Well, as it were, Skooma and Moon Sugar are illegal, but only confiscated when you are searched.
So the best tactic is to drop everything you own, pay the small fine, then pick everything you own back up. Then there are no worries of having your stolen items returned to their owners, nor your illegal substances confiscated.
In all reality, the illegality is just for roleplay. They seem to have no issue with walking past a pile of 200 skooma bottles that I drop next to them on the road!
Ah, liberty!
*crosses fingers for Oblivion*
By the way, how about administering Operation Politically Homeless? I'm trying that at my school.