Posted on Monday, December 27, 2010
An arm of the United States Marshals Service undervalued what could amount to untold millions of dollars in assets forfeited by white-collar criminals — including some from the family of Bernard L. Madoff — and sold them for far less than they were worth, according to a lawsuit filed in federal court in Manhattan.
As a result, the lawsuit suggests, crime victims, including some who lost fortunes in the Madoff case, may have been deprived of millions of dollars in restitution.
The complaint filed in the case contains a range of accusations about the actions of Leonard Briskman, the leader of the marshals unit. It 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.
The lawsuit, a whistle-blower action filed in November under the Federal False Claims Act, was brought by Brian S. Aryai, a former federal agent and certified public accountant who worked for a government contractor that helped the Marshals Service, through its Asset Forfeiture Program, administer more than $2 billion in seized and forfeited assets. Mr. Aryai, who uncovered the alleged improprieties involving Mr. Briskman, reported them to the contractor, Forfeiture Support Associates LLC, and the Marshals Service, both of which responded by retaliating against him, according to the suit.
Mr. Aryai’s allegations have prompted an internal investigation by the Office of the Inspector General in the Justice Department, Mr. Aryai’s lawyer, Joshua L. Weiner, said in an interview this month.
The inspector general is also conducting an audit to evaluate the oversight of seized and forfeited complex assets, according to its semiannual report to Congress. Cynthia A. Schnedar, deputy inspector general, acknowledged the audit but would neither confirm nor deny an investigation. A spokeswoman for the Marshals Service said the agency would not comment because the lawsuit was pending.
Mr. Briskman did not return several calls seeking comment.
The Marshals Service is the nation’s oldest law enforcement agency, and most of its responsibilities involve securing federal courthouses, transporting prisoners, hunting fugitives and operating the witness security program.
But over several decades, the value of forfeited assets managed by the agency has grown exponentially. Hundreds of millions of dollars of complex financial instruments — securities, interests in partnerships, limited liability corporations, other businesses and real estate — now fall under the purview of its complex assets group. Its mission is to value these assets, sell them and in some instances return the proceeds to the victims of financial crimes.
The lawsuit, filed Nov. 30 in United States District Court in Manhattan, names the Marshals Service and Eben Morales, who leads the service’s Asset Forfeiture Division, as well as Forfeiture Support Associates.
Mr. Aryai began working for the contractor in October 2009. As a senior forfeiture financial specialist assigned to the Marshals Service office in Manhattan, his job was to provide financial expertise for the forfeiture program on complex assets and help improve internal controls, the lawsuit said.
He was hired months after a broad audit of the Justice Department’s overall Asset Forfeiture Program by KPMG found fault with the Marshals Service’s internal controls and recommended the hiring of certified public accountants.
The Marshals Service spokeswoman, Lynzey Donahue, would not say how much of the more than $2 billion in seized and forfeited assets managed by the agency was handled by the complex assets group.
But 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.
Mr. Briskman, 73, joined the Marshals Service in 1997, after running a public company that operated 41 retail shoe shops. A 2006 profile of him in Forbes magazine portrayed him as a savvy manager who entered the agency after selling off the last parts of his shoe store company, which had sought Chapter 11 bankruptcy protection.
Officials with the Marshals Service would not disclose any details of his experience, hiring or assignments.
While the lawsuit does not detail the potential losses to the Asset Forfeiture Program and, by extension, to crime victims, it cites Mr. Briskman’s handling in early March of a minority interest in the Delta Fund, which had been held by Ruth Madoff. The fund came under the purview of the complex assets group.
“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.”
Later in March, when Mr. Aryai reported his findings to his superiors at Forfeiture Support Associates and in the Marshals Service, he was transferred so that he reported directly to Mr. Briskman, according to the lawsuit. When Mr. Aryai tried to add his new supervisor to his professional networking profile on the Web site LinkedIn, he found that Mr. Briskman did not list himself as an employee of the Marshals Service, but as the chief executive of Asset Valuation Advisors.
When Mr. Aryai sought to look into Mr. Briskman’s company, he found that it “held itself out as a business with experience in the disposition of distressed assets, with examples that shockingly appeared to be U.S.M.S. forfeiture matters,” the complaint said.
Mr. Aryai reported what he had learned to Barbara Ward, an assistant United States attorney in Manhattan who handles forfeiture matters, and, the lawsuit said, it was agreed that his findings would be reported to the inspector general. That led to a series of what the lawsuit alleges were retaliatory actions by the company, the Marshals Service and Mr. Morales, along with harassment and, ultimately, in June, his removal from his position with the contractor.
Forfeiture Support Associates, which has a $613 million contract to provide clerical and professional assistance to the Justice Department, the Marshals Service and other federal agencies involved in handling seized and forfeited assets, said through a spokesman that the company’s policy was not to comment on lawsuits.
The suit indicates that Mr. Briskman was reassigned from his duties overseeing the complex assets group. A response from his office e-mail account last week said he was on special assignment.
NYTBy WILLIAM K. RASHBAUM