On June 8, 2015, the United States Supreme Court agreed to hear the issue of whether a criminal defendant’s rights to due process and counsel of choice under the Fifth and Sixth Amendments are violated if the court orders a pretrial freeze of the defendant’s assets; assets which may be necessary for the defendant to hire private.
In Luis v. United States, the defendant, Sila Luis, was charged with Medicare fraud in the Southern District of Florida. Luis was indicted in 2012 on fraud charges involving around $45 million in illegal Medicare payments. The FBI said Luis, president of a healthcare provider, paid kickbacks and bribes to Medicare patient recruiters and submitted false claims for work done on behalf of its beneficiaries. Once indicted, federal prosecutors froze Luis’s assets the same day, but Luis argued that the frozen assets were in no way connected to the alleged crimes and that prosecutors violated her Sixth Amendment rights since she needed the money to hire an attorney to mount a defense. In a motion responding to the prosecutor’s temporary restraining order, Luis argued, “the Fifth and Sixth Amendments, individually and in combination, require that the court exempt from restraint and forfeiture those assets needed for (and ultimately expended on)  legal defense to the charges pending before [the court].” Further, she argued that by freezing her untainted assets before trial, the government not only “cripple[d] [her] ability to retain [private] counsel,” but it also deprived her of money she would have invested “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.”
However, the lower court ruled against Luis after federal prosecutors argued that freezing the assets was necessary because she had already spent the tainted money on travel and luxury goods, and freezing the remaining funds were necessary to recover the full value of alleged fraud if convicted. The court, in conclusion, stated that there is “no Sixth Amendment right to use untainted, substitute assets to hire counsel.” The court also quoted an analogy from the Fourth Circuit’s decision in In re Forfeiture Hearing As to Caplin & Drysdale, Chartered, which illustrated a bank robbery involving $100,000, after which, the defendant is arrested in possession of the $100,000. The defendant, without proof, argues his innocence and claims the money to be a gift from a friend. The Fourth Circuit provided that no reasonable person would “contend that the $100,000 must be made available to pay for the defendant’s lawyer, and not be kept available for return to the bank in the event the defendant is found guilty.” In reliance on the analogy, the Fourth Circuit held that prosecutors may take steps to freeze a defendant’s assets.
The Luis case differs from the case that was before the Fourth Circuit. In Luis, the defendant’s frozen assets were not traceable to the fraud scheme. The lower court again relied on the Fourth Circuit’s analogy, adding that the bank robber spent the $100,000 shorty after stealing it, but it just so happens he has an extra $100,000 obtained legitimately sitting in a bank account. The court provided that Congress authorized restraint of those substitute assets in 18 U.S.C. § 1345 and therefore, the bank has the right to have those substitute, untainted assets kept available for return.
The Eleventh Circuit also rejected Luis’s arguments without any further explanation. The Supreme Court granted certiorari to decide whether Luis’s Sixth Amendment right to hire counsel of choice should outweigh prosecutorial efforts to recover the full value of alleged fraud against the government.
The Fifth Amendment provides that “No person shall be … deprived of … property, without due process of law.” Further, the Sixth Amendment provides that criminal defendants “enjoy the right … to have the assistance of Counsel for his defense.” The Supreme Court has subsequently found in Powell v. Alabama that “a defendant should be afforded a fair opportunity to secure counsel of his own choice.” This right to counsel of choice has been upheld even recently in the 2006 United States v. Gonzalez-Lopez decision, when the Supreme Court found that a defendant’s right to counsel is violated “whenever the defendant’s choice is wrongfully denied,” and such an error “pervades the entire trial.”
However, last term, the Supreme Court in Kaley v. United States reaffirmed the government’s ability to freeze property and/or money if there is a chance it could be tied to illegal activity. The Court first approved of the government’s ability to freeze a defendant’s assets in the 1989 United States v. Monsanto decision, where the Court approved the constitutionality of such an order as long as it is “based on a finding of probable cause to believe that the property will ultimately be proved forfeitable.” The Kaley Court held that standard to apply even when the defendant seeks to use the disputed assets to pay for counsel. Since Monsanto, lower courts have provided hearings to defendants seeking to remove an asset restraint to pay for counsel. In these hearings, defendants have been allowed to litigate the issue of whether the assets in question are connected to the crime; however, the Kaley Court “[did] not opine on” whether pretrial restraint of untainted assets could pose constitutional problems. Lower courts since then have differed. For example, the Fourth Circuit has held that defendants are still guaranteed the right to counsel of choice and are allowed to use untainted assets to hire counsel, but the Court of Appeals in Luis found that Monsanto, Kaley, and Caplin & Drysdale “foreclose[d]” constitutional challenges to pretrial restraint of untainted assets needed to hire counsel of choice.
The Luis decision will be worth following because the government has increasingly used asset forfeiture as a “potent weapon” to ensure “crime doesn’t pay,” as put by Warren Richey of The Christian Science Monitor. Many fraud cases are a result of government claims on property or stolen proceeds that are directly traceable to criminal activity; however, prosecutors have sought to freeze and preserve assets and/or proceeds that may or may not be linked to criminal activity as a form of insurance that the government will be able to collect if the defendant is convicted. The problem with this strategy is that pretrial freezing of the defendant’s money may leave the defendant short of funds—funds necessary to hire a lawyer.
It is difficult to predict how the Supreme Court will decide in this case. The case raises issues of the defendant’s presumption of innocence, right to counsel of choice, fairness, and property rights, all of which are rooted in the Constitution. Chief Justice Roberts touched on the issue last year in a dissenting opinion, in which he said, “[f]ew 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 … [such a move would be] fundamentally at odds with our constitutional tradition and basic notions of fair play.”
Although the Luis decision will most likely affects federal practitioners, state-level practitioners should follow this case. Some states have various statutes providing for the forfeiture of property and/or money that was either used in criminal activity, or traceable to criminal activity. For example, Wisconsin’s statute does not explicitly provide for or prohibit pretrial seizures of assets and there have been no cases to address the issue. Practitioners in similarly situated states should be wary of this decision because any limitations the Supreme Court places under the Fifth and Sixth Amendments would apply to the states.
By Mahira Khan