May the US Government obtain a preliminary injunction under 18 U.S.C. § 1345 to prohibit a defendant from spending assets unrelated to the crime charged without violating a defendant’s right to hire an attorney of choice?
The Supreme Court’s decision in this case will determine whether the United States Government can constitutionally obtain a preliminary injunction under 18 U.S.C. § 1345 (“§ 1345”) to prohibit a defendant facing federal fraud charges from spending assets not derived directly from the charged crime. Luis argues that such a preliminary injunction violates a defendant’s right to counsel under the Sixth Amendment, and that the language of § 1345 does not allow the Government to restrain spending of untainted assets. Luis also asserts that even if a preliminary injunction of untainted assets is constitutional, the district court violated Fifth Amendment Due Process by failing to determine whether the Government was entitled, beyond a reasonable doubt, to the untainted assets. On the other hand, the United States argues that the Supreme Court has previously held the Government’s restraint of all assets in a defendant’s possession to be constitutional, so long as the Government can show probable cause that the assets are forfeitable even if the defendant needs those assets to pay for counsel. The Court’s decision could significantly impact criminal defendants’ ability to hire private counsel in cases of federal fraud and will also shape U.S. asset forfeiture law.
Questions as Framed for the Court by the Parties
Did a pretrial injunction prohibiting a defendant from spending untainted assets to retain counsel of choice in a criminal case violate the Fifth and Sixth Amendments?
Petitioner Sila Luis provided health care to homebound patients through her two businesses, LTC Professional Consultants, Inc. and Professional Home Care Solutions, Inc., of which she was both owner and operator. On October 2, 2012, Luis, along with two other individuals, was indicted for paying and conspiring to pay kickbacks for patient referrals and conspiring to defraud Medicare. Specifically, the Government charged Luis with conspiracy to commit healthcare fraud under 18 U.S.C. § 1349, conspiracy to defraud the United States and commit offenses against the United States under 18 U.S.C. § 371, paying kickbacks involving federal healthcare programs as prohibited under 42 U.S.C. § 1320a-7b(b)(2)(B), and finally, with criminal forfeiture under 18 U.S.C. § 982.
Special Agent Clint Warren, who previously investigated Luis’s businesses for federal health care fraud and received information from witnesses regarding Luis’s alleged fraud, testified at trial. The witnesses reported to Special Agent Warrant that Luis’s businesses had defrauded Medicare from January 2006 to January 2012. The businesses allegedly paid nurses to recruit patients, and the nurses then allegedly gave a portion of those kickbacks to the patients. The businesses also allegedly billed Medicare for medical services that were either unnecessary or not actually provided to patients. Medicare paid out a total of $45 million to Luis’s business during the period of her alleged fraudulent activity.
The United States brought a civil action under 18 U.S.C. § 1345 in the District Court for the Southern District of Florida to restrain $45 million worth of Luis’s assets before the criminal trial, including substitute assets that were not directly linked to the alleged charges. The court first granted a temporary restraining order against the assets, then granted the Government’s motion for a preliminary injunction upon a hearing on that motion. The court found that Special Agent Warren’s testimony had established probable cause to satisfy the elements of § 1345, which allows courts to grant preliminary injunctions to prevent a defendant from alienating property associated with certain types of fraud, such as federal health care fraud.
Luis appealed the preliminary injunction order to the Eleventh Circuit of the United States Court of Appeals, arguing that the injunction violated her constitutional rights by restraining money that she needed to hire a criminal defense attorney. The Eleventh Circuit affirmed the district court’s decision, holding that the U.S. Supreme Court’s decisions in Kaley v. United States, Caplin & Drysdale Chartered v. United States, United States v. Monsanto, and United States v. DBB, Inc. foreclosed Luis’s arguments. Luis petitioned for a rehearing en banc, but the Eleventh Circuit denied the petition. The U.S. Supreme Court granted a writ of certiorari on June 8, 2015 in order to resolve a circuit split concerning whether the government's restraint of a defendant's untainted assets needed to hire private counsel violates the Fifth and Sixth Amendments.
The parties in this case disagree over the scope of a preliminary injunction barring a defendant from using forfeitable assets.
Luis argues that the preliminary injunction can only enjoin tainted assets (assets derived directly from the crime) because she has a right to use the untainted assets to retain counsel. Additionally, Luis argues that untainted assets should be treated in a different manner from tainted assets, specifically as they relate to the relation-back doctrine. Luis also contends that the standard of proof in a § 1345 pretrial hearing should constitute something more than probable cause. The United States, on the other hand, argues that a court may enjoin both directly forfeitable assets (assets derived from the crime) and substitute assets (assets used to fulfill the rest of the judgment) because the Government has the right to use both types of assets to fulfill a criminal judgment. The United States further maintains that the standard of proof in a § 1345 pretrial hearing should be probable cause.
RIGHT TO USE UNTAINTED ASSETS TO RETAIN COUNSEL OF CHOICE
Luis asserts that the Sixth Amendment to the Constitution ensures that defendants retain a right to counsel. Luis contends that she has a right to use the untainted assets to retain counsel consistent with the Sixth Amendment. Luis argues that, although the Government wants to enjoin the untainted assets in order to fulfill a potential criminal monetary judgment, that reason is insufficient in light of her Sixth Amendment rights. . Allowing the Government to enjoin untainted assets, she claims, “undermines the adversarial system of justice” by taking away her ability to retain the counsel of her choice. Without the untainted assets, Luis argues that she would be unable to exercise her rights meaningfully as guaranteed under the Sixth Amendment.
The United States, however, contends that while the Sixth Amendment does give a defendant the right to counsel, the Sixth Amendment does not give a defendant the right to counsel that the defendant cannot afford. Furthermore, the United States asserts that the Government has a strong interest in ensuring that assets (whether directly forfeitable or substitute assets) will be available to compensate the victims of the crime in a criminal monetary judgment. According to the United States, the adversarial system would not be compromised because the defendant would still have publicly appointed counsel to adequately advocate her position.
TREATMENT OF UNTAINTED ASSETS VERSUS TAINTED ASSETS
Luis concedes that the Government may enjoin the tainted assets without violating the Sixth Amendment because of the relation-back doctrine. Luis asserts that, under the relation-back doctrine, the Government has a right to any assets that the defendant obtained from the offense. She argues, however, that the relation-back doctrine does not apply to untainted assets. Therefore, Luis asserts that she should be able to retain her property right in the untainted assets prior to trial and use those assets to retain counsel.
Luis further argues that 18 U.S.C. § 1345(a)(2) maintains that if the assets seized contain both tainted assets and untainted assets, then only the tainted assets should be enjoined in the pretrial hearing. According to Luis, if the Government cannot show that the assets are tainted, then the Government has no right to stop her from using the assets to retain counsel.
The United States counters, arguing that Luis misinterprets the relation-back doctrine. The relation-back doctrine, according to the United States, preserves the potential of forfeiture of both directly forfeitable assets and substitute assets. The United States argues that if the directly forfeitable assets are not enough, a court will use the substitute assets to fulfill a criminal monetary judgment. According to the United States, a court may therefore treat both types of assets equally in order to ensure the fulfillment of the judgment without running afoul of the relation-back doctrine.
The United States also argues that treating the assets differently would lead to what it calls “absurd and unfair results.”The United States claims that the Government would be unable to enjoin assets from a defendant who has already used up the directly forfeitable assets. On the other hand, the United States asserts that the Government would be able to enjoin assets from a similarly situated defendant who completely used the substitute assets and only had directly forfeitable assets. The United States claims that the Court, by following Luis’ proposed argument, would be unjustly rewarding what it calls a “rapid dissipation of criminal proceeds.”
The United States contends that §1345(a)(2) maintains that “property of equivalent value” may also be enjoined to ensure that the criminal monetary judgment will be fulfilled. Specifically, the United States claims that a court can enjoin substitute assets for the same reason that it can enjoin directly forfeitable assets. While the United States agrees that the Government does not have a current property interest in the assets, the Government has a right to preserve the future property interest from the likely criminal monetary judgment.
DUE PROCESS SCRUTINY STANDARD
Luis argues that Due Process under the Fifth Amendment requires that an adequate hearing be held before the government restrains her assets. Luis analogizes her inability to choose counsel to suppression of a person’s speech because she would not be able to have her case adequately represented by counsel of her choice, thus violating her rights. Luis contends that the same standard of scrutiny should apply to the hearing to determine tainted assets as applied to other constitutional issues related to speech. Therefore, Luis argues, the Government should be required to apply a standard of proof greater than probable cause during the hearing to determine whether the Government is likely to obtain a monetary judgment. Luis claims that the correct standard of proof is beyond a reasonable doubt, since that is the standard that will be applied to the criminal trial as well.
In opposition, the United States argues that the Government routinely removes particular defense counsel from the courtroom for a variety of reasons, such as conflict of interest. Any action that removes counsel and their arguments, the United States claims, does not violate freedom of speech. Therefore, the United States argues that Luis’ inability to hire counsel of her choice is similar to such a removal of counsel and does not violate the First Amendment. The United States contends that Luis’ freedom of speech is not implicated because neither she nor her counsel will be restricted from speaking freely in her defense. Furthermore, the United State argues that a First Amendment argument does not bear on questions of procedure, such as the question of the applicable standard of proof in this case.
Additionally, the United States argues that the probable cause standard of proof that already applies to directly forfeitable assets should also apply to “property of equivalent value” under § 1345.According to the United States, “the risk of error is no higher [with substitute assets] than when dealing with directly forfeitable assets.”The United States further supports its position by relying on the cases United States v. Monsanto and Kaley v. United States to illustrate the use of the probable cause standard during § 1345 hearings.
This case allows the Supreme Court to determine whether the Federal Government can constitutionally obtain a preliminary injunction to prevent a criminal defendant, facing fraud charges, from spending assets not obtained as a result of the fraud. Luis argues that restraining a criminal defendant’s untainted assets is a Constitutional violation that bars the defendant from hiring the attorney of her choice. The United States asserts that such a restraint of a defendant’s assets is not unconstitutional if the Government can show that it has probable cause to believe that the assets are forfeitable. The Court’s decision could affect whether certain defendants, who are prohibited from spending their monetary assets during trial, will be able to hire a private attorney or will have to use the services of a public defender. The decision will also assist in shaping forfeiture law in the United States.
THE FINANCIAL IMPACT ON DEFENDANT’S ABILITY TO HIRE COUNSEL OF CHOICE
The American Bar Association (“ABA”), in support of Luis, argues that a preliminary injunction restraining a defendant’s assets will prevent that defendant from hiring the defense attorney of her choice. The ABA suggests that the inability to choose an attorney will affect whether and how the defendant is able to cooperate with the prosecution, agree to a plea bargain, or create a trial strategy. The ABA also asserts that if a hired attorney must withdraw representation as a result of the defendant’s lack of assets, the defendant will need to restart the trial preparation process with a public defender who has no knowledge of the case and with whom the defendant has not established a relationship of confidence. Additionally, the Cato Institute and the DKT Liberty Project contend that restraint of a defendant’s untainted assets runs counter to public interest in that it will result in taxpayers paying the bill for a public defender, rather than the defendant paying for her own attorney.
The United States, however, maintains that the Government’s interest in completely recovering all forfeitable assets overrides a defendant’s interest in using those assets for an attorney. The National Conference of State Legislatures (“NCSL”) claims that full recovery of all forfeitable assets benefits the public interest by disrupting criminal organizations that would otherwise be able to continue committing crimes with those assets. The United States further contends that a defendant will receive an undeserved financial reward if he or she is permitted to retain “untainted” assets for defense counsel after having spent all of the illegally obtained assets received from the crime. The United States also argues that a privately hired attorney is not necessarily any more effective or trustworthy than the public defender that a defendant would be appointed if the Government restrains her assets.
ASSET FORFEITURE LAW IN THE UNITED STATES
The National Association of Criminal Defense Lawyers (“NACDL”) argues that the Government’s ability to use 18 U.S.C. § 1345 (“§ 1345”) to restrain untainted assets would result in an unintended expansion of criminal forfeiture law. The NACDL asserts that Congress and the courts have purposefully limited the Government’s ability to restrain untainted assets because the Government would otherwise have the power to destroy businesses and livelihoods.
The NCSL counters by arguing that allowing a defendant to access forfeitable assets to pay for her criminal defense actually conflicts with the history and tradition of forfeiture law. The NCSL also argues that forbidding the Government from restraining the defendant’s assets under § 1345 will prevent the states from protecting their citizens from crime and will inhibit the states’ efforts to create their own forfeiture laws. In addition, the NCSL maintains that some criminals will be aware of the proposed distinction between tainted and untainted assets in U.S. forfeiture law and will therefore combine or spend the tainted assets so that they may later retain any untainted assets in a possible criminal trial.
In this case, the Court will determine whether a preliminary injunction under § 1345, preventing a defendant from spending untainted assets to retain counsel, violates the Fifth and Sixth Amendments. Luis argues that the preliminary injunction violates the Sixth Amendment because Luis would be unable to use her untainted assets to adequately exercise her right to retain the counsel of her choice. Furthermore, according to Luis, the language of § 1345 does not allow the Government to restrain the spending of untainted assets. Luis also argues that the pretrial § 1345 hearing should use a standard more rigorous than that of probable cause because of the potential constitutional implications that could result. On the other hand, the United States argues that the Government has a right to enjoin forfeitable assets (which include both tainted and untainted assets) in order to ensure that a monetary judgment will be fulfilled, provided that the Government can show via probable cause that there will be a monetary judgment.
- Bryan Koenig, Freezing “Untainted” Assets Stifles Defense, High Court Told, Law360 (Aug. 26, 2015).
- Samantha Lachman, Supreme Court to Decide Whether Criminal Defendants Have Right to Hire Lawyers With Frozen Assets, Huffington Post (June 8, 2015).
- Debra Cassens Weiss, Does Freezing Defendant’s Untainted Assets Violate Right to Counsel of Choice? SCOTUS To Decide, ABA Journal (June 9, 2015).