Supreme Court Decision on Pretrial Restraint of Untainted Assets

There has been a long debate within the federal circuits regarding whether property unrelated to a crime may be seized or forfeited without a criminal conviction. However, the Supreme Court recently struck a blow against such efforts, at least in cases where such untainted property is crucial to securing counsel of choice. See Luis v. United States decided March 30, 2016. http://www.supremecourt.gov/opinions/15pdf/14-419_nmip.pdf.

To properly understand the legal question a few terms should be defined.

Asset forfeiture: The Governmental taking of property on the basis that it is connected to a crime. The two most common theories are that property was used to commit a crime (facilitation or instrumentalities theory) or that it is the fruit of illegal activity (proceeds theory). Federally, this is authorized under 18 USC 981, 983, Rule G of the Supplemental Rules, and other statutes. It is also allowed in criminal cases under 18 USC 982. In Texas, this is authorized under Article 59.01, 59.02, 59.03, 59.04 and 59.05 of the Texas Code of Criminal Procedure.

Criminal forfeiture: The forfeiture of property after a federal conviction. 18 USC 982 and Rule 32.2 of the Federal Rules of Criminal Procedure.

Seizure Warrant: A legal order signed by a judge upon a showing of probable cause, allowing the Government to seize and possess property subject to forfeiture.

Restraining Order: An order by the Court prohibiting individuals from transferring, spending, or otherwise making unavailable property so that it will be available for forfeiture or restitution purposes.

Restitution: The taking of private property to satisfy a victim's loss in a criminal case. Such property need only belong to the defendant. It does not matter whether the property was used in a crime or proceeds of a crime.

Substitute Assets: The forfeiture of property belonging to a criminal defendant that is unconnected to the underlying crime but is otherwise subject to forfeiture because the forfeitable property has been dissipated.

Untainted/Unconnected property: Property owned by the target of a federal investigation or case that is not the fruit of crime or was not used to commit a crime. A simple example, if an alleged Medicare fraudster inherits a home from his parents and is later convicted of that offense, the home may be seized and forfeited as a substitute asset but would not generally be susceptible to forfeiture under a facilitation or proceeds theory (unless the home was used as a home office to commit the crime).

Put simply, restitution gives defendant property to a victim and forfeiture gives defendant property to U.S. Government. A lot of this money is ‘equitably shared' with local law enforcement agencies but a lot of it ends up in the Asset Forfeiture and Money Launder Section's (AFMLS) Asset Forfeiture Fund (the AFF). This fund is worth well over a billion dollars.

Previously, federal circuits were divided whether pretrial restraint of property was acceptable regarding untainted/unconnected property. For example, United States v. Ivanchukov, 405 F.Supp2d 708, states that substitute property may be restrained before they may be used to hire an attorney of choice. Also, In re Billman, 915 F.2d 916, held that substitute assets may even be restrained from a non-defendant if it will be subject to forfeiture at a later point.

However, Luis strikes a significant blow against pretrial seizure of untainted assets. The high court repeated the long-held notion that the 6th Amendment Right to counsel of choice is a fundamental right. It then goes on to state that "the pretrial restraint of legitimate, untainted assets needed to retain counsel of choice violates the Sixth Amendment."

This will come as a surprise to many federal prosecutors who believe that while defendants have a right to counsel they don't have a right to counsel of their choice. Luis contradicts that proposition.

This case is part of a national trend to facially curtail forfeiture activity. However, most often such curtailment has been accomplished by the Department of Justice in deciding to abandon federal adoption and temporarily suspend equitable sharing distributions. These steps, while receiving national attention are mere cosmetic changes that do not change the forfeiture apparatus significantly. While Luis will not stop forfeiture, it will certainly allow defendants to use their own property to defend themselves.

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