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Forfeiture Audit Shows Police, City Mismanagement

By Judith Scherr
Tuesday July 17, 2007

An auditor’s report released late Monday morning says Berkeley police and city workers mismanaged asset forfeiture accounts, which could have caused the city to lose the uninsured funds or allowed the money to be misused or embezzled—neither of which happened, according to the audit. While the council and public did not receive a copy of the audit on asset forfeiture funds until late Monday morning, the council will be asked to approve the report and its suggested remedies at tonight’s (Tuesday) council meeting.  

City Auditor Ann-Marie Hogan performed the audit following a request by the Police Review Commission’s Subcommittee on Evidence Theft Issues, a committee originally formed to examine issues arising from the theft of drug evidence by convicted felon and former Berkeley police sergeant Cary Kent, who stole drugs from the evidence locker he oversaw.  

After another alleged incident of police misconduct, the subcommittee added to its charge a review of policies that could have led to the alleged theft of cash and property belonging to arrestees by another officer. This officer was charged with criminal activity by Berkeley Police; he subsequently left the department. The Alameda County district attorney’s office declined to press charges against him.  

Kent’s responsibilities, in addition to oversight of the drug evidence room, included being a signatory on the asset forfeiture funds accounts. When cash is found by police as part of narcotics enforcement, it is placed in an asset forfeiture fund.  

There are three of these funds that had been housed at the United Services Credit Union. As a result of the audit report, the funds were moved to Wells Fargo Bank, according to Hogan, in a Monday morning phone interview with the Planet.  

Hogan underscored that, while there were a number of managerial problems in the account oversight, she concluded that no money was stolen from the accounts, which had been a major concern for members of the Police Review subcommittee.  

The audit covered the period of July 1, 2003, when Kent began his role in charge of the accounts, to April 30 of this year.  

When Berkeley police confiscate cash, they put the money into a bank account. That money then is transferred to the Alameda County District Attorney, Hogan said.  

“If they don’t successfully prosecute, they have to give the money back [to the suspect],” Hogan said.  

Part of the funds not returned to former suspects are given back to the city. The funds are shared with the state or federal government, depending on the jurisdiction of the crime.  

“We found no indication that any transaction in the three asset forfeiture related accounts during the period covered by our review was inappropriate,” Hogan said in her report. “However, accountability and controls for these deposit accounts need improvement.”  

Among the problems was that a sum of about $738,000 was in uninsured, non-collateralized credit union deposits. The credit union cannot insure accounts of that magnitude and the city risked losing the funds if the credit union failed, Hogan said, noting that the city has responded by moving the funds to a commercial bank.  

Another problem is that, while the City Charter requires two signatures for every withdrawal, the officer in charge—the one convicted of stealing drugs—was able to withdraw funds without the signature of either the city manager or city auditor.  

“During the period of our review the city manager and the city auditor approved only two of 35 transfers from the seized cash impound account,” the report says, further noting, “One police officer had autonomy over withdrawals because the credit union did not enforce the dual signatures requirement.”  

The audit report points to the potential for embezzlement: “…one police officer acting alone could withdraw funds from the three accounts, which increased the risk of misappropriation of funds. Segregation of duties, where no one person has control over all aspects of a transaction, is a basis [sic] tenet of internal control.”  

On the question of signatures, the report concludes that no wrongdoing was found: “Although we found no evidence that any withdrawal was for an inappropriate purpose, failure to obtain required approval, combined with the lack of dual signatures, increased the risk of withdrawals being made for inappropriate or illegal reasons.”  

The report says that on June 26 the police chief instituted corrective action, issuing a memorandum stating “… no withdrawals should be made from police credit union accounts without approval signed by the city manager and the city auditor.”  

The audit also discovered that:  

• The Finance Department did not reconcile the quarterly and monthly deposit account statements received from the credit union and  

• Police do not have written procedures to specify requirements for credit union transactions involving seized currency and asset forfeiture.