CORPORATE SCANDALS PRODUCE HOT BARGAINS

Confiscated goods -- seized from recent corporate hooligans -- offer
buyers a wealth of hard-to-find options. On your mark, shoppers

It was a chilly Thursday morning in an industrial neighborhood a
half-hour's drive south of Los Angeles. But that didn't stop 1,500
people from turning out to bid at a government auction sponsored by
the Treasury Dept. As a propeller-tongued auctioneer and four
assistants known as "ring-men" worked the crowd, more than 300
confiscated items were auctioned. Among the treasures: gold ingots
and coins seized from an illegal "digital gold" money-transfer
business and a 2002 BMW 530i taken from a nurse who committed Medicare fraud.

The surge in white-collar crime in recent years has resulted in
booming sales of forfeited goods. Since 2001, the total value of
confiscated goods sold by the Justice Dept. and the Treasury, the two
main branches of the government that handle such property, has
climbed to $926 million, from $627 million.

Among the high-profile booty: a Galveston (Texas) beach house
belonging to former Enron CFO Andrew S. Fastow, which the government
sold for $595,000 last year, and a 1999 Shelby Series 1 sports car
belonging to his former colleague, Kenneth Rice, who headed Enron's
broadband unit. The car, sold a few months after the beach house,
fetched $56,000. Both men pleaded guilty to securities fraud.

King's Ransom.

In recent years, the government has sold luxury cars and diamonds
belonging to Martin Frankel, who pleaded guilty to stealing $200
million in the largest insurance fraud in the U.S., as well as wine,
watches, and jewelry owned by John D. Garitta, the former CFO of
mortgage lender PinnFund U.S.A. He pleaded guilty to filing false
financial statements in 2002. Still to come: the Mar. 23 auction of
Asian rugs and antiques from former Congressman Randy "Duke"
Cunningham, who pleaded guilty to bribery charges last November.

For consumers looking for bargains, hunting down the soon-to-be-sold
goods isn't always easy. The Treasury Dept., which also handles sales
for the Customs and Border Protection, the Secret Service, and the
Internal Revenue Service's criminal division, lists all of the items
up for auction at its Web site, www.treas.gov/auctions/customs/. It
runs about 48 auctions a year in various cities around the country,
but handles less than 5% of the overall goods. The U.S. Marshals
Service manages the rest.

The Marshals Service, which sells property confiscated by the Justice
Dept., is not as well organized. The service does not maintain a
central list of forfeited property for sale. Instead, it fans the
goods out to dozens of local contractors. The best aggregation of
their inventory is available at www.bid4assets.com, which has a
contract to sell some confiscated government property via the Internet.

Status Symbols.

In most asset-forfeiture cases, the Justice Dept. and Treasury split
the proceeds between the various law-enforcement agencies involved in
the cases, both locally and nationally. Much of the proceeds from
property forfeited in white-collar cases, however, are returned to
investors and other injured parties, says Leonard Briskman, deputy
chief of business management at the U.S. Marshal's asset forfeiture division.

For a few buyers, there may even be some cachet to purchasing
confiscated goods. Los Angeles resident Betty Thomas camped out at
8:30 a.m. at the recent Treasury auction in Los Angeles. Her target:
a 2001 Jaguar XK8 convertible that once belonged to James Graf, a
resident of Canyon Lake, Calif., who was convicted last November of
running a $20 million health insurance fraud. Thomas won the car for
$38,000 -- and she didn't have to pay taxes on it.

The California Department of Motor Vehicles did initially want her to
pay past-due registration fees on the car. They ultimately relented,
making her even happier about the purchase. Says Thomas of her new
Jaguar's infamous heritage: "I wonder if anyone will recognize it."

Palmeri is a senior correspondent in BusinessWeek's Los Angeles bureau