How the seizure of Russian superyachts helps the feds punish Putin and his oligarchs

You name it, former U.S. Marshal Jason Wojdylo seized it: Racehorses. Luxury cars. Paintings. Cryptocurrency.

Recently retired after a 25-year career, Wojdylo served as the Marshals Service's lead expert in asset forfeiture, and he's watching as his former colleagues wreak havoc on Russian oligarchs and their ill-gotten gains under orders of President Joe Biden and Task Force KleptoCapture.

The most recent seizures include $1 billion worth of superyachts, tracked down in ports from Europe to Fiji.

"Really, the power of asset forfeiture is that allows us to hit them where it hurts the most, which is in the pocket, and not let them keep things that were otherwise illegally acquired," Wojdylo said. "A Russian oligarch yacht is certainly a new level of vessel we've never seized before."

U.S. officials, along with governments around the world, have sanctioned Russian oligarchs and some of their family members as punishment for the Ukrainian invasion. Oligarchs are widely considered to have improperly benefited from their close relationships to President Vladimir Putin, and in many cases have been accused of illegally accumulating their wealth at the expense of ordinary Russians.

THE YACHTS: A look at the luxury yachts that are being taken from Russian oligarchs

Seizures crack down on wealthy criminals

Although asset forfeiture is a fairly common practice to target drug dealers, con artists and embezzlers in that way — with the money returned to victims or kept by law enforcement — Congress would have to pass a new law allowing the proceeds to go to Ukraine, as Biden has proposed.

Experts say freezing these assets is just one step in what is usually a lengthy cat-and-mouse game between federal investigators and criminals, fought via electronic financial records, shell companies, offshore bank accounts and street-level surveillance.

"Seizing is only the beginning of the process," said Aixa Maldonado, a former top federal prosecutor who oversaw billions of dollars in seizures from drug lords and other criminals. "It takes forever."

In one yacht seizure case, federal investigators say they traced payments from a Russian oligarch through several intermediaries to a yacht manager who used the money to pay for maintenance, despite the oligarch's name never appearing on ownership papers.

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Maldonado, now a partner at the law firm Zeichner Ellman & Krause, said investigators first have to determine whether there's evidence to support a seizure, and then build a case for why a court should let the government sell the seized asset under the legal process known as forfeiture.

But unlike in typical criminal cases, the burden of proof in forfeiture cases is lower, and the government can oftentimes hold onto someone's house, money, yacht or car until they prove their purchase was aboveboard. In other words, the government can declare it thinks the owner is a Russian oligarch, and it's up to the owner to prove otherwise.

While the forfeiture system has been abused in the United States — in particular being used by local police departments to seize cars and cash from small-time drug dealers — federal officials say it's an important and powerful tool to hit wealthy criminals where it hurts the most.

Maldonado once cracked a case because investigators were going through foreign bank records and found a name they'd never heard before attached to a small payment. Digging deeper, they discovered it wan alias used by a well-known drug lord in another country, she said.

"You need people who are really good at tracing — you have to make the connection between the property and a crime. Because just having a nice boat or a nice house is not a crime," Maldonado said. "You have to track down who is really calling the shots."

In some cases, Maldonado said, ultra-wealthy criminals simply walk away from their property instead of risking prosecution or subjecting their finances to additional search warrants.

With Putin, experts say he's typically insulated himself by putting assets in the names of family or other oligarchs, who themselves have created a network of shell companies to hide the money trail. One of the yachts seized in Italy, the $700 million Scheherazade, is widely believed to be Putin's personal yacht.

"Do we envision Putin coming in and filing a claim in U.S. court? I don't think so," Maldonado said.

WHO ARE THE OLIGARCHS?  And how do they play into the war in Ukraine?

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Feds target yachts linked to Putin

On Thursday, the Biden administration targeted additional boats they say are linked to Putin or his cronies, including the $156 million Madame Gu; the $65 million Sea Rhapsody; motor yachts Flying Fox, Graceful and Olympia; and boats Shellest and Nega, along with several aircraft. Additionally, the new sanctions also target a yacht management company, which U.S. officials said helps oligarchs manage or rent their yachts when they're not using them.

“Russia’s elites, up to and including President Putin, rely on complex support networks to hide, move and maintain their wealth and luxury assets,” said Brian Nelson, under secretary for terrorism and financial intelligence in the Department of Treasury, in a statement. “Today’s action demonstrates that Treasury can and will go after those responsible for shielding and maintaining these ill-gotten interests. We will continue to enforce our sanctions and expose the corrupt systems by which President Putin and his elites enrich themselves.”

Although they know the risk of moving money through U.S. bank accounts, or of buying property in the United States, many criminals consider it worth the risk, said Michael A. Crain, a CPA and director of the Center for Forensic Accounting at Florida Atlantic University. That's because the dollar remains among the most stable of currencies, as does the U.S. property market.

Additionally, many international financial transactions invariably pass through the computers of banks with U.S. operations, opening up those transactions to scrutiny by American law enforcement.

"It's like Sherlock Holmes, trying to figure out a big puzzle," Crain said. "... You find someone who has no apparent source of income and then they suddenly have millions of dollars, and so you then look at where that money came from and where did that money go. You follow the money."

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Stefan D. Cassella, another former top federal asset-forfeiture prosecutor, said he helped seize everything from $1.2 billion in laundered drug money to a Rolls-Royce, Lamborghini, two Bentleys and other luxury cars bought by a Baltimore man running a $9 million biodiesel scam.

"He couldn’t think of anything else with to do with the money so he bought this fleet and parked it in front of his house. And that's how he got caught," Cassella said, citing that case as an example of how many criminals do a poor job covering their tracks after making extravagant purchases.

Cassella, who now serves as an expert witness and seizure consultant as the CEO of AssetForfeitureLaw LLC, said he suspects that his former colleagues are closely scrutinizing certain neighborhoods of New York, Miami and London, where Russian oligarchs have bought property, which in many cases is just sitting empty.

He said he could see how Biden's threat to sell the yachts and give the money to Ukrainians would anger oligarchs, potentially making them pressure Putin to withdraw.

Any items seized are held by the federal government until a judge decides whether the government can formally take possession and then sell them off. In many cases, maintenance and upkeep is so expensive, the government will simply seize the owners' money and let a bank repossess the property, said Wojdylo, the former U.S. Marshal.

Since 2002, the Justice Department has returned over $8.5 billion in assets to crime victims.

"At the end of the day, you recover some cool stuff and get some money back for the victims," Cassella said. "That's very satisfying."

This article originally appeared on USA TODAY: Russia sanctions: US seizes yachts to punish Putin, oligarchs for war