Thursday, September 29, 2011

Millions in complex assets mishandled or lost while under US Marshals Service care

A new audit report from the Department of Justice Inspector General largely supports allegations made by a contract forfeiture support whistle-blower, detailing wasteful procedures and undervaluation of complex assets.
The Justice Department’s top internal investigator released a scathing audit report last Tuesday confirming many of the allegations made by a former government contractor who accused the US Marshals Service, its director and his employer of improprieties 10 months ago. The report, from the Office of the Inspector General, not only calls into question the leadership and oversight of the Marshals’ Complex Assets Group from 2005 to 2009, it also portrays an asset management strategy that allowed the unit to mishandle, undervalue and ultimately lose millions of dollars that might have gone to restitution for victims of financial crimes.
The report exonerates former Complex Assets Group leader Leonard Briskman of wrongdoing, while exposing significant deficiencies in asset management practices during his tenure. His group, operating under the service’s Asset Forfeiture Program and forfeiture director Eben Morales, handles intricate, high-dollar assets such as financial instruments or interests in partnership businesses. The value of these complex assets, according to the report, ranges from $1 million to $49 million. The OIG found that the group disposed of $136 million between 2005 and 2010.
Whistleblower’s lawsuit sparked investigation
Briskman brought to the position a wealth of experience in managing retail and other properties in the private sector. But in 2009, Brian Aryai, a certified public accountant working for the largest government forfeiture contractor, Forfeiture Support Associates (FSA), began to notice irregularities in the valuation of assets handled by the Complex Assets Group. In a federal court complaint filed in November 2010, Aryai claims some assets were sold for significantly less than they were worth, often to buyers who got the inside track on the sales, which were not opened to public auction. Audit trails, he alleged, were nonexistent or obscured.
Briskman, Aryai suggested, was operating a fiefdom in which he was the ultimate arbiter of the value and the seller of these instruments, and no one else in the Marshals’ Asset Forfeiture Division was overseeing his activities.  
While other employees of the service were in no position to question Briskman’s expertise – according to the audit, Morales says his staff was not well versed in these types of assets – Aryai was better qualified to render judgment. A longtime US Treasury agent and fraud examiner, Aryai has worked in complex financial fraud and assets investigations throughout his career. The undervaluation of assets was immediately apparent to him, he claims.
In his 2010 complaint, filed in the Southern District of New York, Aryai says Briskman’s decisions “were not supported by a process whereby independent valuations were secured” to ensure a better sale price. Briskman, Aryai claims, would place low values on items and then negotiate with buyers – who were often his personal contacts – to sell the items without public notice.
Aryai says he approached his bosses at the contractor, FSA, about what he discovered. But during the March 2010 disposition of a minority interest in the so-called Delta Fund – another asset Aryai says he found to be vastly undervalued and undersold by Briskman – Aryai received an e-mail from his FSA supervisor, Yolanda Lopez.
“Brian. Be careful,” the e-mail said. “Len is the Senior USMS for Business and Complex assets. We are contractors and must cover for him, present a united front. US Attorneys should not get the impression that we are in differing levels.”
But that is exactly what did happen. From the Inspector General’s report:
“According to the AUSA [Assistant U.S. Attorney] who is working on the Madoff case, the Complex Asset Team’s lack of transparent disposition procedures in part undermined her confidence in the Complex Asset Team’s ability to manage and dispose of complex assets effectively.”
Further investigation led Aryai to suspect that Briskman was operating his own private assets valuation firm, Asset Valuation Advisors LLC. On various websites, AVA claimed to be working assets valuation cases that were actually Marshals Service forfeiture matters – an ethical grey area for professionals in the public sector. According to a cached historical page stored on the American Society of Appraisers website, Briskman as recently as 2009 listed AVA as his employer. Tax documents filed with the state of Maryland show that AVA shares a Rockville, Md., address with Briskman. In several professional associations and on other private websites, Briskman did not disclose his work for the Marshals Service.
Briskman cleared of wrongdoing, but his unit’s practices ripped
While Tuesday’s report does not explicitly credit Aryai, it was he who got the ball rolling. Before litigating, he took his concerns to Barbara Ward, an assistant US attorney for the Southern District of New York, who the report says alerted the Inspector General to the problems.
The resulting investigation found Briskman had not used his position to funnel business to his private business, but Aryai claims otherwise. His complaint describes Briskman’s LinkedIn profile, which he says describes disposed assets credited to AVA’s efforts but were remarkably similar to assets handled by the Marshals Complex Assets Group.
Briskman has since been reassigned. Reached by e-mail on Wednesday, he said he could not comment on the report. [In the interest of full disclosure, Briskman is an IAAR member, and FSA is a frequent sponsor of IAAR events.]
“This report … fully validates the legitimate concerns [Aryai] had with the manner and means in which Leonard Briskman operated and controlled the Complex Assets Group,” said Joshua L. Weiner, Aryai’s attorney. His whistleblower case is currently before the Southern District of New York.
Full article can be found here.

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