United States v. Chamberlain (4th Cir., 8/18/17) Fourth Circuit Abrogates Rule Allowing Forfeiture of Substitute Assets Pre-trial.
A very good and well-reasoned opinion on this important issue. The full panel (en banc) abrogated its unique rule that permitted the pre-trial restraint of substitute assets (unlike other circuits). Both the government and the defense now agree that such forfeiture is contrary to the United States Supreme Court’s recent opinion, Luis v. United States, 136 S. Ct. 1083 (2016).
The defendant in this case was serving overseas in the military where he and his co-defendants embezzled some federal funds. The government sought the forfeiture of $200,000 which was the value of the funds derived from the proceeds of the scheme. If the defendant didn’t have that in cash, the government intended to pursue any eligible substitute property pursuant to 21 U.S. §853(p). Since doing so did not implicate any right to counsel issues, the government argued it was entitled to do so. Later, after securing some pleadings from Luis, they reconsidered their position. Before the Court, both government and defense counsel argued the current Fourth Circuit rule violated Luis.
For most offenses, federal law provides for the forfeiture upon conviction of property associated with a defendant’s crimes. There are two types of assets the government can forfeit. First,
(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 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.
21 USC §853(a). Also, when directly forfeitable property like the above has substantially diminished in value or is otherwise beyond the court’s reach, (p) allows for the forfeiture of “substitute property” up to the value of any property that would have been directly subject to forfeiture under (a).
The statute also allows pretrial restraint of certain assets. Section 853(e)(1)(A) allows district courts to enter orders or take necessary steps “to preserve the availability of property described in [Section 853(a)]” that “would, in the event of conviction, be subject to forfeiture.” The Fourth Circuit has long interpreted that provision to allow for the pretrial restraint of both tainted and untainted property.
In this case, the Fourth Circuit expressly overruled two precedents that allowed for pretrial restraint of substitute assets, United States v. McKinney (In re Billman), 915 F.2d 916 (4th Cir. 1990), cert. denied, 500 U.S. 952 (1991), and United States v. Bollin, 264 F.3d 391 (4th Cir. 2001). The Fourth Circuit acknowledges Luis‘s position on this issue:
Specifically, the Luis plurality explained that, unlike tainted assets– the defendant’s ownership of which is necessarily “imperfect”– untainted assets “belong to the defendant, pure and simple.” Luis, 136 S. Ct. at 1090. With this in mind, the plurality emphasized that the contention that “property– whether tainted or untainted– is subject to pretrial restraint, so long as the property might someday be subject to forfeiture… asks too much of [the Court’s] precedents.” Id. at 1091.
Assessing its position in light of the plain language of the statute, and recognizing the continuing developments in this area of the law, the Fourth Circuit overruled its existing precedent.
A great decision for citizens charged with federal crimes. No longer can the government restrain perfectly legal assets while waiting for his or her day in court. Excellent work by Elliot Sol Abrams of Cheshire Parker in Raleigh, NC, and with amici from the National Association of Criminal Defense Lawyers (I’m the Vice-Chair on committee now!), and the Cato Institute.
Also, see Pirate Kitty, since asset forfeiture has its roots in piracy. Clever, huh.