Pubdate: Tue, 07 Mar 2006
Source: Business Week (US)
Section: Investing
Copyright: 2006 The McGraw-Hill Companies, Inc.
Contact:  http://www.businessweek.com/
Details: http://www.mapinc.org/media/753
Author: Christopher Palmeri
Bookmark: http://www.mapinc.org/af.htm (Asset Forfeiture)

CORPORATE SCANDALS PRODUCE HOT BARGAINS

Confiscated goods -- seized from recent corporate hooligans -- offer 
buyers a wealth of hard-to-find options. On your mark, shoppers

It was a chilly Thursday morning in an industrial neighborhood a 
half-hour's drive south of Los Angeles. But that didn't stop 1,500 
people from turning out to bid at a government auction sponsored by 
the Treasury Dept. As a propeller-tongued auctioneer and four 
assistants known as "ring-men" worked the crowd, more than 300 
confiscated items were auctioned. Among the treasures: gold ingots 
and coins seized from an illegal "digital gold" money-transfer 
business and a 2002 BMW 530i taken from a nurse who committed Medicare fraud.

The surge in white-collar crime in recent years has resulted in 
booming sales of forfeited goods. Since 2001, the total value of 
confiscated goods sold by the Justice Dept. and the Treasury, the two 
main branches of the government that handle such property, has 
climbed to $926 million, from $627 million.

Among the high-profile booty: a Galveston (Texas) beach house 
belonging to former Enron CFO Andrew S. Fastow, which the government 
sold for $595,000 last year, and a 1999 Shelby Series 1 sports car 
belonging to his former colleague, Kenneth Rice, who headed Enron's 
broadband unit. The car, sold a few months after the beach house, 
fetched $56,000. Both men pleaded guilty to securities fraud.

King's Ransom.

In recent years, the government has sold luxury cars and diamonds 
belonging to Martin Frankel, who pleaded guilty to stealing $200 
million in the largest insurance fraud in the U.S., as well as wine, 
watches, and jewelry owned by John D. Garitta, the former CFO of 
mortgage lender PinnFund U.S.A. He pleaded guilty to filing false 
financial statements in 2002. Still to come: the Mar. 23 auction of 
Asian rugs and antiques from former Congressman Randy "Duke" 
Cunningham, who pleaded guilty to bribery charges last November.

For consumers looking for bargains, hunting down the soon-to-be-sold 
goods isn't always easy. The Treasury Dept., which also handles sales 
for the Customs and Border Protection, the Secret Service, and the 
Internal Revenue Service's criminal division, lists all of the items 
up for auction at its Web site, www.treas.gov/auctions/customs/. It 
runs about 48 auctions a year in various cities around the country, 
but handles less than 5% of the overall goods. The U.S. Marshals 
Service manages the rest.

The Marshals Service, which sells property confiscated by the Justice 
Dept., is not as well organized. The service does not maintain a 
central list of forfeited property for sale. Instead, it fans the 
goods out to dozens of local contractors. The best aggregation of 
their inventory is available at www.bid4assets.com, which has a 
contract to sell some confiscated government property via the Internet.

Status Symbols.

In most asset-forfeiture cases, the Justice Dept. and Treasury split 
the proceeds between the various law-enforcement agencies involved in 
the cases, both locally and nationally. Much of the proceeds from 
property forfeited in white-collar cases, however, are returned to 
investors and other injured parties, says Leonard Briskman, deputy 
chief of business management at the U.S. Marshal's asset forfeiture division.

For a few buyers, there may even be some cachet to purchasing 
confiscated goods. Los Angeles resident Betty Thomas camped out at 
8:30 a.m. at the recent Treasury auction in Los Angeles. Her target: 
a 2001 Jaguar XK8 convertible that once belonged to James Graf, a 
resident of Canyon Lake, Calif., who was convicted last November of 
running a $20 million health insurance fraud. Thomas won the car for 
$38,000 -- and she didn't have to pay taxes on it.

The California Department of Motor Vehicles did initially want her to 
pay past-due registration fees on the car. They ultimately relented, 
making her even happier about the purchase. Says Thomas of her new 
Jaguar's infamous heritage: "I wonder if anyone will recognize it."

Palmeri is a senior correspondent in BusinessWeek's Los Angeles bureau
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