Criminal Forfeiture Procedure in 2008: A Survey of Developments in the Case Law

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1 Department of Justice From e SelectedWorks of Stefan D Cassella August, 2008 Criminal Forfeiture Procedure in 2008: A Survey of Developments in e Case Law Stefan D Cassella Available at:

2 Criminal Forfeiture Procedure in 2008: An Annual Survey of Developments in e Case Law Stefan D. Cassella 1 A survey of e developments in e case law in e past year relating to e procedure for obtaining a forfeiture judgment as part of e sentence in a federal criminal case. I. Introduction This is anoer in a series of articles on developments in e federal case law relating to criminal forfeiture procedure. It covers e cases decided in Like e earlier articles in is series, is one does not attempt to discuss every topic related to criminal forfeiture, nor all of e exceptions and nuances at apply to e topics at are discussed; raer, it covers only ose matters on which ere was a significant development in e case law in e past year. Thus a basic familiarity wi federal criminal forfeiture procedure is assumed. 2 The article begins wi e law on e scope of criminal forfeiture and e seizure and restraint of property prior to trial. It en continues more or less chronologically rough e trial, sentencing, ancillary proceeding and post-trial phases of a criminal forfeiture case. Except in instances where it is necessary to refer to e leading case in a given area for purposes of comparison or context, e citations are limited to e cases decided in The auor is a Special Assistant U.S. Attorney in e Eastern District of Virginia, on detail from his position as e Deputy Chief for Legal Policy of e Asset Forfeiture and Money Laundering Section of e United States Department of Justice. This article is an edited version of a presentation made by e auor at e Asset Forfeiture Chiefs and Experts Conference at e National Advocacy Center, University of Sou Carolina, on February 26, The views expressed in is article are solely ose of e auor and do not necessarily reflect e views or policies of e Department of Justice or any of its agencies. 2 For similar summaries of e developments in criminal forfeiture procedure from 2003 rough 2006, see S. Cassella, Criminal Forfeiture Procedure in 2007: A Survey of Developments in e Case Law, 43 Criminal Law Bulletin 461 (2007); S. Cassella, Criminal Forfeiture Procedure in 2006: A Survey of Developments in e Case Law, 42 Criminal Law Bulletin 515 (2006); S. Cassella, Criminal Forfeiture Procedure: An Analysis of Developments in e Law Regarding e Inclusion of a Forfeiture Judgment in e Sentence Imposed in a Criminal Case, 32 American Journal of Criminal Law 55 (2004). 3 A complete discussion of each of e issues covered in is article, along wi e citations to e relevant cases, may be found in Chapters of Stefan D. Cassella, Asset

3 II. The Scope of Criminal Forfeiture In 2007, ere were a number of cases dealing wi e limited scope of criminal forfeiture i.e., wi e requirements at ere be a criminal conviction and at e property be connected to e offense of conviction, and wi e rule at property belonging to a ird party may not be forfeited in a criminal case. Forfeiture requires a conviction In a criminal case, forfeiture is part of e defendant s sentence. So, if a conviction is reversed, any forfeiture based on at conviction must be vacated along wi e rest of his sentence. 4 In United States v. Lake, e Ten Circuit reversed e convictions of two defendants in a massive white-collar fraud scheme and accordingly vacated e 5 forfeiture orders at had been issued by e district court. The panel held, however, at e defendants could be retried on some, but not all, of e original charges. Thus, when e case was remanded, e district court had to determine what should become of e forfeited property pending retrial. The court held at if e property could be forfeited a second time if e defendants were convicted again on e remaining offenses, e Government could retain possession of e property pursuant to a pre-trial restraining order. But if e property was subject to forfeiture only in connection wi e offenses on which e defendants could not be retried, e Government had to release e property to e defendants. 6 Forfeiture requires a nexus to a specific offense The district court s decision on is point was a straightforward application of e rule at because forfeiture is part of e defendant s sentence, ere must Forfeiture Law in e United States, Juris Publishing: New York, 2007 (hereafter AFLUS ). 4 See id. at 15-3(a). 5 United States v. Lake, 472 F.3d 1247, (10 Cir. 2007) (because underlying fraud and money laundering convictions were reversed on appeal, forfeiture had to be vacated as well). 6 United States v. Wittig, 2007 WL , at * 6 (D. Kan. 2007) (restraining order reinstated following remand to preserve directly forfeitable assets for e next trial). 2

4 be a nexus between e property and e specific offense for which e defendant 7 is convicted. Anoer case involving e same rule was e Second Circuit s decision in United States v. Capoccia. 8 In Capoccia, e defendant a lawyer accused of stealing funds from his clients was charged wi several substantive offenses involving e interstate transportation of stolen property (ITSP). See 18 U.S.C The defendant committed ese offenses in bo Vermont and New York, but for venue reasons, only e Vermont offenses were charged in e indictment. When e defendant was convicted, e Government argued at e forfeiture should include e proceeds of e entire scheme, but e Second Circuit said at it could not. Because e defendant was charged and convicted only of e offenses at occurred in Vermont, e court said, e forfeiture had to be limited to e proceeds of e Vermont offenses; it could not include e proceeds of e New 9 York offenses. The same rule applies if e Government is seeking a money judgment (or substitute assets) in an amount equal to e proceeds of an offense: e amount at can be forfeited is determined by e offense of conviction. Thus, in United States v. McKay, when e court calculated e amount of e money judgment to be issued as part of e order of forfeiture in a RICO case, it included only e conduct at occurred wiin e dates alleged in e indictment, and refused to include conduct at occurred at oer times. 10 Forfeiture of property derived from a conspiracy If e Government wants to forfeit property involved in conduct beyond what is alleged in e specific acts set for in e indictment, it usually has to 7 See AFLUS, note 3, supra, at 15-3(b). 8 nd United States v. Capoccia, 503 F.3d 103 (2 Cir. 2007). 9 Capoccia, 503 F.3d at 110, 114 (notwistanding prefatory language in e indictment stating at e defendant s acts were part of a larger scheme, defendant who was convicted of an ITSP offense under 2314 may be made to forfeit only e proceeds of e specific acts alleged in e indictment. 10 United States v. McKay, 506 F. Supp.2d 1206, (S.D. Fla. 2007) (reducing amount of requested money judgment by e amount of proceeds defendant received in e year before e date alleged in e indictment as e beginning of e scheme). 3

5 11 charge a conspiracy. For example, in United States v. White, e defendant was charged wi two substantive drug offenses and a drug conspiracy. When he was found guilty on all ree counts, e Government moved to forfeit two Cadillacs at e defendant had used to facilitate his drug sales. The court declined to order e forfeiture based solely on e substantive convictions because ere was no evidence at e vehicles were used in connection wi ose specific crimes, but it held at e vehicles could nevereless be forfeited 12 as property used to facilitate e conspiracy. Forfeiture of property derived from an offense involving a scheme In 2007, several courts extended is principle to cases involving a scheme to defraud, holding at once a defendant is convicted of engaging in a scheme, he must forfeit e proceeds of e entire scheme, not just e proceeds of e particular acts alleged in e indictment. Thus, in United States v. Boesen, a defendant convicted of 82 substantive counts of federal heal care fraud was required to forfeit e proceeds of his entire scheme encompassing hundreds of uncharged substantive offenses and not just e proceeds traceable to e counts alleged in e indictment. Once e defendant has been convicted of perpetrating a scheme, e court said, it does not matter how many executions of at scheme were alleged in e indictment. The offense of conviction is e scheme; hence e defendant must forfeit e proceeds of e entire scheme See United States v. Hasson, 333 F.3d 1264, 1279 n.19 (11 Cir. 2003) (e court in a money laundering case may not impose a forfeiture order based on a money laundering offense wi which defendant was not charged or for which he was acquitted, but if he is convicted of a conspiracy, e forfeiture may be based on amounts defendant conspired to launder, including amounts derived from uncharged substantive conduct, or substantive counts for which he has been acquitted). 12 United States v. White, 2007 WL , at *4 (W.D. Mich. 2007) (where defendant was convicted of a conspiracy and two substantive counts, vehicles could be forfeited in connection wi e conspiracy because ey facilitated various offenses encompassed by e conspiracy, but ey could not be forfeited in connection wi e substantive counts because ere was no nexus to ose particular offenses). See also Wittig, 2007 WL , at *7 (because defendant, on remand, can only be retried on e conspiracy counts, e only property subject to forfeiture, and hence e only property subject to pretrial restraint, is property derived from e conspiracy; proceeds of e substantive acts committed before ere was a conspiracy are no longer subject to forfeiture) United States v. Boesen, 473 F. Supp. 2d 932, 952 (S.D. Iowa 2007). Id. 4

6 The Second Circuit said e same ing in Capoccia. In at case, e forfeiture was limited to e property derived from e specific acts alleged in e indictment because e ITSP offense on which e defendant was convicted was based on discrete acts, not a continuing scheme. But if e defendant had been convicted of someing else such as mail fraud, e court said, at necessarily involves proof of a continuing scheme, he would have been required to forfeit e proceeds of e entire scheme. 15 The Seven Circuit s rule The Seven Circuit seems to be setting its own course on is. In 2003, e court held in United States v. Genova at if e defendant is convicted of at least one offense giving rise to forfeiture, property involved in offenses on which a defendant has been acquitted may be forfeited based on a relevant conduct analysis similar to e analysis a court would employ in calculating e 16 defendant s sentence under e Sentencing Guidelines. That decision was controversial at e time it was decided and has not been widely followed. But in United States v. Black, a district court in Illinois followed e Genova approach, holding at e forfeiture could be based on conduct on which e defendant, Conrad Black, was found not guilty, as long as e Government established by a preponderance of e evidence at e property was involved in criminal conduct related to e offenses on which e defendant was being sentenced. In e end, it did not matter, however, as e court found at e Government had not met e preponderance standard wi respect to e property it wanted to forfeit Capoccia, 503 F.3d at 117 (stating in dicta at if a defendant were convicted of mail or wire fraud, or any oer offense of which a scheme is an element, he would be liable for e proceeds of e entire scheme, citing Boesen). See also United States v. Jennings, 487 F.3d 564, 584 (8 Cir. 2007) (affirming wiout discussion of is point e forfeiture of e proceeds of e entire mail fraud scheme based on a conviction on just two substantive counts). Cf. United States v. Phillips, 434 F.3d 913, 915 (7 Cir. 2005) (pretrial restraint of defendant s assets is not limited by e amount involved in e specific substantive heal care fraud counts alleged in e indictment as long as e amount of proceeds derived from e entire scheme is alleged as well). 16 United States v. Genova, 333 F.3d 750, (7 Cir. 2003) (because criminal forfeiture is part of sentencing, e forfeiture is not limited to e property involved in e offenses for which e defendant was convicted; to e contrary, property involved in conduct for which e defendant has been acquitted may be forfeited if e judge finds at it is forfeitable by a preponderance of e evidence). 17 United States v. Black, 526 F. Supp.2d 870, (N.D. Ill. 2007) (following Genova; proceeds of mail fraud counts on which defendant has been acquitted may be 5

7 Property held by ird parties The limited scope of criminal forfeiture is also reflected in e rule at property belonging to a ird party cannot be forfeited in a criminal case, even if it 18 was used to commit e crime for which e defendant has been convicted. To forfeit property at genuinely belongs to a ird party, e Government generally has to commence a civil forfeiture proceeding. The ownership issue is not litigated during e criminal trial, however. As Rule 32.2(b) provides, all questions regarding e ownership of e property are deferred to e post-trial ancillary proceeding where ird parties are given e opportunity to contest e forfeiture on e ground at e property really 19 belonged to em. Thus, if property was used to commit a criminal offense, and notwistanding e way e property is titled, e defendant appears to be e true owner, or e ownership is unclear, e Government may include e property in e indictment, obtain an order of forfeiture against it, and sort out e ownership of e property in e ancillary proceeding. This is precisely what happened in United States v. White. The two Cadillacs at e Government wanted to forfeit in at case were held in e names of ird parties, but e court held at e vehicles could be included in e indictment and forfeited in e criminal case. Wheer e persons whose names were on e titles to e vehicles were e true owners, e court said, would be sorted out in e ancillary proceeding. 20 forfeited if e Government establishes forfeitability by a preponderance of e evidence, but finding at Government did not meet at standard in is case) See AFLUS, note 3, supra, at 15-3(f). See Rule 32.2(b)(2), F.R.Crim.P. 20 United States v. White, 2007 WL , at *5 (W.D. Mich. 2007) (court orders forfeiture of vehicles held in ird party names; ird parties will be able to contest e forfeiture in e ancillary proceeding). 6

8 Proceeds of a criminal offense titled in a ird party s name The proceeds of e defendant s criminal offense can always be forfeited in a criminal case regardless of whose name e property may be titled, unless e titled owner was a bona fide purchaser for value who acquired e property 21 wiout having reason to know at it was subject to forfeiture. Thus, e Government may seek e forfeiture of e criminal proceeds and obtain an order of forfeiture in a criminal case even if e defendant caused e proceeds to be titled in e name of his wife or some oer ird party when he committed e crime. For example, in United States v. Grossman, e defendant used bank fraud proceeds to purchase a house at he titled in his wife s name. A ird party, who lent money to e wife secured by e house, filed a claim asserting at e preliminary order of forfeiture was defective because criminal forfeiture is limited to e property of e defendant, but e court held at because e proceeds of e crime are always forfeitable regardless of who may have subsequently acquired title, ere was noing wrong wi e order of forfeiture. 22 Property acquired by e defendant after e offense was committed As ese recent cases illustrate, at e time e order of forfeiture is entered, ere is no burden on e Government to show at e defendant had any interest in e property. At e conclusion of e criminal trial, e court simply forfeits e property derived from or used to commit e offense, and en affords ird parties e right to contest e forfeiture in e ancillary proceeding See United States v. Hooper, 229 F.3d 818, (9 Cir. 2000) (drug dealer s wife could not assert community property interest in his drug proceeds because e Government s interest in e proceeds vested upon e commission of e offense); 21 U.S.C. 853(n)(6)(B) (creating an exception to e relation back doctrine for bona fide purchasers for value). 22 United States v. Grossman, 501 F.3d 846, 849 (7 Cir. 2007) (e proceeds of e crime, or property traceable ereto, is always subject to forfeiture in a criminal case, even if it is held in e name of a ird party; e rule at criminal forfeiture orders cannot reach e property of ird parties is not violated because under e relation back doctrine, e transfer of e proceeds to a ird party is void). 23 See De Almeida v. United States, 459 F.3d 377, 381 (2d Cir. 2006) (criminal forfeiture is not limited to property owned by e defendant; it reaches any property at is involved in e offense; but e ancillary proceeding serves to ensure at property belonging to ird parties who have been excluded from e criminal proceeding is not inadvertently 7

9 In 2007, however, e Six Circuit issued a contrary decision on is point a decision at appears to be wrongly decided. In United States v. Jones, e defendant used her parents property to commit a drug offense and en took title to e property sometime ereafter. The court held at e property could not be forfeited in e criminal case 24 because e defendant did not own it at e time e offense was committed. But e panel was mistaken; ere is no requirement at e defendant be e owner of e property when e offense occurs or at any oer time. The rule is at property of a ird party may not be forfeited; not at e property must belong to e defendant. The Jones cases illustrates why at distinction is important. The forfeiture of property used to facilitate a drug offense is mandatory, subject only to a ird party s filing a successful claim in e ancillary proceeding. The issue in Jones should have been not wheer e defendant owned e property at e time of e offense, but wheer, at e time of e ancillary proceeding, her parents had standing to contest e forfeiture. Because e parents had no ownership interest in e property by e time it was forfeited, ey had no cause to oppose e forfeiture once e order of forfeiture was entered. forfeited). 24 United States v. Jones, 502 F.3d 388, 394 (6 Cir. 2007) (real property where defendant conducted drug and money laundering operation should not have been forfeited because defendant did not take title to e property from her parents until after e offense was committed). 8

10 III. Preserving e Property for Forfeiture Pending Trial The next set of cases dealt wi e court s auority to issue orders preserving e property subject to forfeiture while e criminal case is pending. 25 One case involved e pretrial seizure of e property; e oers involved e issuance of pretrial restraining orders pursuant to 21 U.S.C. 853(e). 26 The effect of an illegal seizure In United States v. Pierre, e defendant argued at at e illegal seizure of his property prior to trial meant at e Government could not forfeit e property as a substitute asset once e defendant was convicted. But e First Circuit disagreed. The illegal seizure of a defendant s property, e panel said, has no effect on e court s auority to order e forfeiture of at property as a 27 substitute asset if e defendant is later convicted of an offense. Procedure and criteria for issuing a post-indictment restraining order In most criminal forfeiture cases, e property is already in e Government s custody when e case begins because it was previously seized as evidence or as part of an administrative or civil forfeiture proceeding. If at is not e case, however, e Government may seek to preserve e property wi a 28 pre-trial restraining order. The procedure and criteria for obtaining such a restraining order have generated some debate. In 2006, e Fif Circuit issued a controversial decision in United States v. Holy Land Foundation, holding among oer ings at no restraining order could be issued in a criminal case wiout prior notice to e affected parties and e 29 opportunity for a hearing. Last year, however, e en banc court reversed at 25 See AFLUS, note 3, supra, at See id. at United States v. Pierre, 484 F.3d 75, 87 (1st Cir. 2007) (e illegal seizure of defendant s property does not bar its forfeiture as a substitute asset once defendant is convicted) See AFLUS, note 3, supra, at See Cassella, Criminal Forfeiture Procedure in 2007, note 2, supra. 9

11 decision: a pre-trial restraining order, e court said, may be issued ex parte, wi no right to a pre-restraint hearing. 30 Moreover, e court held at e standard for issuing e restraining order 31 is simply probable cause. This has long been e rule in oer circuits; indeed it is e standard endorsed by e Supreme Court almost 20 years ago in United 32 States v. Monsanto. Before e Supreme Court decided Monsanto, however, e Fif Circuit applied e standard in Rule 65 of e Federal Rules of Civil Procedure substantial likelihood of success on e merits to restraining 33 orders issued in criminal forfeiture cases. That decision remained unchallenged until e en banc court in Holy Land Foundation expressly overruled it, and brought e law in e Fif Circuit into line wi Monsanto. 34 Satisfying e probable cause requirement To satisfy e probable cause requirement, e Government may rely on e finding of probable cause made by e grand jury at e time it returned e 35 indictment. But while e grand jury s finding of probable cause is sufficient, it is not necessary; in e alternative, e court may base its probable cause finding on an affidavit submitted in support of e application for e order. That practice is well-established, but e district court in e D.C. Madam case saw it differently. In United States v. Palfrey, e court held at a 30 United States v. Holy Land Foundation for Relief and Development, 493 F.3d 469, 475 (5 Cir. 2007) (en banc) ( a court may issue a restraining order wiout prior notice or a hearing ); see also United States v. Wittig, 2007 WL , at * 6 (D. Kan. 2007) ( due process does not require a hearing before restraining assets under 853(e) ). 31 See, e.g., Wittig, 2007 WL , at * 4 ( e standard for entering a pre-trial restraining order is probable cause ). 32 United States v. Monsanto, 491 U.S. 600, (1989) (standard for issuance of restraining order is probable cause) United States v. Thier, 801 F.2d 1463, 1468 (5 Cir. 1986). Holy Land Foundation for Relief and Development, 493 F.3d at See United States v. Jamieson, 427 F.3d 394, 405 (6 Cir. 2005) (initial issuance of restraining order may be based on grand jury s finding of probable cause; probable cause may be challenged in post-restraint hearing if defendant satisfies e requirements for obtaining such a hearing). 10

12 restraining order may be issued only if e property has been named in e indictment and e grand jury has made a probable cause finding as to its 36 forfeitability. That is not correct. The purpose of e restraining order Anoer issue in e Palfrey case presented a closer question. Section 853(e) says at e purpose of e restraining order must be to preserve assets 37 for forfeiture, and indeed most restraining orders are issued for at purpose. In Palfrey, however, e Government s reason for seeking to restrain e asset e defendant s list of e customers of her prostitution business was to prevent e asset from being used to intimidate e Government s witnesses. But e court held at is was not a proper purpose under e terms of e statute and 38 refused to issue e order. Post-restraint hearings: e Jones-Farmer rule Once e property is restrained, a post-restraint, pretrial hearing is required only if e defendant s right to use e restrained property to preserve his Six Amendment right to counsel is implicated, and only if e defendant makes a prima facie showing at ere is no probable cause for e forfeiture of e restrained property. This is known as e Jones-Farmer rule. The Fif and Nin Circuits have not adopted Jones-Farmer expressly, but e Fif Circuit came close in e Holy Land Foundation case, holding at a 36 United States v. Palfrey, 2007 WL , at * 3 (D.D.C. 2007). 37 See Wittig, 2007 WL , at * 6 ( e purpose of 853(e)(1)(A) is to preserve assets and assure e availability of property pending disposition of e criminal case ; restraining order reinstated following remand to preserve e assets for e next trial). 38 Palfrey, 2007 WL , at * 2 (a restraining order may only be issued to preserve e availability of property). 39 See AFLUS, note 3, supra, at See United States v. Jones, 160 F.3d 641, 647 (10 Cir. 1998) (defendant has initial burden of showing at he has no funds oer an e restrained assets to hire private counsel or to pay for living expenses, and at ere is bona fide reason to believe e restraining order should not have been entered); United States v. Farmer, 274 F.3d 800, (4 Cir. 2001) (defendant entitled to pretrial hearing if property is seized for civil forfeiture if he demonstrates at he has no oer assets available; following Jones). 11

13 post-restraint hearing is not necessary in every case, but may be required when e defendant needs e restrained funds to pay for legal defense on associated criminal charges, or to cover ordinary and reasonable living expenses. 41 The Nin Circuit also appears to have adopted Jones-Farmer, but in an unpublished case. In United States v. McCray, e court held at a defendant has no right to a post-restraint, pre-trial hearing under eier e Fif or Six Amendments unless he offers evidence of e legitimate source of e restrained property or his inability to compensate counsel form oer funds available to him. 42 District courts in oer circuits continue to apply e Jones-Farmer rule 43 routinely in civil and criminal forfeiture cases. 41 Holy Land Foundation for Relief and Development, 493 F.3d at 475 (not expressly adopting Jones-Farmer but citing Jones wi approval). 42 United States v. McCray, 113 Fed. Appx. 770, 772 (9 Cir. 2004) (upholding district court s refusal to grant Monsanto hearing regarding funds held in parallel civil case; under United States v. Unimex, Inc., 991 F.2d 546, 551 (9 Cir. 1993), defendant has no Six Amendment right to a hearing unless he offers evidence as to e source of e restrained property, or his inability to compensate counsel from oer funds available to him ); United States v. McCray, Fed. Appx., 2007 WL (9 Cir. Nov. 21, 2007) (defendant s post-conviction challenge to his conviction, alleging Fif Amendment denial of due process when district court denied hearing on release of assets, rejected for same reasons as Six Amendment challenge was rejected in prior appeal). 43 See United States v. All Funds on Deposit... in e name of Jaeggi, 2007 WL , at *7 (E.D.N.Y. 2007) (refusing to allow claimant in civil forfeiture case to challenge e probable cause for e arrest of his property pending trial because he did not satisfy e Jones-Farmer requirements); United States v. E-Gold Ltd., 2007 WL , at *2 (D.D.C. 2007) (applying Jones-Farmer and denying defendants right to a hearing because ey could not show ere was any reasonable ground to believe e seized property was not involved in e conduct alleged in e indictment); United States v. Contents of Nationwide Life Ins. Annuity Account, 2007 WL , at *2 (S.D. Ohio 2007) (denying request for probable cause hearing in civil forfeiture case where stated reason for needing e money was only to pay back taxes, not to retain counsel in related criminal case); United States v. Wittig, 2007 WL , at * 4 (D. Kan. 2007) (e first Jones showing ensures at defendant will have e right to contest e restraining order if his Six Amendment rights are implicated, while e second requirement prevents defendant from using e hearing merely as a way of getting discovery from e Government when he has no real basis for challenging e restraining order). 12

14 The Eleven Circuit remains an exception, however. In at circuit, a defendant has no right to a post-restraint hearing even if he is able to show at he has no oer funds wi which to retain counsel. 44 Filing a notice of lis pendens As an alternative to seizing or restraining property to preserve it for forfeiture pending trial, e Government has e option of simply filing a notice of lis pendens against e property in e local land records pursuant to State law. The notice of lis pendens does not prevent e defendant from selling his property, but it does put ird parties on notice of e Government s interest. If e ird party decides nevereless to purchase e property, or to give e defendant a loan secured by e property, e ird party may find at he is unable to contest e forfeiture of e property as a bona fide purchaser for value. 46 There is no question at e Government can file a notice of lis pendens against any property at is directly traceable to e offenses alleged in e indictment. For example, a district court in Ohio held last year at e Government could file a notice of lis pendens against a directly forfeitable asset even ough a ird party e defendant s spouse had a legal interest in e 47 property. The courts are split, however, as to wheer a lis pendens can be filed on property forfeitable only as a substitute asset. The majority of decisions, including two cases decided in e past year, hold at ere is noing wrong wi See United States v. Bissell, 866 F.2d 1343, 1354 (11 Cir. 1989) (no post-restraint hearing required, even if e Six Amendment is implicated); United States v. Kaley, 2007 WL , at * 2 (S.D. Fla. 2007) (following Bissell; defendant has no right to post-restraint probable cause hearing; district court s initial, independent finding of probable cause for e restraining order is sufficient to protect defendant s Six Amendment rights; us, ere is no due process violation). 45 See AFLUS, note 3, supra, at See Pacheco v. Serendensky, 393 F.3d 348, 351 (2d Cir. 2004) (person who is aware ere is a lis pendens on e property cannot be a bona fide purchaser). 47 See United States v. Poulsen, 2007 WL , at *6 (S.D. Ohio 2007) (ere is no reason why a lis pendens cannot be filed on real property at e defendant holds wi his wife as tenants by e entireties). 13

15 filing a lis pendens on any asset subject to forfeiture, regardless of e eory of 48 forfeiture. But in United States v. Jarvis, e Ten Circuit relying on New Mexico law held at a lis pendens may not be filed against property at was 49 not directly implicated in e underlying criminal offense. This split in e courts is unlikely to be resolved until Congress gives e Government e right under federal law to file a notice of lis pendens against any property named as subject to forfeiture in a civil or criminal forfeiture case. Interlocutory appeals from pretrial restraining orders The issuance of a restraining order is appealable under 28 U.S.C But a defendant is not entitled to a stay of his criminal case pending appeal unless he shows a likelihood of success on e merits and irreparable harm. In e E-Gold case, e court acknowledged e defendant s right to an interlocutory appeal, but held at because e appeal was weak on e merits, it would deny e stay. 51 Third party s right to a hearing on e pretrial restraint of property 48 See United States v. Jewell, F. Supp.2d, 2008 WL (E.D. Ark. Mar. 6, 2008) (a lis pendens is not a restraining order; it does not prevent a property owner from selling his property nor interfere wi his use and enjoyment of his property; it is merely a notice to potential buyers of e Government s interest); United States v. Makki, 2007 WL , at *16 (E.D. Mich. 2007) (finding noing improper in Government s filing lis pendens on property listed in e indictment as substitute assets). 49 United States v. Jarvis, 499 F.3d 1196, 1203 (10 Cir. 2007) (under New Mexico law, a lis pendens may only be filed on property involved in pending litigation; it may not be used merely to secure a future money judgment; substitute assets are not involved in e pending criminal case except to e extent ey may be used to satisfy a money judgment; erefore a lis pendens cannot be filed against such property); see also United States v. Parrett, 469 F. Supp. 2d 489, (S.D. Ohio 2007) (district court assumes wiout analysis at lis pendens is e same as a restraining order, and at cases prohibiting pretrial restraint of substitute assets erefore prohibit filing lis pendens on substitute real property); Poulsen, 2007 WL , at *6 (same ruling in related case). 50 See United States v. Floyd, 992 F.2d 498, 500 (5 Cir. 1993); In re Assets of Martin, 1 F.3d 1351, 1355 (3d Cir. 1993); United States v. Kirschenbaum, 156 F.3d 784, 788 (7 Cir. 1998) (collecting cases). 51 United States v. E-Gold Ltd., 2007 WL , at *3 (D.D.C. 2007) (denying request to stay criminal case while defendants appeal denial of motion to vacate seizure warrant). 14

16 For a long time it was unclear wheer a ird party, who asserted at e restraining order interfered wi his property rights, had any right to contest e 52 restraining order in a pre-trial hearing. The only appellate decision directly on point was e First Circuit s opinion in United States v. Real Property in Waterboro, which created a vague right to raise prudential arguments regarding e burdens of restraint. 53 In 2007, however, e Fif and Nin Circuits held at e ird parties have no right to contest a restraining order prior to trial, but must wihold eir 54 challenges to e forfeiture until e ancillary proceeding. It would be a significant burden on e Government, e Fif Circuit said in e Holy Land case, to have to defend e forfeiture order from attack by a ird party during e course of an ongoing criminal prosecution. The ird party, e court said, will get his day in court in e ancillary proceeding. 55 Pretrial restraint of substitute assets The Four Circuit continues to hold at substitute assets may be restrained pre-trial, while oer courts hold at ey may not. 52 See AFLUS, note 3, supra, at United States v. Real Property in Waterboro, 64 F.3d 752, 756 (1st Cir. 1995) (ird party may not challenge e validity of e indictment or raise ownership issues; superior ownership claims must await e ancillary proceeding, but claimant may raise prudential arguments concerning e burdens of restraint pretrial). 54 United States v. Holy Land Foundation for Relief and Development, 493 F.3d 469, 476 n. 10, 477 (5 Cir. 2007) (en banc) (making ird party wait until e ancillary proceeding to contest e forfeiture as 853(k) requires ensures an orderly proceeding and does not violate due process); United States v. Lazarenko, 476 F.3d 642, 648 (9 Cir. 2007) (ird party has no right to an immediate hearing on validity of seizure pursuant to section 853(f); he must wait until e ancillary proceeding); see also United States v. Hollis, 2007 WL , at *1 (S.D. Ga. 2007) (section 853(k) bars ird party from contesting seizure warrants and restraining orders pretrial; he must wait to contest e forfeiture in e ancillary proceeding pursuant to section 853(n) and Rule 32.2(c)) Holy Land Foundation, 493 F.3d at See United States v. Bromwell, 222 Fed. Appx. 307, 311 (4 Cir. 2007). 57 See United States v. Wittig, 525 F. Supp.2d 1281, 1289 (D. Kan. 2007) (construing United States v. Jarvis, 499 F.3d 1196 (10 Cir. 2007), as holding at substitute assets may not be restrained pre-trial in e Ten Circuit). See generally AFLUS, note 3, supra, at 17-15

17 Retention of Property Seized Wi Civil Process As mentioned earlier, in most cases e Government will already have possession of e forfeitable property when e criminal case begins because it will have seized e property for evidence or in connection wi an ongoing administrative or civil forfeiture proceeding. In such cases, e Government need not do anying more to maintain its custody of e property during e criminal case. But if e Government seizes property for civil forfeiture but does not commence a civil forfeiture action, it may maintain custody of e property during a criminal case only if it obtains criminal process auorizing it to do so. 58 This does not mean at e Government must obtain a seizure warrant to seize e property from itself, however, or at it must obtain a restraining order restraining it own use of e property. To e contrary, as e district court held in United States v. Scarmazzo, all at is required is an order directing e 59 Government to continue to maintain its custody of e property. Courts routinely issue such housekeeping orders wiout objection. 60 IV. Indictment We turn now to e cases discussing e manner in which e forfeiture allegation must be set for in e indictment. Rule 32.2(a) Rule 32.2(a) of e Federal Rules of Criminal Procedure says at ere can be no forfeiture in a criminal case unless e defendant has been given See 18 U.S.C. 983(a)(3)(B). 59 United States v. Scarmazzo, 2007 WL , at *3 (E.D. Cal. 2007) (neier a seizure warrant nor a restraining order is appropriate when e property is already in e Government s possession; raer, all at is required is an ordered issued pursuant to section 853(e) directing e Government to continue to maintain its custody of e property). 60 See United States v. Standridge, 2007 WL , at *3 (M.D. Fla. 2007) (court grants Government s motion seeking permission to maintain custody of property seized wi a civil seizure warrant so at it can pursue criminal forfeiture). 16

18 61 notice of e forfeiture in e indictment or information. In United States v. Silvious, a case decided in early 2008, e Seven Circuit had to decide wheer e Government failed to comply wi e Rule when it included a notice of forfeiture in e indictment but inadvertently cited to e wrong statutory provision. After discussing e purpose of e Rule, e court held at an incorrect statutory citation is harmless if e allegation oerwise adequately informs e defendant 62 at his property will be subject to forfeiture. A district court in Alabama reached e same result in United States v. Russo. 63 The property subject to forfeiture need not be itemized It is well-established at e Government does not have to list e property 64 subject to forfeiture in e indictment if it does not care to do so. Nor does it have to specify e amount of e money judgment at it will be seeking, or even 65 state at it will be seeking a money judgment at all. The reason e Government may prefer to omit any reference to a specific dollar amount in e indictment is avoid being limited to at amount if e evidence available at e 61 See AFLUS, note 3, supra, at United States v. Silvious, 512 F.3d 364, (7 Cir. 2008) (Government s acknowledged error in citing 982(a)(2) instead of 981(a)(1)(C) and 2461(c) in a mail fraud case did not deprive defendant of his right to notice under Rule 32.2(a)). 63 United States v. Russo, 2007 WL , at *3 (S.D. Ala. 2007) (indictment at improperly cited section 982(a)(2) instead of sections 981(a)(1)(C) and 2461(c) was nevereless sufficient to put defendants on notice at Government was seeking forfeiture of e proceeds of e mail and wire fraud offenses alleged in e indictment). 64 See United States v. Lazarenko, 504 F. Supp.2d 791, (N.D. Cal. 2007) (Rule 32.2(a) requires only at e indictment give e defendant notice of e forfeiture in generic terms; at e Government did not itemize e property subject to forfeiture until much later was of no moment; older cases like Gilbert, holding at property had to be listed in e indictment, are no longer good law); United States v. Afremov, 2007 WL , at *10 (D. Minn. 2007) (e Advisory Committee note to Rule 32.2(a) makes clear at e indictment need not explain how e Government intends to trace e property subject to forfeiture to e offenses alleged in e indictment; it is sufficient if e defendant is given notice at he faces forfeiture of his property in terms of e applicable statute). 65 See United States v. Odom, 2007 WL , at *4 (S.D. Miss. 2007) ( e Government was not required to provide specific notice in e indictment at e defendants could be subjected to a money judgment); United States v. McKay, 506 F. Supp.2d 1206, 1211 (S.D. Fla. 2007) (Government is not required to specify e amount of e money judgment it will be seeking in e indictment). 17

19 time of trial turns out to support e forfeiture of a greater amount an did e evidence available at e time e case was presented to a grand jury. In United States v. Segal, e Seven Circuit held at e Government can include a dollar amount in e indictment wiout limiting itself to at specific 66 figure by using terms like at least and not limited to. In at case, e indictment advised e defendant at e Government would be seeking a money judgment of at least $20 million. When e jury returned a forfeiture verdict for $30 million, e defendant objected, but e court upheld e forfeiture on appeal because e indictment did not limit e Government to e $20 million figure. The nexus between e property and e offense need not be alleged In Palfrey, e D.C. Madam case, e defendant argued at e Government was required to spell out e nexus between e property and e offense in e indictment. The court held, however, at if e Government does not even have to identify e property in e indictment, it can hardly be required to spell out e nexus between e property and e offense. 67 Substitute assets need not be listed in e indictment In e same vein, e First Circuit has held at e indictment need not contain a list of e substitute assets at e Government will be seeking to forfeit 68 if e directly forfeitable property turns out to be unavailable. In United States v. Misla-Aldorando, e defendant, a public official convicted of extortion and money laundering, argued at e court should not impose a money judgment because e only way to enforce it would be by forfeiting substitute assets. This would be impossible, e defendant argued, because e indictment did not say anying about substitute assets, and because e prosecutor stated at e defendant s 66 United States v. Segal, 495 F.3d 826, (7 Cir. 2007) (because e forfeiture notice used terms like at least and including but not limited to in describing e proceeds subject to forfeiture, e indictment did not limit e forfeiture to any specific figure or assets). 67 United States v. Palfrey, 499 F. Supp.2d 34, (D.D.C. 2007) (if e indictment is not required to list e property subject to forfeiture, it would be manifestly illogical to require it to allege e factual nexus between e property and e offense). 68 See generally AFLUS, note 3, supra, at

20 sentencing at e Government would only be seeking a money judgment and 69 would not be seeking substitute assets. But e panel was not persuaded. It reasoned at e Government may not know at e time e indictment is returned at it will need to forfeit substitute assets, because at at point e defendant may not yet have dissipated e assets or transferred em to a ird party. Accordingly, e court concluded, to forfeit substitute assets e Government need only show at e requirements of Section 853(p) have been satisfied. 70 Bill of particulars If e Government does not specify e property subject to forfeiture in e indictment, it will usually do so in a bill of particulars, if for no oer reason an to 71 put ird parties on notice at e property is subject to forfeiture. But a district court in Connecticut held at even is is unnecessary. 72 On e oer hand, e district court in Palfrey, having already held at it is not necessary eier to itemize e property or to describe its nexus to e offense in e indictment itself, held at e Government had to specify bo in a bill of 73 particulars. The latter requirement is contrary to e weight of auority on is 74 issue. Indeed, in 2007, e Advisory Committee on e Federal Rules of 69 United States v. Misla-Aldarondo, 478 F.3d 52 (1st Cir. 2007) F.3d at By putting such ird parties on notice, e Government hopes to foreclose later challenges to e forfeiture of e property by persons claiming at ey acquired it from e defendant wiout having any reason to know at it was subject to forfeiture. See 21 U.S.C. 853(n)(6)(B). 72 See United States v. Dubogrysov, 2007 WL , at *5 (D. Conn. 2007) (denying request for bill of particulars; Government does not have to specifically identify e exact property subject to forfeiture in eier e indictment or a bill of particulars; as to e money judgment, it is sufficient at e Government has advised defendant it will seek e amount at he profited from e crime). 73 Palfrey, 499 F. Supp. 2d at United States v. Columbo, 2006 WL , at *5 & n.13 (S.D.N.Y. 2006) (denying motion for bill of particulars describing how e Government calculated e amount subject to forfeiture at was alleged in e indictment; such information is not necessary for trial 19

21 Criminal Procedure rejected a proposal at would have inserted such a bill of particulars requirement into Rule Statute of limitations Forfeiture is part of e defendant s sentence in a criminal case; it is not a separate substantive charge. Thus, as long as e substantive counts in an indictment are filed wiin e statute of limitations, e forfeiture allegations will 75 be considered timely as well, no matter when ey are added to e indictment. In United States v. Lazarenko, e Government obtained an indictment before e five-year limitations period expired, but e indictment contained only a boilerplate forfeiture allegation at did not list e property subject to forfeiture. By e time e Government listed e property, more an five years had passed from e date of e offense. But e court held at is did not prevent it from 76 making forfeiture part of e defendant s sentence. In United States v. Jennings, e defendant made e creative argument at e fungible property provision in 18 U.S.C. 984 creates a one-year statute of limitations for criminal forfeiture when e Government relies on a civil forfeiture 77 statute as e auority for seeking forfeiture in a criminal case, but e Eigh Circuit was unimpressed. Section 984, e court said, relaxes e tracing preparation and is relevant only at sentencing; Government s alternative of sending defendant a letter describing its calculation is reasonable); United States v. Bridges, 2006 WL , at *5 (E.D. Tenn. 2006) (denying request for bill of particulars stating e exact amount of currency possessed by e defendant as illegal proceeds, and stating e exact time and place where e currency was possessed; a bill of particulars may not be used by a defendant to obtain detailed disclosure of all evidence held by e Government before trial ); United States v. Varacalli, 2004 WL , at *2 (S.D.N.Y. 2004) (denying request for bill of particulars identifying e legal eories on which e Government intended to rely to support e forfeiture). 75 See United States v. Ayers, 2007 WL , at *2 (S.D. Ohio 2007) (if e substantive counts in an indictment are filed wiin e statute of limitations, e forfeiture count will be considered timely filed as well); AFLUS, note 3, supra, United States v. Lazarenko, 504 F. Supp.2d 791, 796 (N.D. Cal. 2007) (filing an indictment tolls e statute of limitations; at e Government did not itemize e property subject to forfeiture until after e limitations period expired is of no moment). 77 See 28 U.S.C. 2461(c) (auorizing criminal forfeiture in any case where a civil forfeiture statute auorizes civil forfeiture for e same offense). 20

22 requirement in civil forfeiture cases by treating currency as fungible as long as e Government commences e forfeiture action wiin one year of e offense giving rise to e forfeiture. But is has no application in criminal forfeiture cases. 78 Estoppel In United States v. Odom, e indictment contained a number of substantive criminal charges as well as a forfeiture notice at was also designated as a count. When e defendant agreed to plead guilty to two of e substantive charges, e prosecutor dismissed e remaining counts, including, inadvertently, e forfeiture count. But e court held at at did not estop e Government from seeking forfeiture at sentencing because e defendant was plainly aware of e Government s intent to pursue e forfeiture. 79 V. Guilty Pleas Because forfeiture is part of e defendant s sentence in a criminal case, it is possible for e defendant to plead guilty to e criminal charges and still oppose e forfeiture. In most cases, however, e prosecutor and e defendant agree to resolve e forfeiture issues as part of a written plea agreement. 80 Apprising e defendant of e forfeiture in e change of plea hearing Rule 11(b)(1)(J) requires e court to warn e defendant during e plea colloquy at his property may be forfeited, but in United States v. Heard, e Seven Circuit held at e court s failure to comply wi e rule was harmless 78 United States v. Jennings, 487 F.3d 564, 587 (8 Cir. 2007) (e one-year limitations period in 18 U.S.C. 984(b) applies only to civil forfeiture cases, not to criminal cases even ough e forfeiture is based on 981(a)(1)(C) and 2461(c)). 79 United States v. Odom, 2007 WL , at *5 (S.D. Miss. 2007) (prosecutor s inadvertent dismissal of e forfeiture counts at e change of plea hearing did not estop e Government from seeking forfeiture at sentencing where defendant was plainly aware of e Government s intent). 80 See AFLUS, note 3, supra,

23 error because e defendant had agreed to e forfeiture in his written plea agreement. 81 Agreement to drop charges in return for forfeiture When negotiating a plea agreement at resolves e forfeiture issues, e Government must be careful not to appear to be agreeing to a more lenient sentence in return for e defendant s agreement to forfeit his property. Understandably, courts are wary of e possibility at a well-heeled defendant may be able to bargain for a reduced period of incarceration by willingly turning over a substantial sum of money. In United States v. Imadu, a district court rejected a plea agreement on e ground at it failed to reflect e seriousness of e defendant s conduct, and refused to consider e fact e defendant had agreed to forfeit $300,000 as a reason to accept e plea. 82 Breach of e plea agreement In United States v. Collins, e plea agreement provided at e defendant would assist e Government in recovering e property subject to forfeiture from Liechtenstein, but instead he hired counsel to oppose e recovery efforts in e Liechtenstein courts and won. The Government complained at is constituted a breach of e plea agreement and asked e district court to impose sanctions on e defendant, but e defendant argued at e district court lacked jurisdiction to do so. The Seven Circuit sided wi e Government, holding at e district court retained jurisdiction to sanction e defendant for e breach of e plea agreement no matter how much time had passed since e guilty plea was entered United States v. Heard, 256 Fed. App. 834 (7 Cir. 2007) (rejecting appeal based on inadequacy of plea colloquy; court s failure to warn defendant at his property could be forfeited as required by Rule 11(b)(1)(J) was harmless where defendant agreed to forfeiture in his written plea agreement). 82 United States v. Imadu, 2007 WL , at *2 (M.D. Fla. 2007) (district court declines to accept plea to charge at does not adequately reflect e actual conduct; at defendant agreed to forfeit $300,000 is not a sufficient reason to accept e plea). 83 United States v. Collins, 503 F.3d 616, 617 (7 Cir. 2007) (e district court retains jurisdiction to find defendant in breach of his plea agreement to forfeit property no matter how much time has passed since e plea was entered). 22