§695 Sixth Amendment, Right to Counsel
Fourth Circuit finds no Sixth Amendment violation because at no time in the district court did the defendant express dissatisfaction with counsel or claim that he was unable to pay for substitute counsel. (695) An indictment provided Marshall with notice that, in the event of a conviction, the government would seek forfeiture, including a money judgment of $108,000,000. The government filed a motion to disqualify defense counsel Miller, asserting Miller labored under conflicts of interest arising from his representation of both Marshall and his co-defendant, whose appeal was currently pending, and because the co-defendant’s case included protective orders prohibiting dissemination of certain information to Marshall. Miller filed a response, averring that Marshall was entitled to his counsel of choice: Miller and co-counsel Reynolds. Marshall filed a waiver stating that he had consulted with “independent counsel” (Reynolds) and determined that there was no potential conflict of interest. At a hearing, the district court offered Marshall the opportunity to consult, at government cost, with an appointed lawyer who was “unconnected with Mr. Miller.” Marshall declined, and the court determined he knowingly and voluntarily gave up his right to a conflict-free attorney. Thus, the court denied the government’s motion. The IRS also sought a seizure warrant under seal for $59,000.28, against a credit union account Marshall jointly held with his wife. The IRS averred that the account was “at least” a “substitute asset” related to Marshall’s criminal behavior. The IRS sent out notices of civil forfeiture, and Marshall and his wife both filed administrative claims. After the other defendants pled guilty, a grand jury returned a superseding indictment against Marshall, providing notice of the government’s intent to forfeit the credit union account. At trial the government stated that it would not be seeking to forfeit the credit union account as directly traceable to criminal conduct but that it would, if appropriate, seek forfeiture of those funds as substitute assets. After conviction, the court entered a forfeiture order for a money judgment of $51,300,000. The credit union funds were not included as substitute assets or otherwise in the Government’s motion or the district court’s order. Marshall moved the district court to release the credit union funds to pay his appellate attorney and for other appellate costs, but the court granted the motion to forfeit the credit union account as substitute assets. On appeal, Marshall contended the government violated his Sixth Amendment rights by placing him in the untenable position of attempting to have his counsel disqualified, while at the same time eliminating his ability to pay for new counsel if he believed his current counsel was indeed conflicted. The court found that Marshall’s arguments essentially amounted to claims of ineffective assistance of counsel because his attorney failed to raise the claim and/or properly counsel him, or prosecutorial misconduct based upon the government’s intent to prevent him from hiring the attorney of his choice. However, Marshall did not at any time in the district court state that he did not wish to be represented by Miller or that he was unable to pay for other counsel. To the contrary, he filed a written waiver and testified under oath at a hearing that he wished for Miller to represent him, even after being informed of possible conflicts of interest. As such, the district court did not have the opportunity to address the issue of whether the pretrial seizure of his bank account violated his right to counsel of choice. The court found no error. Although the government implicitly admitted Marshall should have had access to the account if he required the funds to hire his counsel of choice, the seizure did not affect his choice of counsel because Miller, the attorney who represented him, was the very attorney he chose. Marshall requested and was appointed counsel for his arraignment and was informed, prior to arraignment, of his right to counsel. The government actually sought to disqualify counsel, but Marshall adamantly stated that he wanted Miller to represent him. Marshall was also represented by Reynolds, who also was his counsel of choice and did not labor under a conflict of interest. Finally, at no time in the district court did Marshall express dissatisfaction with counsel or claim that he was unable to pay for substitute counsel. There was no record support for Marshall’s assertion that, had he better understood his rights, he would have expressed his need and/or desire for new counsel, so there was no need for the seized funds and no Sixth Amendment violation. United States v. Marshall, No. 16-4494, 2018 WL 5809728 (4th Cir. Nov. 6, 2018).
Tenth Circuit holds that a hearing on a pretrial challenge to seizure of assets is not barred just because the defendant has some unseized assets, since the test is whether the defendant lacks sufficient unseized assets to pay for the reasonable cost of counsel of choice. (695) Kahn sought a district court hearing to challenge the seizure of assets he contended he needed to retain an attorney to represent him in his upcoming criminal trial. His only unseized assets were a $175,000 home encumbered by an $80,000 lien and a business that brought in less than $3,000 a month after taxes. He estimated that he would need at least $200,000 to pay counsel and that his total defense costs would be at least $450,000. The district court denied a hearing because he had some unseized assets with which to pay an attorney, declining to consider whether Kahn’s unseized assets were sufficient to retain counsel of his choice. It thus did not consider whether the seized assets had been properly tied to his alleged offenses. Kahn filed an interlocutory appeal and obtained a stay of the proceedings. The appeals court reversed and remanded, holding that a hearing on a pretrial challenge to seizure of assets is not barred just because the defendant has some unseized assets, since the test is whether the defendant lacks sufficient unseized assets to pay for the reasonable cost of counsel of choice. It held that Kahn should be granted a hearing if he can 1) demonstrate to the district court’s satisfaction that he has insufficient unseized assets to afford reasonable representation by counsel of his choice, and 2) make a prima facie showing of a bona fide reason to believe the grand jury erred in determining that the restrained assets constitute or are derived, directly or indirectly, from gross proceeds traceable to the commission of the offense. United States v. Kahn, No. 17-8035, 2018 WL 2248271 (10th Cir. May 17, 2018).
California district court denies, for lack of jurisdiction, motion for release of funds to pay for counsel because issues were decided against defendant in civil case, which was now on appeal. (695) Defendant was indicted on numerous fraud counts in a criminal case, which the court declined to formally relate to a SEC civil fraud action against him. In the criminal case the defendant filed a motion for release of $200,000 from a fund that was set aside to reimburse him for legal fees in the event that he prevailed in the civil case. The court first found that a defendant has no Sixth Amendment right to spend another person’s money for services rendered by an attorney, even if those funds are the only way that defendant will be able to retain the attorney of his choice. Thus, the government does not violate the Sixth Amendment if it seizes robbery proceeds and refuses to permit the defendant to use them to pay for his defense. The government can freeze assets under forfeiture statutes without violating the Sixth Amendment at the start of a criminal case if the government provides probable cause that the assets were unlawfully obtained. Even with a showing of probable cause, the government can seize assets only that are “fairly traceable” to the criminal activity, and not other assets that the defendant owns “free and clear.” In the SEC civil case, the defendant attempted to obtain the release of the frozen assets because, he alleged, he owned a portion of funds held in receivership not associated with fraud, and he should be indemnified for legal costs under an indemnification provision. The SEC court found that unless it was determined he had not committed fraud, he would have no ownership interest in the funds and no right to indemnification, and ordered $200,000 set aside for reimbursement if the he prevailed in the civil case. The civil court eventually granted summary judgment in favor of the SEC on all of the fraud claims and approved the Receiver’s plan to subordinate the defendant’s claims to the assets to those of the other investors. Since the judgment in that case was that he had committed civil fraud, however, the issue in the criminal case was whether the pending appeal in the civil case divested the court of jurisdiction, and whether the court could alter the final judgment of another district court. The defendant argued that despite the civil judgment finding fraud, the Sixth Amendment required the release of assets because the criminal case was not pending at the time of the civil proceedings, and because the Sixth Amendment issue was never considered in the civil case. The court, however, that due to the pendency of the defendant’s appeals, the district courts were divested of jurisdiction to reconsider whether he owned the assets in the receivership or whether they were covered by the indemnification agreement, because both issues were decided by the civil court before final judgment. Since he had only a potential Sixth Amendment right to the assets, and the issues were resolved against him in the civil case in a final judgment, the court did not have jurisdiction to decide that issue. Otherwise, criminal proceedings would become a forum, under the guise of the Sixth Amendment, to relitigate any civil judgment against the defendant that disposed of the defendant’s assets. Therefore, the motion for release of funds was denied. United States v. Feathers, 2016 WL 7337518 (N.D. Cal. Dec. 19, 2016).
North Carolina district court grants pretrial restraint of potential substitute assets because defendant did not claim he needed assets to hire counsel of his choice. (510, 535 695) Defendant was indicted by a federal grand jury for conspiracy to steal federal funds marked for war operational and reconstruction efforts. As part of the indictment, the government sought criminal forfeiture under 21 U.S.C. §981(a)(1)© and 28 U.S.C. § 2461© of at least $200,000.00 in gross proceeds of his illegal acts and would seek substitute assets, including a single tract of real property. The government moved for a restraining order preserving the property, which both parties agree was an untainted asset. Defendant argued the Supreme Court in its recent decision in Luis ruled pretrial restraint of untainted assets is not allowed under 21 U.S.C. §853. The court held that while Justice Breyer analyzed §853 in the Luis plurality opinion, he did so to distinguish Luis from precedential opinions permitting forfeitures of tainted assets under §853, not to declare pretrial restraint of untainted assets under §853 unlawful. In Luis, the Supreme Court rendered a decision of constitutional import based on its interpretation of a different statute expressly allowing pretrial restraint of untainted assets. Here, Defendant urged the court to find that §853 does not permit pretrial restraint of untainted assets based in part on a comment made by Justice Sotomayor at oral argument. While this district court agreed that the Supreme Court may in fact interpret §853 in this way in the future, it had not yet ruled on this issue and had not upset applicable Fourth Circuit precedents, which permit the pretrial restraint of substitute assets subject to Sixth Amendment concerns. In light of this precedent, Luis requires application of an additional constitutional balancing test when Defendant alleges the government’s requested pretrial restraint of untainted assets would prevent him from hiring counsel of his choice. Here, Defendant did not allege he needed the subject property to be free from pretrial restraint for the purpose of hiring counsel of his choice. Therefore, the constitutional question did not need to be reached, and the court granted the restraining order. United States v. Chamberlain, 2016 WL 2899255 (E.D.N.C. May 17, 2016).
U.S. Supreme Court holds that Sixth Amendment prohibits government from pretrial restraint of untainted, potential substitute assets. (510, 535, 695) A federal statute, ” 18 U.S.C. §1345(a)(2), provides that a court may freeze before trial certain assets belonging to a defendant accused of violations of federal health care or banking laws. Those assets include 1) property “obtained as a result of” the crime, 2) property “traceable” to the crime, and 3), as relevant here, other “property of equivalent value. The government charged petitioner Luis with fraudulently obtaining nearly $45 million through crimes related to health care. To preserve the $2 million remaining in Luis’ possession for payment of restitution and other criminal penalties, the Government secured a pretrial order prohibiting Luis from dissipating her assets, including assets unrelated to her alleged crimes. Though the District Court recognized that the order might prevent Luis from obtaining counsel of her choice, it held that the Sixth Amendment did not give her the right to use her own untainted funds for that purpose. The Eleventh Circuit affirmed. The U.S. Supreme Court vacated the judgment and remanded the case. The Court held that the pretrial restraint of legitimate, untainted assets needed to retain counsel of choice violates the Sixth Amendment, considering the nature and importance of the constitutional right taken together with the nature of the assets. The Sixth Amendment right to counsel grants a defendant a fair opportunity to secure counsel of his own choice that he can afford to hire, a right that is fundamental. Here, the property was untainted, i.e., it belonged to Luis. The government may well be able to freeze before trial “tainted” assets – e.g., loot, contraband, or property otherwise associated with the planning, implementing, or concealing of a crime. As a matter of property law, the defendant’s ownership interest in such property is imperfect. For example, See 21 U.S.C. § 853© provides that title to property used to commit a crime (or otherwise “traceable” to a crime) passes to the government at the instant the crime is planned or committed. But here, the government sought to impose restrictions upon Luis’ untainted property without any showing of any equivalent governmental interest in that property. Insofar as innocent funds are needed to obtain counsel of choice, the Sixth Amendment prohibited the court order sought here. On the one side is a fundamental Sixth Amendment right to assistance of counsel, and on the other side is the government’s interest in securing its punishment of choice, as well as the victim’s interest in securing restitution. These latter interests are important, but – compared to the right to counsel – they lie somewhat further from the heart of a fair, effective criminal justice system. Also, there appears to be no decision of the Court authorizing unfettered, pretrial forfeiture of the defendant’s own “innocent” property. Finally, as a practical matter, accepting the government’s position could erode the right to counsel considerably, and would unleash a principle of constitutional law with no obvious stopping place, as Congress could write more statutes authorizing restraints in other cases involving illegal behavior that come with steep financial consequences. These defendants, often rendered indigent, would fall back upon publicly paid counsel, including overworked and underpaid public defenders. The upshot is a substantial risk that accepting the government’s views would render less effective the basic right the Sixth Amendment seeks to protect. The Court concluded that the constitutional line between a criminal defendant’s tainted funds and innocent funds needed to pay for counsel should prove workable. Money may be fungible, but courts, which use tracing rules in cases of, e.g., fraud and pension rights, have experience separating tainted assets from untainted assets, just as they have experience determining how much money is needed to cover the costs of a lawyer. Luis v. United States, 2016 WL 1228690 (U.S. Mar. 30, 2016).
Supreme Court rules assets are forfeitable even if defendant wishes to use them to pay attorneys’ fees. (695) Justice White, writing for a 5-4 majority of the Supreme Court, held that the federal drug forfeiture statute contains no exemption for assets that a defendant wishes to use to pay the attorney who conducted his defense in the criminal case where forfeiture was sought. Under 21 U.S.C. §853(c) the government’s right to the assets vests “upon the commission of the act giving rise to the forfeiture,” and the “defendant has no Sixth Amendment right to spend another person’s money for services rendered by an attorney, even if those funds are the only way that defendant will be able to retain the attorney of his choice.” Justices Blackmun, Brennan, Marshall and Stevens dissented. Caplin & Drysdale, Chartered, v. U.S., 491 U.S. 617 (1989).
Supreme Court holds assets may be frozen before conviction on finding probable cause even if needed to pay counsel. (695) In this companion case to Caplin and Drysdale, Chartered v. U.S., 491 U.S. 617 (1989), Justice White, writing for a 5-4 majority, upheld the provisions of 21 U.S.C. §853 that allow a court to grant a pretrial restraining order freezing forfeitable assets, even where the defendant claims the assets are needed to pay attorney’s fees. The court found no exemption in the language of §853 for assets a defendant wishes to use to pay a lawyer. Moreover, Justice White, adopting the reasoning of Caplin and Drysdale, found no violation of the Sixth Amendment right to counsel in the restraining order provisions of §853. Neither the Fifth nor the Sixth Amendments require Congress to permit a defendant to use assets adjudged to be forfeitable to pay the defendant’s legal fees. The court held that a pretrial restraining order freezing defendant’s assets may be granted upon a finding of probable cause that such assets are forfeitable. U.S. v. Monsanto, 491 U.S. 600, 109 S.Ct. 2657 (1989).
First Circuit affirms summary judgment of forfeiture despite attorney’s failure to raise statute of limitations defense because Sixth Amendment guaranty of effective assistance of counsel in criminal proceedings does not extend to civil proceedings and because complaint nevertheless was filed timely. (350, 695) The government filed a civil forfeiture action against eight parcels of real property, $12,187 in currency, six vehicles and five financial accounts. After the claimant filed a timely claim and answer, the district court stayed the action pending his ultimate conviction in his parallel criminal case for intent to distribute marijuana. The government moved for summary judgment with an evidentiary record comprising 12 affidavits and numerous exhibits supporting its allegations that all of the defendants were purchased with drug proceeds and that four parcels had been used to facilitate drug trafficking. The claimant argued for the first time in response that the forfeiture complaint was filed outside the five-year limitations period of 19 U.S.C. §1621. The district court ruled that he waived any statute of limitations defense when he failed to raise that affirmative defense in a responsive pleading, and also held that the forfeiture proceeding was timely filed in any event, and granted summary judgment. The claimant appealed, also alleging in part that he was denied effective assistance of counsel. Unable to contest forfeiture on the merits, the claimant requested a remand to enable him to present evidence that the DEA necessarily had knowledge of his illegal activities before 1996, although he failed to produce any such facts when responding to the United States’ summary judgment motion. With that not having been done at the district court level, when it was appropriate to do so, however, the court held that he cannot properly salvage the issue now. The claimant next argued that his delay was due to ineffective assistance of counsel, because his original counsel, initially retained by his girlfriend, filed an answer on his behalf that did not raise a limitations-based affirmative defense. After changing attorneys and then acting pro se, when the government moved for summary judgment, the claimant filed a motion requesting that counsel be appointed to represent him. New counsel raised the statute of limitations defense, though he did not move to amend the pro se answer to include the statute of limitations defense even after the government had highlighted that procedural defect in its reply. The court of appeals held that the Sixth Amendment’s guaranty of effective assistance of counsel in criminal proceedings does not extend to civil proceedings. No potentially viable claim of ineffective assistance existed in any event, because the statute of limitations is triggered only when the government discovers that a particular asset is involved in an offense, and the claimant “did not produce even a shred of evidence” supporting his claim that federal officers were aware of his criminal activity before 2001. Thus, the summary judgment was affirmed. U.S. v. 6 Fox Street, 2007 WL 765706 (1st Cir. 2007) (March 15, 2007).
1st Circuit finds pre-trial seizure of assets defendant needed to pay lawyer did not violate 6th Amendment. (695) Defendant was indicted for fraud, money laundering, and criminal forfeiture, and the government also seized certain property in a parallel civil forfeiture action. Thereafter, the government dismissed the civil forfeiture case but obtained a criminal restraining order for the same property. The First Circuit rejected both defendant’s claim that his Sixth Amendment right to counsel was violated by the civil seizure of property he needed to pay counsel, and defendant’s contention that he was entitled to an adversary hearing on whether assets should be released to him to secure private counsel. First, the dismissal of the civil action mooted the issue of a hearing in the civil case, and the defendant did not contest the propriety of the criminal seizure. Second, said the court, “the Supreme Court has soundly rejected the proposition that the pre-trial seizure of assets that would otherwise be used to pay an attorney implicates the Sixth Amendment.” Citing Caplin & Drysdale v. U.S., 491 U.S. 617, 626 (1989). U.S. v. Kneeland, 148 F.3d 6 (1st Cir. 1998).
2nd Circuit denies appointment of CJA counsel for civil forfeiture. (695) The government filed a civil forfeiture action against real property and bank accounts owned by claimant and her husband. The forfeiture arose out of a criminal case against the husband. Claimant moved for, and the district court granted her, appointment of counsel under the Criminal Justice Act (CJA), 18 U.S.C. §3006A, to contest the civil forfeiture. The property was forfeited pursuant to a jury verdict. Claimant brought an appeal and petitioned the court of appeals for continued CJA representation on appeal. The Second Circuit noted that payment for counsel under the CJA is expressly limited to financially eligible persons who have a Sixth Amendment right to counsel. There is no Sixth Amendment right to counsel in civil forfeiture proceedings, and thus claimant was not entitled to CJA counsel, either at trial or on appeal. U.S. v. 87 Blackheath Road, 201 F.3d 98 (2d Cir. 2000).
2nd Circuit holds defense attorney’s partner’s representation of co-defendant in forfeiture case may be conflict voiding conviction. (695) Defendant and a co-conspirator were charged with transporting illegal aliens. The co-conspirator pled guilty and returned to Canada; however, the government commenced a forfeiture action against his car. Defendant went to trial represented by the partner of the lawyer representing his co-conspirator in the auto forfeiture. Statements by the co-conspirator exculpatory of defendant were introduced at trial, but the co-conspirator himself did not testify. After his conviction, defendant sought reversal based on a claimed conflict of interest caused by his lawyer’s partnership with the co-conspirator’s forfeiture counsel. The Second Circuit conceded that this arrangement might give rise to a conflict requiring reversal of defendant’s conviction, but remanded for further factual findings. U.S. v. Jiang, 140 F.3d 124 (2d Cir. 1998).
2nd Circuit finds no right to counsel in administrative forfeiture proceedings. (695) Defendant filed a motion under Rule 41(e), Fed. R. Crim. P., for return of property that had been seized and administratively forfeited by the DEA. Several weeks after the district court denied the motion, defendant raised two additional challenges to the forfeiture, including ineffective assistance of counsel, in a letter to the district court. The district court apparently did not address the merits of these untimely arguments, but the defendant nonetheless raised them on appeal. Citing U.S. v. 7108 West Grand Avenue, 15 F.3d 632, 635 (1994), the Second Circuit noted that there is no constitutional right to counsel in administrative forfeiture proceedings, and thus that any claim of constitutionally ineffective assistance of counsel is without merit. U.S. v. Muniz, 112 F.3d 506 (2d Cir. 1997) (table) (unpublished).
2nd Circuit upholds bankruptcy agreement that left forfeiture attorney unpaid. (695) In 1993, fraud was discovered in the operation of Revere Armored, Inc., an armored car company. The company’s assets were seized pursuant to a complaint and warrant in rem charging that they were forfeitable for having been used to defraud a financial institution. Revere’s owners were prosecuted and the company went into bankruptcy. Thereafter, attorney Sutton undertook representation of Revere. An agreement between the U.S. Attorney, the bankruptcy trustee, and Sutton provided that his fees would be payable from the bankruptcy estate. Sometime later, it became clear that the amount available to the estate would be insufficient to pay Sutton’s fees and the amount forfeited to the government would be larger. So Sutton sought to invalidate his earlier agreement. The Second Circuit was unsympathetic. It concluded that the division of assets between the U.S. and the trustee had been reasonable, that the original agreement concerning the source to which Sutton must look for his fee had been unambiguous, and that Sutton had been aware of the risks of representation of this bankrupt entity when he undertook it. All Assets of Revere Armored, Inc. v. Revere Armored, Inc., 131 F.3d 132 (2d Cir. 1997) (table) (unpublished).
2nd Circuit, en banc, holds that defendant is entitled to pretrial hearing on seizure of assets needed to retain counsel. (695) Under 21 U.S.C. §853(e)(1)(A), the government may obtain an ex parte restraining order based on a narcotics indictment alleging that, upon conviction, certain property will be subject to forfeiture. On remand from the Supreme Court, the 2nd Circuit, en banc, held that the 5th and 6th Amendments require an adversary, post-restraint, pretrial hearing in order to continue to restrain assets needed to retain counsel of choice. The hearing will determine whether there is probable cause for the forfeiture. The court is not bound by the Federal Rules of Evidence, and the grand jury’s determination of probable cause may be reconsidered. Concurring, Chief Judge Oakes, and Judges Winter, Miner, Altamari, and Walker, agreed that the 5th and 6th Amendments required a hearing, but argued that the statute should be declared unconstitutional, rather than rewritten by the courts. Judge Cardamone dissented, finding the statute constitutional as written. U.S. v. Monsanto, 924 F.2d 1186 (2d Cir. 1991).
4th Circuit holds that court may enjoin disposition of substitute assets belonging to fugitive RICO defendant despite accomplice’s claim of need for funds to hire counsel. (695) Defendant was indicted on various RICO violations which caused the failure of a savings and loan association. The indictment charged defendant and others with transferring $22,000,000 to Swiss bank accounts. Defendant fled the country, but later wired $500,000 to an accomplice in the United States. The district court found that the stolen RICO funds were not the source of wired money, and therefore it had no jurisdiction to enjoin the disposition of the funds pending trial. The 4th Circuit disagreed, ruling that the district court did have jurisdiction to enjoin the disposition of the wired funds. Under the RICO forfeiture statute, a money judgment can be satisfied out of any of the defendant’s assets. The possession of the wired funds by defendant’s accomplice did not defeat the government’s right to those funds, since the accomplice was not a bona fide purchaser for value. The 4th Circuit also rejected the accomplice’s argument that the continued restraint of the funds violated her 6th Amendment right to counsel and due process. In Re Assets of Billman, 915 F.2d 916 (4th Cir. 1990).
5th Circuit rules attorney-client privilege does not cover transfer of notice of forfeiture from client to lawyer. (695) Defendant was arrested for drug offenses, and while he was in jail, he received a notice of forfeiture regarding $3500 in cash seized at the time of arrest. He met his court-appointed attorney in jail, handed the notice to the lawyer, and requested representation on the forfeiture matter. For various reasons, neither appointed counsel nor another lawyer to whom the first attorney sent a copy of the notice undertook the representation. When defendant, acting pro se, sought return of the money, he swore that he had never received notice. His appointed counsel advised the U.S. Attorney that he possessed evidence proving the contrary, and the government subpoenaed the notice and correspondence concerning it from defense counsel. At defendant’s ensuing perjury trial, both the notice and testimony from defendant’s attorney about how he got it were admitted. The Fifth Circuit concluded that neither the notice nor the attorney testimony was privileged. U.S. v. Robinson, 21 F.3d 971 (5th Cir. 1997).
6th Circuit holds that Sixth Amendment right to counsel does not apply to civil forfeitures. (695) The DEA seized currency from claimant at the airport. In subsequent civil forfeiture proceedings under 21 U.S.C. §881(a)(6), claimant’s attorney failed to take any steps on behalf of claimant. After the attorney failed to comply with numerous discovery requests, the district court granted a default judgment to the government. Claimant sought to have the judgment set aside on the ground that it was obtained in violation of his Sixth Amendment right to counsel and his Fifth Amendment rights to due process and fundamental fairness. The Sixth Circuit held that the Sixth Amendment right to counsel does not apply to civil forfeiture proceedings. Claimant’s remedy was to file a malpractice action against counsel. Since the claimant did not raise the Fifth Amendment issue below, the appellate court declined to consider it. U.S. v. $100,375.00 in U.S. Currency, 70 F.3d 438 (6th Cir. 1995).
6th Circuit holds Sixth Amendment right to counsel not violated by pretrial seizure of assets that deprive claimant of potential resources to pay attorney’s fees. (695) Following defendant’s grand jury indictment for trafficking in a controlled substance, an investigation linked money in his bank accounts to the illegal activity. The Government brought forfeiture proceedings against the property but defendant failed to file a claim or answer. The district court issued a default judgment against the property followed by a final decree of forfeiture. Defendant filed motion for return of property–which the court denied, followed by a motion to set aside the order of default–which the district court also denied. The defendant appealed the district court’s ultimate decision, arguing that he did not have effective assistance of counsel because the government’s seizure of his assets prevented him from paying attorney’s fees necessary to defend him against the state court criminal charges. The 8th Circuit affirmed the district court’s ruling holding that, under criminal and civil forfeiture provisions, a defendant’s Sixth Amendment right to counsel is not violated by the pretrial seizure of assets that could otherwise have been used to pay an attorney. Tolliver v. U.S., 2001 WL 278292 (6th Cir. 2001) (unpublished).
7th Circuit says failure to seek post-restraint hearing on seizure of assets not ineffective assistance. (695) Defendant filed a §2255 motion attacking his drug conviction for ineffective assistance of counsel. Shortly after the indictment, the government seized or encumbered with a lis pendens much of defendant’s real and personal property. Defendant alleged that, in consequence, he was unable to pay his first counsel, who withdrew as a result of non-payment. Neither the first lawyer nor the second lawyer appointed by the court filed a post-restraint motion seeking a hearing to determine if the lis pendens should be removed so that the assets could be used to pay retained counsel. See U.S. v. Moya-Gomez, 860 F.2d 706 (7th Cir. 1988) (holding that where seizure of assets prevents defendant from retaining private counsel, the government is obliged to prove the likelihood that the restrained assets are subject to forfeiture). The Seventh Circuit held that defendant was not entitled to such a hearing because he had unrestrained assets which he could have, but did not, use to pay private counsel. Thus, defendant did not make out a per se violation of his Sixth Amendment rights. Moreover, defendant failed to show that, even if a hearing had been held, he would have prevailed. His trial counsel testified that the government’s evidence was strong and would undoubtedly have established probable cause for the forfeiture. Starnes v. U.S., 1999 WL 1054593 (7th Cir. 1999) (unpublished).
7th Circuit finds defendant not deprived of right to counsel by pretrial restraint of assets. (695) The government indicted defendant for fraud and money laundering in connection with the operation of hospice facilities, and obtained a post-indictment, pretrial restraining order against $20 million in assets. Defendant argued that the restraining order deprived him of his Sixth Amendment right to counsel of his choice. The Seventh Circuit rejected the claim, in large measure because defendant claimed to have no assets himself to pay a lawyer, his counsel repeatedly avoided answering the question of whether family members had funds they were willing to make available to pay for counsel. U.S. v. Kirschenbaum, 156 F.3d 784 (7th Cir. 1998).
7th Circuit says ineffective assistance will not excuse default as 6th Amendment does not cover forfeitures. (695) Thirteen years after a default judgment of forfeiture was entered against claimant’s property, he filed a motion for relief from judgment under Fed. R. Civ. P. 60(b). The district court dismissed the action as untimely under both Rules 60(b)(1) and 60(b)(6). The Seventh Circuit affirmed on the same ground, holding in addition that claimant lacked standing to contest the forfeiture because he never filed a claim to the property or an answer to the complaint. Moreover, his default could not be excused by the alleged ineffective performance of his attorney because “the Sixth Amendment right to effective assistance of counsel does not extend to forfeiture proceedings and, therefore, ineffective assistance cannot constitute good cause for the default.” U.S. v. $284,960.00 in United States Currency, 139 F.3d 902 (7th Cir. 1998) (table) (unpublished).
7th Circuit requires probable cause hearing if civil forfeiture impacts right to counsel. (695) In U.S. v. Michelle’s Lounge, 39 F.3d 684, 700-01 (7th Cir. 1994) (Michelle’s Lounge I), the Seventh Circuit held that due process mandated “a post-seizure adversary hearing on probable cause when the district court has found that the government has seized through civil forfeiture all of the assets a criminal defendant needs to obtain counsel.” If the government cannot show probable cause, it must release sufficient funds to pay for defense of the criminal action. In this opinion arising from the same forfeiture case as Michelle’s Lounge I, the court appears to hold that if the government does not establish probable cause it must also release funds sufficient to pay for attorney’s fees incurred in that portion of the civil forfeiture action devoted to freeing funds for a defendant’s criminal defense. U.S. v. Michelle’s Lounge (Michelle’s Lounge II), 126 F.3d 1006 (7th Cir. 1997).
7th Circuit says attorney’s negligence in forfeiture case does not entitle claimant to relitigate. (695) Claimants’ property was forfeited after their counsel failed to file a timely claim on their behalf, or appear at the hearing on the government’s default motion. With new counsel, claimants then filed a motion under Fed. R. Civ. P. 60(b) for relief from judgment based on their former lawyer’s gross negligence. The 7th Circuit held that the lawyer’s negligence did not entitle claimants to another opportunity to relitigate the forfeiture matter. It is well-established that an attorney’s errors and misconduct are attributed to the client, even if the errors are negligent or the misconduct willful. The label “gross” does not make a difference to the underlying principle. U.S. v. 7108 West Grand Avenue, 15 F.3d 682 (7th Cir. 1994).
7th Circuit holds attorney’s negligence was not “good cause” for opening default judgment. (695) Claimant argued that the district court abused its discretion by denying his motion to vacate a default judgment entered against his indoor cultivation equipment. The Seventh Circuit found no “good cause” for the default. The 6th Amendment’s guarantee of effective assistance does not extend to forfeiture proceedings because such proceedings are not “criminal prosecutions” and claimants are not “accused.” Claimant’s appropriate remedy was a suit against his attorney for malpractice. There was no due process violation. Defendant’s attorney received notice of the pending default. Notice to a party’s attorney constitutes notice to that party. U.S. v. Indoor Cultivation Equipment From High Tech Indoor Garden Supply, 55 F.3d 1311 (7th Cir. 1995).
7th Circuit requires probable cause hearing if civil seizure affects right to counsel in criminal case. (695) The government seized much of claimant’s personal and real property in a civil forfeiture action. Under U.S. v. Moya-Gomez, 860 F.2d 706 (7th Cir. 1988), claimant moved for an adversary hearing at which the government would be required to prove the likelihood that the seized assets were subject to forfeiture, or alternatively, for the release and exemption of certain assets from forfeiture to pay his attorneys. The 7th Circuit concluded that Moya-Gomez applies in the civil forfeiture context only insofar as the civil seizure affects a defendant’s right to select counsel of choice in a related criminal case. Thus, due process requires the government to participate in a post-seizure adversary hearing on probable cause when the district court has found that the government has seized through civil forfeiture all of the assets a criminal defendant needs to obtain counsel. If the defendant successfully rebuts the probable cause showing, due process requires that sufficient assets be released to pay a defense attorney’s reasonable fees. U.S. v. Michelle’s Lounge, 39 F.3d 684 (7th Cir. 1994).
7th Circuit upholds jurisdiction to review order releasing assets to pay legal fees. (695) Claimant moved the district court to release seized assets so that he could pay his legal fees. On July 2, the court released some of the assets, but refused to release most of them. Claimant then became a fugitive and on July 16, the district court entered a final decree of forfeiture and vacated the July 2 order releasing the property. On September 15, claimant filed a notice of appeal. The 7th Circuit upheld its jurisdiction to review the July 2 order releasing the assets. The notice of appeal adequately conveyed defendant’s intent to appeal from the court’s ruling on his motion to release assets. The appeal was not time-barred. The time to appeal from the July 2 order began to run on July 16, the date of entry of final judgment from which defendant also appealed. The July 2 order was appealable under the collateral order doctrine. This doctrine allows review under 28 U.S.C. §1291 of certain otherwise non-final orders if the order conclusively determines a disputed question that is completely separate from the merits of the action and is effectively unreviewable on appeal from the final judgment. U.S. v. Michelle’s Lounge, 39 F.3d 684 (7th Cir. 1994).
8th Circuit dissolves injunction that ordered return of non-refundable retainer. (695) Defendant was a farmer who engaged in a check-kiting scheme at his local credit union resulting in a $7.9 million overdraft. When federal regulators discovered the scheme and began civil and criminal investigations, defendant went bankrupt. He also secured counsel and entered into a non-refundable retainer agreement pursuant to which he paid $72,000 to the law firm. The National Credit Union Association Board (NCUAB) obtained a preliminary injunction ordering that the firm pay over the money to the NCUAB. The Eighth Circuit concluded that the evidence did not support the conclusion that defendant transferred the money to defraud the Credit Union or the NCUAB. Nor did the evidence support the finding that the firm took the money in bad faith and not for value. The court distinguished U.S. v. Monsanto, 491 U.S. 600 (1989), which held that the federal drug forfeiture statute permits a court to freeze assets that are intended to be used to pay attorney’s fees. The language of the forfeiture statute in Monsanto was “plain and unambiguous” in permitting attorney fee forfeiture. However, the Federal Credit Union Act, 12 U.S.C. §1787, appears to prohibit “acceptance of a nonrefundable retainer from a bankrupt … only if the retainer was excessive or a means of hiding assets of the bankrupt.” Neither condition was satisfied here, so the appellate court dissolved the preliminary injunction. National Credit Union Administration Board v. Johnson, 133 F.3d 1097 (8th Cir. 1998).
8th Circuit holds en banc that attorneys fee forfeiture claims are foreclosed by Supreme Court’s Monsanto and Caplin & Drysdale decisions. (695) In Caplin and Drysdale, Chartered v. U.S., 491 S.Ct. 617 (1989) and U.S. v. Monsanto, 491 S.Ct. 600 (1989), the Supreme Court held that a defendant’s Sixth Amendment right to counsel is not violated by the pretrial seizure of the defendant’s assets for forfeiture. The Monsanto case also held that pretrial restraint of such assets is permissible after a showing of probable cause. Vacating the district court’s order the en banc 8th Circuit held that Caplin and Monsanto foreclosed the defendant’s claims that the seizure of his assets violated his right to counsel and due process. The court declined to rule on whether due process requires a hearing before a pretrial restraining order can be imposed, noting that the issue had not been raised below. U.S. v. Unit No. 7 and Unit No. 8, 890 F.2d 82 (8th Cir. 1989).
9th Circuit denies motion for return of funds based on ineffective counsel claim, reasoning there is no constitutional right to counsel in forfeiture proceedings. (695) Defendant appealed pro se the district court’s denial of his motion for return of funds following a guilty plea for drug violations, claiming his appointed counsel failed to file a timely claim concerning $3,400 in U.S. currency seized and forfeited in an administrative forfeiture proceeding. The court denied defendant’s motion on two grounds: (1) because defendant did not allege receipt of insufficient or inadequate notice, he had an adequate remedy at law to attack the validity of the forfeiture, but failed to do so; and (2) to the extent that defendant contends his counsel’s failure to file a timely claim to the seized funds constituted ineffective assistance of counsel, there is no constitutional right to counsel in forfeiture proceedings. U.S. v. Loaiza, 2000 WL (9th Cir. 2000) (unpublished opinion).
9th Circuit rejects right to appointed counsel in forfeiture cases. (695) The Ninth Circuit held that there is no right to appointed counsel in civil forfeiture cases. A civil forfeiture proceeding is not a criminal prosecution, and claimant showed no “exceptional circumstances that would justify appointment of counsel. U.S. v. $292,888.04, in U.S. Currency (Robinson), 54 F.3d 564 (9th Cir. 1995).
9th Circuit does not decide whether forfeiture claimant has right to effective counsel. (695) The government seized $30,440.00 from the claimant’s house after claimant was shot and called paramedics and the police. Forfeiture proceedings were instituted. Although the trial court raised the question of the legitimacy of the search of the house, claimant’s counsel did not litigate the search issue but instead tried the forfeiture case on an innocent owner defense. The trial court found for the government and ordered the money forfeited. On appeal, claimant challenged the effectiveness of his counsel. Without determining whether the Sixth Amendment right to effective assistance of counsel applies to civil forfeiture proceedings, the Ninth Circuit found that the performance of counsel in this case did not fall below the required standards. The court noted that the question of whether the Sixth Amendment right applies is a complex and unsettled question. U.S. v. $30,440 in U.S. Currency, 2 F.3d 328 (9th Cir. 1993).
9th Circuit holds order freezing bank fraud defendant’s assets cannot be modified in criminal case despite claim of need for funds to pay attorney’s fees. (695) Defendant was the CEO of a savings and loan that collapsed. The Office of Thrift Supervision filed an administrative proceeding under 12 U.S.C. 1818, claiming defendant’s assets belonged to the bank. The OTS issued restraining orders requiring approval of all expenses greater than $5,000. When defendant was later indicted, his lawyers applied to the judge in the criminal proceeding for an order authorizing defendant to use his own assets to pay attorneys fees. The district judge refused, and on appeal the 9th Circuit affirmed, holding that the judge in the criminal case had no power to modify the OTS’s restraining order. Under §1818, defendant could seek judicial review of the restraining order in a separate action in which the OTS would be a party. But the district court’s authority was limited to taking such steps as appointing counsel under the Criminal Justice Act. U.S. v. Spiegel, 995 F.2d 138 (9th Cir. 1993).
9th Circuit reverses corporation’s conviction where asset seizure left it unable to obtain counsel. (695) Unimex, a corporation, was engaged in buying and selling foreign currency and operating a travel agency. An undercover investigation revealed it was also being used to launder money. All of its assets were seized, and it was convicted of money laundering, along with one of its officers. It was not represented by counsel at trial because a corporation is not entitled to appointed counsel. On appeal, the 9th Circuit reversed, holding that the court should have conducted a pre-seizure hearing to determine whether some of the assets of the corporation were legitimate. See U.S. v. Crozier, 777 F.2d 1376 (9th Cir. 1985). The court distinguished the Supreme Court’s opinion in Caplin & Drysdale v. U.S., 491 U.S. 617 (1989), on the ground that the defendants in that case had a right to appointed counsel. Here, the corporation was deprived of the ability to retain counsel without a prior hearing on whether the seizure was proper. U.S. v. Unimex, Inc., 991 F.2d 546 (9th Cir. 1993).
9th Circuit holds defendant’s claim that seizure of assets deprived him of right to counsel is not subject to interlocutory appeal. (695) Defendant was arrested after he allegedly delivered $69,680 to an undercover DEA agent to purchase six kilograms of cocaine. When the government filed a civil in rem civil forfeiture action against the money, defendant moved to release $50,000 to enable him to retain counsel in the criminal trial. The motion was denied, and defendant appealed. On appeal, the 9th Circuit held that the this case was governed by U.S. v. Flanagan, 465 U.S. 259, 265 (1984), which held that the denial of the right to counsel of one’s choice is not appealable before trial. The appeal was dismissed. U.S. v. Consiglio, 866 F.2d 310 (9th Cir. 1989).
10th Circuit finds no right to appointed counsel in civil forfeiture cases. (695) Claimant sought return of $43,646 in cash seized from his house in proximity to crack cocaine and civilly forfeited under 21 U.S.C. §881(a)(6). Claimant argued he was improperly denied the services of appointed counsel in the civil forfeiture case. The Tenth Circuit held that he waived any Sixth Amendment claim by failing to ask for an attorney during the proceedings. Moreover, said the court, there is no Sixth Amendment right to counsel in a civil forfeiture case. U.S. v. $43,646.00, 182 F.3d 933 (10th Cir. 1999) (table) (unpublished).
10th Circuit finds no right of confrontation or right to counsel in civil forfeiture cases. (695) The government alleged that claimant’s property was used to facilitate the drug offenses of which claimant was convicted, and a civil forfeiture judgment was entered pursuant to an “Agreed Order of Forfeiture” signed by claimant’s attorney. More than three years later, claimant filed a motion under Rule 60(b)(4), Fed. R. Civ. P., alleging that his attorney had no authority to enter such an agreement and that he had therefore been deprived both of his right to confrontation of witnesses and his right to effective assistance of counsel. The Tenth Circuit upheld the denial of the motion because neither the Confrontation Clause nor the Sixth Amendment right to counsel applies to civil forfeitures. U.S. v. Real Property Located at Rt. 1, Box 118, 132 F.3d 44 (10th Cir. 1997) (table) (unpublished).
10th Circuit rules failure to raise double jeopardy claim not ineffective assistance of counsel. (695) Defendant filed a 28 U.S.C. §2255 motion to set aside his 1990 drug conviction on the ground that he received ineffective assistance of counsel. The Tenth Circuit affirmed denial of his petition, ruling, inter alia, that it was not ineffective assistance of counsel for petitioner’s trial attorney to fail to advise that the government’s seizure of $7,960.22 caused jeopardy to attach. Civil forfeiture does not constitute punishment, and “failure to assert a meritless issue does not constitute ineffective assistance of counsel.” U.S. v. Stanberry, 129 F.3d 131 (10th Cir. 1997) (table) (unpublished).
11th Circuit finds no right to pre-trial probable cause hearing even though lis pendens encumbers property needed to hire counsel. (695) Defendant in this drug prosecution alleged he was prevented from retaining counsel of his choice because the government placed a forfeiture lis pendens on real property he needed to liquidate or borrow against to raise attorney’s fees. He conceded that he had no right to use forfeitable property to pay his attorney, but insisted that he did have a right to a pre-trial probable cause hearing to determine whether the government had adequate justification for seizing his assets. The Eleventh Circuit, alone among the circuits, has held that, “although pre-trial restraint of assets needed to retain counsel implicates the Due Process Clause, the trial itself satisfies this requirement.” See U.S. v. Bissell, 866 F.2d 1343, 1352-54 (11th Cir. 1989). The court intimated that Bissell should be re-examined, but held it unnecessary to do so on these facts. The court ruled that filing a lis pendens does not effectuate a seizure of real property, and therefore does not implicate any due process right to a hearing. U.S. v. Register, 182 F.3d 820 (11th Cir. 1999).
11th Circuit holds attorneys have no standing to assert a defendant’s Sixth Amendment claim to property. (695) Defendant sold his forfeited property and distributed some of the proceeds to his attorneys. The government appealed, and the 11th Circuit reversed, holding that because Sixth Amendment rights are personal, an attorney has no standing to claim that the use of the forfeiture statute deprives a defendant of assets with which to obtain counsel. There was no violation of the Sixth Amendment because the defendant had been represented by counsel of his choice throughout the course of the proceedings. Third party standing simply did not exist, and the attorneys stood as ordinary creditors. More careful research might have revealed this to the attorneys, leading them to refuse their services, but they did not do so. The attorneys could not satisfy their claim against the defendant at the expense of the governments’ prior interest. U.S. v. Real Property On Lake Forest Circle, 870 F.2d 586 (11th Cir. 1989).
11th Circuit holds potential for prosecutorial abuse does not render forfeiture statute per se unconstitutional. (695) The possibility that prosecutors will use forfeiture proceedings to control the adversarial process by restricting the defendant’s ability to retain private counsel does not require that the forfeiture statutes be struck down as unconstitutional. Ample safeguards exist to guard against such abuse. Here the judge made an independent determination that there was probable cause to forfeit the property. The jury returned a verdict of forfeiture, and the defendant failed to allege bad faith by the government. There was no reason to strike down the statute because the potential abuse never materialized. U.S. v. Bissell, 866 F.2d 1343 (11th Cir. 1989).
11th Circuit holds pretrial restraint of assets does not deprive a defendant of his Sixth Amendment right to counsel of choice. (695) Several defendants were indicted on drug trafficking charges, and the grand jury alleged that their assets were forfeitable under 21 U.S.C. §853(a). The trial judge found probable cause to forfeit the property and issued an ex parte seizure order preventing disposal of the assets prior to trial. The defendants were convicted and the property forfeited. The 11th Circuit held that the defendants were not deprived of their right to counsel of choice by this procedure. Under the terms of the statute, the government’s interest in the property vested at the time the offenses were committed, therefore the defendants never owned the assets to begin with. Thus, they had no right to use them to retain private counsel. The defendants’ Sixth Amendment right to effective and competent assistance of counsel was not violated because the defendants were represented by appointed counsel. U.S. v. Bissell, 866 F.2d 1343 (11th Cir. 1989).
D.C. district court denies stay of criminal case while defendants appeal denial of their motion for release of seized funds for attorney fees because they failed to adequately demonstrate that they are without resources to pay counsel. (695) The criminal defendants, two corporations and three individuals, sought a stay of the prosecution while they appealed the court’s denial of their motion to release funds seized by the government. Any stay pending appeal must be evaluated in terms of four factors: 1) a strong showing that the defendants are likely to prevail on the merits of their appeal, 2) without such relief, they will be irreparably injured, 3) would an issuance of a stay substantially harm other parties interested in the proceedings, and 4) the public interest. Defendant corporations operated a system that allowed buying and selling of gold and other precious metals on the Internet under the rubric of “e-gold.” The government contended they operated an unregistered and unlicensed money exchange business that also launders money. Immediately before the criminal indictment was unsealed, the government obtained warrants to seize the two operating accounts at e-Gold by which it conducted its exchange business. Defendants filed a motion for a Monsanto hearing. The court held that Defendants had to make a preliminary showing of: 1) a bona fide reason to believe that the grand jury erred in determining that the restrained assets constitute or are derived, directly or indirectly, from gross proceeds traceable to the commission of the alleged offenses, and (2) that Defendants have no assets, other than those restrained, with which to retain private counsel and provide for themselves and their families. The district court then held that Defendants were totally unable to make any showing of any kind that the operating accounts did not contain monies entirely resulting from the exchange business which the government asserted was an unregistered and unlicensed money exchange business, and refused to quash the warrants or order the release of any seized funds. On appeal, Defendants argued their Sixth Amendment right to counsel and their Fifth Amendment right to due process of law were jeopardized by the seizure of the accounts, asserting that the individual Defendants were unable to retain counsel of their choice and their incomes were substantially reduced below levels needed for living expenses, and the corporations could not defend themselves without access to the funds. However, Defendants stood literally mute about the source of the monies in the operating accounts. Since the record indicated that all of the monies in the seized operating accounts were fairly traceable to the alleged illegal activity, Defendants’ likelihood of success on appeal was very narrow, counseling against a stay. Also, counsel of their choice is not a right of constitutional dimension. They have a right to “adequate representation,” but cannot insist on representation by an attorney they cannot afford. A defendant has no Sixth Amendment right to spend another person’s money for services rendered by an attorney, even if those funds are the only way that defendant will be able to retain the attorney of his choice. Even more tellingly, Defendants failed to demonstrate adequately that they are really without resources. Since Defendants’ legal argument was weak and their financial situation stronger than they admit, the Court found no irreparable harm to support a stay. Although the Government argued it would be harmed if a stay were entered in the criminal case because a delay would harm in its ability to present its evidence as quickly as possible, possibly reduce witnesses’ abilities to testify to the events in question, and cause a greater expenditure of resources by the numerous Government offices involved in this prosecution, the Court held that these harms would not outweigh a decent showing of likelihood of success or irreparable harm. Nevertheless, since Defendants failed on the two more important of the four factors to be considered, the government’s expression of harm to its interests counsels against a stay. Finally, the public has a strong interest in seeing justice rendered expeditiously, also counseling against a stay. Thus, the Court denied the stay. U.S. v. E-Gold Ltd., 2007 WL 2103602 (D.D.C. 2007) (July 20, 2007).
Florida district court holds that restraining defendant’s funds needed to retain counsel violates due process. (695) After former Panamanian President Manuel Noriega was arrested, the U.S. government persuaded foreign countries to freeze his bank accounts containing millions of dollars, without a hearing. Noriega argued that he needed these funds in order to retain counsel. The district court ruled that the government violated due process by causing these assets to be frozen without first holding a hearing at which Noriega could challenge the government’s claims that the funds were linked to drug trafficking. U.S. v. Noriega, 746 F.Supp. 154 (S.D.Fla. 1990).
Georgia district court orders hearing for government to provide explanation of the connection between seized funds and offenses charged in the defendant’s indictment, where defendant moved for partial release of funds to pay counsel of his choice for criminal defense. (695) The government seized $185,080 from a metal safe located in the attic above the defendant’s residence pursuant to a federal criminal search warrant, and initiated civil forfeiture proceedings, which were stayed pending outcome of the criminal indictment on 129 counts of dispensation of controlled substances. After the court denied the defendant’s motion to appoint counsel, the defendant moved to release a portion of the funds based on his Sixth Amendment right to counsel of his choice. At the hearing, the government stated that it could not be certain of the source of the seized funds. Because the defendant ran a cash business, the government was unable to determine how much he charged his patients for office visits, however, based on an analysis of client records, the government believed that almost all of the defendant’s business was in violation of federal law, and it therefore contended that seizure of the entire $185,080 was appropriate. Although the court first found that the defendant has a Sixth Amendment right to counsel of his choice, in cases where the government has legitimately seized the defendant’s potentially forfeitable funds, courts have held that the defendant has no automatic right to a release of such funds, even when he intends to use them to procure the counsel of his choosing. A defendant has no Sixth Amendment right to spend another person’s money for services rendered by an attorney, even if those funds are the only way that the defendant will be able to retain the attorney of his choice. Generally, a showing of probable cause is sufficient to establish that the funds are subject to seizure (and therefore not available to pay for counsel of the defendant’s choice). Although here the defendant had not been appointed counsel in the case, this did not change the rule that funds properly subject to seizure are not available for retention of counsel. However, based upon this distinction, the court stated it wished to closely examine the basis for the seizure of funds. Thus, the court said it needed further inquiry into the link between the charged offenses and the full $185,080 seized by the government, and ordered the government to provide a detailed explanation of the basis for the seizure and withholding of the seized funds, including an explanation of the connection between the funds and the offenses charged in the Defendant’s indictment. U.S. v. Ly, 2008 WL 361006 (S.D.Ga. 2008) (February 8, 2008).
Illinois District Court says failing to claim fine was double jeopardy was not ineffective assistance. (695) Defendant was convicted of narcotics and weapons violations and was sentenced to imprisonment and a $12,500 fine. In this §2255 action, defendant claimed ineffective assistance of counsel on the ground that his attorney failed to raise a double jeopardy objection to the fine in light of the prior civil forfeiture of an automobile and cash. The district court rejected this contention out of hand, noting that a civil in rem forfeiture is not punishment under the rule of U.S. v. Ursery, 518 U.S. 267 (1996), and therefore such a forfeiture did not preclude imposition of a fine. U.S. v. Daily, 970 F.Supp. 628 (N.D. Ill. 1997).
Kansas District Court holds that defendants’ right to advance payment of attorney fees in criminal proceedings was not subject to forfeiture. (695) Defendants, who were charged with money laundering and wire fraud, moved to modify the pre-conviction restraining order directed against their assets in connection with their criminal forfeiture count. The defendants argued that their right under their former employer’s articles of incorporation to advance payment of attorney fees in criminal proceedings was not subject to forfeiture. The District of Kansas District Court held that neither due process, nor the 6th Amendment right to counsel, requires that assets needed to pay an attorney be exempted from restraining orders or, ultimately, from forfeiture. Rather, the constitutional requirement is simply a requirement that the court, in certain circumstances, hold a hearing on the restraining order and make a determination that the assets are properly subject to forfeiture. Absent a showing that the defendants’ right to advancement of legal fees was derived from the alleged scheme or conspiracy to commit the underlying charges, the funds will not be restrained. Motion to modify granted. U.S. v. Wittig, 2004 WL 1846116 (D.Kan., Aug. 13, 2004).
Maryland district court disqualifies attorney from representing defendant in criminal case because attorney had attorney fee claim for restrained funds in forfeiture count in indictment. (510, 590, 695) In 2006 the government filed a civil forfeiture complaint against $82,764.93 and $108,229.31 in cash seized from Bundy’s residence and bank accounts after a police investigation into a shooting in which Bundy was the victim. Attorney Neverdon was Bundy’s counsel in that matter and filed a claim for return of the money. On May 12, 2008, the court signed an order in the civil forfeiture case pursuant to a settlement agreement under which the government agreed to release $190,000 of Bundy’s property by check payable to Neverdon. On May 13, 2008, Bundy was indicted for possession with intent to distribute narcotics, with a forfeiture provision for all property derived from such violations, including $300,000 and interest and proceeds traceable thereto. The forfeiture provision pursuant to 21 U.S.C. §853(p) included substitute assets, thus the government filed an Application for a Protective Order for Substitute Asset requesting a protective order for $190,000 in the custody of the U.S. Marshals Services in Baltimore pursuant to the forfeiture order in the other case. Neverdon opposed and sought immediate release of the funds. He asserted a Notice of Lien against the property subject to the forfeiture provision, based on a 33 and 1/3% interest ($63,333.333) as recovery of attorneys’ fees. He then entered his appearance on behalf of Bundy in the criminal matter. In a letter to Neverdon, the government asserted a conflict of interest in Neverdon’s representation of Bundy because of his claim to the assets subject to the forfeiture provision. Bundy then signed a release waiving the conflict. Neverdon then requested a hearing on enforcement of the consent forfeiture order and counsel’s lien and the conflict of interest. Neverdon contended that the government’s application for a protective order should be denied because he had a legitimate interest in the monies based on work performed, and the proceeds of the settlement were not connected to any illegal activity. Neverdon also stresses that the monies were acquired and held before the government’s investigation. The government asserted that the $190,000 is subject to forfeiture as substitute assets because it had been unable to recover the assets related to the violations charged in the Indictment. It also contended that if Neverdon had a valid claim to the seized money, he was a third party whose claim could not be considered until an order of forfeiture was entered in the criminal case. The court agreed, and held that when an order of forfeiture is entered, notice of the order of forfeiture will be given to the public, and Neverdon could assert an interest in the forfeited property by filing a petition under 21 U.S.C. §853(n)(2). The court further held that although disqualification is a drastic remedy that deprives clients of their right to freely choose their own counsel, it must find a balance between the client’s free choice of counsel and the maintenance of the highest ethical and professional standards in the legal community. Moreover, counsel whose interests diverge from that of the defendant-client cannot render competent legal services or give the client undivided loyalty. An actual conflict of interest existed because of Neverdon’s claim. If the case proceeded to trial and Bundy were convicted, Bundy could claim that Neverdon’s financial interests in the forfeited assets prevented him from negotiating a favorable plea. If Bundy pled guilty, Bundy could claim that Neverdon encouraged the plea to protect his interest in the forfeited assets. Because Neverdon’s financial interest would interfere with his exercise of independent professional judgment, the court found that he had a conflict of interest. Because of an actual conflict, Bundy’s waiver was rejected and Neverdon was disqualified as his counsel. U.S. v. Bundy, 2008 WL 4133857 (D.Md. 2008) (September 2, 2008).
Massachusetts District Court denies motion to disqualify defense counsel paid from allegedly forfeitable funds. (695) Defendant was indicted for bank fraud, embezzlement, and money laundering. The indictment also sought forfeiture of assets traceable to these crimes. During the pre-indictment investigation, defendant entered into a fee and escrow agreement with attorney Thornton. She refinanced two properties (later alleged to have been purchased with criminal proceeds) and deposited over $159,000 into the escrow account controlled by Thornton. The lawyer used the money in the account to pay his own fees and to pay mortgage and other expenses on the properties. The government moved to disqualify the lawyer for conflict of interest because: (1) He might be called as a witness against his client because setting up and authorizing disbursement of the funds in the escrow account could be construed as money laundering; and (2) the lawyer himself might be criminally liable for money laundering if he knew the source of the funds he disbursed from escrow for attorney’s fees and other purposes. The district court denied the motion. The court found that the lawyer’s testimony would not be necessary to prove the course of transactions from the escrow account. As for the lawyer’s own liability, the court conceded that criminal prosecution was a theoretical possibility, but found it too speculative an eventuality to justify disqualifying the lawyer over his client’s objection. U.S. v. Matta-Timmins, 81 F.Supp.2d 193 (D. Mass. 2000).
Massachusetts District Court says inquiry into eligibility for appointed counsel is not for identifying forfeitable assets. (695) Defendants in this RICO action claimed indigency and sought appointment of CJA counsel under 18 U.S.C. §3006A. A judicial inquiry into defendants’ eligibility for appointed counsel is required and defendants argued that the court should take ex parte affidavits from defendants for review in camera to avoid having the government use the information disclosed to identify forfeitable assets. The government sought an adversary hearing. The court agreed to receive ex parte affidavits, with the proviso that, should they prove insufficient for determination of eligibility, an adversary hearing might be required at which defendants would receive use immunity of the type conferred in suppression hearings under Simmons v. U.S., 390 U.S. 377, 394 (1968). Any information disclosed at such a hearing could nonetheless be used to impeach defendants at trial and for determining whether forfeiture would be an appropriate component of the sentence. U.S. v. Salemme, 985 F.Supp. 197 (D. Mass. 1997).
North Carolina district court appoints Legal Services Corporation to represent indigent minors pursuant to CAFRA. (695) It appeared to the court from the pleadings that the minor claimants were per se unable to afford counsel and that the forfeiture involved a home that was being used as their primary residence. The appointment of counsel for indigent claimants in civil forfeiture proceedings is governed. By 18 U.S.C. §983(b)(2)(A), which provides that if a person with standing to contest forfeiture of property in a judicial civil forfeiture proceeding is financially unable to obtain representation by counsel, and the property subject to forfeiture is real property that is being used by the person as a primary residence, the court must insure that the person is represented by an attorney for the Legal Services Corporation with respect to the claim. While the potential claimants did not make a request, the court, in loco parentis, ordered the appointment of counsel and contacted the Legal Services Corporation, which agreed to take the appointment. Recognizing that the Legal Services Corporation may have little experience in civil forfeiture actions, the court advised appointed counsel that civil forfeiture actions are governed by unique rules that require claimants to file both claims and answers within very specific time frames, and that the action is governed by the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions. The court further advised counsel that they should pay particular interest to Rule G, and especially Rule G(5)(a), specifying the requirements for filing a “claim” to the property and Rule G(5)(b) requiring the filing of an Answer to the Complaint within 20 days after filing the claim. Since the minor claimants were acting under legal disability until counsel is appointed and until a guardian is thereinafter appointed, the court extended the time for filing an answer under Rule G(5)(a)(ii). U.S. v. Real Property at 130 High Rock Acres Drive, 2007 WL 2264475 (W.D.N.C. 2007) (August 6, 2007 ).
Ohio district court denies partial release of seized funds to pay attorneys’ fees because claimants did not identify any likely hardship and failed to show funds constituted the assets of a legitimate business. (305, 695) The government sought civil forfeiture action against four bank accounts pursuant to 18 U.S.C. §981. The claimants moved for a partial release of the funds of one-half of the monies in each of the accounts to secure legal counsel and any expert witnesses that may be required to defend against the action and any related criminal proceedings under 18 U.S.C. §983(f)(1), which provides for the release of seized property if the claimant can prove he has a possessory interest in the property and sufficient ties to the community to provide assurance that the property will be available at the time of the trial, and continued possession by the Government pending the final disposition of forfeiture proceedings will cause him substantial hardship, such as preventing the functioning of a business, or leaving an individual homeless, and the claimant’s likely hardship outweighs the risk that the property will be destroyed, damaged, lost, concealed or transferred during the pendency of the proceedings. The court found that the claimants failed even to address the issue of ties to the community much less whether such ties provided adequate assurance that the funds held in the bank accounts, if released, would still be available at the time of trial. Given their proposed use of the funds, to secure legal counsel and/or expert witnesses, it was almost assured that these funds would, in fact, not be available at trial. As to the third factor, the motion described in general terms the hardships that may be imposed in civil forfeiture cases and stated without any evidentiary foundation that none of the claimants were wealthy individuals. Although the seizure of the bank accounts occurred more than a year ago, however, the businesses owned by the claimants were apparently still operating, and there was no indication that any of the claimants had been left homeless. Also, the claimants did not identify any likely hardship caused by the government’s continued possession of the bank accounts except for their lack of financial wherewithal to secure legal counsel and/or expert witnesses. Assuming that such a hardship is one contemplated by §983(f), the court found that the hardship did not outweigh the risk that the funds would be transferred during the pendency of this proceeding. Finally, Section 983(f)(8)(A) forecloses the release of seized money unless it constitutes the assets of a legitimate business which has been seized. Because the claimants failed to show that the funds held in the four bank accounts constituted the assets of a legitimate business, they were not entitled to a release of such funds under §983(f)(1). U.S. v. Huntington Nat. Bank, Account ***3558, 2007 WL 2713832 (S.D. Ohio 2007) (September 14, 2007).
Pennsylvania District Court dismisses claim of defendant’s lawyers to substitute assets as premature. (695) Defendant was convicted of RICO offenses and the government sought forfeiture of certain investment accounts. Because these accounts held untainted money before funds derived from criminal activity were deposited, the entire contents were not directly forfeitable; the accounts were, however, forfeitable as substitute property. At the same time the government filed its motion for forfeiture of substitute property, defendant’s criminal lawyers filed a petition to adjudicate their interest in the substitute assets. The district court dismissed this petition as premature, but noted that the lawyers could file a third party claim pursuant to 21 U.S.C. §853(n) after the entry of the preliminary order of forfeiture. U.S. v. Stewart, 1998 WL 472466 (E.D. Pa. 1998) (not reported in F.Supp.).
Pennsylvania District Court asserts authority to appoint trustee to preserve corporation’s forfeited assets. (695) Defendant was convicted of RICO, mail fraud, wire fraud, and money laundering and 100% of the stock in his insurance company was ordered criminally forfeited. The district court appointed a receiver to assure that the assets of the corporation were protected. When former officers, directors, and employees of the company sought indemnification from the company’s assets for their own legal expenses in defending against the criminal investigation, the trustee denied their requests. The district court approved the denial because payments for attorneys’ fees would dissipate the corporation’s assets and reduce the value of the interest forfeited to the United States. U.S. v. Stewart, 1998 WL 472466 (E.D. Pa. 1998) (not reported in F.Supp.).
Pennsylvania District Court rules commingled funds forfeitable only as substitute assets. (695) Defendant was convicted of RICO violations, mail fraud, wire fraud, and money laundering, and the jury found certain of his assets forfeitable under the RICO and money laundering statutes. The district court held that the entire the contents of one of defendant’s bank accounts were not directly forfeitable because the account held untainted funds before criminally derived funds were transferred into it. See U.S. v. Voigt, 89 F.3d 1050, 1087-88 (3d Cir. 1993). Nonetheless, the entire contents of the accounts were forfeitable as substitute assets. The district court also ruled that the forfeiture did not impermissibly burden defendant’s right to counsel. A defendant has no Sixth Amendment right to spend forfeitable funds to finance a criminal defense. U.S. v. Stewart, 1998 WL 472466 (E.D. Pa. 1998) (not reported in F.Supp.).
Pennsylvania District Court finds no conflict of interest when defendant’s lawyers want to be paid. (695) Petitioner sought relief from his conviction and sentence pursuant to 28 U.S.C. §2255. He argued that his attorneys had a conflict of interest because they were paid for their services. Petitioner contended that “counsels’ status as paid attorneys was an actual conflict of interest because it may have prevented [them] from informing the Petitioner that he might receive a more lenient sentence by offering their fees as further forfeiture.” The district court denied the motion, noting that acceptance of petitioner’s contention would require courts “to force any defendant subject to a forfeiture action to accept the services of a public defender because of the potential that a private attorney might be interested in the property being forfeited.” The court also observed that petitioner’s sentence would not have been different in this case had the forfeiture amount been larger. [Ed. Note: One implication of the court’s opinion is that a defendant might be entitled to a lower sentence based on the amount of forfeiture. The weight of authority on this point is strongly to the contrary.] U.S. v. Martinson, 1998 WL 111801 (E.D. Pa. 1998) (not reported in F.Supp.).