Criminal Debt: Court-Ordered Restitution Amounts Far Exceed Likely Collections for the Crime Victims in Selected Financial Fraud Cases
Published: 2005-01-31T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In the wake of a recent wave of corporate scandals, Senator Byron L. Dorgan noted that the American taxpayers have a right to expect that those who have committed corporate fraud and other criminal wrongdoing will be punished, and that the federal government will make every effort to recover assets held by the offenders. Recognizing that GAO previously reported on deficiencies in the Department of Justice's (Justice) criminal debt collection processes (GAO-01-664), Senator Dorgan asked GAO to review selected criminal white-collar financial fraud cases for which large restitution debts have been established but little has been collected. Specifically, GAO was asked to determine (1) the status of Justice's efforts to collect on the outstanding debt, (2) the prospects for future collections, and (3) whether specific problems have affected Justice's ability to collect the debt.
section_title: What GAO Found
paragraphs: The court-ordered restitution for the five selected white-collar financial fraud criminal debt cases GAO reviewed far exceeded amounts likely to be collected and paid to the victims. These offenders, who had either been high-ranking officials of companies or operated their own business, pled guilty to crimes for which the courts ordered restitution totaling about $568 million to victims. As of the completion of GAO's fieldwork, which was up to 8 years after the offenders' sentencing, court records showed that amounts collected for the victims in these cases totaled only about $40 million, or about 7 percent of the ordered restitution. At some point prior to the judgments establishing the restitution debts, each of the five offenders either reported having wealth or significant financial resources to the courts or to Justice, or there were indicators of such. However, following the judgments, the offenders claimed that they were not financially able to pay full restitution to their victims. Justice's Financial Litigation Units (FLU) that were responsible for collection performed certain activities to collect the debts after the judgments, but the debts had not been significantly reduced as a result of the FLUs' identification and liquidation of additional assets of the offenders. The FLUs' prospects are not good for collecting additional restitution amounts on these cases. A major problem hindering the FLUs' ability to collect restitution debt in the selected cases was the long time intervals between the criminal offense and the judgment. Court records show that 5 to 13 years passed between when the offenders began to engage in the criminal activity for which they were sentenced and the date of their judgments. For each of the selected cases, by the time the court rendered the judgment establishing the restitution debt, certain of the offenders' assets had been, among other things, transferred to family members or others, involved in forfeiture actions, subject to bankruptcy, or moved to a foreign account. In addition, one of the selected cases involved an offender who was jointly and severally liable for the debt with another offender who had been deported. Justice acknowledged that such dispositions or circumstances are not uncommon and create major debt collection challenges for the FLUs. Moreover, there were minimal, if any, apparent negative consequences to these offenders for not paying their restitution debts. Recently, to further implementation of a related recommendation made in 2001 by GAO, the Congress directed the Attorney General to develop a strategic plan with certain other federal agencies to improve criminal debt collection. Given the significant upward trend in outstanding criminal debt and the difficulty experienced by Justice in collecting criminal restitution debt, it is important that Justice include in such a plan legislative initiatives, operational initiatives, or both to enhance the federal government's capacity to collect restitution for victims of financial crimes.

section_title: Letter
paragraphs: In March 2004, we reported that the Department of Justice’s (Justice)  unaudited records indicated that the total amount of outstanding criminal  debt had more than quadrupled over a 6-year period, growing from about  $6 billion as of September 30, 1996, to almost $25 billion as of   September 30, 2002. This significant upward trend started with enactment  of the Mandatory Victims Restitution Act of 1996 (MVRA). One feature of  that law substantially increased the restitution amounts the courts were  required to order for certain offenses. Our 2004 report included detailed  information on the reported amount and growth of criminal debt for fiscal  years 2000 through 2002, including specific amounts related to white-collar  financial fraud. As discussed in that report, Justice’s unaudited records  indicate that for each of these 3 fiscal years, about two-thirds or more of  criminal debt was related to white-collar financial fraud. About 80 percent  of the white-collar financial fraud debt as of September 30, 2002, was  categorized as nonfederal restitution, which is criminal debt owed to other  than the federal government and for which Justice has a significant  responsibility to collect on behalf of crime victims.
We noted in our earlier July 2001 report, and reaffirmed in our 2004 report,  that the collection of outstanding criminal debt is inherently difficult due to  a number of factors, including the nature of the debt, in that it involves  criminals who may be incarcerated, may have been deported, or may have  minimal earning capacity; the MVRA requirement that the assessment of  restitution be based on actual loss and not on an offender’s ability to pay;  and the significant amount of time that may pass between offenders’ arrest  and sentencing, thus affording opportunities for offenders to hide  fraudulently obtained assets in offshore accounts, shell corporations,  family members’ names and accounts, or other ways. Our 2001 report also  noted as contributing factors to the growth of reported uncollected  criminal debt Justice’s inadequate policies and procedures for collecting  criminal debt, lack of adherence to established criminal debt collection  procedures in certain judicial districts, and Justice’s insufficient  coordination with other entities involved in the collection of criminal debt.
In the wake of a recent wave of corporate scandals, you noted that the  American taxpayers have a right to expect that those who have committed  corporate fraud and other criminal or civil wrongdoing will be punished,  and that the federal government will make every effort to recover assets  and the ill-gotten gains held by such offenders. Recognizing that we  previously reported on specific deficiencies in Justice’s and other federal  agencies’ criminal debt collection processes and had made  recommendations to improve collections, you asked us to study several  specific criminal restitution debt cases to shed additional light on the  difficulties involved in attempting to collect restitution for victims of crime.   Specifically, for selected criminal white-collar financial fraud cases for  which large restitution debts have been established but little has been  collected, you asked that we determine (1) the status of Justice’s efforts to  collect on the outstanding debt, (2) the prospects for future collections,  and (3) whether specific problems have affected Justice’s ability to collect  the debt.
subsections: section_title: Background
paragraphs: Justice is responsible for collecting criminal debt and has delegated  operating responsibility to its FLUs within all of Justice’s U.S. Attorneys’  Offices (USAO). Justice’s Executive Office for United States Attorneys  (EOUSA) provides administrative and operational support, including  support required for debt collection, to the USAOs. According to Justice,  the FLUs typically become involved in the criminal debt collection process  after the judgment, which occurs when an offender is convicted and a  judge orders the offender to pay a fine or restitution. The U.S. Courts and  their probation offices may also assist in collecting moneys owed. AOUSC  provides national standards and promulgates administrative and  management guidance, including standards and guidance required for debt  collection, to the various U.S. judicial districts.
In July 2001, we reported on the growth of uncollected criminal debt  through fiscal year 1999. We noted that although some of the key factors  that contributed to the increasing amount of criminal debt were beyond  Justice’s control, certain of Justice’s criminal debt collection processes  were inadequate. Accordingly, in the 2001 report, we made 14  recommendations to Justice to improve the effectiveness and efficiency of  its criminal debt collection processes.
In our March 2004 report, we discussed the extent to which Justice had  acted on our previous recommendations to it to improve criminal debt  collection. Our follow-up work on Justice’s efforts to implement our 2001  recommendations showed that it had completed actions on 7 of the 14  recommendations, most of which were completed about 2 years after we  made the recommendations, and had efforts under way to address 6 other  recommendations. We noted that because many of these recommendations  largely focused on establishing policies and procedures, it is important that  they be effectively implemented once they are established, and it will likely  take some time for collection results to be realized from full  implementation. However, efforts to implement the recommendation that  we considered the most critical had not progressed—namely for Justice to  participate in a multiagency effort to develop a unified strategy for criminal  debt collection. Specifically, we reported that Justice had not yet worked  with other agencies, including AOUSC, OMB, and Treasury, to implement a  key recommendation to work as a joint task force to develop a strategic  plan that addresses managing, accounting for, and reporting criminal debt.  We concluded that the long-standing problems in the collection of  outstanding criminal debt—including fragmented processes and lack of  coordination—continued because there is no united strategy among the  major entities involved with the collection process.
section_title: Scope and Methodology
paragraphs: Our case study review, on which the results described in this report are  based, focused on a nonrepresentative selection of five criminal white- collar financial fraud debts that Justice reported outstanding as of  September 30, 2002, each with a judgment prior to fiscal year 2001 that  assessed the offender millions of dollars of restitution. We selected debts  involving offenders who were not currently in prison and for which the  offenders had paid a relatively small amount of the outstanding restitution  amounts as of September 30, 2002. Also, our review only involved selected  cases for which we could clearly identify the lead debtor in court and  Justice records.
We obtained sufficient information to address our three reporting  objectives; however, we were not provided all of the details pertaining to  each of the five selected cases and thus cannot be assured that there was  not additional relevant information. Because Justice still considers these  cases to be open law enforcement cases for collection purposes, the  information Justice provided for each case was limited primarily to what  was included in its debt collection file minus personal identifiers, such as  the names of the offenders, their addresses, and their Social Security  numbers. Therefore, we are not providing a comprehensive account of any  particular case.
For each selected debt, we reviewed Justice’s debt collection file or files,  minus all personal identifiers. We interviewed appropriate officials from  Justice’s EOUSA and the responsible FLUs concerning actions taken to  collect the debt, obstacles to collection, and prospects for future  collections. To supplement or attempt to further corroborate the  information obtained from Justice for each case, we obtained and reviewed  pertinent information about the selected debts and debtors from certain  records made available by the courts and from public sources available  through the Internet, such as property records. Also, for reporting  purposes, rather than highlighting specific case studies in detail, our  discussions focus on specific types of debt collection problems identified  during this review, many of which we were aware of from our previous  work. This was done to ensure sufficient privacy of those involved in our  selected cases, and in consideration of Justice’s concern that the release of  information on open cases could hinder the department’s efforts to collect  the debts.
We conducted our review from November 2003 through June 2004 in  accordance with U.S. generally accepted government auditing standards.
We received written comments signed by the Director, Executive Office for  United States Attorneys, on a draft of this report. Justice’s comments are  reprinted in appendix I, and technical comments received from both  Justice and AOUSC have been addressed as appropriate in this report.
section_title: Restitution Amounts Far Exceed Likely Collections for the Crime Victims
paragraphs: The court-ordered restitution amounts assessed the offenders for the five  selected criminal debt cases far exceed likely collections for the crime  victims. The offenders’ restitution amounts totaled about $568 million.  However, according to court records, only about $40 million, or about 7  percent of the total, had been collected several years after the courts  sentenced each of the offenders. The vast majority of these collections  resulted from asset forfeiture actions and from payments that were made  before the offenders were sent to prison or placed on probation. We found  that the FLUs, which typically become involved in criminal debt collection  after the debt is established at judgment, performed certain debt collection  activities; however, they were not able to reduce the restitution debts  significantly by identifying and liquidating additional assets of the  offenders to pay the victims. Moreover, based on information available to  us, the FLUs’ prospects are not good for collecting additional restitution  amounts from the offenders to compensate their victims to the extent  initially ordered by the courts. Following the judgments, despite  indications of prior wealth or possession of significant financial resources,  the offenders claimed to have limited financial means to pay their  restitution debts. Further, there were minimal, if any, apparent negative  consequences to the offenders for not paying such debts.
A major debt collection problem for the FLUs for the selected cases was  that up to 13 years had passed between the offenders’ criminal activities  and the related judgments. By the time the FLUs became involved in trying  to collect the restitution debts, the offenders’ assets had been, among other  things, transferred to family members or others, forfeited to the  government, or involved in bankruptcy. Justice acknowledged to us that  the long intervals between criminal activity and the related judgments, and  certain dispositions and circumstances involving the offenders’ assets or  the offenders that take place during such intervals, make collection  difficult for many criminal restitution debt cases.
subsections: section_title: Most of the Court-Ordered Restitution Has Not Been Collected
paragraphs: As previously mentioned, the offenders’ restitution amounts for the  selected cases totaled about $568 million. Restitution amounts for  individual cases ranged from over $7 million to more than $400 million.  Court records show that each of the offenders, who pled guilty to engaging  in criminal activity, had been high-ranking officials of companies and  lending institutions or operated their own business. The crimes in these  cases consisted of fraudulently manipulating company sales figures and  inventories to increase stock values or to obtain loans, engaging in  schemes to convert business loan proceeds for personal use, selling  securities to private investors under false pretenses, and illegally sharing in  loan proceeds from a federally insured financial institution. The victims of  the crimes involving the offenders of our selected cases included corporate  shareholders, large lending institutions, and small investors—many of  whom were elderly and had been harmed financially. In addition to the  court-ordered restitution, prison terms ordered by the courts for four of  these offenders ranged from 1 to 5 years followed by 3 to 5 years of  supervised release. One offender received several years of probation rather  than prison. As of June 2004, all of the offenders were out of prison or off  probation, but three offenders were still on supervised release.
As noted earlier, only about $40 million, or about 7 percent of the total  restitution for the selected cases had been paid as of June 2004, which was  from about 4 to 8 years after the courts sentenced each of the offenders.  Collections for the individual cases ranged from less than 1 percent to  about 10 percent of the restitution amounts owed. About $24 million of   these collections resulted from asset forfeiture actions, and over   $11 million from payments that were made prior to the offenders’  sentencing. After the judgments were rendered, the FLUs performed  certain debt collection activities, such as filing liens on the offenders’ real  property; issuing restraining notices forbidding the transfer or disposition  of assets; performing title searches; and requesting, obtaining, and  reviewing financial information from the offenders. Performing such  activities did not enable the FLUs to further reduce the restitution debts  significantly by identifying and liquidating additional assets of the  offenders.
section_title: Prospects Are Not Good for Collecting Additional Restitution to Fully Compensate the Crime Victims
paragraphs: For the selected cases, based on information available to us, the FLUs are  not likely to collect sufficient additional restitution amounts from the  offenders to compensate their victims to the extent initially ordered by the  courts. At some point prior to the judgments establishing the restitution  debts, each of the offenders either reported having wealth or significant  financial resources to the courts or to Justice, or there were indicators of  such. Specifically, prior to sentencing, one or more of the offenders  reported earning millions of dollars in annual gross income, having millions  of dollars in net worth, or spending thousands of dollars per month on  clothing and entertainment. In addition, court records indicate that certain  of the offenders converted millions of dollars of fraudulently obtained  assets for personal use, established businesses for their children, or held  residential properties worth millions that were located in upscale  communities. In spite of the reported wealth or financial resources or  indications of such, following their judgments, each of the offenders  reported to either the courts or Justice a modest income or net worth and  claimed to have limited financial means to pay restitution debt. Further, at  the time of our file reviews, three of the offenders were on supervised  release and making monthly or yearly payments set by the courts that will  do little to reduce the outstanding balance of their restitution debts, one  offender had stopped making routine monthly payments after supervised  release terminated, and one offender had negotiated a settlement with the  crime victim, which was approved by Justice and the court, for far less than  the initial court-ordered restitution.
There were minimal, if any, apparent negative consequences to the  offenders for not paying restitution to their victims as initially ordered by  the courts. First, information obtained from the courts and public  documents indicated that the offenders were living in reasonable comfort.  For example, one offender and his immediate family owned and, at the time  of our review, resided in a property worth millions of dollars; another  offender owns a home worth over $1 million; and two offenders took  overseas trips while on supervised release. Second, after probation or  supervised release has expired, the offenders cannot be sent to prison for  failure to pay their restitution debts. According to Justice, although it does  not apply to restitution, the willful failure to pay a fine is a crime of criminal  default, which can result in the offender’s receiving an additional fine of not  more than twice the amount of the unpaid balance of the fine or $10,000,  whichever is greater; being imprisoned not more than 1 year; or both.  However, there is no such similar crime for willful failure to pay restitution.  A court may revoke or modify the terms and conditions of probation or  supervised release for an offender’s failure to pay restitution. However,  these are of little consequence once the offender has successfully  completed the term of probation or supervised release.
section_title: Long Intervals between the Offenders’ Criminal Activities and Their Judgments Create Major Debt Collection Challenges for the FLUs
paragraphs: For the selected cases, according to records provided by the courts, at least  5 to 13 years passed between when the offenders began to engage in the  criminal activities for which they were sentenced and the date of their  judgments. We identified and the FLUs acknowledged that by the time the  courts rendered the judgments establishing the restitution debts, certain of  the offenders’ assets were, among other things, transferred through legal or  potentially fraudulent means to a family member or others, involved in  forfeiture actions, subject to bankruptcy, or moved to a foreign account. In  addition, one of our selected cases involved an offender who was jointly  and severally liable for the debt with another offender who had been  deported.
Justice stated that after criminal activity occurs, years may pass before the  initial investigation of a crime, let alone the arrest, trial, and conviction of  an offender. Justice also stated that the primary focus during the criminal  investigation, prior to judgment, is on the discovery and prosecution of the  offender’s criminal acts rather than on the potential future debt recovery by  the federal government. During the intervals between criminal activities  and the related judgments, Justice acknowledged that dispositions and  circumstances involving the offenders’ assets or the offenders often occur  that create major debt collection challenges for the FLUs. According to  Justice, criminals with any degree of sophistication, especially those  engaged in fraudulent criminal enterprises, commonly dissipate their  criminal gains quickly and in an untraceable manner. Assets acquired  illegally are often rapidly depleted on intangible and excess “lifestyle”  expenses. Specifically, travel, entertainment, gambling, clothes, and gifts  are high on the list of means to rapidly dispose of such assets. Moreover,  money stolen from others is rarely invested into easily located or  exchanged assets, such as readily identifiable bank accounts, stocks or  bonds, or real property. Justice emphasized that the initial efforts by  criminal law enforcement investigators, federal prosecutors, and the  probation office promise the greatest opportunity for meaningful recovery  of illegally obtained assets. Therefore, in our view, coordination among the  FLUs and other entities involved in criminal debt collection is critical.
subsections: section_title: Transfer of Assets
paragraphs: According to Justice, there is no general statutory authority for Justice to  obtain pretrial restraint of assets in order to satisfy a potential criminal  judgment that may result in a restitution debt. However, once such a  judgment is imposed, Justice can proceed against a third party by filing a  separate federal action to recover the assets or proceeds thereof. Justice  emphasized that it must prove by a preponderance of the evidence that the  offender fraudulently transferred assets, which often involves a lengthy  and time-consuming process. Moreover, even when a valid claim is made  against a third party for a fraudulent transfer, the third party may have a  “good faith” defense if the transfer was accepted in exchange for a  “reasonably equivalent value.”
The challenges encountered in collecting restitution debt from offenders  who may have transferred assets to others through legal or potentially  fraudulent means were evident in our review of selected cases. According  to Justice, at least one of the offenders in our selected cases has engaged in  a shell game for the purpose of shielding their assets. In addition, Justice  stated that at least one of the offenders has not provided full financial  disclosure, and that the FLU is currently exploring whether the offender  fraudulently conveyed assets to family members and others. Based on  information in Justice and court records, certain of the offenders in the  selected cases engaged in one or more of the following activities.
Prior to the judgment, the offender and the offender’s family established  trusts, foundations, and corporations for their assets at about the same  time they closed numerous bank and brokerage accounts.
Over the course of several years, the offender converted for personal  use hundreds of millions of dollars obtained through illegal white-collar  business schemes.
Several years prior to the judgment, the offender’s minor child, who is  now an adult, was given the offender’s company. As of completion of our  fieldwork, that company employed the offender.
Prior to the judgment, the offender placed a multimillion-dollar  residence in a trust.
Prior to the judgment, the offender established a trust worth hundreds  of thousands of dollars for the offender’s child.
The offender and the offender’s family rent their expensively furnished  residence, which they previously owned, from a relative.
section_title: Forfeited Assets
paragraphs: Justice stated that forfeited assets are the property of the federal  government and do not always go to crime victims. Justice can restore  forfeited assets to a victim upon the victim’s filing of a petition, but only in  those limited cases when it is the victim’s actual property that is being  restored. According to Justice, the FLUs’ coordination with Justice’s Asset  Forfeiture Unit and others at the outset of the case is invaluable in securing  assets for payment of the victims’ restitution when such potential exists.
The importance such coordination has to securing forfeited assets for the  crime victim was evident in one of our selected cases. Court records  showed that about $175 million of the offender’s assets that had been  identified as related to the case had been forfeited; however, the FLU’s  records showed that only about $50 million of such assets had been  forfeited. At the time of our file review, the FLU was not certain whether  any forfeited assets had been, or could be, applied toward the offender’s  restitution debt. Subsequent to our visit to the FLU and our inquiries  related to this matter, Justice stated that only about $24 million of the   $50 million of forfeited assets in its records may be applied toward the  offender’s restitution debt as a result of a petition filed by the victim.
section_title: Bankruptcy
paragraphs: According to Justice, bankruptcy can impair the FLU’s ability to collect  criminal restitution debt. When a bankruptcy proceeding is initiated before  the criminal judgment, the bankruptcy estate attaches to all of the  offender’s property and rights to property, which can significantly limit  assets available for restitution. When a bankruptcy proceeding is initiated  after the criminal judgment, the United States may file a proof of claim in  the bankruptcy proceeding and may have secured status if its lien was  perfected against any of the defendant’s property. However, there may be  other creditors seeking payment from the offender’s estate, including often  the Internal Revenue Service. These other creditors may be just as much  victims of the offender as the victims named in the restitution order and  may also have valid interests in payment from the estate. Moreover,  bankruptcy’s automatic stay may limit the FLUs’ ability to otherwise  enforce the debt.
For one of the selected cases, the offender went into bankruptcy prior to  the judgment. Shortly after the judgment, which was rendered over 5 years  ago, the FLU issued a restraining notice to the offender, forbidding the  transfer or disposition of his assets, and filed a lien on certain property.  However, according to the FLU, the ongoing bankruptcy has prevented it  from taking additional collection action. Recently, Justice stated that it had  been advised by the bankruptcy trustee that for this case, most of the  offender’s bankruptcy estate of several million dollars would be distributed  to the victim. Justice emphasized that generally for cases in which the  offender goes into bankruptcy prior to the judgment, the criminal  restitution debt will only be recognized as a general unsecured debt and,  therefore, most often will not be satisfied.
section_title: Foreign Accounts and Deportation
paragraphs: Justice stated that money obtained illegally is often moved to offshore  accounts or to debtor-haven countries. In the absence of a treaty with a  foreign government or a provision of law to provide for the repatriation of  money transferred to foreign accounts, acquiring such money for the  liquidation of an offender’s restitution debt is difficult at best. Justice also  stated that certain offenders are deported; however, they continue to be  liable for the unpaid portion of their restitution debts, as current law  requires that the debts stay on the books for 20 years after the period of  incarceration ends or after the judgment if no incarceration is ordered.  Justice acknowledged that potential collection actions are limited for  offenders who have been deported. For example, liens filed in counties  where the offender previously held property have little, if any, effect when  offenders have moved assets and are living abroad. In addition, FLU  officials cannot subpoena financial information from offenders who have  been deported or obtain depositions from such offenders regarding their  assets.
Debt collection complications due to transfers of assets to foreign accounts  and the deportation of offenders were evident in our selected cases. For  one case, according to Justice, the FLU’s efforts to identify and secure  assets of the offender to liquidate the restitution debt have been hampered,  in part, because the offender had established, among other things, a foreign  bank account for the purpose of shielding his assets. For another case  involving two offenders who were jointly and severally liable for the  restitution debt, one offender had settled his liability for the debt, with the  approval of Justice and the court, by paying the victim far less than the  amount initially ordered by the court. With regard to this offender, Justice  stated that his reported assets and net worth were such that the thought  that additional collection efforts would have positive results was not  considered by the FLU to be reasonable. The FLU was left with little  recourse for additional collection action because the other offender in the  case, who is still liable for the remainder of this debt, was deported after  serving a prison term.
section_title: Recent Congressional Action
paragraphs: Our March 2004 report and ongoing discussions with your office have kept  you apprised of progress in implementing the recommendations included  in our 2001 report.  As discussed more fully in the background section of  this report, Justice has made progress in establishing certain policies and  procedures to improve criminal debt collection. Unfortunately, the effort  we considered key to more substantive progress, namely, development of a  strategic plan by all of the involved entities, had not been started. However,  very recently, the Congress directed the Attorney General to develop a  strategic plan with certain other federal agencies to improve criminal debt  collection.  Specifically, the conference report that accompanied the  Consolidated Appropriations Act, 2005, Public Law No. 108-447, signed into  law on December 8, 2004, included language to further the implementation  of our 2001 recommendation regarding the establishment of an interagency  task force for the purpose of better managing, accounting for, reporting,  and collecting criminal debt.
In the conference report, the conferees directed the Attorney General to  establish a task force within 90 days of enactment of the act and to include  specified federal agencies, such as Treasury, OMB, and AOUSC, to  participate in the task force.  Led by the Department of Justice, the task  force will be responsible for developing a strategic plan for improving  criminal debt collection. The strategic plan is to include specific  approaches for better managing, accounting for, reporting, and collecting  criminal debt. Specifically, the plan is to include steps that can be taken to  better and more promptly identify all collectible criminal debt so that a  meaningful allowance for uncollectible criminal debt can be reported and  used for measuring debt collection performance. Also, the conferees  directed the Attorney General to report to the Committees on  Appropriations within 180 days of enactment of this act on the activities of  the task force and the development of a strategic plan.
section_title: Conclusion
paragraphs: Given such poor prospects for collection for the selected cases, as well as  the overall low collection rates for criminal debt we have previously  reported, it is important that Justice determine how to better maximize  opportunities to make offenders’ assets available to pay offenders’ victims  once judgments establish restitution debts. By taking advantage of all debt  collection opportunities, Justice may be able to better achieve the intent of  MVRA, which is to compensate crime victims to the extent of their financial  loss. Justice can best accomplish this aim by implementing the  recommendation we made in 2001 to work with AOUSC, OMB, and  Treasury to develop a strategic plan as now also called for by the  conference report accompanying the Consolidated Appropriations Act,  2005, to address managing, accounting for, and reporting criminal debt  including the collectibility of such debt.
Further, our review of the five selected criminal white-collar financial fraud  debts, in conjunction with the findings on our previous criminal debt  collection work, strongly supports the need for Justice to take the  leadership role in promptly addressing this recommendation. Effective  coordination and cooperation is essential for maximizing collections, and  as the federal agency primarily responsible for criminal debt collection,  Justice’s leadership in this effort is vital. The strategic plan should include a  determination of how to best maximize opportunities to make offenders’  assets available to pay the victims once judgments establish restitution  debts. Until such a strategic plan is developed and effectively implemented,  which could involve legislative as well as operational initiatives, the  effectiveness of criminal restitution as a punitive tool may be diminished,  and Justice will lack adequate assurance that offenders are not benefiting  from ill-gotten gains and that innocent victims are being compensated for  their losses to the fullest extent possible.
section_title: Recommendations for Executive Action
paragraphs: To help ensure that the strategic plan called for in the conference report  effectively addresses all potential opportunities for collection, we  recommend that the Attorney General include in the strategic plan  legislative initiatives, operational initiatives, or both that are directed  toward maximizing opportunities to make offenders’ assets available to pay  victims once restitution debts are established by judges.
To monitor progress in leading the development and implementation of the  strategic plan, we also recommend that the Attorney General report  annually in Justice’s Accountability Report on progress toward developing  and implementing a strategic plan to improve criminal debt collection. This  report should include a discussion of any difficulties or impediments that  significantly hinder such progress.
section_title: Agency Comments and Our Evaluation
paragraphs: Overall, Justice’s EOUSA’s comments on a draft of this report, which are  reprinted in appendix I, are consistent with our conclusion that given such  poor prospects for collection for the selected cases, as well as the overall  low collection rates for criminal debt we have previously reported, it is  important that Justice determine how to better maximize opportunities to  make offenders’ assets available to pay offenders’ victims once judgments  establish restitution debts. EOUSA stated that consistent with our  recommendation and the conference report that accompanied the  Consolidated Appropriations Act of 2005, Justice is in the process of  organizing an interagency joint task force to develop a strategic plan for  improving criminal debt collection.
EOUSA did not specifically comment on our recommendations including  the recommendation that the Attorney General include in the strategic plan  legislative initiatives, operational initiatives, or both that are directed  toward maximizing opportunities to make offenders’ assets available to pay  victims once restitution debts are established by judges. However, EOUSA  did emphasize that current statutes do not provide adequate remedies for  the collection of criminal debt and cited several examples including the  lack of general statutory authority for the United States to obtain pretrial  restraint of assets in order to satisfy a potential criminal judgment that may  result in a restitution debt. Regarding operational initiatives, as stated in  this report, because many of the recommendations we have previously  made to Justice to improve criminal debt collection focused on establishing  policies and procedures, it is important that the policies and procedures be  effectively implemented once they are established.  Moreover, any  multiagency effort to develop a unified strategy for criminal debt collection  will need to address operational issues.
Both EOUSA and AOUSC provided technical comments that have been  addressed as appropriate in this report.
As agreed with your office, unless you announce its contents earlier, we  plan no further distribution of this report until 30 days after its issuance  date. At that time, we will send copies to the Chairmen and Ranking  Minority Members of the Senate Committee on Homeland Security and  Governmental Affairs; the Subcommittee on Financial Management, the  Budget and International Security, Senate Committee on Homeland  Security and Governmental Affairs; and the Subcommittee on Government  Efficiency and Financial Management, House Committee on Government  Reform. We will also provide copies to the Attorney General, the Director  of the Administrative Office of the U.S. Courts, the Director of the Office of  Management and Budget, and the Secretary of the Treasury. Copies will be  made available to others upon request. The report will also be available at  no charge on GAO’s Web site, at http://www.gao.gov.
If you have any questions about this report, please contact me at (202) 512- 3406 or engelg@gao.gov or Kenneth R. Rupar, Assistant Director, at   (214) 777-5714 or rupark@gao.gov. Staff acknowledgments are provided in  appendix II.
section_title: Comments from the Department of Justice
paragraphs: The following are GAO’s comments on the Department of Justice’s letter  dated January 13, 2005.
subsections: section_title: GAO’s Comments
paragraphs: 1.  As discussed in this report, only about $40 million, or about 7 percent, of  the $568 million restitution for these five selected cases had been paid as of  June 2004, and collections for these individual cases ranged from less than  1 percent to about 10 percent of the restitution amounts owed. Prospects  are not good for collecting additional restitution to fully compensate the  crime victims for the selected cases in our study. Regardless of whether  these offenders currently have, or once had, wealth equal to the restitution  amounts, the disparity between restitution owed to the crime victims for  the financial losses they incurred as a result of criminal activity and  amounts paid to the victims by the offenders makes it necessary for Justice  to take advantage of all debt collection opportunities to better achieve the  intent of MVRA, which is to compensate crime victims to the extent of their  financial loss. 2.  EOUSA stated that the USAOs had collected over $4 billion on behalf of  victims of crime over the last 5 years. However, as stated in this report, the  low collection rate (about 7 percent of the ordered restitution) for the  selected cases coincides with overall collection rates for criminal debt as  we have previously reported. In 2004, we reported that according to  Justice’s unaudited records, collections relative to outstanding criminal  debt averaged about 4 percent for fiscal years 2000, 2001, and 2002 (GAO- 04-338). In 2001, we reported that criminal debt collection averaged about 7  percent for fiscal years 1995 through 1999 (GAO-01-664).
section_title: Staff Acknowledgments
paragraphs: Richard T. Cambosos, Michael D. Hansen, Andrew A. O’Connell, Ramon J.  Rodriguez, Linda K. Sanders, and Matthew F. Valenta made key  contributions to this report.
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