The Asset Forfeiture Program : a case study of the Bicycle Club Casino : hearing before the Permanent Subcommittee on Investigations of the Committee on Governmental Affairs, United States Senate, One Hundred Fourth Congress, second session, March 19, 199

180 Pages·1996·6 MB·English

by  United States. Congress. Senate. Committee on Governmental Affairs. Permanent Subcommittee on Investigations

S. Hrg. 104-526
THE ASSET FORFEITURE PROGRAM:
A CASE STUDY OF THE BICYCLE CLUB CASINO
104-526
Y 4, G 74/9; S, HRG.
The dsset Forfeiture Projrin: (I Cas... J,ING
BEFORE THE
PERMANENT
SUBCOMMITTEE ON imnESTIGATIONS
OF THE
COMMITTEE ON
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED FOURTH CONGRESS
SECOND SESSION
MARCH 19, 1996
Printed for the use of the Committee on Grovernmental Affairs
h
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON 1996
:
ForsalebytheU.S.GovernmentPrintingOffice
SuperintendentofDocuments,CongressionalSalesOffice,Washington,DC 20402
ISBN 0-16-052982-4

S. Hrg. 104-526
THE ASSET FORFEITURE PROGRAM:
A CASE STUDY OF THE BICYCLE CLUB CASINO
104-526
Y 4. G 74/9; S. HRG.
The dsset Forfeiture Progran: A Cas... |{,ING
BEFORE THE
PERMANENT
SUBCOMMITTEE ON im^STIGATIONS
OF THE
COMMITTEE ON
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED FOURTH CONGRESS
SECOND SESSION
MARCH 19, 1996
Printed for the use of the Committee on Governmental Affairs
U.S. GOVERNMENT PRINTING OFFICE
23^65cc WASHINGTON 1996
:
ForsalebytheU.S.GovernmentPrintingOffice
SuperintendentofDocuments,CongressionalSalesOffice,Washington,DC 20402
ISBN 0-16-052982-4
COMMITTEE ON GOVERNMENTAL AFFAIRS
TED STEVENS, Alaska, Chairman
WILLIAM V. ROTH, Jr., Delaware JOHN GLENN, Ohio
WILLIAM S. COHEN, Maine SAM NUNN, Georgia
FRED THOMPSON, Tennessee CARL LEVIN, Michigan
THAD COCHRAN, Mississippi DAVID PRYOR, Arkansas
JOHN McCAIN, Arizona JOSEPH I. LIEBERMAN, Connecticut
BOB SMITH, New Hampshire DANIEL K. AKAKA, Hawaii
HANK BROWN, Colorado BYRON L. DORGAN, North Dakota
Albert L. McDermott, StaffDirector
Leonard Weiss, Minority StaffDirector
Michal Sue Prosser, ChiefClerk
PERMANENT SUBCOMMITTEE ON INVESTIGATIONS
WILLIAM V. ROTH, Jr., Delaware, Chairman
TED STEVENS, Alaska SAM NUNN, Georgia
WILLIAM S. COHEN, Maine JOHN GLENN, Ohio
FRED THOMPSON, Tennessee CARL LEVIN, Michigan
THAD COCHRAN, Mississippi DAVID PRYOR, Arkansas
JOHN MCCAIN, Arizona JOSEPH I. LIEBERMAN, Connecticut
BOB SMITH, New Hampshire DANIEL K. AKAKA, Hawaii
HANK BROWN, Colorado BYRON L. DORGAN, North Dakota
Harold Damelin, ChiefCounsel and StaffDirector
Daniel S. Gelber, ChiefCounsel to the Minority
Carla Martin, ChiefClerk
(II)
CONTENTS
Opening statements: Page
Senator Roth 1
Senator Nunn .... 3
WITNESSES
Tuesday, March 19, 1996
Laurie E. Ekstrand, Ph.D., Associate Director, Administration of Justice Is-
sues, General Government Division, General Accounting Office; accom-
panied by James M. Blume, Assistant Director, and Gary T. Engel, Assist-
ant Director, Accounting and Information Management Division 6
James F. Lisowski, Sr., Former Attorney for the Bicycle Club Casino and
the Trustee 13
Thomas Atherton, General Manager, Bicycle Club Casino 23
Douglas Sparkes, DirectorofSecurity, Bicycle Club Casino 25
Hollman Cheung, former Bicycle Club Casino Employee 35
HarryJ. Richard, Trustee for the Bicycle Club Casino 37
Eduardo Gonzalez, Director, U.S. Marshals Service, accompanied by Kenneth
C. Holecko, Assistant Director for Human Resources, and Gerald E.
McDowell, Chief, Asset Forfeiture and Money Laundering Section, Criminal
,Division, Department ofJustice 49
Alphabetical List of Witnesses
Atherton, Thomas:
Testimony 23
Prepared Statement 74
Cheung, Hollman:
Testimony 35
:
Ekstrand, Laurie E.:
Testimony 6
Prepared Statement 63
Gonzalez, Eduardo:
Testimony 49
Prepared Statement 85
Lisowski, James F. Sr.:
Testimony 13
Prepared Statement 70
Richard, HarryJ.:
Testimony 37
Prepared Statement 81
Sparkes, Douglas:
Testimony , 25
Prepared Statement 76
APPENDIX
Prepared statements ofwitnesses in order ofappearance 63
(III)
IV
Exhibit List
Page
1. Bicycle Club Net Income chart, prepared by the Permanent Subcommit-
tee on Investigations 110
2. Salary and Bonuses Paid to Trustee, 1993-1995 chart, prepared by
the Permanent Subcommittee on Investigations Ill
3. Resume ofHarryJ. Richard 112
4. The Attorney General's Guidelines on Seized and Forfeited Property,
Directive No. 90-5, prepared by the U.S. Department ofJustice, dated
July 1990 (excerpted) 115
5. United States v. Kramer, No. 87-879-CR (S.D. Fla. April 3, 1990)
(judgment and orderofforfeiture) *
6. United States v. Kramer, No. 87-879 (S.D. Fla. March 22, 1993) (order
appointingtrustee) *
7. United States v. Kramer, No. 87-879-CR (S.D. Fla. Nov. 22, 1993)
(order modifyingorderappointingsuccessortrustee) *
8. United States v. Kramer, No. 87-879-CR (S.D. Fla. Jan. 18, 1995)
(government and successor trustee submission regarding proposed oper-
ational budget forJanuary 1, 1995 to December 31, 1995) 117
9. Articles of Incorporation filed in the State of Nevada for Badger Gam-
ing, Inc., dated June 29, 1993 130
10. Memorandum from Joseph L. Ilk, U.S. Marshals Service, to Tim Miller,
Supervisory Deputy, dated July 18, 1994 132
11. Classified advertisement. The Wall StreetJournal, July 25, 1994 133
12. Memorandum (undated) from Harry Richard to Tim Miller 134
13. U.S. Treasury check payable to (and endorsed by) Harry Richard, dated
March 3, 1995 135
14. Letter from James F. Lisowski, Sr., to Stephen Kuypers, Bell Gardens
Bicycle Club, dated March 13, 1995 136
15. Memorandum from James F. Lisowski, Sr., to Timothy Miller, Super-
visory Deputy, U.S. Marshals Service, dated June 5, 1995 139
16. In re: George G. Hardie, No. 95-0931 (Gaming Registration Program,
California Department of Justice, June 10, 1995) (accusation, without
attachments) *
17. Letter from Kenneth C. Holecko, Assistant Director for Human Re-
sources, U.S. Marshals Service, to Harry Richard, dated August 21,
1995 140
18. Letter from Kenneth C. Holecko, Assistant Director for Human Re-
sources, U.S. Marshals Service, to Harry Richard, dated November 1,
1995 143
19. Letter from Harry J. Richard to James F. Lisowski, dated November
3, 1995 145
20. Deposition of Harry J. Richard before the Permanent Subcommittee
on Investigations, dated December 22, 1995 *
21. Independent Expenditure Committee and Major Donor Committee Cam-
paign Statement, filed by the Bell Gardens Bicycle Club, dated January
22, 1996 (excerpted) 146
22. Schedule E of Payments and Contributions Made, filed by Concerned
Taxpayers ofCalifornia, dated January 31, 1996 (excerpted) 147
23. U.S. Marshals Service report, "Oversight of the Bicycle Club: Assess-
mentofInternal Controls,"dated January 1996 (revised) *
24. Letter from Stephen E. Kuypers to Ariadne Allan, Investigator, Perma-
nent Subcommittee on Investigations, dated February 2, 1996 148
25. Bicycle Club Evaluation, prepared by Don Kelly & Co., dated February
6, 1996 *
V
Page
26. Letter from Robert Brink, Deputy Assistant Attorney General, U.S.
Department of Justice to Harold Damelin, Chief Counsel, Permanent
Subcommittee on Investigations, dated March 13, 1996 (without attach-
ment) 149
27. Letter from Senator V. Roth, Jr. to Eduardo Gonzalez, Director, U.S.
Marshals Service, dated March 28, 1996 150
28. In re:'Harry John Richard, No. 96-02002 (Gaming Registration Pro-
gram, California Department of Justice, April 16, 1996) (accusation,
without attachments) *
29. Letter from Ann Kane Smith to Kenneth C. Holecko, Assistant Director
for Human Resources, U.S. Marshals Service, dated April 22, 1996 152
30. Letter from Andrew Fois, Assistant Attorney General, U.S. Department
ofJustice, to Senator William V. Roth, Jr., dated April 30, 1996 (with-
out attachments) 155
31. Declaration ofHarry J. Richard, dated May 3, 1996 (with attachments) *
32. Letter from Eduardo Gonzalez, Director, U.S. Marshals Service, to Sen-
atorWilliam V. Roth, Jr., dated June 3, 1996 161
33. Letter from Gregory M. Holloway, Director, Governmentwide Audits,
General Accounting Office, to Senator William V. Roth, Jr., dated June
26, 1996 162
34. Letter from Paul J. Fishman, Associate Deputy Attorney General, U.S.
Department of Justice, to Harry Damelin, Staff Director and Chief
Counsel, Permanent Subcommittee on Investigations, dated July 10,
1996 (without attachments) 169
35. Letter from Senator William V. Roth, Jr. to Eduardo Gonzalez, Director,
U.S. Marshals Service, dated July 16, 1996 170
*Retained inthefilesoftheSubcommittee.

THE ASSET FORFEITURE PROGRAM: A CASE
STUDY OF THE BICYCLE CLUB CASINO
TUESDAY, MARCH 19, 1996
U.S. Senate,
Permanent Subcommittee on Investigations,
Committee on Governmental Affairs,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:05 a.m., in
room 342, Dirksen Senate Office Building, Hon. William V. Roth,
Chairman ofthe Subcommittee, presiding.
Present: Senators Roth and Nunn.
Staff Present: Harold Damelin, Chief Counsel and Staff Director;
Daniel S. Gelber, Minority Chief Counsel; Eric Thorson, Chief In-
vestigator; Carla J. Martin, Chief Clerk; Sallie Cribbs, Executive
Assistant to the Chief Counsel; John H. Cobb, Counsel, Ariadne
Allan, Investigator; Mary A. Ailes, Staff Assistant; Stephen H.
Levin, Senior Counsel; Kathryn O'Connor, Receptionist; Deborah
McMahon, Investigator; Mark Webster, Minority Investigator; Tom
Griffith, Legal Counsel; Monica Dolin, Legal Counsel; Claudia
McMurray, Senator Thompson; Verna Hensley, Senator Roth;
Brian Tassinari, Senator Roth; Sandra Bruse, Senator Levin; Brian
Dettelbach, Senator Glenn; Steven R. Valentine, Senator Smith;
David Huntman, Senator Feinstein.
OPENING STATEMENT OF SENATOR ROTH
Chairman RoTH. The Subcommittee will please come to order.
This morning, the Subcommittee will examine one ofthe most bi-
zarre stories in our long history of uncovering waste, fraud, and^
mismanagement in government programs. The Subcommittee has
discovered that, as incredible as it sounds, the United States Mar-
shals Service is running a gambling casino and has been doing so
for nearly 6 years. However, this is not just any gambling casino.
The Marshals run the infamous Bicycle Club Casino in Bell Gar-
dens, California.
The Bicycle Club is no stranger to this Subcommittee. During
hearings the Subcommittee held in 1991 on Asian organized crime,
law enforcement officials testified that the Bicycle Club was sus-
pected of being a money laundering center and that the casino's
Asian games manager was suspected of hiring gang members to
work there. The Marshals ran the casino even then. Today, we will
focus on this particular situation as a case study of the problems
plaguing the Asset Forfeiture Program.
I would like to thank our distinguished ranking member, Senator
Nunn, and his stafffor their assistance in this investigation.
(1)
As we will learn today, there are many ironies in this story. The
Marshals Service, in effect, owns and operates the Bicycle Club
under the federal Asset Forfeiture Program. That program is based
on federal laws that authorize the government to seize property re-
lated to criminal conduct. The Marshals Service is the bureau of
the Justice Department responsible for seizing and managing as-
sets until they are sold or disposed of. Typically, the Marshals hire
private contractors or government trustees tlu-ough the courts to
oversee these assets, which currently total over $1 billion.
Because of the program's size and because the GAO has identi-
fied asset forfeiture as a high risk area since 1990, the Subcommit-
tee decided to examine this program. The Asset Forfeiture Pro-
gram, in principle, can be a valuable weapon in law enforcement's
arsenal. Its importance in the war against crime is precisely why
we must ensure that it is operated efficiently and effectively.
We learned that significant management problems persist and
that these problems are often most striking when the Marshals
seize a business and then attempt to operate it. In recent years,
the Marshals have tried to run a number of businesses, including
a huge run-down welfare hotel, a vineyard, a barbecue restaurant,
a concrete company, and a minor league baseball team. But the
most startling holding in the Marshals' portfolio is the Bicycle Club
Casino.
The Marshals Service became a casino owner when it seized the
Bicycle Club in 1990 as part of a drug and money laundering case.
Since 1991, the Marshals have held the controlling interest in the
casino.
What is the Bicycle Club? It is a legal California card casino, one
ofthe largest of its kind, with more than 1,800 employees. The Bi-
cycle Club offers gamblers both traditional poker and Asian-style
games and is open 24 hours a day, 365 days a year. Hundreds of
millions ofdollars pass through the casino annually.
What has happened at the casino since the Marshals Service ar-
rived? Despite the Marshals' 6-year presence, the Bicycle Club con-
tinues to have many ofthe same significant law enforcement prob-
lems we heard about at our 1991 hearings. It is still linked to
Asian organized crime. In 1994, the Club's highest-paid employee
was convicted ofconspiracy, loan sharking, and extortion ofpatrons
at the casino. Moreover, we will hear testimony that the govern-
ment's trustee has turned a blind eye to law enforcement concerns.
In fact, the trustee has insisted that a felon convicted of skimming
from another casino be kept on the Bicycle Club's payroll.
If that were not enough, the State of California has charged one
of the casino partners with the theft of millions of dollars from the
casino. In addition, there has been a dramatic decline in casino
profits, resulting in a devaluation of the business that the casino's
other partners blame on the Marshals' and their trustee's manage-
ment.
In spite of this bleak picture, the Marshals saw fit to pay nearly
$325,000 in salary and bonuses last year to their trustee, Harry
Richard, who manages this asset. In fact, over the course of Mr.
Richard's 3-year tenure as trustee, the government has paid him
a total of nearly $2 million in salary, bonuses, and trustee-related
expenses. I can only wonder what they would have paid him had