I know as a fact that confiscated corals at SFO go to The California Academy of Sciences and then maybe to other public aquariums like The Monterey Aquarium. They are not sent back as far as I know.
The inspectors here at SFO inspect alot of shipments and seem to have certain Genera that they like to inspect the validity of the coral compared to what was permited. For example Euphyllia. They are checking to make sure that the Euphyllia ancora on the permit is indeen ancora and not another Euphyllia species. If they are not 100 % sure the coral is confiscated until the identity is known. Then if it is the correct coral on the permit, it can be picked up, and if it is not you do not get it back but you do get a $500 fine.
The thing is that when importers smuggle in non permitted corals its the whole hobby that gets screwed over. The more times that people get caught, the more heavy duty laws get passed. Gresham nailed it in a prior posting. People should obey the existing laws and do not reward those who are breaking them because in the long run all rewarding them is going to do is to kill future importation of more corals.
Off the soap box,
tyler