The headline is not just shameless attorney self-promotion, but in fact reflects sound advice to anyone or any company facing a government investigation. More often than not, the U.S. Attorney’s Office seizes a defendant’s assets at the same time he is placed under arrest. In these cases, the defendant not only finds himself under arrest facing charges, but also unable to use any of his own money to hire a defense attorney of his choice to fight the charges.
This practice began in the 1970s and was ultimately sanctioned in the Supreme Court case of United States v. Monsanto, 491 U.S. 600 (1989). Under Monsanto, the pretrial seizure of assets a defendant wishes to use to hire a defense attorney is acceptable so long as probable cause exists to believe the property will ultimately be proved forfeitable. Probable cause is already determined by a judge who signs an arrest complaint, or by a grand jury that hands up an indictment. Thus, federal prosecutors will start a prosecution with the ability to seize a defendant’s assets from the very beginning. The clear advantage they gain with this tactic is devastating.
Challenges to the tactic have thus far been unsuccessful. Last year, the Supreme Court decided Kaley v. United States, __U.S.__, 134 S.Ct. 1090 (2014), in which it rejected the defendants’ request to hold a hearing post-indictment on whether the assets the grand jury indicted as tainted assets were indeed tainted. In its decision, the Court held that the grand jury already decided that probable cause existed to seize the assets, so revisiting the issue at a post-indictment hearing would have “strange and destructive consequences.”
As if these two Supreme Court cases don’t seem unbelievably unfair to a defendant who is “innocent until proven guilty,” last week the Court heard arguments in Luis v. United States, 14-419. In a twist from Monsanto and Kaley, the Luis Court considered the question of whether seizure of a defendant’s untainted assets needed to retain counsel of choice in a criminal case violates the Fifth and Sixth Amendments. The defendant in Luis was charged with Medicare fraud, and the government seized her assets. She then sued for the right to use $15 million of her own money that all sides agree is not connected to any criminal activity in order to defend herself. She has been denied that right.
Shockingly, comments from the justices, including Chief Justice Roberts, implied that whether assets are tainted should not matter. He said, “I just don’t understand that if you can freeze the assets despite the Sixth Amendment when they’re tainted, why it’s not the same rule when they’re untainted.”
Justice Kennedy commented that, “This would, in effect, prevent the private bar from practicing law unless it did so on a contingent basis.”
The lesson here is this: pay your attorney early to ensure you have retained your counsel of choice the moment you learn that you are under investigation. This will always present ethical challenges. Consider Clarence Darrow, the legendary attorney as portrayed by Arthur Miller in his play “All Too Human.” In the play, a client promises to pay his bill with ill-gotten gains, to which Darrow answers, “I told him I could never accept money that was stolen. So recently.”
An attorney cannot legally or ethically help a client launder money or hide ill-gotten gains, but if a client retains counsel early in an investigation, it maximizes the chance that the attorney may get paid, and thus be available to defend the client in an ensuing prosecution. Early retention may also allow an attorney to enforce or draft compliance plans to address the shortcoming under investigation, or to conduct an internal investigation that could convince the government that the controversy is civil, not criminal.
It remains to be seen what will happen to criminal defense if the Supreme Court decides in Luis that the government can seize even untainted assets at the beginning of a prosecution.