Imposing indigence: reclaiming the qualified right to counsel of choice in criminal asset forfeiture cases.

• Author: Lasky, Matthew R.

TABLE OF CONTENTS INTRODUCTION I. ATTORNEY'S FEE FORFEITURE IN THE LATE 1980s II. POST-1989 FEDERAL APPELLATE DEVELOPMENTS A. Monsanto IV B. United States v. E-Gold, Ltd. C. United States v. Kaley III. FLAWS UNDERPINNING MONSANTO III AND CAPLIN & DRYSDALE A. The "Explosion" of Forfeiture B. Socialization of the Defense Bar C. Bank Robbers, the Freedom of Speech, and the Qualified Right to Counsel of Choice IV. NEW ARGUMENTS IN KALEY A. The Sanctity of the Grand Jury B. Does the Defendant Get Two Trials? CONCLUSION INTRODUCTION

On January 19, 2012, the Department of Justice charged seven individuals and two corporations with organizing an international criminal enterprise through the website Megaupload.com. (1) Pursuant to these charges, at the U.S. Government's request, New Zealand law enforcement officials arrested Megaupload founder and CEO Kim Dotcom at his home. (2) The police raid on Dotcom's home involved over 70 officers armed with M-4 automatic rifles and body armor. (3) Dotcom and Megaupload were not charged with any violent crime, but with "engaging in a racketeering conspiracy, conspiring to commit copyright infringement, conspiring to commit money laundering, and two substantive counts of criminal copyright infringement." (4) The file-sharing site claimed that it complied with the law by obeying "notice and takedown" procedures in accordance with the Digital Millennium Copyright Act (DMCA) safe harbor whenever rights-holders notified it of infringing material posted on the site. (5) Despite its compliance with these takedown requests, Megaupload.com was one of the most visited sites in the world. (6) The source of the site's popularity was its reputation for permitting the posting of copyrighted materials. (7)

The Justice Department executed a number of arrest warrants, as well as twenty search warrants, in the United States and eight other countries. (8) During the raid on Dotcom's home, the Megaupload servers were shut down. (9) As a part of this action, the Justice Department seized $50 million in assets and completely removed them from the defendant's control. (10) Federal prosecutors subsequently objected to unfreezing a portion of these funds so that the defendant could hire attorneys. (11) The cumulative result of prosecutors' actions was clear: "[Kim Dotcom's] business has been effectively destroyed before he sets foot inside a courtroom." (12)

Of particular concern in this ordeal was that providing Megaupload.com a legal defense would require settling unresolved and complicated copyright questions--certainly ones that would demand the services of experienced copyright attorneys. (13) Whether a party can be held criminally liable for inducing third parties to infringe copyright--known as secondary infringement--was central to the matter. (14) Although the Supreme Court has established that secondary copyright infringement gives rise to civil liability, (15) the Court has not yet extended this doctrine to criminal liability. (16) Because the Government's case was on such shaky ground, it was clear from the beginning that the quality of Megaupload's legal counsel would be outcome-determinative. (17) Aside from these novel questions of law, the facts of the case are "hugely complex" and involve petabytes of data. (18)

Without the frozen $50 million in assets, the company and the individuals indicted would be unable to afford a legal defense. (19) Given the novel questions of law involved, it is counter to the public interest (and most certainly counter to Megaupload's interests) to have such an enormously complicated case be resolved by overworked and underpaid public defenders. (20) More bizarre is the idea that public defenders' already scarce resources should be redirected from indigent defendants to a defendant who has the means to pay for his own legal defense--that the Government should impose indigence upon Megaupload.

The law firm Quinn Emanuel Urquhart & Sullivan sought to represent Megaupload in the criminal trial. (21) The attorneys argued that "[i]f the Government is to have its way, the only evidence available to the Court would be that [evidence] cherry-picked by the Government.... Megaupload will never get its day in Court and the case will effectively be over before it has even begun." (22) Megaupload's prospective attorneys further argued that the Government's imposition of secondary criminal liability was unprecedented and unlikely to succeed. (23) Still, the Government was able to successfully freeze Megaupload's assets. (24)

The Megaupload case illustrates the burgeoning use of forfeiture law in the United States. In the 1970s, Congress passed as parts of other legislation the Racketeer Influenced and Corrupt Organizations Act (RICO) (25) and the Continuing Criminal Enterprise (CCE) statute, (26) which both include criminal asset forfeiture provisions. (27) In order to bolster the effectiveness of these forfeiture provisions, Congress later passed the Comprehensive Forfeiture Act (CFA). (28) As a result of the CFA, the Justice Department was granted the power to seize forfeitable assets before trial, so long as there was "probable cause to believe that the property is subject to forfeiture." (29) The statute itself provides for no adversarial hearing, pre-or post-restraint, to determine the propriety of the asset seizure. (30)

While these forfeiture statutes were originally aimed at organized crime and the drug trade, the Megaupload case shows that the use of the tool has expanded. As time has gone by, more and more offenses have become forfeitable. (31) The forfeiture device itself was originally expanded to combat the perception that organized crime was profitable. (32) Today, it is used indiscriminately and in a way that deprives defendants of a meaningful legal defense.

Another critical element of this problem is financial. In 1986, the second year after the creation of the Department of Justice Asset Forfeiture Fund, the Fund received $93.7 million. (33) In 2008, the Asset Forfeiture Fund exceeded $1 billion in net assets. (34) This Comment demonstrates that financial incentives for investigating and prosecuting forfeitable offenses have the utterly predictable effect of increasing said investigations and prosecutions. (35)

Part I of this Comment discusses the Supreme Court's firm rejection of an exception to the CFA for the payment of attorney's fees, (36) although the Court left open the possibility of courts using a pretrial procedure to help protect defendants from improper forfeiture. (37) Part II discusses the two main approaches the circuit courts take in formulating a pretrial procedure for determining the propriety of a forfeiture action. The D.C. and Second Circuits have taken the view that these hearings should encompass the questions of (1) whether the forfeitable assets are rightly traceable to illegal activity and (2) whether the government can prove that there is probable cause that an offense took place. (38) In contrast, the Eleventh Circuit has held that such a hearing can only address the former. (39) Part III introduces evidence and argument questioning the assumptions made by the Eleventh Circuit in denying defendants a full pretrial hearing. (40) Part IV then argues that the D.C. and Second Circuits' approach more adequately protects the serious interests involved in pretrial restraint of assets and that the increasing problem of the overuse of federal forfeiture statutes should be of paramount importance in these matters. On those grounds, Part IV argues that the Supreme Court should adopt the D.C. and Second Circuit's approach in Kaley v. United States.

1. ATTORNEY'S FEE FORFEITURE IN THE LATE 1980S

   In 1989 companion decisions, the Supreme Court took up the question of whether a criminal defendant has the right to use forfeitable assets to pay attorney's fees. (41) In Caplin & Drysdale, Chartered v. United States, the defendant, Christopher Reckmeyer, had been indicted for importing and distributing illegal narcotics. (42) The indictment charged that Reckmeyer's activities constituted a continuing criminal enterprise in violation of federal law. (43) Pursuant to federal criminal forfeiture law, (44) the indictment authorized forfeiture of a range of Reckmeyer's assets. (45) Subsequently, the district court issued a restraining order freezing his potentially forfeitable assets. (46)

   By the time Reckmeyer was indicted, he had already retained an attorney, who subsequently moved for permission to use restrained assets for legal fees and to exempt his fees from postconviction forfeiture. (47) Unfortunately for Reckmeyer's attorney, Reckmeyer reached a plea agreement with the prosecutor before the question of the forfeitability of his fees could be resolved--Reckmeyer's assets were forfeited as a part of the agreement. (48)

   Reckmeyer's attorney, the petitioner in Caplin & Drysdale, argued, inter alia, that the lack of an exemption for attorney's fees in the federal forfeiture statue impinged upon Reckmeyer's Sixth Amendment right to counsel as well as his Fifth Amendment right to a balance of power between the government and the accused. (49) The Fourth Circuit affirmed the district court's finding that the forfeiture statute violated Reckmeyer's right to his counsel of choice, guaranteed by the Sixth Amendment. (50) However, the Fourth Circuit, sitting en banc, later reversed the panel decision, finding that the lack of an attorney's fee exception did not violate the Sixth Amendment. (51) Specifically, the court found that "there is no established Sixth Amendment right to pay an attorney with the illicit proceeds of drug transactions." (52)

   The Supreme Court, upholding the Fourth Circuit's disposition of Caplin & Drysdale, held that neither the Sixth Amendment nor the Fifth Amendment prohibited the forfeiture scheme in question. (53) In his majority opinion, Justice Byron White was concerned that an attorney's fee exception would...