BY LINDSAY ADKIN — The United States Government deposited more than $4.2 billion in its asset forfeiture fund during the 2012 fiscal year. That was more than double what the Government deposited in each of the two previous years. Asset forfeiture became a common practice after Congress first passed asset forfeiture statutes in the 1970s. These statutes were originally passed to deprive organized-crime figures of racketeering gains, but forfeiture law now has been expanded to cover almost all crimes. The Government defends the practice as a way to ensure that the money is available for restitution either to victims of crime or to the government. The real question, however, is whether a criminal defendant’s Fifth Amendment Due Process rights are infringed upon when his assets are seized without a hearing that allows him to challenge the evidentiary support for the charges against him. This question becomes more complicated when he needs those assets to hire the counsel of his choice.
The Supreme Court is currently grappling with those issues in Kaley v. United States. The Supreme Court heard oral argument on October 16, 2013. A decision is expected by June 2014. The question before the Court was “whether, when a post-indictment, ex parte restraining order freezes assets needed by a criminal defendant to retain counsel of choice, the Fifth and Sixth Amendments require a pretrial, adversarial hearing at which the defendant may challenge the evidentiary support and legal theory of the underlying charges.” In hearing this case, the Supreme Court will resolve a circuit split as to whether such a hearing is necessary.
The petitioners, Kerri and Brian Kaley, originally came under investigation in 2005 for selling old medical devices that hospitals no longer wanted on the “gray market.” The grand jury indicted the Kaleys on February 6, 2007. The next day, a magistrate judge granted the Government’s request for a protective order restraining the Kaleys’ assets. The Kaleys appealed this order, as well as their subsequent request for an evidentiary hearing, to the United States Court of Appeals for the Eleventh Circuit. The Eleventh Circuit reversed the district court’s denial of the Kaleys’ request for an evidentiary hearing. On remand, the district court found that the Kaleys were entitled to an evidentiary hearing. The district court limited the scope of the hearing and determined that the only relevant inquiry was whether the restrained assets were traceable to or involved in the alleged criminal conduct. The district court ultimately denied the Kaleys’ motion to vacate the protective order because they had not challenged traceability. The Kaleys then lodged a second interlocutory appeal to the Eleventh Circuit to address the nature and scope of the hearing. They argued that they should be able to challenge the merits of the Government’s case.
In its second opinion in this case, the Eleventh Circuit concluded that the Kaleys could not challenge the evidentiary support for the underlying charges. The court reasoned that because the forfeiture statute at issue, 21 U.S.C. § 853, does not require a hearing, the only pretrial hearing required is that provided by the Due Process Clause. As discussed in the court’s first opinion on this case, the Kaleys were entitled to a pretrial hearing under the test announced in United States v. Bissell. This test, as restated in the Eleventh Circuit’s second Kaley opinion, dictates that “when a restraint on the defendant’s assets prevents him from retaining counsel of choice, due process requires a pretrial hearing if the four-factor balancing test enunciated in Barker v. Wingo weighs in favor of a hearing.” The court, however, also explained that there are several reasons for the limitation on the scope of the hearing. First, the legislative history of § 853 makes clear that Congress did not want defendants to be able to challenge the indictment itself. Second, a pretrial evidentiary hearing would be inconsistent with Supreme Court precedent that shows the Court’s reluctance to allow pretrial challenges to a grand jury’s probable cause determination. Lastly, the grand jury’s unique nature as an independent body precludes the need for a hearing. The Eleventh Circuit did recognize that this case raises a legitimate Sixth Amendment issue but declined to address the implications of such an issue, focusing instead solely on due process.
Circuit Courts of Appeals are split on this issue. The Second Circuit allows a hearing, which challenges the evidentiary support for the underlying charges, in part because it does not place an additional burden on the Government. If the Government does not want to go forward with such a hearing, it can forgo pretrial restraint of the money and obtain forfeiture after conviction. The D.C. and Ninth Circuits also allow defendants to challenge probable cause in a pretrial, post-restraint hearing. The Tenth, Sixth, and Seventh Circuits all held, in accordance with the Eleventh Circuit, that a defendant at a pretrial, post-restraint hearing may challenge only the connections between the restrained assets and the alleged criminal activity—as opposed to the evidentiary support for the underlying charges. The Third and Eighth Circuits held that a full hearing is necessary, but did so prior to the Supreme Court’s holding in United States v. Monsanto that pretrial restraints can be based on probable cause. As such, it is unclear what standard they would impose today.
Miami-based attorney and adjunct professor at Miami Law, Howard Srebnick, argued Kaley v. United States on behalf of the Kaleys. Michael Dreeben, a deputy United States Solicitor General, argued on behalf of the Government. Justice Scalia garnered laughter right from the start of argument. He asked Mr. Srebnick if it was okay to detain an individual before trial based on a grand jury indictment, but not okay to seize assets based on such an indictment. Mr. Srebnick responded that it was not okay for either, and Justice Scalia then quipped that this was a bigger case than he thought. While Justice Scalia was being playful, the reality is that this case is important because the outcome will affect an individual’s ability to retain the counsel of his or her choosing. As Chief Justice Roberts pointed out, while the grand jury indictment may be used to jail a criminal defendant until trial, “property can be used to hire a lawyer who can keep [the defendant] out of jail for the next 30 years.”
Justice Breyer seemed to agree with Chief Justice Roberts, stating, “[t]o make the arguments is complicated. You can’t do it without a good lawyer.” Justice Breyer also proposed a narrow exception to the pretrial hearing prohibition that would give the trial judge authority to hold a hearing but allow him to impose conditions that would prevent the defendant from conducting a “fishing expedition” at the hearing. Justice Kagan, however, went with a more pragmatic approach. After pointing out that defendants in the Second Circuit have lost all 24 evidentiary hearings of this kind on record, she asked, “[s]o what are we going through all this rigamarole for, for the prospect of, you know, coming out the same way in the end?” Justice Scalia offered a third approach—to create a rule that even with a grand jury indictment, a defendant cannot be prevented from using funds in his possession to hire counsel. He preferred this approach to allowing pretrial evidentiary hearings.
It is not clear after argument where a majority of the justices lie. What is clear is that this is an extremely important case for the rights of criminal defendants—not only because of the due process implications, but also because of how it will affect a defendant’s ability to hire the counsel of his choice. In its Amicus Brief, the National Association of Criminal Defense Lawyers (“NACDL”) argued that pre-trial restraints of assets corrode the equal and adversarial presentation of a case by threatening to “bring about the ‘virtual socialization of criminal defense work in this country.’” When asked about the significance of this case, Howard Srebnick echoed the sentiments of the NACDL, saying, “Criminal lawyers should keep a close eye on the Kaley case. A ruling permitting the Government, without meaningful judicial review, to restrain a defendant from using his assets to retain counsel of his choice would portend a dismal future for the private criminal defense bar.” University of Miami Law Professor Scott Sundby stated that providing prosecutors with the power to take private defense counsel off the table based on a grand jury indictment is cause for concern. He went on to say that defendants will be at a disadvantage if the Government is able to dictate a defendant’s advocate in an adversarial setting. The question is whether this disadvantage will rise to the level of a constitutional violation. For the sake of defendants and private criminal defense attorneys alike, the Court should find that it does.