Mimesis Law
19 April 2021

Is Criminal Asset Forfeiture On Its Last Legs?

August 19, 2016 (Mimesis Law) – Despite its utility, civil forfeiture is increasingly going the way of the dodo. At least until the public remembers what purpose it served in the first place, anyhow. The primary complaint against civil forfeiture is that it happens absent a conviction. Although statutes can be drafted to comply with due process, groups like Institute for Justice have taken the “conviction or bust” approach. And they’ve been winning hearts and minds.

Ohio gives us a glimpse of what that post-civil-asset-forfeiture world might look like. The Ohio House passed HB 347, which eliminates civil forfeiture unless the owner is unavailable or the apparent owner fails to assert any ownership interest. Plus, if the amount is less than $25,000, then the bill would insulate those proceeds from civil forfeiture. One can imagine that no drug dealer will be foolish enough to carry that much cash anymore.

In the place of civil forfeiture, lawmakers intend to criminalize receiving proceeds from certain offenses:

No person shall receive, retain, possess, or dispose of proceeds knowing or having reasonable cause to believe that the proceeds were derived from the commission of a drug abuse offense, a theft offense, or the offense of trafficking in persons.

One wonders how the General Assembly foresees this working, particularly in situations where cash is found without drugs. While it may be possible to convict someone under this statute, there is the not insignificant problem of establishing probable cause to arrest and seize the money. It would go something like this.

Patrol Officer sees Mr. Ne’er Do Well, a known drug trafficker, commit a traffic offense. Patrol Officer makes a lawful traffic stop and approaches the driver. He notices the smell of marijuana and does field tests, which fail to show Mr. Ne’er Do Well is intoxicated. Patrol Officer gets consent and completes a search of the car and finds a bag of cash. While the cash is packaged in such a way that would facilitate drug trafficking, he finds no drugs.

Patrol Officer: Where did you get $10,000?

Mr. Ne’er Do Well: It’s my life savings.

Patrol Officer: What do you do for a living?

Mr. Ne’er Do Well: Odd jobs. A little bit of this and a little bit of that.

Patrol Officer: So, what are you doing with $10,000 of cash in your gym bag?

Mr. Ne’er Do Well: I am going to buy a boat.

Patrol Officer: It’s 2am; what dealer is open at this hour?

Mr. Ne’er Do Well: It’s this dude, Jerry. I found him on, what’s it called, Craigslist. He’s got a boat for sale.

Patrol Officer: At 2am?

Mr. Ne’er Do Well: Yeah. He must work days or something.

Patrol Officer: Where’s Jerry live?

Mr. Ne’er Do Well: I don’t know. I will call him when I get close.

Patrol Officer: If you don’t know where he lives, how will you know when you’re close?

Mr. Ne’er Do Well: I don’t know. I just text him, when I feel like it, I guess.

Patrol Officer: What’s his number?

Mr. Ne’er Do Well: I don’t know. I have to text my girl to get it.

Patrol Officer: Have a good night. Enjoy your new boat.

There certainly are reasons to think the money is proceeds from drug trafficking, but there isn’t probable cause to arrest or seize the money. After this encounter, Patrol Officer might suggest a detective look at it further. But chances aren’t good that it will happen. So, it’s not immediately clear what this new crime will actually do.

For those who say, “It’s none of the cop’s damn business anyway; it’s good that Patrol Officer couldn’t take the guy’s life savings. Besides, who can say that it wasn’t his life savings?” True, and under existing Ohio law, the officer wouldn’t (shouldn’t) have taken it because it is quite unlikely civil forfeiture could have been justified. The point here is the seemingly meaninglessness of criminalizing receiving proceeds.

The importance of civil forfeiture is not to provide a cheap substitute for criminal forfeiture. Rather, when at its best, asset forfeiture can ensure victims are maximally protected and defenfants are deprived a ill-gotten windfall. Ultimately, if state legislators want to force all forfeitures into the criminal area, then it will get harder, in some cases, to go after a number of proceeds.

Cash found with drugs in a trunk or inside a grow house will not be affected. But criminals of a white collar bent often have many options on where to place proceeds. Without a plea agreement, it can be difficult to track the purchases for which the tainted cash was used. Civil forfeiture provided a means to get far more proceeds stashed with other people, who themselves may not be criminally liable.

But life will go on without civil forfeiture, though with only criminal forfeiture available, certain aspects of plea agreements might raise eyebrows from time to time. Cries of “policing for profit” and overzealous use of power will of course continue, though the caterwauling will then be because a defendant appeared to get less prison time for coughing up large sums of ill-gotten cash and prizes.

Moreover, criminal forfeiture is not a magical cure-all. Recently, in federal court in North Carolina, the government sought forfeiture, which would proceed after obtaining a conviction. The court explained the facts as follows:

On June 25, 2014, Defendant was indicted by a federal grand jury in the Eastern District of North Carolina for conspiracy to unlawfully embezzle, steal, and convert United States federal funds marked for war operational and reconstruction efforts for his benefit and that of co-conspirators. As part of the indictment, the government sought criminal forfeiture under 21 U.S.C. § 981(a)(1)(C), as made applicable by 28 U.S.C. § 2461(c), of the gross proceeds of Defendant’s alleged illegal acts, in an amount of at least $200,000.00. Defendant was noticed the government would seek assets in substitution for the gross proceeds of the offense should the proceeds be made unavailable due to the acts or omissions of Defendant. * * * The government moves for a restraining order preserving the subject property, which both parties agree is an untainted asset.

The legal dispute is ultimately one about whether the statutes authorize the pre-conviction seizure of untainted assets, to ensure that enough assets are available after conviction. The primary issue is whether a wrongdoer can avoid disgorging ill-gotten assets by spending those on transient expenses such as food, entertainment, and regular expenses and using untainted funds to purchase things of value, such as real property.

The way the Fourth Circuit interpreted the law, the answer was no, a defendant couldn’t live a rock star lifestyle with embezzled funds and then negate the government’s ability to protect untainted assets from waste. Though the Fourth Circuit was alone in this regard.

In addition, if this sounds vaguely familiar, it’s probably due to a recent Supreme Court decision deciding whether the Sixth Amendment overcomes restraining orders under this general statute. The plurality concluded that the constitutional right to counsel did, indeed, overcome the statute.

In reaching this conclusion, the Court analogized the government’s interest in tainted assets to be similar to a secure credit, while the interest in untainted assets was like that of an unsecured creditor. It’s curious to find a call-out to bankruptcy law in a criminal forfeiture matter, but there it is. All the more so because it seems beside the point. The Court acknowledged that at least in a case of the type before it, the federal government could detain untainted assets.

Later on, the Court acknowledges that at common law, forfeiture was appropriate after conviction but not before. From this, the Court concludes that a “restraining order might as well be a forfeiture.” That’s neat. Of course, the Supreme Court has previously upheld pre-judgment attachment against constitutional challenges. Such a pre-judgment lien is intended to preserve assets for satisfaction of a possible judgment.

Justice Breyer surveys the law but overlooks key precedent that would be unfavorable to his argument. The ghost of Justice Douglas speaks to Justice Breyer at midnight, when a full moon is out. Plus, Justice Breyer tells us to have to no fear because tainted cash converted into assets will be recovered via tracing. Except, of course, when it can’t. But, oh well.

The problem all this causes for the federal court in North Carolina, is while the Supreme Court was addressing these questions in the context of a right to counsel question, it used broad and sweeping language to do so. This is particularly so in most of Justice Thomas’ concurring opinion. Though Justice Thomas hedges a bit near the end with his incidental-burden rule musing.

Overall, this opinion has invited an attack on the validity of Fourth Circuit precedent. As a result, the Fourth Circuit’s opinion may soon fall, and leave the constitutionality of the statutes in question. Justice Kennedy described such an outcome like this:

That unprecedented holding rewards criminals who hurry to spend, conceal, or launder stolen property by assuring them that they may use their own funds to pay for an attorney after they have dissipated the proceeds of their crime. It matters not, under today’s ruling, that the de­fendant’s remaining assets must be preserved if the victim or the Government is to recover for the property wrong­fully taken. * * *

The result reached today makes little sense in cases that involve fungible assets preceded by fraud, embezzle­ment, or other theft. An example illustrates the point. Assume a thief steals $1 million and then wins another $1 million in a lottery. After putting the sums in separate accounts, he or she spends $1 million.

If the thief spends his or her lottery winnings, the Government can restrain the stolen funds in their entirety. The thief has no right to use those funds to pay for an attorney. Yet if the thief heeds today’s decision, he or she will spend the stolen money first; for if the thief is apprehended, the $1 million won in the lottery can be used for an attorney. This result is not required by the Constitution.

Joining Justice Kennedy’s thought experiment, suppose that the victim brought a civil action for theft against the defendant during the pendency of the criminal trial. Presumably, the plaintiff would be entitled to use civil remedies such as restraining orders to preserve untainted assets for the possible judgment. As a judgment creditor, the plaintiff would later be able to execute liens and perhaps institute foreclosure actions against such property. Yet, when the government seeks to do it essentially on behalf of the victims in an already filed action, such an action is view as mendacious or perhaps overzealous.

If substituted assets are off the table in criminal forfeiture, then its utility is reduced, particularly in large fraudulent schemes taking places of many years. This is all the more so if the stolen funds are not readily ascertained. Likewise, tracing rules operate to the determent of the victim and to the benefit of the convicted. And there is a strong possibility that many of those assets may be gone, particularly if were intervening bona fide purchasers or secured creditors.

It is possible to protect a defendant’s rights, the property rights at issue, and the possible restitution interest of the putative victim, during the course of a criminal case. The asset forfeiture doctrines were not created as malicious bypass for the greedy government; it served as a meaningful and efficient way to restore the victims as much as possible and force the wrongdoers to disgorge. But no one is interested in that. Right now the public mood is that asset forfeiture must be banished—and let the heavens fall, if that’s what it takes.

5 Comments on this post.

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  • Nigel Declan
    19 August 2016 at 2:18 pm - Reply

    Your analysis is faulty as it considers only the effect of such laws on those who have committed crimes, as opposed to those whose assets could be seized either by overzealous, mistaken or, yes, unethical police officers (such as those who seize assets without laying charges and threatening retaliation against the individual if he or she attempts to pursue recovery of the assets), leaving individuals destitute and, if charges are laid, unable to afford the counsel of their choice. To ignore the possibility that such an approach could be used by an ethically-challenged officer or prosecutor to attempt to impair the ability of a defendant to obtain adequate counsel is hardly unheard of or unprecedented. If the governing factor in determining how a law should be applied is whether or not a particularly wealthy, legally-savvy hypothetical criminal could somehow escape the full extent of punishment that we might feel is appropriate, then every criminal law that does not completely wipe out all Constitutional protections for everyone, criminal and innocent alike, falls critically short. Yes, I saw your link about due process, which thoughtfully cites no less authoritative a source than yourself, personally asserting that civil forfeiture satisfies due process.

    The Paul analogy is critically flawed in that it assumes that the objective of criminal law is to stop what one officer believes in his gut will be a potential drug transaction. It is not. If the detective and the officer aren’t able to follow up and obtain probable cause (assuming it even exists), then they are simply bad carpenters blaming their tools for their inability to construct a case. But, as Blackstone surely meant to say, it is better that 10 innocent defendants lose at trial due to an inability to obtain counsel than that the government be denied its ability to get its grubby hands on the filthy lucre of civil forfeiture from anyone who happens to be carrying more cash or valuables than a cop feels appropriate for an innocent, as everyone per the Constitution of the United States of America is legally presumed to be, person to have.

    Perhaps if law enforcement, instead of getting to enjoy part of the spoils of civil forfeiture, had to preserve it for ten years until such time as the victims it claims to care about had the opportunity to receive it as restitution, with any remaining unclaimed funds to be donated in their entirety to the Legal Aid programs to help secure counsel for indigent defendants, including those rendered indigent through civil forfeiture, with neither LEO’s, prosecutors, judges, governments of any stripe or the like seeing a single red cent, thereby eliminating the flagrantly perverse incentives that civil forfeiture creates, the warm fuzzies those charged with enforcing and prosecuting the law would no doubt receive from having done justice, rather than from receiving personal gain at the expense of someone who might very well be innocent, should be more than enough reward.

    • Nigel Declan
      19 August 2016 at 2:19 pm - Reply

      Apologies. I inexplicably referred to “Paul” when I meant “Mr. Ne’er Do Well”.

  • Peter Gerdes
    22 August 2016 at 1:47 am - Reply

    My short answer is “so what if we lose asset forfeiture.”

    You spend a great deal of ink on how some anecdotal criminal defendants might get away with something but give very little evidence that asset forfeiture provides any substantial deterrent effect or even that it is often responsible for frequent substantial utility gains by victims of crimes. If I had to guess I would say that most crimes, *especially* white collar crimes, are undertaken because the perpetrator believes they can get away and that the risk of going to prison looms much larger in their decision making than any concern about keeping the proceeds if they go to prison.

    Still, to the extent you believe asset forfeiture is of primary importance to restore proceeds to victims perhaps we can agree on a mutual solution. How about a bill that bans the government from keeping any money seized via civil forfeiture. If the government is truly concerned about the victims of a crime they can initiate forfeiture and place the money in a trust to be divided among victims of the crime and their heirs.

    Everyone wins with this. People like me will expect it to reduce governmental abuses and it will insulate police and prosecutors from accusations that they are doing this to line the pockets of their own departments.

  • Eva
    23 August 2016 at 12:36 pm - Reply

    It is unfortunate that apparently civil forfeiture has been apparently a critical part of funding govt. local’s and nationally. We should be garnering that funding from taxes and those type of prescribed measures instead of proceeds from civil forfeiture. Civil forfeiture has apparently been the subject of severe misuse in tmedia reports which should be a concern to all.

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