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Law Enforcement Cannot Freeze Assets Not Tied to Crimes, Supreme Court Rules

By Paul V. Kelly
  • April 1, 2016

The U.S. Supreme Court, in a 5-to-3 decision, has ruled that federal law enforcement may not freeze an accused’s assets needed to pay criminal defense lawyers if the assets are not linked to a crime. Luis v. United States, No. 14-419 (Mar. 30, 2016).

A federal statute provides that a court may freeze before trial certain assets belonging to a defendant accused of violations of specified federal laws, including statutes covering federal health care or banking. Those assets may include (1) property “obtained as a result of” the crime, (2) property “traceable” to the crime, and (3) as relevant in Luis, other “property of equivalent value.” 18 U.S.C. § 1345(a)(2).

The Luis case arose from the prosecution of Sila Luis on charges of Medicare fraud involving $45 million in charges for unneeded or nonexistent services. The Government alleged that Ms. Luis’s profits from the fraud had been spent by the time the charges were filed. Relying on § 1345(a)(2), law enforcement asked the judge to freeze $2 million of her funds that were not connected to the alleged fraud, saying the money would be used to pay fines and provide restitution if she were convicted. Ms. Luis challenged law enforcement’s request, asserting that she needed the money to pay her attorneys. The trial judge ultimately issued the order and froze Ms. Luis’s assets. An appellate court affirmed.

The U.S. Supreme Court ruled that the judge’s order violated Ms. Luis’s Sixth Amendment right to the assistance of counsel. Justice Stephen G. Breyer, in a plurality opinion also signed by Chief Justice John G. Roberts, Justice Ruth Bader Ginsburg, and Justice Sonia Sotomayor, wrote that the government can seize “a robber’s loot, a drug seller’s cocaine, a burglar’s tools, or other property associated with the planning, implementing, or concealing a crime,” but cannot freeze money or other assets unconnected to the crime. Justice Breyer pointed out that, although the government’s interest in recovering money is important, the right to counsel is a fundamental constitutional guarantee.

Justice Breyer was careful, however, to hold that the Luis ruling did not change the general framework established by United States v. Monsanto, a 1989 Supreme Court decision, that said freezing assets was permissible, even if it frustrated the defendant’s ability to hire a lawyer, as long as there was probable cause that a crime had been committed and the assets were linked to the offenses described in the indictment.

Justice Clarence Thomas, providing the fifth vote needed to reverse the lower courts, concurred in the judgment but did not adopt what he called the plurality’s balancing approach. While agreeing with the ultimate result, he wrote that if the right to counsel is a fundamental constitutional guarantee, it cannot be weighed against other interests.

In dissent, Justice Anthony M. Kennedy, joined by Justice Samuel A. Alito, Jr., wrote that the decision by the Court “rewards criminals who hurry, conceal, or launder stolen property.” Justice Kennedy stated that “[t]he true winners today are sophisticated criminals who know how to make criminal proceeds look untainted.”

In a separate dissent, Justice Elena Kagan maintained that she found the Court’s 1989 Monsanto decision troubling, but maintained that it required ruling against Ms. Luis, rather than drawing baseless divisions. Justice Kagan wrote, “The thief who immediately dissipates his ill-gotten gains and thereby preserves his other assets is no more deserving of chosen counsel than the one who spends those two pots of money in reverse order. Yet the plurality would enable only the first defendant, and not the second, to hire the lawyer he wants.” Justice Kagan continued, “I cannot believe the Sixth Amendment draws that irrational line, much as I sympathize with the plurality’s effort to cabin Monsanto.”

Jackson Lewis attorneys experienced in white collar and government enforcement matters are available to advise companies on the scope of law enforcement seizure rights, asset forfeiture, and the Mandatory Victims Restitution Act.

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