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If a defendant must forfeit all assets, is her right to counsel violated?

A petition urging the US Supreme Court to examine this issue, which has come up in a Miami Medicare fraud case, was expected to be considered at the justices' private conference on Thursday.

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    The Supreme Court building in Washington on June 30, 2014.
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The US Supreme Court is being asked to take up a case testing whether federal prosecutors are entitled to freeze all the assets of a criminal defendant – even when some of those assets are not tainted by any crime and the funds are needed to pay for a defense lawyer. 

The question is whether the defendant’s Sixth Amendment right to hire counsel of choice should outweigh efforts by prosecutors to recover the full value of an alleged fraud on the government.

A petition urging the high court to examine the issue is expected to be considered at the justices' private conference on Thursday. An announcement of whether they will hear the case could come as early as Monday.

The issue is significant because the government is increasingly using forfeiture as a potent weapon to ensure – literally – that crime doesn’t pay. For example, in a 15-month period in 2012 and 2013, the Justice Department seized $1.5 billion and returned those assets to 400,000 crime victims, including to the US Treasury.

Most forfeitures involve government claims on stolen property or proceeds directly traceable to criminal activity. But a growing segment of seizures involves using civil statutes to freeze financial and other assets that are not proceeds of criminal activity or otherwise tainted by crime.

In such cases, prosecutors are seeking to freeze – and thus, preserve – untainted, substitute assets that the government will be able to claim at a later time in the event of a conviction.

Here’s the problem: If that freeze occurs before a criminal trial, the defendant may be rendered broke and unable to hire a lawyer.

Critics say such heavy-handed tactics raise fundamental questions about fairness, property rights, and the right to use one’s own money to hire an effective defense lawyer.

Chief Justice John Roberts touched on this issue in a dissenting opinion last year.

“Few things could do more to undermine the criminal justice system’s integrity than to allow the government to initiate a prosecution and then, at its option, disarm its presumptively innocent opponent by depriving him of his counsel of choice,” Chief Justice Roberts wrote.

Such a move, he added, would be “fundamentally at odds with our constitutional tradition and basic notions of fair play.”

The issue arises in a Miami Medicare fraud case.

In October 2012, Sila Luis, president of two heath-care companies, was indicted on charges that she and others defrauded the Medicare program of $45 million during a six-year period.

Investigators said bribes and kickbacks were paid to prospective patients who agreed to sign up for home health care they did not need or never received.

On the same day as the indictment, prosecutors filed a civil action against Ms. Luis asking a federal judge to immediately freeze all her assets up to $45 million.

Luis’s net worth was far less than $45 million, so the asset freeze effectively rendered her broke.

In the space of a few hours, the federal government had accused Luis of a major crime and then ensured that she would be unable to use her own money to pay lawyers to defend her.

Luis’s lawyers argued that of the $45 million in Medicare payments her companies had received, she’d retained $4.5 million after paying operating costs and other expenses. They added that her companies had also generated more than $15 million in revenues unrelated to any Medicare payments.

Nonetheless, the judge determined that under the civil forfeiture statute, prosecutors were entitled to freeze not only tainted assets linked directly to the alleged Medicare fraud, but also untainted assets that could later be substituted in any future forfeiture order if Luis was convicted of the Medicare fraud.

“By freezing even a defendant’s untainted assets before trial, the government not only cripples a defendant’s ability to retain private counsel, but also takes from her the funds she would otherwise invest in her defense for the best and most industrious investigators, experts, paralegals, and law clerks, to at least attempt to match the litigation support available to the United States Attorney’s Office,” her lawyer argued, urging the federal judge to reject the government’s freeze request.

The judge disagreed. He issued a restraining order, effectively freezing all of Luis’s assets.  

Luis appealed the ruling. A panel of the Atlanta-based Eleventh Circuit Court of Appeals upheld the judge’s decision.

In taking their case to the US Supreme Court, lawyers for Luis argue that the lower court decisions raise significant constitutional issues about the right to obtain counsel in the face of aggressive government forfeiture tactics.

“The restraint of untainted assets needed to retain counsel poses a serious threat to the constitutional right to counsel of choice and the balance of forces in a criminal case,” Miami lawyer Howard Srebnick writes in his petition urging the high court to take up the case.

“A statute that dispossesses a presumptively innocent defendant of her untainted assets before trial – denying her the financial ability to retain counsel – should be of great concern to this court,” he said.

In response to the petition, US Solicitor General Donald Verrilli said the high court’s review of the Luis case was unwarranted.

“A statutorily authorized restraint on a defendant’s assets does not violate the Constitution if the government has shown probable cause to believe that those assets are forfeitable,” Mr. Verrilli said.

The solicitor general said that the high court had established in prior cases that there is a strong governmental interest in obtaining full recovery of federal funds obtained through fraud. He said that strong interest “trumps any Sixth Amendment interest in permitting criminals to use assets adjudged forfeitable to pay for their defense.”

Verrilli said the key distinction is not whether assets are tainted or not tainted. The key distinction is whether they are forfeitable or nonforfeitable, he said.

He said Luis’s untainted assets could be frozen because the judge in the case had found probable cause to believe that she had spent some of the proceeds of the alleged Medicare fraud on luxury items and travel.

“Petitioner’s desire to spend the substitute assets to hire counsel does not trump the strong governmental interest in obtaining full recovery of all forfeitable assets,” Verrilli said.

“If petitioner’s position were adopted, then a defendant could effectively deprive her victim of any opportunity for compensation simply by dissipating her ill-gotten gains,” he said.

In response, Mr. Srebnick says the government has it backward: The Sixth Amendment protects the right of a defendant to use her untainted assets to hire a lawyer without interference from prosecutors seeking to render her broke and resourceless on the eve of a criminal trial.

In a friend-of-the-court brief urging the justices to take up the case, appellate lawyer William Olson said asset forfeiture is growing exponentially as an abusive crime-fighting tool.

“Asset forfeiture has become the tip of the spear wielded by prosecutors against Americans in a federal criminal justice system designed to extract guilty pleas and collect financial awards,” he wrote.

“Giving the federal government the power to seize tainted assets of a defendant ... is a fearsome power, but can be understood if the assets seized are the fruits of the crime,” he said.

“It is quite another to grant the government the power to seize the assets of a defendant which are unrelated to the crime,” Mr. Olson wrote.

He said it is unseemly and unjust for the government to impoverish those it prosecutes in order to disable their defense at trial.

The case is Sila Luis v. United States (14-419).

 
 
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