Asset Forfeiture Update

Apr 11, 2016   

March of 2016 was a busy month for the law governing asset forfeitures. First, at the national level, in Luis v. United States, the United States Supreme Court ruled that the pretrial restraint of legitimate, untainted assets needed to retain a criminal defendant’s counsel of choice violates the Sixth Amendment. A copy of the opinion can be here. At the state level, Gov. Rick Scott signed into law S.B. 1044 which provides sweeping reforms to Florida Contraband Forfeiture Act making it more difficult for law enforcement to seize assets through civil forfeiture and expanding protections to those subject to such forfeitures. A copy of S.B. 1044 can be read here.

In Luis, the defendant was charged with obtaining $45 million through health care fraud. Pretrial, the Government argued that Luis had spent most of the $45 million she was charged with fraudulently obtaining. Thus, in an effort to preserve Luis’s remaining funds for possible restitution, the Government moved for an injunction pursuant to 18 U.S.C. § 1345 to prevent Luis from spending her remaining assets. These assets included not only the remaining ill-gotten gains, but also untainted assets, i.e. those assets and funds not connected with the crimes charged. However, such a freeze was allowable under 18 U.S.C. § 1345 because it allowed for an injunction freezing: 1) ill-gotten gains, i.e. those fund fraudulently obtained; 2) property “traceable” to the crime; and 3) “property of equivalent value.”

Luis argued that a freeze of her untainted assets, i.e. “property of equivalent value,” would prevent her from using her own untainted funds to pay for her legal defense and would therefore violate her Sixth Amendment right to counsel. The District Court disagreed and found that, while an injunction may prevent the defendant from obtaining the counsel of her choice, the Sixth Amendment did not give her the right to use her own untainted funds for that purpose. The Eleventh Circuit affirmed.

In overturning the lower court’s decision and holding that the pretrial freeze of untainted assets needed to retain a criminal defendant’s counsel of choice violates the Sixth Amendment, the Supreme Court focused on two key areas: 1) the fundamental right to counsel versus the Government’s preferred punishment, i.e. restitution; and 2) the distinction between untainted and tainted assets. As to the former, the Court made clear that although the right to counsel is not unlimited, the Sixth Amendment grants a defendant “a fair opportunity to secure counsel of his own choice” that he “can afford to hire.” Here, the Court found that to allow the Government to freeze untainted assets pretrial would allow the Government to undermine the value of this fundamental right in order to secure assets for the Government’s preferred method of punishment, in this case restitution. The Court found that when compared to the right of counsel, the Government’s interest lies “further from the heart of a fair, effective criminal justice system.”

As to the latter, the Court noted that what made this case fundamentally different from its previous cases regarding asset forfeiture and the Sixth Amendment is that here the assets at issue are untainted. The Court found this important for several reasons. First, as a matter of property law, a defendant only maintains an “imperfect” ownership interest in tainted funds. Assets and funds stolen are the property of the victims, not the defendant, and the tools used to procure ill-gotten gains and assets traceable to such gains are considered to be property of the Government at the instant a crime is planned or committed pursuant to 21 U.S.C. § 853. However, no such situation exists with untainted assets.

The Court considered other factors too. First, as noted above, the right to counsel outweighs the Government’s choice of punishment. Second, limited to no support exists in the common law to support the Government’s position that the Court may engage in unfettered, pretrial forfeiture of otherwise innocent funds. Finally, the Court found that as a practical matter, the right to counsel would be significantly eroded because the result of a pretrial asset freeze would be to create essentially an indigent defendant who would “fall back upon publicly paid counsel, including overworked and underpaid public defenders.” As explained by the Court, “[t]he upshot is a substantial risk that accepting the Government’s views would—by increasing the government-paid-defender workload—render less effective the basic right the Sixth Amendment seeks to protect.”

Turning to Florida, increasingly, civil asset forfeiture, a mechanism through which law enforcement can seize assets without ever charging an asset owner with a crime, has come under scrutiny due to its potential for abuse by law enforcement. However, with the passage of S.B. 1044, Florida has attempted to create significant reforms to the civil assert forfeiture process under the Florida Contraband Forfeiture Act, Fla. Stat. §§ 932.701-932.7062, through a number of measures.

First, S.B. 1044 requires that in order to seize property, in most cases, a property owner must be arrested for a criminal offense that forms the basis for determining that the property is considered a “contraband article.” (A “contraband article” as defined under Florida law is found at Fla. Stat. § 932.701(2)(a).). However, it must be noted that the law provides for an exception in the cases of seizure of “monetary instruments” defined as “coin or currency of the United States or any other currency; a traveler’s check; a personal check; a bank check; a cashier’s check; a money order’ a bank draft of any country; an investment security or negotiable instrument in bearer form or in other form such that title passes upon delivery a prepaid or stored value card or other device that is the equivalent of money and can be used to obtain cash,. Property, or services; or gold, silver, or platinum bullion or coins.” Seizures of monetary instruments can still be made without arrest.

Second, S.B. 1044 increases the evidentiary standard required under Florida law that the state government must meet to forfeit property after seizure. Under the previous version of the Florida Contraband Forfeiture Act, the state was only required to establish the seized property was contraband by “clear and convincing evidence.” However, with the passage of S.B. 1044, this standard has been raised to that of proof beyond a reasonable doubt. Additionally, within 10 days of seizure, the seizing agency shall submit an application of probable cause to a court of competent jurisdiction for an order determining whether probable cause exits for the seizure of the property. These reforms bring civil asset forfeiture more in line with the steps that must be taken and the proof necessary to sustain a criminal conviction.

S.B. 1044 provides for additional measures such as: 1) increasing the filing fee paid by law enforcement at the commencement of forfeiture actions to $1000; 2) requiring that law enforcement post a $1500 bond at the commencement of the forfeiture action which shall become payable to the property owner should the property owner prevail in the forfeiture action; and 3) increasing the amount of attorneys’ fees available to innocent property owners if no probable cause is found at the preliminary hearing level.

It is important to note, while these reforms limit seizures under the Florida Contraband Forfeiture Act, these reforms do not address the issues regarding federal civil asset forfeiture. Additionally, with the recent announcement by the Department of Justice that it has restarted its “equitable sharing” asset forfeiture program, which provides that local law enforcement agencies which partner with federal law enforcement to seize assets pursuant to federal laws get to keep large chucks of the assets seized, it remains to be seen whether S.B. 1044 will curb perceived abuses in the program’s use in Florida. During the “equitable sharing” programs initial launch, local law enforcement often used the program as a way around more restrictive state seizure laws or state programs which placed restrictions on the amounts of forfeited assets an agency could keep for itself. Articles by the Washington post describing the “equitable sharing” program’s controversy can be found here and here.

The anti-money laundering and white collar criminal defense attorneys at Fuerst Ittleman David & Joseph have extensive experience representing clients in a wide variety of forfeiture cases at the state and federal levels. FIDJ’s white collar practice group brings their thorough understanding of criminal law and procedure, civil procedure, constitutional law, and the rules of evidence into every forfeiture matter they handle. For more information, please contact us at 305-350-3690 or contact@fuerstlaw.com.