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On Nov. 10, 2015, the Supreme Court heard argument in Luis v. United States. In that case the government had obtained an injunction under 18 U.S.C. § 1345 prohibiting the defendant, charged with health care fraud, from spending any of her assets. The potential loss resulting from criminal activity proved up by a preponderance of the evidence at the injunction hearing exceeded the value of all of the defendant’s assets, so all of her property was restrained. The untainted assets were considered “substitute assets.” Defendant sought from the district court release of some of her funds so that she could retain counsel. Citing Caplin & Drysdale v. United States¹ and United States v.Monsanto,² the district court denied the request, holding that there was no Sixth Amendment right to spend tainted funds or substitute assets to retain counsel. The Eleventh Circuit agreed.³ Thus, one of the issues presented to the Supreme Court was whether 18 U.S.C. § 1345 can, consistent with the Sixth Amendment guarantee of representation by counsel in a criminal proceeding, authorize the restraint of funds not derived from criminal activity, but of equal value to those so derived, so as to render the defendant unable to hire a lawyer. Put another way, do the holdings in Caplin & Drysdale and Monsanto extend to assets not derived from alleged criminal activity but designated by the government as substitute assets, replacing the value of tainted assets no longer available?

To further frame the argument, it is important to point out that § 1345 is not a forfeiture statute. Under the statutory forfeiture scheme established by 18 U.S.C. § 853 and other statutes that adopt its procedure, substitute assets may not be restrained pretrial. The lone exception has been carved out by the Fourth Circuit for funds restrained under the RICO statute.⁴ While forfeiture involves a criminal penalty for wrongdoing and deprives the wrongdoer of the fruits of his criminal enterprise, the purpose of § 1345 is to enjoin further criminal activity and to prevent further harm to alleged victims. This is an important distinction. Caplin & Drysdale and Monsanto both dealt with whether a defendant can use funds shown to have been derived from illegal activity to retain counsel. In Luis the government argued that Caplin & Drysdale and Monsanto should be extended to authorize the pretrial restraint of untainted assets even if this leaves the defendant unable to employ counsel, unless the defendant has assets over and above the amount of the potential fines and restitution that may result from a criminal conviction.

In the course of arguing that there is no Sixth Amendment exception to the pretrial restraint of untainted assets, the government necessarily implied that there is no limitation at all on pretrial seizure of assets as long as procedural requirements are observed and the amount restrained is equal to the loss suffered by the alleged victims or the potential fine that might be imposed upon conviction. This prompted Justice Kennedy to make the following observation during the government’s argument:

But what is it that confines your — your rationale to a specific area? It seems to me that if the government prevails in this case, every state in the union, every locality could say that in the event of assault and battery, malicious — malicious mischief, drunk — an accident caused by drunk driving, any crime involving a bodily injury, that the government is entitled to restrain disposition of assets that might be used for medical care, for pain and suffering. And this would, in effect, prevent the private bar from practicing law unless it did so on a contingent fee basis.⁵ 

Government counsel acknowledged that Justice Kennedy was indeed correct in his observation that the principle espoused by the government was not limited to the types of crimes at issue in the instant case.

Ponder for a moment the effect of what the government would have the law to be. Any jurisdiction could enact legislation that would allow for the pretrial restraint of the assets of an accused upon a showing of probable cause that the accused had damaged someone by criminal wrongdoing and that a certain sum of money would be the total of the damages. The statute could, just for good measure, authorize restraint of assets sufficient to satisfy potential fines. If the total amount authorized to be restrained left the accused without the financial ability to retain counsel, so be it. The accused can always obtain representation through whatever indigent defense system the jurisdiction has made available.

Justice Kagan engaged in similar crystal ball gazing and raised the following with government’s counsel:

Mr. Dreeben, I think, you know, in essence your argument goes like this: You have Monsanto, you combine Monsanto with a simple factual acknowledgement that money is fungible, and it gets you to a judgment in this case. You win, the petitioner loses. And you know, that’s a fair, strong argument, if one is comfortable with Monsanto.

I mean, there is — so I think I would just ask you, I mean, suppose the Court is just uncomfortable with the path we started down the road on in Monsanto? And you might be right that it just doesn’t make sense to draw a line here, but it leaves you with a situation in which more and more and more we’re depriving people of the ability to hire counsel of choice in complicated cases. And so what should we do with that intuition that Monsanto sent us down the wrong path?⁶ 

I am not an accomplished watcher of the Supreme Court. I don’t know whether Justice Kagan’s observations about the “path we started down the road on in Monsanto” are shared by a majority of the Court, but they are spot on. The only thing I would add is that people are being deprived of their ability to hire counsel in more than just what Justice Kagan might consider complicated cases. What Monsanto and cases like Kaley v. United States⁷have done is place in the hands of the government the tools with which to control an accused’s access to counsel of choice and to the resources to mount and effective defense.

It is interesting to note that Justice Kagan wrote the majority opinion in Kaley, which authorized the pretrial seizure of property based on a finding of probable cause by a grand jury as evidenced by an indictment that the defendant had committed an offense and the property was connected to the offense. Perhaps she has been swayed in her thinking about pretrial seizures of assets that render a defendant incapable of hiring counsel by the dissent in Kaley authored by Chief Justice Roberts and joined by Justices Breyer and Sotomayor. As Justice Roberts observed in Kaley, “The possibility that a prosecutor could elect to hamstring his target by preventing him from paying his counsel of choice raises substantial concerns about the fairness of the proceeding.”⁸ 

The pretrial restraint of assets not traceable to criminal wrongdoing simply goes too far. It shifts a tremendous amount of power to the prosecution to diminish the effectiveness of an accused’s defense by preventing him not only from hiring his counsel of choice, but by limiting his ability to employ experts, investigators and the other essential tools necessary for a vigorous defense. Should the Supreme Court rule in Luis that such pretrial restraint of assets passes constitutional muster, Congress should act to take this weapon away from the government. As NACDL’s amicus brief points out,⁹ the legislative history of § 1345 does not indicate that Congress intended it to authorize pretrial restraint of untainted assets including those available for retaining counsel.

Notes

1. 491 U.S. 617 (1989).
2. 491 U.S. 600 (1989).
3. United States v. Luis, No. 13-1379 (11th Cir. May 1, 2014).
4. See In re Billman, 915 F.2d 916, 921 (4th Cir. 1990).
5. Transcript of Oral Argument at 32-33, Luis v. United States, 2015 WL 5955290 (2014) (No. 14-419).
6. Id. at 35-36.
7. ___ U.S. ___; 134 S. Ct. 1090 (2014).
8. 134 S. Ct. at 1107.
9. Brief for National Association of Criminal Defense Lawyers et al. as Amici Curiae Supporting Petitioner, 2015 WL 5955290, at 13, Luis v. United States, brief filed Oct. 7, 2015 (No. 14-419).

About the Author

A certified criminal law specialist, E.G. “Gerry” Morris has been practicing criminal defense law for 37 years. His practice focuses primarily on trials in state and federal courts, but he also handles state and federal appeals as well as post-judgment actions. He is a frequent lecturer at continuing legal education programs.

E.G. Morris
Law Office of E.G. Morris
2202 Lake Austin Blvd.
Austin, TX 78703
512-478-0758
Fax 877-497-8347
egm@egmlaw.com

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