- Image via Wikimedia Commons
Ever wonder where the money goes when a gambling ring gets busted? When a car is seized by police and auctioned?
Last weekend, The Indianapolis Star reported that as much as several million in cash from police seizures has not been making its way to the state Common School Fund, as is required by state law.
But I've been doing my own investigating on this story for several weeks now, and what I've found doesn't paint quite as clear a picture. There are reasons I didn't yet run a print story.
That's because millions of dollars each year are, in fact, making it from county courts to the Common School Fund, and some of it may be from seized assets.
What's unclear is how much of those millions come from civil forfeiture cases — in which seized property is forfeited to counties by way of civil court settlement. This is what The Star and some city advocates say is missing. The Star could be right (and is probably at least partly right), but unless it has examined the records at county clerk offices in all 92 counties, there's no way to know for sure.
Having read the article, there's no indication the research went that deep. Research like that would take months, if not longer.
This stuff is complicated, so take a deep breath and plunge along with me. As with scuba diving, it's not for the faint of heart:
State law (Indiana Code 34-24-1-4) explicitly requires that "any excess in value of the proceeds of the money over the law enforcement costs be forfeited and transferred to the treasurer of state for deposit in the common school fund." It's the responsibility of county judges, prosecutors and police departments to figure out what constitutes "excess" and pass it along to the state.
Indeed, it is unclear where much of that money from civil forfeitures is going. I confirmed with treasury officials last month that only about $100,000 in civil seizure revenue has come directly from all 92 counties to the treasurer for the Common School Fund over the last three years — most of it from Wayne and Putnam Counties.
As The Star points out, there's a lot of wiggle room in the state code language — and every reason to believe county law enforcement is interpreting the term "law enforcement costs" as broadly as possible. Even in Wayne County, County Prosecutor Michael Shipman explained to me that "law enforcement costs" included, at the very least, compensation for hours spent busting and prosecuting crimes, at hourly rates consummate with police and prosecutor wages.
[There's a convincing argument to be made that hourly compensation goes above and beyond "costs," since police and prosecutor pay is already budgeted. A cop or prosecutor gets paid from taxpayer revenues regardless of whether the hour spent making a bust turns up nothing, or turns up $100 grand.]
Steve Johnson, executive director of the Indiana Prosecuting Attorneys Council agreed there was a lot of room for interpretation. After Muncie prosecutor Mark McKinney was caught siphoning money from forfeiture settlements in 2008, IPAC took a look at how those settlements were handled around the state.
"After Muncie, we started looking around at how counties handled those funds," Johnson said. "And I was really surprised at the disparity in the way the funds are handled."
Johnson explained that there's even more wiggle room than that. For example, assets seized in connection with racketeering charges can be seized under what's known as the Racketeer Influenced and Corrupt Organizations statute (RICO). In those cases, whenever a pattern of conspiracy is proven (think organized crime) RICO says law enforcement may hold onto assets seized.
Little surprise, then, if police and prosecutors weren't forking over what they should for the Common School Fund. No one's really forcing them to.
But here's the thing: Millions in "Fines and Forfeitures" dollars each year are, in fact, passing from counties to the Common School Fund.
It begins with county courts. And here's where the money chain begins:
- — The county clerks pass the "excess" forfeiture money from the county courts to county auditors each month.
- — Those county auditors pass that money along as a lump sum every six months to the state auditor.
- — The state auditor sends it to the state treasurer, for deposit in the Common School Fund.
If you're confused, join the club. It's a very confusing subject.
But here's the gist: According to the Indiana state auditor's office, counties are not supposed to send "excess" forfeiture money directly to the state treasurer, the way Wayne and Putnam counties do. It's supposed to come via the chain described above.
Here's what Dan Bastin, settlement director for the state auditor, told me. As of a few weeks ago, he had only recently learned that some counties were sending fine and forfeiture money directly to the treasurer.
"Our direction to county clerks, and the state board of accounts direction to county clerks is, whenever you receive [excess civil forfeiture money], then that money is forfeiture money and you should just remit that over to the county auditor as you do all other forfeiture money on a monthly basis. Then the county auditor will include that money in the money they remit to us each six months. And, when we receive that money, we deposit it with the State Treasurer and recede it to the Common School Fund."
"In some instances, the county clerk gets that order, and they read that language and they think, 'well, we need to remit that over to the state immediately,' and they'll cut a check to the state treasurer, and the state treasurer will recede it to the common school fund."
For some reason, the treasurer has only kept track of the latter — money sent directly from counties to the treasury, even though, according to the state auditor, that's not how you're supposed to do it.
Per the state auditor's spread sheets, here are some examples of what's been handed over recently:
- — Last May, the state treasury received $3,195,013.80 for the Common School Fund from Indiana counties, via the state and county auditors, collected over a period of six months. Of that:
- — $401,213.61 came from Marion County
- — $105,178.31 came from Hamilton County
- — $362,359.11 came from St. Joseph County
- — $197,250.50 came from Lake County
- — $502,551.92 came from Elkhart County
Etc. Those are just some of the higher figures. But money like that is sent along every month to the Common School Fund.
What's not clear is how much of that "Fine and Forfeiture" money comes from seized assets, because those sums include money from all kinds of things — from fines to bail bonds.
Maybe it's half. Maybe a quarter. Maybe only five dollars out of $3 million comes from seized assets. The Star's broader point — that law enforcement is probably keeping more than it should — is undoubtedly true. And sources close to the prosecutor's office have told me it's likely Marion County keeps all the cash it seizes and all the money from auctioning seized assets, sending no money from those cases to the Common School Fund.
From a moral standpoint, that's a problem.
But we don't know how big a problem until we examine the county clerk records at each of the 92 counties. They're the only ones who know how it breaks down before it's bundled and sent down the chain.
The only way we'll know for sure is a statewide audit of every county clerk's office. Last I checked, the state treasurer is up for re-election this November. Seems like good politics to get this house in order first.
The Star article begs more questions than we've seen answered so far. I'll update as I learn more. And I invite conversation if anyone can help me clarify. To my mind, the issue is clear as mud right now.