Federal forfeiture statutes authorize a dirty business—the taking of an individual’s assets the government believes are tied to criminal activity, for both convicted and un-convicted activity.
For example, 18 U.S.C. § 1345 permits a federal district court to freeze, before trial, certain assets of a defendant charged with either a federal banking or health care law violation. These assets include: 1) property ‘obtained as a result of” the crime; 2) property “traceable” to the crime; and 3) other “property of equivalent value” owned by the defendant.
28 U.S.C. § 853 provides for two types of forfeiture of assets upon conviction. First, § 853(a) permits forfeiture of three categories of “tainted” property (i.e., property directly linked to the offense of conviction) which includes: 1) any property constituting, or derived from, any proceeds the person obtained, directly or indirectly, as the result of such [offense]; 2) any of the [defendant]’s property used, or intended to be used, in any manner or part, to commit, or to facilitate the commission of, such [offense]; and 3) in the case of a person convicted of or engaging in a continuing criminal enterprise[,] … any of his interest in, claims against, and property or contractual rights affording a source of control over, the continuing criminal enterprise.
Second, when any of the above-mentioned property has either diminished in value or is otherwise beyond the court’s reach, § 853(p) permits the forfeiture of “substitute property” (“untainted” property) that is equal in value to any of the property authorized for forfeiture under § 853(a).
US Supreme Court Addresses Forfeiture
During its last two terms, the U.S. Supreme Court has issued rulings that significantly reduced the reach of these draconian statutes. In March 2016, the Court held in United States v. Luis that any “restraint on legitimate, untainted assets” under § 1345 needed to retain counsel of choice violates the Sixth Amendment. And in June 2017, the Court restricted the reach of § 853(a) in United States v. Honeycutt to the “property the defendant himself acquired as a result of the crime”—eliminating the rule of joint and several liability to any co-conspirators in the crime.
Limits on Pre-Trial Restraint of Untainted Property
Federal district courts, at the urging of Government prosecutors, have issued “pretrial restraint” orders under § 853((c)(1)(A) “to preserve the availability of property described in [§ 853(a)]” that “would, in the event of conviction, be subject to forfeiture.” The Fourth Circuit Court of Appeals, at odds with its sister circuits, has routinely extended the reach of § 853(c) to include both tainted [§ 853(a)] and untainted property [§ 853(p) substitute property] that has no direct relationship to the charged offense.
On August 18, 2017, the Fourth Circuit in United States v. Chamberlain overruled its prior precedents that authorized pretrial restraint orders on untainted property. The appeals court held that the Supreme Court in Luis had “all but rejected such an expansive reading of its earlier holdings.”
Difference Between Tainted and Untainted, Substitute Assets
In effect, the Fourth Circuit was forced to recognize that under Luis a defendant’s “imperfect”—untainted assets—belong to him or her “pure and simple.” The Fourth Circuit concluded its holding in Chamberlain with the following observation:
“In sum, the Supreme Court has signaled that there is a firm distinction between the government’s authority to restrain tainted and untainted assets in construing Section 853 and related restraint provisions. Consistent with this important distinction, when Congress intends to permit the government to restrain both tainted and untainted assets before trial, it has clearly provided for such authority. Lacking such express authorization, Section 853(c) does not by its terms permit pretrial restraint of substitute assets.”
These judicial rulings curtailing the government’s ability to restrain untainted assets come at an opportune time when the current Justice Department led by Attorney General Jeff Sessions does not respect any distinction between tainted and untainted assets.