Appeals Court Says Gov't Can't Seize Untainted Assets Ahead Of Trial

from the modest-Sixth-Amendment-restoration dept

Using nothing more than one of the easiest things the government can obtain -- a grand jury indictment -- accused criminals can be locked out of their choice of representation. In essence, the government, right up until the Supreme Court's 2016 Luis decision, was allowed to take everything a defendant had, whether or not the property could be linked to criminal activity.

What this did was make a mockery of the Sixth Amendment. Prior to even taking the case to court, much less securing a conviction, the government could leave defendants with no funds to hire a lawyer. The Supreme Court rolled this back, limiting the government to taking tainted assets. It wasn't a complete win. A complete win would have required the government to secure a conviction before taking any assets, or at least not until it was proven certain assets were tied to criminal activity.

It was a limited win for the Sixth Amendment, very much restricted to the facts of the case -- one in which the government had admitted the disputed property was untainted by criminal acts. Still, it was better than leaving it untouched and giving the government the option to bankrupt defendants supposedly considered innocent until proven guilty.

This precedent is starting to play a part in the lower courts. The Fourth Circuit Appeals Court has just struck down previous rulings allowing the government to seize untainted property pre-trial. The government's operating theory has been that, despite the Supreme Court ruling, untainted assets can be seized as a "substitution" for tainted assets to ensure the collection of fines and fees, as well as the replacement of any fraudulently-obtained property.

The government still argued the Luis decision didn't apply. From the decision [PDF]:

[T]he government conceded that the property at issue is not traceable to any alleged crime and is thus subject to pretrial restraint, if at all, as substitute property pursuant to 21 U.S.C. § 853(p). The government also agreed that, following Luis, the Constitution prohibits the pretrial restraint of innocently-obtained property when it is needed by a criminal defendant to obtain counsel. The government nonetheless asserted that the restraining order was proper under our existing rule that the government may restrain a criminal defendant’s “substitute property” pending trial under 21 U.S.C. § 853(e)(1)(A), see United States v. Bollin, 264 F.3d 391, 421–22 (4th Cir. 2001)—a rule, the government maintained, that Luis did not abrogate.

In this case, the government sought to prevent a defendant from selling some property completely unconnected to the fraud charges. The defendant admitted the sale of the property had nothing to do with raising money for legal costs, prompting the government to assert blocking the sale under the "substitute property" clause wouldn't harm the defendant's Sixth Amendment rights. The lower court didn't exactly agree with the government's arguments, but allowed pre-Luis precedent to control its ruling granting the government's restraining order against the sale of assets.

The Appeals Court goes off into the Section 853 weeds for awhile before coming to the following conclusion: the government can still seize "substitute" assets, but not the way it's doing it here -- not after the Supreme Court's Luis decision. While the government can attempt to deter the dissipation of tainted assets prior to trial, locking defendants out of their untainted assets isn't the solution. Deliberate dissipation of assets opens defendants to more criminal charges or, at minimum, a greater chance of an adverse ruling. That is the deterrent. Depriving the accused of assets the government acknowledges are untainted isn't.

[A]lthough we have interpreted Section 853(a) to permit courts to issue money judgments covering a convicted defendant’s substitute assets, United States v. McHan, 345 F.3d 262, 272 (4th Cir. 2003), it does not follow that Section 853(e) is similarly permissive. Indeed, Section 853(p) authorizes courts to order the forfeiture of substitute property only where property “described in [Section 853(a)]” is rendered unavailable “as a result of any act or omission of the defendant.” 21 U.S.C § 853(p). Framed in the past tense, this provision means that a forfeiture order covering substitute property may issue only upon a showing, after conviction, that directly forfeitable assets have been rendered unavailable.

The use of Section 853 to seize substitute assets now comes with a conviction requirement.

In sum, the Supreme Court has signaled that there is a firm distinction between the government’s authority to restrain tainted and untainted assets in construing Section 853 and related restraint provisions. Consistent with this important distinction, when Congress intends to permit the government to restrain both tainted and untainted assets before trial, it has clearly provided for such authority. Lacking such express authorization, Section 853(e) does not by its terms permit pretrial restraint of substitute assets.

Conviction requirements are good. The government has plenty of leeway already when it comes to taking control of people's assets. In most places, civil asset forfeiture is just that: a judicial process that pretty much eliminates the input of the seized property's owner and hardly requires the government to prove anything about the property's "guilt." Pre-trial seizures of assets the government has yet to prove are derived from criminal activity allows the government to perform what amounts to civil forfeiture based on nothing more than some unproven accusations. By helping lock people out of obtaining the best possible legal representation, the government increases the odds it will be able to hold onto everything it has seized, whether criminally-derived or not. Now, if only the courts would apply this thinking to actual civil asset forfeiture...

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Filed Under: asset seizure, fourth circuit, seizure