Supreme Court Limits Government’s Power to Freeze Assets Supreme Court Limits Government’s Power to Freeze Assets

Supreme Court Limits Government’s Power to Freeze Assets

The government can no longer freeze “untainted” assets in criminal cases in order to preserve property for possible criminal forfeiture or restitution. In its decision in Luis v. United States, the Court reaffirmed a defendant’s Sixth Amendment right to obtain counsel of his or her choice. Although the case involved a statute that applied to violations of health care and banking laws, the decision is applicable to other laws involving pre-trial restraints because the decision is based on the Sixth Amendment right to counsel

At issue in Luis was whether the government could freeze assets belonging to a defendant that were not “tainted” by criminal activity. Sila Luis allegedly engaged in a $45 million Medicare fraud. She spent the majority of the assets she collected. However, Luis retained nearly $2 million in assets that were not “tainted” by the alleged crime. 

Pursuant to 18 U.S.C. 1345, the government obtained an order freezing all of Luis’ assets, including the remaining “untainted” $2 million. The statute, 18 U.S.C. 1345, enabled the government to enjoin defendants charged with violating a health care law or banking law from spending or disposing of property. The freeze order, thus, prevented Luis from using the $2 million to pay for defense counsel. Luis challenged the freeze order.

A Plurality of the Court (Breyer, J., Roberts, C.J., Ginsburg, J., Sotomayor, J., Thomas, J. (concurring separately)) held for Luis. They held that the pre-trial freeze of Luis’ assets unconstitutionally infringed on her Sixth Amendment right to counsel of her choice. The Plurality’s decision turned, largely, on the fact that the funds at issue were not “tainted.” Specifically, the Plurality held that the government has a title to tainted funds, like stolen property, from the time a defendant commits a crime, but the government does not have the same title or interest in untainted funds that it may later use to pay criminal forfeiture or restitution. Therefore, the order freezing Luis’ untainted assets was unconstitutional.

The Plurality rejected the government’s argument that determining what funds were, or were not, tainted, would prevent the effective application of this rule. The Dissent (Kennedy, J., Alito, J., Kagan, J. (dissenting separately)) argued that differentiating between tainted and untainted funds rewarded the crafty criminal and had no basis in law. They argued that barring the government from freezing untainted assets incentivized criminals to “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 been caught. 

Further, the Dissent argued that the Plurality’s holding elevated the Sixth Amendment’s protections above other constitutional rights. Specifically, the Plurality’s ruling permits defendants to spend forfeitable assets on counsel, but not on speech or travel. The Luis decision leaves significant questions unresolved. Most importantly, how will courts determine whether funds are tainted?  The Plurality declined to answer this question, stating simply “the law has tracing rules that help courts implement the kind of distinction we require.”  Thus, courts may have to hold fact-intensive hearings immediately after indictment to determine what funds, if any, are untainted, so that the defendant may pay counsel. This opinion raises additional ancillary questions as well: What standard will courts adopt at these “taint” hearings? Will these hearings be immediately appealable? Will assets remain unfrozen for these hearings, and if not, who will represent the defendant at these hearings? These, along with many others, are questions that later courts will have to address. 

For more information about asset seizures, please contact Daniel O. CulicoverMatthew L. Fornshell, or the Ice Miller attorney with whom you work. 

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances. 

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