations.

“We’re trying to turn that around,” said Serrano, arguing that larger cuts began when Republicans controlled the Appropriations committees in both chambers. “We all felt that wherever possible we were going to try to make sure that there are dollars for investigations, dollars for auditing, dollars for those jobs that were not done in the last couple of years.”

House Financial Services Appropriations Subcommittee Chairman Mike Quigley of Illinois wrote Trump Jan. 26 that the fund’s mission is to enhance law enforcement’s “efforts to disrupt and dismantle criminal enterprises.” He urged Trump not to apply money in the fund “towards the construction of a symbolic, but ultimately ineffective, border wall.”

But it could be a particular challenge for Financial Services appropriators to keep their own hands off the asset seizure money, since that spending bill has accounted for three-quarters of the rescissions since fiscal 2017, helping appropriators remain within their subcommittee allocation.

The courts may yet provide some relief: while the administration claims it has the legal authority to take money from the forfeiture fund for border security, lawsuits filed against the president’s move take a narrower view.

They point to the statute that defines the forfeiture fund and limits its expenditures to law enforcement purposes, such as paying the cost of an investigation or paying informants. Because of the nature of the fund, approved expenditures also include the costs of storing, advertising and auctioning the thousands of homes, vehicles, boats and airplanes confiscated each year.

The fiscal 2018 audit of the fund listed among its assets 130 vessels, 35 aircraft, 4,949 vehicles and 488 pieces of real estate, with a total value of $305 million. Upcoming auctions of seized assets feature gold coins, quite a few safes and electronics. Receiving the highest bid so far in a current online auction of boats and boat motors ending March 1 is a Nitro Z9 high performance bass fishing boat with a bid of $25,125 as of Feb. 27.

The top items, though, are real estate, with a dozen properties up for auction in March, typically held at the property. Next month’s fare includes a 4,390-square-foot house in Tuscon, Arizona, with mountain views and what was formerly The Spot Casino, a 4,794-square-foot building in Abilene, Texas.

All of that booty takes cash to safeguard. But with money seized from criminal enterprises, including drugs flowing across the border, the administration’s messaging is clear: use forfeited assets to build a wall and keep out criminals. But nowhere in the statute, according to lawsuits, does it specifically say building a wall is an approved use of forfeiture funds.

And that’s the crux of the issue for the cases currently wending their way through the courts, which is really the critics’ best recourse, as Congress is unlikely to have the votes to block the move. What lawmakers can do, however, is grab that cash as an offset — perhaps for the next two-year budget deal lawmakers want to pass — before Trump can, and hope the White House doesn’t notice or care enough.

Watch: Trump announces national emergency on border

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Correction 1:48 p.m. | An earlier version of this story misstated the balance in the Treasury Forfeiture Fund at the end of fiscal 2018. It was $825 million.