Sotheby Parke Bernet, the international auction house, makes a business of selling rare and valuable pieces of art, but perhaps none so unusual as the collection of Tiffany lamps and other "Art Nouveau" objects it put on the block early in 1984.
The 273-piece selection of vases, furniture and other exotic turn-of-the-century items drew a slew of interested art collectors, lured by what Sotheby's described as the "finest (such) collection to come on the market in several years."
Unlike most auctions conducted by Sotheby's, however, the proceeds from the auction did not go to the person who originally acquired the pieces -- in this case, Barry W. Toombs of Annandale, a rich collector. Instead, most of the money went to a new Sotheby's client: the U.S. government.
Federal authorities had seized the collection two years earlier after arresting Toombs, a member of an alleged East Coast drug-smuggling ring. After Toombs was convicted of conspiracy and drug possession, the Drug Enforcement Agency and the U.S. Marshals Service chose Sotheby's to dispose of the confiscated art.
"The result was excellent," said William M. Lenck, a lawyer with DEA. "Property that would have been sold in this area by the General Services Administration for some $150,000 to $200,000 (was) bought for up to $1.7 million up there (in New York)."
Although the Sotheby's auction was unusual, Lenke and other officials say it is part of an increasing use of private auctioneers to dispose of confiscated property. Agencies Turn to Private Sector
Beset by criticism that it has allowed the value of assets like the Toombs collection to dissipate while under its control, the federal government is increasingly turning to private industry for help in property management. The range of seized assets under government control includes cars, airplanes, jewelry, real estate and even operating businesses -- amounting to hundreds of millions of dollars.
Last year, the Customs Service awarded a four-year, $44 million contract to a subsidiary of the Northrop Corp. to help in the custody of more than $500 million in goods seized annually by its agents.
And last month, the Marshals Service, an arm of the Justice Department, released a report outlining the early progress of a new program to manage and dispose of property taken by the federal courts. The program makes extensive use of appraisers, auction houses and other private-sector businesses skilled in asset management and disposal.
For a long time, several government agencies have been involved in disposing of seized goods, including Customs, the Marshals, the Federal Bureau of Investigation and DEA.
But concern grew in the early 1980s as result of a series of studies reporting that property was losing value after being seized by the government because of carelessness, inadequate storage facilities and mismanagement. Boats were rotting and aircraft freezing, among other problems, and the agencies did not have the resources to stop the deterioration, officials say.
As a consequence, the Customs Service last year decided to farm out its management program -- mostly the upkeep of boats, cars and other vehicles -- to Worldwide Aircraft Services Inc., the Northrop subsidiary. By contrast, the Justice Department kept the program in-house. But it reorganized its procedures and designated the Marshals Service as the principal departmental agency for asset management and disposal.
Although agencies such as the Immigration and Naturalization Service and DEA continue to deal with low-value items, the Marshals are taking over most of the responsibility for seized assets.
This task has grown significantly in recent years, mostly as a result of the Comprehensive Crime Control Act of 1984, which, among other things, dramatically expanded the government's power to seize the property of suspected drug criminals. Prosecutors Gained Leeway
Under the act, federal prosecutors essentially are allowed greater leeway to seek control of property and other goods thought to be gained through drug proceeds, even before a defendant is convicted.
In anticipation of the act, the Marshals Service established a special unit to oversee the management of the seized goods and land, and to hold auctions and other sales in the event the property is confiscated by the courts.
The National Asset Seizure and Forfeiture program employs more than 50 officials, located in judicial districts around the country, and gives U.S. Marshals technical support and advice in handling the property.
With more than $300 million worth of cash, real estate and other goods under its control, the Marshals Service, traditionally known as a law enforcement agency, has gone into the property-management business in a big way.
"A pure profit motive, like any large corporation has -- that's not our goal," said Jeffrey Fratter, chief of the Marshals' asset management branch. "It's a law enforcement program, but obviously it has great potential for turning revenues back to the Treasury."
Fratter and other Marshals Service officials readily acknowledge that their experience and resources, while growing, are limited.
They say that's why their field workers rely heavily on private-sector help -- both for assessing how to manage a certain piece of property and for hands-on assistance in disposing of property once it is forfeited by the courts.
Auction houses such as Sotheby's are called on to dispose of art and real estate seized by the government.
Appraisers give the Marshals an idea of how much they can fetch for certain jewelry and other items.
And in the event an ongoing business is seized, the Marshals must rely on people with "special" expertise.
In fiscal year 1985, officials say, the Marshals managed, among other assets: a horse-breeding ranch valued at $13 million; the Western State Bank in Denton, Tex.; an aviation company; a lumber mill; a recording studio in California, and the Shelburne Glebe estate, the 1,000-acre Loudoun County farm owned by Christopher F. Reckmeyer, the convicted head of a widely publicized drug-trafficking ring. Marshals Use Former Employes
For these unusual cases, the Marshals often turn for help to individuals associated with the seized enterprise but found by investigators to be "clean."
For example, Stanley W. Kutt, the forfeiture management officer for the agency's Mid-Atlantic region, said the Marshals Service found it necessary to hire two caretakers who had worked for Reckmeyer prior to the January 1985 seizure of the large Shelburne Glebe estate.
Also, the inventory and equipment of the Goshorn Lumber Co. near McConnellsburg, Pa., were put into storage for the Marshals Service by a former employe of the company, Kutt said.
Those assets were auctioned off last month.
Meanwhile, Marshals Service officials in California have changed the management of the Plant Recording Studio near San Francisco -- sometime home of rock groups Santana and Journey, according to officials -- but are continuing to run the operation.
A key part of the Justice Department's program is that the Marshals are able to fund these and other operations out of a newly established assets-forfeiture account, which is filled by the proceeds from seized property.
Previously, officials say, agencies were without such funds -- and hence without incentive to keep up goods and property.
At the end of the fiscal year, all but $5 million in this fund is returned to the Treasury, under terms of the program.
Fratter said that $17 million was returned in 1985, but the program was only in operation part of the year. A better idea of the program's effectiveness will come this year, he said.
Although the Marshals don't claim they have established a new cottage industry for professional liquidators, certainly the potential for new business seems large, especially because seizures and forfeitures are expected to increase greatly in coming years.
Private companies welcome the new business, and several say the prospect of buying previously "hot" property helps them drum up enthusiasm for their sales. "Many times the reason for the sale is a tool that can be used positively in the marketing" of an auction, said William Z. Fox, chairman of Michael Fox Auctioneers of Baltimore. Fox's company was lined up to sell the Pennsylvania lumber mill, and it has previously been hired to sell real estate for the Marshals.
As is normal in the business, the auction house gets a percentage of the total take from its sales -- somewhere on the order of 10 percent, Fox said -- as well as the expenses of running the sale. Seized Bank Found Insolvent
As part of a conviction last summer, the government took control of the Western State Bank in Texas from Rex C. Cauble, the convicted head of a big cocaine ring.
Soon after the Marshals put a new manager in charge, however, it was discovered that the bank, with approximately $28 million in assets, had $6 million worth of bad loans, as well as extensive liquidity and capitalization problems, Marshals officials say.
In effect, the bank was insolvent -- and the Marshals had to arrange with the Federal Deposit Insurance Corp. for a bailout. "This is one case where we really did not have an in-depth financial analysis," admitted Joseph B. Enders, a top Marshals Service official.