8 Criminal Forfeiture Proceedings

• Library: Asset Forfeiture: Practice and Procedure in State and Federal Courts (ABA) (2014 Ed.)

8 Criminal Forfeiture Proceedings

A. Introduction

After 15 years as a spy for the former Soviet Union, veteran FBI agent Robert Hanssen pled guilty to 15 counts of espionage and conspiracy and received a life term in federal prison. Federal prosecutors alleged that Hanssen made $1.4 million from his espionage activity, $600,000 of which was in cash and jewelry.¹ However, investigators were unable to find more than a small portion of those illicit profits. As part of his criminal plea, therefore, Hanssen stipulated to a criminal forfeiture money judgment of $1.4 million.² This plea demonstrates the growing importance of criminal forfeiture as a weapon in recouping the profits of illegal activity.

There are three basic rules to remember when litigating a criminal forfeiture action, namely:

1) A criminal conviction is required, see United States v. Aramony, 88 F.3d 1369, 1387 n. 11 (4th Cir. 1996);
2) It is limited to the defendant's interest in the property, see United States v. Harris, 246 F.3d 566, 575 (6th Cir. 2001); and
3) There must be a nexus between the property and the criminal activity, see Fed. R. Crim. P. 32.2(b)(1).

This chapter will review the federal and state procedures commonly utilized in criminal forfeiture actions.

B. Federal Criminal Forfeiture

The most common federal criminal forfeiture procedure statutes are found in the racketeering (RICO), see 18 U.S.C. § 1963, and drug forfeiture statutes, see 21 U.S.C. § 853. Because most federal statutes adopt the drug forfeiture statute provisions, see 18 U.S.C. § 982(b)(1), and Congress specifically provides that the provisions of 21 U.S.C. § 853 apply to all stages of a criminal proceeding filed under 28 U.S.C. § 2461, we will refer to those procedures.³

C. Initiation

A federal criminal forfeiture action is initiated with notice in the indictment or information that the government seeks forfeiture as part of the criminal sentence. See Fed. R. Crim. P. 32.2(a); United States v. Grammatikos, 633 F.2d 1013; 1024 (2d Cir. 1980); United States v. Dolney, 2005 WL 1076269, *4 (E.D.N.Y. 2005). General language tracking the forfeiture statute followed up with a bill of particulars listing specific forfeitable property prior to trial is sufficient. See Fed. R. Crim. P. 7(c); United States v. Davis, 177 F. Supp. 2d 470, 484 (E.D. Va. 2001); United States v. Galestro, 2008 WL 2783360, *1 1-12 (E.D.N.Y. 2008). However, substitute assets are not required to be listed in the indictment or elsewhere. United States v. Hatcher, 323 F.3d 666, 673 (8th Cir. 2003); United States v. Misla-Aldarondo, 478 F.3d 52, 75 (1st Cir. 2007). If property has been seized for civil forfeiture, the Civil Asset Forfeiture Reform Act (CAFRA) Section 2, 106 P.L. 185, 114 Stat. 202, 204, gives the prosecutor the option of listing the property in a criminal indictment in lieu of proceeding on the civil forfeiture. See 18 U.S.C. § 983(a)(3)(B)(ii)(I); Del. Valley Fish Co. v. Fish & Wildlife Serv, 2009 WL 1706574, *10 (D. Me. 2009).

D. Seizure of Property

There is no specific warrantless seizure authority in federal criminal forfeiture procedure similar to that authorized under the civil forfeiture process. See 18 U.S.C. § 981(b)(2). However, many criminal forfeitures commence as administrative or civil forfeitures, or the property is seized pursuant to a lawful search or arrest warrant; therefore, 18 U.S.C. § 981(b)(2) does have practical application to criminal forfeitures. Seizing property under the civil forfeiture procedures and filing a parallel criminal case or converting the civil action to a criminal forfeiture is specifically acknowledged and approved in CAFRA Section 2. See 18 U.S.C. § 983(a)(3)(B)-(C).

To preserve and maintain custody of property for criminal forfeiture, prosecutors may obtain two types of preindictment restraining orders. An ex parte 10-day temporary restraining order (TRO) is available without notice to the opposing side, provided there is a showing of probable cause, and notice would jeopardize the availability of the asset for forfeiture. In re Restraint of Bowman Gaskins Financial Group Accounts, 345 F. Supp. 2d 613, 619 (E.D. Va. 2004); United States v. Park, 825 F. Supp. 2d 644, 646 (D. Md. 2011). A hearing must be held at the earliest time possible and prior to the expiration of the order, see 21 U.S.C. § 853(e)(2), where the government must show:

1) A substantial probability of prevailing on the forfeiture;
2) A threat that the property may be destroyed, or unavailable for trial; and
3) The need to preserve outweighs the hardship against the owner.

At that hearing, the court could then convert the 10-day TRO into a preindictment restraining order for up to 90 days and, if an indictment or information is filed, it may remain in effect through trial. See United States v. Kirschenbaum, 156 F.3d 784, 792 (7th Cir. 1998); United States v. Hailey, 2011 WL 5386328, *2 (D. Md. 2011) (court issued a TRO, converted it to a 90-day protective order and, subsequently, a pretrial restraining order).

In lieu of seeking a 10-day TRO, the prosecutor may elect to apply directly for a 90-day restraining order by giving notice to the opposing side and providing an opportunity for a hearing. See 21 U.S.C. § 853(e)(1)(B). Because many prosecutors are concerned that notice would cause the property to be concealed, they usually opt for the 10-day restraining order provision.

Post-indictment restraining orders are also available ex parte by alleging that the property would be subject to forfeiture upon conviction. See 21 U.S.C. § 853(e)(1)(A); United States v. Acord, 47 F. Supp. 2d 1339, 1341 (M.D. Ala. 1999); United States v. Jamieson, 427 F.3d 394, 405-06 (6th Cir. 2005); United States v. Adams, 782 F. Supp. 2d 229, 234 (N.D. W.Va. 2011).

Does a claimant have a right to an adversarial hearing to contest criminal restraining orders? The general rule is that there is no right to a pre-restraint hearing when an order is issued either pre-indictment or post-indictment. See United States v. Monsanto, 924 F.2d 1186, 1192 (2d Cir. 1991); United States v. Bissell, 866 F.2d 1343, 1352 (11th Cir. 1989); United States v. St. Pierre, 950 F. Supp. 334, 338 (M.D. Fla. 1996); United States v. Musson, 802 F.2d 384, 387 (10th Cir. 1986); United States v. E-Gold, Ltd., 521 F.3d 411, 417 (D.C. Cir. 2008).

However, when a claimant's Sixth Amendment right to counsel may be infringed, and he or she has no other funds to retain counsel, a hearing may be required to determine whether the restrained funds should be released to hire counsel in the criminal case.⁴ See United States v. Jones, 160 F.3d 641, 647 (10th Cir. 1998); United States v. Farmer, 274 F.3d 800, 805 (4th Cir. 2001); United States v. Moya-Gomez, 860 F.2d 706, 729 (7th Cir. 1988). The claimant is required to show a lack of funds to retain counsel and that there is no probable cause for the forfeiture of the funds. United States v. St. George, 241 F. Supp. 2d 875, 878-80 (E.D. Tenn. 2003); United States v. Edwards, 856 F. Supp. 2d 42, 45-46 (D.D.C. 2012). If the court finds probable cause that the assets are forfeitable, the TRO remains in place, even if the funds are needed to pay for attorney fees. United States v. Melrose East Subdivision, 357 F.3d 493, 507 (5th Cir. 2004). However, if no probable cause is established, the funds are released. United States v. Wittig, 333 F. Supp. 2d 1048, 1052 (D. Kan. 2004).

May the government restrain the assets of third parties if they allege that the property is subject to criminal forfeiture? The majority view is that property held by third parties may be restrained to preserve the government's interest, see United States v. Regan, 858 F.2d 115, 120 (2d. Cir. 1988); United States v. Jenkins, 974 F.2d 32, 36 (5th Cir. 1992); United States v. Park, 825 F. Supp. 2d 644, 647 (D. Md. 2011); United States v. Egan, 2010 WL 3258085, *2 (S.D.N.Y. 2010); however, a few courts have declined to permit restraining orders of property held by third parties, reasoning that the orders are limited to the defendant and his or her agents. See United States v. Kirschenbaum, 156 F.3d 784, 794 (7th Cir. 1998); United States v. Lugo, 63 F. Supp. 2d 896, 897 (N.D. Ill. 1999). If restraining orders are issued against property held by third parties, they are entitled to a post-restraint hearing to challenge the scope of the order. See United States v. Real Property in Waterboro, 64 F.3d 752, 755-56 (1st Cir. 1995); United States v. Siegal, 974 F. Supp. 55, 58 (D. Mass. 1997); In re Restraint of Bowman Gaskins Financial Group Accounts, 345 F. Supp. 2d 613, 628 (E.D. Va. 2004). The third party may assert a superior interest in the property or challenge the nexus between the property and the charged criminal offense, but may not attack the underlying indictment. United States v. Siegal, 974 F. Supp. 55, 59 (D. Mass. 1997); Roberts v. United States, 141 F.3d 1468, 1471 n. 6 (11th Cir. 1998).

Are substitute assets subject to restraint by pretrial orders? Although a few federal courts have allowed pretrial restraint of substitute assets, see United States v. Bollin, 264 F.3d 391, 421, (4th Cir. 2001); In re Billman, 915 F.2d 916, 920-21 (4th Cir. 1990), the vast majority do not permit it. See United States v. Gotti, 155 F.3d 144, 149 (2d Cir. 1998); United States v. Floyd, 992 F.2d 498, 502 (5th Cir. 1993); In re Assets of Martin, 1 F.3d 1351, 1359 (3d Cir. 1993); United States v. Field, 62 F.3d 246, 249 (8th Cir. 1995); United States v. Ripinsky, 20 F.3d 359, 364 (9th Cir. 1994); United States v. Parrett, 530 F.3d 422, 430-31 (6th Cir. 2008).

If a court does allow a post-restraint hearing to be conducted, the government is required to establish probable cause that the restrained property is traceable to the underlying offense, see United States v. Jones, 160 F.3d 641, 648 (10th Cir. 1998); United States v. Bollin, 264 F.3d 391, 421 (4th Cir. 2001), and the issues are limited to the forfeitability of the property. See...