On
March 18, 2013, the United State Supreme Court granted certiorari in Kaley v. United States. Docket No. 12-464. The case represents a complicated but narrow
legal issue regarding the scope of a defendant’s right to challenge an order
seizing property that the government claims is subject to forfeiture when the
defendant asserts that the property is necessary to pay legal fees. Typically, these seizure orders come during
an ex-parte hearing where the government needs to show property is subject to
forfeiture based on probable cause.
Those assets are then frozen until the conclusion of an underlying
criminal proceeding. The Federal Circuits
permit defendants to challenge the traceability of those assets in
post-indictment, pretrial Jones-Farmer
hearings. The Circuits are split,
though, as to whether a defendant may challenge the evidentiary support and
legal theory of the underlying charges or only the traceability of the property
the government claims is subject to forfeiture.
Forfeiture law is
designed to combat the profit motive created by illegal activity by
“[confiscating] property used in violation of the law, and to require
disgorgement of the fruits of illegal conduct.”[1] When the government chooses to pursue
forfeiture against a suspect, there are three methods available – criminal,
civil, and administrative. Criminal
forfeiture is a form of punishment that attaches following the conviction of a
criminal offense. The relevant
procedures controlling criminal forfeiture, enacted in 1984, states “any
property constituting, or derived from, any proceeds the person obtained,
directly or indirectly, as a result of” specified offenses are subject to
forfeiture.[2] The federal courts under the Relation Back Doctrine
have determined that the property becomes vested in the government upon the
commission of an act giving rise to forfeiture.[3] Thus, property subject to forfeiture may be
frozen by court order to prevent the dissipation of assets before conviction.[4]
Civil forfeiture is an
in rem proceeding against the
“proceeds” and items that “facilitate” criminal activity.[5] The government must show by a preponderance
of the evidence that the property is proceeds of criminal activity. This permits the government to pursue two
causes of action for the same underlying offense – criminally against the
person and civilly against the property – and can seize property pursuant to a
grand jury’s probable cause determination.
It provides a valuable and necessary resource in complex cases where the
human perpetrator is unknown, fled, or otherwise not within the jurisdiction of
the United States. This is an acute
problem in prosecuting large criminal enterprises for crimes such as money
laundering, bulk cash smuggling, and counterfeit good cases. In situations where property has been wrongly
seized, a claimant may present the affirmative defense of being an innocent
owner or a bona fide purchaser for value.[6]
The forfeiture statute
in question does not provide a right to a hearing following an indictment. However, the legislative history indicated
that Congress intended to permit a court to hold a hearing to decide whether
the court should “modify the order or vacate an order that was clearly improper
(e.g., where information presented at
the hearing shows that the property restrained was not among the property named
in the indictment).”[7] The Senate Report, though, contemplated a
limited hearing wherein the court was not entitled to review challenges to the
validity of the indictment itself.[8] The parameters of that post-indictment,
pretrial hearing is the question the Supreme Court is set to resolve in Kaley.
The majority view,
colloquially known as Jones-Farmer
hearing, provides a defendant a post-indictment, pretrial hearing with the
opportunity to present evidence that the property subject to seizure is not
traceable to criminal activity.[9] Procedurally, this precludes the defendant
from attacking the basis for the underlying indictment. The government, in its petition for
certiorari, argued that to permit otherwise would undermine the grand jury
system that presumes an indictment is facially valid for calling a trial, which
may not be attacked.[10] In the forfeiture context, nothing more is
necessary and is less intrusive when the same standard is applied to seize a
person pending trial. Also, the ability
to attack the merits creates a “mini-trial” between the grand jury’s probable
cause determination and the trial itself.
Effectively, the defendant gets two bites at the apple in an attempt to
defeat the charges against him or her.
Finally, such a “mini-trial” would prejudice the government’s interest
in the case by requiring premature disclosure of the government’s case and
trial strategy that may jeopardizes the identity of testifying witnesses,
victims, and confidential informants.
The minority view permits a defendant to present evidence
undermining the underlying indictment.[11] This position reasons that assets subject to
a seizure represent a deprivation of property subject to the Fifth Amendment
limitation. By nature of the consequence
of possibly restraining all of a
person’s assets, a person is effectively denied the opportunity to exercise
their Sixth Amendment conditional right to counsel of their choice. While a person has no right to use assets
that are forfeitable, the nature and position of the proceedings requires that
pursuant to the Fifth and Sixth Amendments, an adversarial hearing permitting
review of the probable cause determination provides procedural safeguards of
substantial value that outweigh the government’s interests.[12]
The Kaley case has the potential to create
new due process standards for Jones-Farmer
hearings. The government’s position
that seizure of assets is necessary pending the outcome of a case is reasonable,
especially given the availability of federal public defenders to assure a
person will receive effective assistance of counsel. However, assets that are subject to a seizure
order require only a showing of probable cause, which in an ex-parte hearing
permits the government to show evidence that would normally be highly
prejudicial at trial while casting a wide net.
The right to manage one’s own defense with all available resources becomes
subjugated or rendered impossible. These
two positions are very far apart and represent a gray area for the Supreme
Court to build in new protections. This
may include permitting defendants to use evidence that would seemingly attack
the probable cause determination but not actually allow the court to use those
arguments for throwing out an indictment.
Instead, the grand jury’s determination remains valid pending trial but
the permissible scope of evidence to confront the traceability issue expands. Under such a rule, the government preserves
its position to protect the grand jury’s determination while creating
additional procedural protections for the defendant.
Joe Hernandez
Executive Editor, Criminal Law Brief
Let us know what your thoughts are before the Supreme Court makes its decision and be sure to check back with the Criminal Law Brief Blog for the Supreme Court's decision in Kaley v. United States.
Image by John L Marino [Public domain or Public domain], via Wikimedia Commons.
[1] United
States v. Ursery, 518 U.S. 267, 284 (1996).
[2] See
21 U.S.C. § 853(a)(1).
[3] U.S.
v. A Parcel of Land, Blgds., Appurtenances and Imprivements, Known as 92 Buena
Vista Ave., Rumson, N.J., 507 U.S. 111 (1993); See U.S.
v. $84,740.00 Currency, 981 F.2d 1110 (9th Cir. 1992).
[4] See
21 U.S.C. § 853(e)(1).
[5] See
generally 18 U.S.C. § 981.
[6] See
21 U.S.C §§ 853(n)(6)(A)-(B).
[7] S. Rep. No. 225, 98th Cong., 1st Sess.
203 (1983) (hereinafter “Senate Report”).
[8] Id.
at 201-03.
[9] U.S.
v. Jones, 160 F.3d 641 (10th Cir. 1998); U.S. v. Farmer, 274 F.3d 800 (4th Cir. 2001).
[10] See
Costello v. United States, 350 U.S. 359, 362-63 (1956) (holding that an
indictment by an unbiased grand jury is valid and sufficient for calling a
trial of the charge and “the Fifth Amendment requires nothing more.”).
[11] See
US v. Monsanto, 924 F.2d
1186 (2nd Cir. 1991); United
States v. E-Gold, Ltd., 521 F.3d 411 (D.C.C. 2008).
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