Wednesday, June 7, 2023 | Back issues
Courthouse News Service Courthouse News Service

Justices Upend Bank-Breaking Asset Freeze

WASHINGTON (CN) - The Supreme Court overturned a pretrial asset freeze Wednesday that targeted clean money and would otherwise have helped the defendant hire a lawyer.

Sila Luis faced this predicament after she was indicted and sued civilly in 2012 as part of a large Medicare fraud case in Miami.

Though the government claimed that Luis' two health care companies benefitted from the fraud to the tune of $45 million, Luis herself had just $2 million in remaining assets.

The government moved to immediately freeze those funds as "property of equivalent value" to the fraud proceeds, leaving Luis unable to afford an attorney.

After Senior U.S. District Judge Paul Huck gave the government its freeze, and the 11th Circuit affirmed, Luis appealed the restraining order to the Supreme Court.

Luis said the order violated her Sixth Amendment right to defense counsel, and the justices agreed 5-3 Wednesday, vacating the order.

Citing "the nature and importance of the constitutional right taken together with the nature of the assets," the court called it unconstitutional to target "legitimate, untainted assets needed to retain counsel of choice."

Rather than denying Luis her right to chosen counsel outright, the government's course of conduct here "would undermine the value of that right," the lead opinion by Justice Stephen Breyer states.

Justice Anthony Kennedy blasted the "unprecedented holding" in a dissent joined by Justice Samuel Alito, saying it "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."

This is just what Luis did, according to the dissent, which points to evidence that she "opened and closed well over 40 bank accounts and withdrew large amounts of cash to hide the conspiracy's proceeds."

"Luis personally received almost $4.5 million in funds and used at least some of that money to purchase luxury items, real estate, and automobiles, and to travel," Kennedy added.

Calling the holding shortsighted, Kennedy said: "No doubt Luis would have enjoyed her travel and expenditures even more had she known that, were her alleged wrongs discovered, a majority of the Justices would insist that she be allowed to pay her chosen legal team at the price they set rather than repay her victim."'

Breyer and the plurality meanwhile found it critical "that the property here is untainted; i.e., it belongs to the defendant, pure and simple."

"In this respect it differs from a robber's loot, a drug seller's cocaine, a burglar's tools, or other property associated with the planning, implementing, or concealing of a crime," the opinion continues.

Unlike loot, Luis' property belongs to her, "free and clear," Breyer wrote.

"We have found no decision of this court authorizing unfettered, pretrial forfeiture of the defendant's own 'innocent' property - property with no connection to the charged crime," the decision states. "Nor do we see any grounds for distinguishing the historic preference against preconviction forfeitures from the preconviction restraint at issue here." (Emphasis in original.)

The 18-page ruling highlights the avenues by which the government recovers fraud proceeds after conviction, namely criminal fines and restitution.

"How are defendants whose innocent assets are frozen in cases like these supposed to pay for a lawyer - particularly if they lack 'tainted assets' because they are innocent, a class of defendants whom the right to counsel certainly seeks to protect?" Breyer asked.

Meanwhile "only 27 percent of county-based public defender offices have sufficient attorneys to meet nationally recommended caseload standards," the decision states, citing a 2007 census from the Department of Justice.

Accepting the government's position carries the substantial risk of increasing the government-paid-defender workload, thus rendering "less effective the basic right the Sixth Amendment seeks to protect," Breyer added.

Kennedy's dissent says "cases that involve fungible assets preceded by fraud, embezzlement, or other theft" give the government more leeway to recover wrongfully taken property.

"The true winners today are sophisticated criminals who know how to make criminal proceeds look untainted," he wrote. "They do so every day."

As the Treasury Department found in its National Money Laundering Risk Assessment 2015, they "buy cashier's checks, money orders, nonbank wire transfers, prepaid debit cards, and traveler's checks to use instead of cash for purchases or bank deposits," according to the dissent.

"They structure their transactions to avoid triggering recordkeeping and reporting requirements," Kennedy added. "And they open bank accounts in other people's names and through shell companies, all to disguise the origins of their funds."

Justice Elena Kagan dissented separately, saying Luis has no right to spend her assets on paying an attorney "because the government has established probable cause to believe that it will eventually recover Luis's assets."

Kennedy's dissent says criminal defendants have other opportunities available for them to retain counsel even if their assets are on ice, citing two cases from 1989 - Caplin & Drysdale, Chartered v. United States, and United States v. Monsanto.

Borrowing funds or convincing counsel to take them on without advance payment are both viable options, according to Kennedy's dissent.

"To be sure, a pretrial restraint may make it difficult for a defendant to secure counsel who insists that high defense costs be paid in advance," he wrote. "That difficulty, however, does not result in a Sixth Amendment violation any more than high taxes or other government exactions that impose a similar burden."

Chief Justice John Roberts joined the plurality with Justices Ruth Bader Ginsburg and Sonia Sotomayor.

Justice Clarence Thomas concurred in judgment alone, taking issue with the plurality's balancing approach.

"The asset freeze here is not merely an incidental burden on the right to counsel of choice; it targets a defendant's assets, which are necessary to exercise that right, simply to secure forfeiture upon conviction," Thomas wrote. "The prospect of that criminal punishment, however, is precisely why the Constitution guarantees a right to counsel. The Sixth Amendment does not permit the government's bare expectancy of forfeiture to void that right. When the potential of a conviction is the only basis for interfering with a defendant's assets before trial, the Constitution requires the government to respect the longstanding common-law protection for a defendant's untainted property."separately to emphasize


Read the Top 8

Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.