The second time police came to the Hawaii home of Joseph and Frances Lopes, they came to take it.

"They were in a car and a van, I was in the garage. They said, 'Mrs. Lopes, let's go into the house, and we will explain things to you.' They sat in the dining room and told me they were taking the house. It made my heart beat very fast."

For the rest of the day, 60-year old Frances Lopes and her 65-year-old husband, Joseph, trailed federal agents as they walked through every room of the Maui house, the agents recording the position of each piece of furniture on a video tape that serves as the government's inventory.

Four years after their mentally unstable adult son pleaded guilty to growing marijuana in their back yard for his own use, the Lopeses face the loss of their home. A Maui detective trolling for missed forfeiture opportunities spotted the old case. He recognized that the law allowed him to take away their property because they knew their son had committed a crime on it.

A forfeiture law intended to strip drug traffickers of ill-gotten gains often is turned on people, like the Lopeses, who have not committed a crime. The incentive for the police to do that is financial, since the federal government and most states let the police departments keep the proceeds from what they take.

The law tries to temper money making temptations with protections for innocent owners, including lien holders, landlords whose tenants misuse property, or people unaware of their spouse's misdeeds. The protection is supposed to cover anyone with an interest in a property who can prove he did not know about the alleged illegal activity, did not consent to it, or took all reasonable steps to prevent it.

But a Pittsburgh Press investigation found that those supposed safeguards do not come into play until after the government takes an asset, forcing innocent owners to hire attorneys to get their property back - if they ever do.

"As if the law weren't bad enough they just clobber you financially," says Wayne Davis, an attorney from Little Rock, Ark.

FEARED FOR THEIR SON

In 1987, Thomas Lopes, who was then 28 and living in his parents' home, pleaded guilty to growing marijuana in their back yard. Officers spotted it from a helicopter.

Because it was his first offense, Thomas received probation and an order to see a psychologist. From the time he was young, mental problems tormented Thomas, and though he visited a psychologist as a teen , he had refused to continue as he grew older, his parents say.

Instead, he cloistered himself in his bedroom, leaving only to tend the garden.

His parents concede they knew he grew the marijuana.

"We did ask him to stop, and he would say, 'Don't touch it', or he would do something to himself," says the elder Lopes, who worked for 49 years on a sugar plantation and lived in its rented camp housing for 30 years while he saved to buy his own home.

Given Thomas' history and a family history of mental problems that caused a grandparent and an uncle to be committed to institutions, the threats stymied his parents.

The Lopeses, says their attorney Matthew Menzer, "were under duress. Everyone who has been diagnosed in this family ended up being taken away. They could not conceive of any way to get rid of the dope without getting rid of their son or losing him forever."

When police arrived to arrest Thomas, "I was so happy because I knew he would get care," says his mother. He did, and he continues weekly doctor's visits. His mood is better, Mrs. Lopes says, and he has never again grown marijuana or been arrested.

But his guilty plea haunts his family.

Because his parents admitted they knew what he was doing, their home was vulnerable to forfeiture.

Back when Thomas was arrested, police rarely took homes. But since, agencies have learned how to use the law and have seen the financial payoff, says Assistant U.S. Attorney Marshall Silverberg of Honolulu.

They also carefully review old cases for overlooked forfeiture possibilities, he says. The detective who uncovered the Lopes case started a forfeiture action in February - just under the five-year deadline for staking such a claim.

"I concede the time lapse on this case is longer than most, but there was a violation of the law, and that makes this appropriate, not money-grubbing," says Silverberg. "The other way to look at this, you know, is that the Lopeses could be happy we let them live there as long as we did." They don't see it that way.

Neither does their attorney, who says his firm now has about eight similar forfeiture cases, all of them stemming from small-time crimes that occurred years ago but were resurrected. "Digging these cases out now is a business proposition, not law enforcement," Menzer says.

"We thought it was all behind us," says Lopes. Now, "there isn't a day I don't think about what will happen to us."

They remain in the house, paying taxes and the mortgage, until the forfeiture case is resolved. Given court backlogs, that likely won't be until the middle of next year, Menzer says.

They've been warned to leave everything as it was when the videotape was shot.

"When they were going out the door," Mrs. Lopes says of the police, "they told me to take good care of the yard. They said they would be coming back one day."

'DUMB JUDGMENT'

Protections for innocent owners are "a neglected issue in federal and state forfeiture law," concluded the Police Executive Research Forum in its March bulletin.

But a chief policy maker on forfeiture maintains that the system is actively interested in protecting the rights of the innocent.

George J. Terwilliger III, associate deputy attorney general in the Justice Department, admits that there may be instances of "dumb judgment." And says if there's a "systemic" problem, he'd like to know about it.

But attorneys who battle forfeiture cases say dumb judgment is the systemic problem. And they point to some of Terwilliger's own decisions as examples.

The forfeiture policy that Terwilliger crafts in the nation's capital he puts on use in his other federal job: U.S. attorney for Vermont.

A coalition of Vermont residents, outraged by Terwilliger's forfeitures of homes in which small children live, launched a grass roots movement called "Stop Forfeiture of Children's Homes." Three months old, the group has about 70 members, from school principals to local medical societies.

Forfeitures are a particularly sensitive issue in Vermont where state law forbids taking a person's primary home. That restriction appears nowhere in federal law, which means Vermont police departments can circumvent the state constraint by taking forfeiture cases through federal courts.

The playmaker for that end-run: Terwilliger.

"It's government-sponsored child abuse that's destroying the future of children all over this state in the name of fighting the drug war," says Dr. Kathleen DePierro, a family practitioner who works at Vermont State hospital, a psychiatric facility in Waterbury.

The children of Karen and Reggie Lavalle, ages 6, 9 and 11, are precisely the type of victims over which the Vermonters agonize. Reggie Lavalle is serving a 10-year sentence in a federal prison in Minnesota for cocaine possession.

Because police said he had been involved with drug trafficking, his conviction cost his family their ranch house on 2 acres in a small village 20 miles east of Burlington. For the first time, the family is on welfare, in a rented duplex.

"I don't condone what my husband did, but why victimize my children because of his actions ? That house wasn't much, but it was ours. It was a home for the children, with rabbits, chicken, turkeys and a vegetable garden. Their friends were there, and they liked the school," says Mrs. Lavalle, 29.

After the eviction, "every night for months, Amber cried because she couldn't see her friends. I'd like to see the government tell this 9-year-old that this isn't cruel and unusual punishment."

Terwilliger's dual role particularly troubles DePierro. "It's horrifying to know he is setting policy that could expand this type of terror and abuse to kids in every state in the nation."

Terwilliger calls the group's allegations absurd. "If there was some one to blame, it would be the parents and not the government."

Lawyers like John MacFadyen, a defense attorney in Providence, R.I., find it harder to fix blame.

"The flaw with the innocent owner thing is that life doesn't paint itself in black and white. It's often times gray, and there is no room for gray in these laws," MacFadyen says. As a consequence, prosecutors presume everyone guilty and leave it to them to show otherwise. "That's not good judgment. In fact, it defies common sense."

PROVING INNOCENCE

Innocent owners who defend their interests expose themselves to questioning that bores deep into their private affairs. Because the forfeiture law is civil, they also have no protection against self-incrimination, which means that they risk having anything they say used against them later.

The documentation required of innocent owner Loretta Stearns illustrates how deeply the government plumbs.

The Connecticut woman lent her adult son $40,000 in 1988 to buy a home in Tequesta, Fla, court documents show.

Unlike many parents who treat such transactions informally, she had the foresight to record the loan as a mortgage with Palm Beach County. Her action ultimately protected her interest in the house after the federal government seized it, claiming her son stored cocaine there. He has not been charged criminally.

The seizure occurred in November 1989, and it took until last May before Mrs. Stearns convinced the government she had a legitimate interest in the house.

To prove herself an innocent owner, Mrs. Stearns met 14 requests for information, including providing "all documents of any kind whatsoever pertaining to your mortgage, including but not limited to loan application, credit reports, record of mortgages and mortgage payments, title reports, appraisal reports, closing documents, records of any liens, attachments on the defendant property, records of payments, canceled checks, internal correspondence or notes (hand-written or typed) relating to any of the above and opinion letter from borrower's or lender's counsel relating to any of the above."

And that was just question No. 1.

LANDLORD AS COP

Innocent owners are supposed to be shielded in forfeitures, but at times they've been expected to become virtual cops in order to protect their property from seizure.

T.T. Masonry Inc. owns a 36-unit apartment building in Milwaukee, Wis., that's plagued by dope dealing. Between January 1990, when it bought the building, and July 1990, when the city formally warned it about problems, the landlord evicted 10 tenants suspected of drug use, gave a master key to local beat and vice cops, forwarded tips to police and hired two security firms - including an off-duty city police officer - to patrol the building.

Despite that effort, the city sized the property. Assistant City Attorney David Stanosz says, "once a property develops a reputation as a place to buy drugs, the only way to fix that is to leave it totally vacant for a number of months. This landlord doesn't want to do that."

Correct, says Jermome Buting, attorney for Tom Torp of Masonry. "If this building is such a target for dealers, use that fact," says Buting. "Let undercover people go in. But when I raised that, the answer was they were short of officers and resources."

IT LOOKS LIKE COKE

Grady McClendon, 53, his wife, tow of their adult children and two grandchildren - 7 and 8 - were in a rented car headed to their Florida home in August 1989. They were returning from a family reunion in Dublin, Ga.

In Fitzgerald, Ga, McClendon made a wrong turn on a one-way street. Local police stopped him, checked his identification and asked permission to serach the car. He agreed.

Within minutes, police pulled open suitcases and purses, emptying out jewelry and about 10 Florida state lottery tickets. They also found a registered handgun.

Then says McClendon, the police "started waving a little stick they said was cocaine. They told me to put on my glasses and take a good look. I told them I'd never seen cocaine for real but that it didn't look like TV."

For about six hours, police detained the McClendon family at the police station where officers seized $2,300 in cash and other items, as "instruments of drug activity and gambling paraphernalia" - a reference to the lottery tickets.

Finally, they gave McClendon a traffic ticket and released them, but kept the family's possessions.

For 11 months, McClendon's attorney argued with the state, finally forcing it to produce lab tests results on the "cocaine".

James E. Turk, the prosecutor who handled the case will say only "it came back negative."

"That's because it was bubble gum," says Jerry Froelich, McClendon's attorney. A Judge returned the McClendon's items.

Turk considers the search "a good stop. They had no proof of where they lived boyond drivers' licenses. They had jewelry that could have been contraband, but we couldn't prove it was stolen. And they had more cash than I would expect them to carry."

McClendon says: "I didn't see anything wrong with them asking me to search. That's their job. But the rest of it was wrong, wrong, wrong."

SELLER, BEWARE

Owners who press the government for damages are rare. Those who do are often helped by attorneys who forgo their usual fees because of their own indignation over the law.

For nearly a decade, the lives of Carl and Mary Shelden of Moraga, Calif., have been intertwined with the life of a convicted criminal who happened to buy their house.

The complex litigation began when the Sheldens sold their home in 1979, but took back a deed of trust from the buyer - an arrangement that made the Sheldens a mortgage holder on the house.

Four years later, the buyer was arrested and later convicted of running an interstate prostitution ring. His property, including the home on which the Sheldens held the mortgage, was forfeited. The criminal, pending his appeal, went to jail, but the government allowed his family to live in the home rent free.

Panicked when they read about the arrest in the newspaper, the Sheldens discovered they couldn't foreclose against the government and couldn't collect mortgage payments from the criminal.

After tortuous court appearances, the Sheldens got back the home in 1987, but discovered it was so severely damaged while in government control that they can now stick their hand between the bricks near the front door.

The home the Sheldens sold in 1979 for $289,000 was valued at $115,000 in 1989 and now needs nearly $500,000 in repairs, the Sheldens say, chiefly from uncorrected drainage problems that caused a retaining wall to let loose and twist apart the main house.

Disgusted, they returned to court, saying their Fifth Amendment rights had been violated. The amendment prohibits the taking of private property for public use without just compensation. Their attorney, Brenda Grantland of Washington, D.C., argues that when the government seized the property but failed to sell it promptly and pay off the Sheldens, it violated their rights.

Between 1983 and today, the Sheldens have defended their mortgage through every type of court: foreclosures , U.S. District Court, Bankruptcy, U.S. Claims.

In January 1990, a federal judge issued an opinion agreeing the Sheldens' rights had been violated. The government asked the judge to reconsider, and he agreed. A final opinion has not been issued.

"It's been a roller coaster," says Mrs. Shelden, 46. A secretary, she is the family's breadwinner. Shelden, 50, was permanently disabled when he broke his back in 1976 while repairing the house. Because he was unable to work, the couple couldn't afford the house, so they sold it - the act that pitched them into their decade-long legal quagmire.

They've tried to rent the damaged home to a family - a real estate agent showed it 27 times with no takers - then resorted to renting to college students, then room-by room boarders. Finally, they and their children, ages 21 and 16 moved back in.

"We owe Brenda (Grantland) thousands at this point, but she's really been a doll, " says Shelden. "Without people like her, people like us wouldn't stand a chance."

The following is a side box on Part Three:

CIVIL FORFEITURES CAN THREATEN A COMPANY'S EXISTENCE For businesses, civil forfeitures can be a big, big stick. Bad judgment, lack of knowledge or outright wrongdoing by one executive can put the company itself in jeopardy. A San Antonio bank faces a $1 million loss and may close because it didn't know how to handle a huge cash transaction and got bad advice from government banking authorities, the bank says. The government says the bank knowingly laundered money for an alleged Mexican drug dealer. The problems began when Mexican nationals came to Stone Oak National Bank, about 150 miles north of the border, to buy certificated of deposits with $300,000 cash. The Mexicans planned to start an American business, they said. They had drivers' licenses and passports. Bank officers, who wanted guidance about the cash, called the Internal Revenue Service, Secret Service, Office of the Comptroller of the Currency, the Federal Reserve, and the Department of Treasury. Federal banking regulators require banks to file CTRs - currency transaction reports - for cash deposits greater than $10,000. That paper trail was created to develop leads about suspicious cash. Once the government was alerted, the thinking went, it could track the cash, put depositors under surveillance or set up a sting. A tape-recorded phone line that Stone Oak, like many banks, uses for sensitive transactions captured a conversation between a Treasury official and then-bank president Herbert Pounds. According to transcripts, Pounds said: "We're a small bank. I've never had a transaction like that.....I talked to several of my banking friends. They've never had anybody bring in that much cash, and the guys say they've got a lot more where that came from." Pounds asked for advice and was told to go through with the transaction. "That's fine...as long as you send the CTRs," the Treasury official said. "That's all you're responsible for." The bank took the money and filed the form. Between that first transaction in March 1987 and the government's March 1989 seizure of $850,000 in certificates of deposit, bank officials continued to file reports, according to photocopies reviewed by The Pittsburgh Press. "The government had two years to come in and say, 'Hey, something smells bad here,' but it never did," says Sam Bayless, the bank's attorney. But the government now charges that the bank customers were front men for Mario Alberto Salinas Trevino, who was indicted for drug trafficking in March 1989. Fourteen months later, the bank president and vice president were added to the indictment and charged with money laundering. The bank never was criminally charged, and the officers' indictments were dismissed May 29. The U.S. attorney's office in San Antonio said it would not discuss the case. Because the Mexicans used their certificates as collateral for $1 million in loans from Stone Oak, the bank is worried it will lose the money. In addition, according to banking regulations, it must keep $1 million in reserve to cover that potential loss. For those reasons, it has asked the government for a hearing and has spent nearly $250,000 for lawyers' fees. But the bank can't get a hearing because the forfeiture case is on hold pending the outcome of the criminal charges. And the criminal case has been indefinitely delayed because Salinas escaped six weeks after he was arrested. Because the bank is so small, the $1 million set-aside puts it below capital requirements, meaning "regulatory authorities could well require Stone Oak National Bank to close before ever having the opportunity for its case to be heard," says its court brief. To brace for a loss, Stone Oak closed one of its branches. "For the life of me," says Bayless, "I can't understand why the government would want to sink a bank. And, to boot, why would the government want another Texas bank?" Bayless, who says, "I'm very conservative, I'm a bank lawyer, for heaven's sake," derides the federal action as "narco-McCarthyism." Problems with paperwork also led to the seizure of $227,000 from a Colombian computer company. The saga started in January, 1990 when Ricardo Alberto Camacho arrived in Miami with about $296,000 in cash to pay for an order of computers. Camacho is a representative of Tandem Limitada, the authorized dealer in Colombia and Venezuela for VeriFone products, says VeriFone spokesman Tod Bottari. The cash covered a previously placed order for about 1,600 terminals. Both the government and Camacho agree that when he arrived in Miami, he declared the amount he was carrying with Customs. They also agree that the breakdown of the amount - cash vs. other monetary instruments, such as checks - was incorrect on his declaration form. Camacho and the government disagree about whether the incorrect entry was intentional - the government's position - or a mistake made by an airport employee. The airport employee, in a deposition, said he had filled out the form and handed it to Camacho for him to initial, which he did. "Mr. Camacho assumed the agent had correctly written down the information provided to him," says Camacho's court filings over the subsequent seizure of the money. The government says Camacho deliberately misstated the facts to hide cash made form drug sales. Camacho brought in the suitcase full of U.S. cash which he had purchased at a Bogata bank, because he thought it would speed delivery of his order, he told federal agents. VeriFone lawyers directed Camacho to deposit the money in their account in Marietta, Ga, says Bottari. The final bill for the computers was $227,000. VeriFone arranged for an employee to meet Camacho at the bank and told the bank he was coming, Bottari says, The bank notified U.S. Customs agents that it was expecting a large deposit. When Camacho arrived, federal agents were waiting with a drug-sniffing dog. The agents asked Camacho if he would answer "a few questions about the currency." Camacho agreed. The handler walked the dog past a row of boxes, including one containing some of Camacho's money. The dog reacted to that box. At that point, the agents said they were taking the money to the local Customs office, where they retrieved information from the report Camacho had filed in Miami. The reporting discrepancy, and the dog's reaction, prompted the government to take the cash. Although the computer deal went through several weeks later when Tandem wired another $227,000, that wasn't enough to convince Albert L. Kemp Jr., the assistant U.S. attorney on the case, that the first order was real. After the seizure, Kemp said, the government checked Camacho's background. He is a naturalized American citizen who went to business school in California and then returned to help run several family businesses in Colombia. He travels to the United States "four of five times a year," says Kemp. "He has filled out the currency reports correctly in the past, but now he says there was a mistake and he didn't know about it. "C'mon," says Kemp. "In total his whole story doesn't wash with me." "We believe the money is traceable to drugs, but we don't have the evidence. So instead of taking it for drugs, we're using a currency reporting violation to grab it."