Forfeiture - Criminal Procedure

United States v. Watts, 786 F.3d 152 (2d Cir. 2015)

The defendant’s attorney took an assignment of the defendant’s interest in certain bank accounts prior to trial. At the time, the district court had conducted a hearing and determined that the government had not established in a pretrial hearing that some of the money in the account was subject to forfeiture. After the hearing, however, the money remained in an account of the court in order to resolve competing claims to the money. At trial, the jury determined that all the money was subject to forfeiture. The Second Circuit held that the attorney was arguably a bona fide purchaser for value who had a valid claim to the money in a post-trial ancillary proceeding pursuant to 21 U.S.C. § 853(n). The court reviews at some length various issues relating to the “relation back” principle, as well as New York fraudulent conveyance law.

United States v. Mahaffy, 693 F.3d 113 (2d Cir. 2012)

The definition of “proceeds” differs in a criminal forfeiture proceeding depending on whether the crime involved the sale of a lawful product in an unlawful manner, versus the sale of an unlawful product. 18 U.S.C. § 981(a)(2). In this case, the defendants were charged with selling securities with the improper use of confidential information. The Second Circuit concluded that this constituted the sale of a lawful product in an unlawful manner, which means that the forfeiture was limited to the profit, as opposed to gross proceeds.

United States v. Shakur, 691 F.3d 979 (8th Cir. 2012)

Because the trial court failed to enter a preliminary order of forfeiture, as required by Rule 32.2(b), the final forfeiture order could not be entered.

Kaley v. United States, 134 S. Ct. 1090 (2014)

In this case, the Supreme Court reviewed an Eleventh Circuit decision that addressed whether a defendant was entitled to challenge a pretrial restraint of his assets if the assets were necessary to retain counsel. The Court concluded that a defendant does have the right to challenge whether the restrained assets represented proceeds of the conduct that is the subject of the indictment, but a defendant does not have the right to challenge whether there is probable cause to believe that the defendant engaged in the illegal conduct or, whether the conduct was illegal. Because the grand jury already has decided the question of probable cause, no further inquiry into the legality of the conduct is required or permitted. Again, however, the defendant is permitted to challenge whether the restrained assets were derived from that conduct.

United States v. E-Gold Ltd., 521 F.3d 411 (D.C. Cir. 2008)

If the government seizes a defendant’s assets prior to trial, the defendant is entitled to a post-seizure adversarial hearing to contest the probable cause that he committed the underlying offense and that the assets are subject to forfeiture, if the money is needed to hire an attorney. This case includes an extensive discussion of the forfeiture / attorney’s fees issues that arise in a criminal forfeiture case. This decision did not survive Kaley v. United States, 134 S. Ct. 1090 (2014).

United States v. Silvious, 512 F.3d 364 (7th Cir. 2008)

Though 18 U.S.C. § 982 limits the federal crimes for which criminal forfeiture is an available remedy, a separate statute, 28 U.S.C. § 2461(c) permits criminal forfeiture in any case in which civil forfeiture is an available remedy. Therefore, because the civil forfeiture statutes provide for forfeiture in mail fraud cases, criminal forfeiture is also available, pursuant to 28 U.S.C. § 2461, even though mail fraud is not one of the listed offenses in 18 U.S.C. § 982 (unless the offense involved a financial institution).

United States v. Capoccia, 503 F.3d 103 (2d Cir. 2007)

Where an indictment charges the defendant with substantive offenses, but does not allege a “scheme,” enterprise or conspiracy, the forfeiture is limited to the assets involved in the charges. In this case, the crimes were interstate transportation of stolen property, which does not involve a “scheme” which could otherwise broaden the scope of the forfeiture.

United States v. Jarvis, 499 F.3d 1196 (10th Cir. 2007)

Placing a lis pendens on property that the government claimed it would seek to forfeit as “substitute assets” was not proper under New Mexico law. Under New Mexico law, a lis pendens is only appropriate if the real estate itself is the focus of the action and the party claims a present interest in the property. Substitute assets, however, are only recoverable as part of a money judgment against the defendant. The forfeiture component of the criminal case does not constitute an action “affecting title” to the property, which is required in order to file a lis pendens under New Mexico law. The Tenth Circuit also notes that the pretrial seizure of substitute assets is not permissible under the criminal forfeiture provisions. Note that this issue was litigated pretrial in connection with the defendant’s efforts to sell the property in order to raise money to pay attorney’s fees.

United States v. Arbolaez, 450 F.3d 1283 (11th Cir. 2006)

The trial court erred in barring the defendant from introducing evidence, or making a closing argument during the forfeiture phase of this case.

United States v. Razmilovic, 419 F.3d 134 (2d Cir. 2005)

28 U.S.C. § 2461(c) allows for criminal forfeitures in certain cases in which the civil forfeiture of property is authorized in connection with a violation of a federal law, but there is no specific statutory provision made for criminal forfeiture upon conviction. When criminal forfeiture is sought pursuant to this unusual procedure, the government may not seek pretrial restraint of the assets pursuant to § 853(e).

United States v. Nava, 404 F.3d 1119 (9th Cir. 2005)

In this criminal forfeiture action, the jury reached a special verdict that required the defendant to forfeit to the government his interest in certain properties. The defendant’s daughter claimed that the properties were hers and she was an innocent owner. The Ninth Circuit held that the daughter did, in fact, have legal title, despite the fact that she did not pay for the property when it was given to her by her grandmother. In answering this question, the focus is on state law. The fact that the defendant occasionally paid the taxes on the property and usedit for illegal purposes did not operate to vest title in him. Therefore, the property was not subject to in personam forfeiture.

United States v. Swanson, 394 F.3d 520 (7th Cir. 2005)

The Seventh Circuit limited the scope of criminal forfeiture, holding that “money put at risk” is not subject to forfeiture. Only actual gains are forfeitable. Even if the victim lost money as a result of the defendant’s conduct, this does not necessarily translate into a forfeiture amount. Loss to the victim is essential to a calculation of restitution (or setting a base offense level), but only gain to the defendant can be the measure of forfeiture.

United States v. Iacaboni, 363 F.3d 1 (1st Cir. 2004)

Payments of gambling winnings to the bettors constituted a money laundering financial transaction and the amount of these payments could be forfeited. However, the court erred in forfeiting additional money that may have been a financial transaction that concealed the money, because the money laundering charge only alleged “promotion prong” money laundering and therefore, a financial transaction that concealed the nature, source, or ownership of the money could not be forfeited. This would improperly amend the indictment.

United States v. Vondette, 352 F.3d 772 (2d Cir. 2003)

IRA’s are subject to criminal forfeiture, even as substitute assets.

United States v. McHan, 345 F.3d 262 (4th Cir. 2003)

The defendant transferred assets to his wife and children after he committed the criminal offense, but prior to indictment. The Fourth Circuit held that his property may be seized as a substitute asset. The wife and children argued that substitute assets can be seized only if they are transferred after the forfeiture judgment is entered, or, at the latest, after the defendant is indicted. The Fourth Circuit disagreed, holding that the relation-back doctrine applies to substitute assets as well as tainted assets. The Fourth Circuit also rejected a Due Process challenge that focused on the pre-hearing “preliminary order of forfeiture” which ties up property before a third-party claimant has notice, or a right to be heard. The Court also rejected the claimant’s Seventh Amendment argument that they were entitled to a jury trial. Finally, the court addressed various specific challenges to the forfeiture of particular parcels and rejected each challenge.

United States v. Pantelidis, 335 F.3d 226 (3rd Cir. 2003)

In the unusual posture of this case, the claimant had a right to appeal the trial court’s denial of his Rule 41(g) motion for return of seized property. The money that was seized constituted “substitute assets” under the forfeiture law and, therefore, were not actually part of a pending criminal case. Thus, the decision to deny the return of the money was independent of the criminal case and amounted to a final order for appellate jurisdiction purposes.

United States v. Gotti, 155 F.3d 144 (2d Cir. 1998)

A post-indictment pre-trial seizure is not authorized for substitute assets under 18 U.S.C. § 1963(d)(1)(A), because the pre-trial seizure provision only authorizes the seizure of proceeds, or property affording a source of interest over the enterprise. The substitute asset provision, §1963(m) does not define a species of proceeds, but, rather, property that may be seized, posttrial, in the event that proceeds are not available.

United States v. Kirschenbaum, 156 F.3d 784 (7th Cir. 1998)

The defendant was indicted on charges of fraud and money laundering related to his alleged Medicare fraud. The indictment sought the forfeiture of $31 million in various accounts. The trial court ordered the freeze of accounts containing $20 million. The Seventh Circuit reached the following conclusions: (1) Protective orders entered pursuant to 18 U.S.C. § 982(b)(1) are immediately appealable; (2) property that is alleged to be involved in (or traceable to) money laundering is subject to pre-trial seizure. The Court of Appeals held that the pre-trial seizure provisions are not limited to drug offenses. When § 982(b)(1) states that pre-trial seizure procedures are governed by 21 U.S.C. §853(e), this refers to the procedure by which seizures should be handled – it is not a limitation on what can be seized. (3) If the restrained money was needed to retain an attorney, a post-indictment hearing may be required (and a pre-indictment hearing is statutorily required) though the defendant made an inadequate showing in this case. (4) The court declined to decide whether there was a Due Process right to a post-seizure hearing. The court noted numerous decisions in other Circuits that ruled both ways on this topic: United States v. Crozier, 777 F.2d 1376 (9th Cir. 1985); United States v. Roth, 77 F.3d 1525 (7th Cir. 1996); United States v. Monsanto, 924 F.2d 1186 (2d Cir. 1991); United States v. Bissell, 866 F.2d 1343 (11th Cir. 1989). (5) The restraint on the defendant’s wife’s property was the proper subject of an appeal and was not proper. The wife was not a party in the district court and could not be restrained from transferring her own assets.

United States v. Jones, 160 F.3d 641 (10th Cir. 1998)

The defendant was indicted for health care fraud, 18 U.S.C. § 1347 and the indictment alleged that certain real and personal property was subject to forfeiture, pursuant to 18 U.S.C. § 982(a)(6). Post-indictment, the government moved to freeze certain assets – $1.5 million – pursuant to 21 U.S.C. § 853(e)(1)(A). The district court denied the defendant’s motion for a pretrial hearing. The defendant argued that the Due Process Clause of the Fifth Amendment required a pre-trial hearing at which the government must establish probable cause to believe that defendants committed health care fraud and the assets named in the indictment are traceable to the offense. The Tenth Circuit holds that in certain situations, the defendant is entitled to a postrestraint, pre-trial hearing. The defendant must first demonstrate to the court’s satisfaction that she has no assets, other than those restrained, with which to retain private counsel and provide for herself and her family. The defendant must also establish a prima facie showing of a bona fide reason to believe the grand jury erred in determining that the restrained assets constituted or were derived, directly or indirectly, from gross proceeds traceable to the commission of the health care offense.