Freezing a Federal Defendant’s Assets Pretrial and the Current Constitutional Challenge

frozen assets - Law Offices of Hope C. Lefeber

You may have seen sensational news stories of federal authorities freezing the assets of big-time organized crime and drug trafficking defendants before trial. Usually this type of news is accompanied by pictures of authorities standing behind giant stacks of some combination of cash, drugs and weapons they found during a search. What you may not be aware of is that the government has this type of authority to freeze the assets of a criminal defendant in a number of different criminal cases, including white-collar cases. Over time, the government has continued to expand the use of freezing criminal defendants’ assets ahead of trial, but a recent case filed with the Supreme Court could challenge an aspect of the practice.

What Is an Asset Freeze and When Can It Be Used?

The government’s ability to freeze a defendant’s assets before trial grew out of the larger concept of asset forfeiture, a legal mechanism the government originally utilized to seize control of property that had been used in or gained from a crime. The federal government’s use of asset forfeiture in criminal cases began in the 1970s as a part of the larger effort to crack down on organized crime and drug trafficking. Once a defendant was convicted, the government used asset forfeiture to seize property related to the crime as a way of both punishing the person found guilty as well as preserving money for victims.

Not long after the forfeiture practice took hold, the federal government began enacting laws expanding the use of forfeiture to other crimes and allowing prosecutors to freeze a defendant’s assets before the criminal trial began. The idea behind allowing this pretrial freezing of a defendant’s assets was to ensure that the defendant did not squander or otherwise conceal money and assets that could later be subject to forfeiture. Federal law currently allows for forfeiture in over 200 types of criminal cases, including a number of fraud-based crimes. In all cases, the law specifically allows the government to seek forfeiture of a defendant’s assets even if they are unrelated to the crime if the proceeds of the crime are no longer available. Those assets are what are known as "substitute assets." In turn, courts have allowed prosecutors to freeze untainted assets before trial in the name of preserving those assets for forfeiture should the defendant be found guilty.

Constitutional Challenge – Analysis of Luis v. U.S.

A recent case brought before the Supreme Court, Luis v. U.S., seeks to challenge a part of the federal government’s ability to freeze a defendant’s assets before trial based on a criminal defendant’s constitutional right to effective counsel.

Sila Luis is a defendant in a federal Medicare fraud case, accused of defrauding the federal government through two home health companies she helped run along with two other defendants. The government alleges that the companies received more than $45 million in Medicare payments, but that much of that money has been either spent or moved out of reach. Prosecutors in the case sought to freeze Luis’ assets, including her assets unrelated to the alleged Medicare fraud since the tainted funds were largely out of reach. The lower court agreed and ordered all of Luis’ assets to be frozen.

Luis has appealed this decision all the way to the United States Supreme Court, arguing among other things, that the lower court’s order deprived her of her right to hire an attorney of her choice, a right guaranteed under the Sixth Amendment of the Constitution. According to Luis’ argument, while the government may have a right to freeze a defendant’s tainted assets before trial, the government should not have the ability to freeze untainted assets belonging to a defendant when those assets could otherwise be used to pay for a lawyer. The government, on the other hand, argues that the law under which they froze Luis’ assets makes no distinction between tainted and untainted assets, and if at the end of the day, the assets would be subject to forfeiture, they should be able to freeze them before trial.

The Supreme Court heard arguments from both sides on November 10th, and if you're wondering whether the Court tipped its hand on which way it is leaning, the answer is no. According to observers, the justices seemed equally skeptical of both side’s positions during oral argument. In response to Luis’ argument, several justices questioned the outcome of the proposed rule, noting among other things, the difficulties in drawing a distinction between tainted and untainted assets. The government’s argument was greeted with equal skepticism when their attorney took to the podium. Some of the justices noted that the government’s argument could ultimately lead to a much broader ability of prosecutors to freeze a defendant’s assets in all kinds of criminal cases, which could then lead to more defendants being unable to afford a lawyer of their own choice.

What Next?

The Luis case is now with the Supreme Court to decide. The Court’s decision should be issued by July 2016 if not sooner. At that point, we will have a better understanding of just where a prosecutor’s ability to freeze a defendant’s assets stops and the defendant’s right to hire a lawyer of their choice begins. Whatever the outcome, the federal government’s ability to freeze those assets related to the crime at hand does not appear to be in jeopardy and will continue to be heavily utilized by prosecutors.

If you have been charged with a federal crime and are looking for a tough defense lawyer, please contact the Law Offices of Hope Lefeber for a free initial consultation. I have over 30 years of experience defending clients from across the New York City area and am ready to fight for you too.

Categories: Federal Law