See - A Supreme Court Decision on Freezing Assets Bolsters the Right to Hire a Lawyer - The New York Times
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By PETER J. HENNING
APRIL 4, 2016
It seems clear that you get to spend your money any way you see fit, as long as what you are buying is legal.
But it took the Supreme Court until last week to decide inLuis v. United States that criminal defendants can spend their own money to hire the lawyer they want even when the government wants a chunk of it.
Paying for a lawyer in a white-collar crime prosecution is almost always an expensive proposition, with legal expenses quickly running into the hundreds of thousands of dollars long before a trial.
If the case does reach a courtroom, then those costs can grow into the millions of dollars, as defendants like Raj Rajaratnam and Rajat K. Gupta discovered in fighting insider trading charges.
Even if you had the money, there was a chance the government would try to keep you from spending it. The federal forfeiture laws give prosecutors a powerful — and oft-criticized — tool to seek a court order freezing a person’s assets until the criminal case is completed so that the money is available to cover a fine or restitution to victims if there is a conviction. That usually means defendants must rely on appointed counsel rather than the lawyer of their own choosing and will have far fewer resources to defend the case that can put them at a distinct disadvantage.
The Supreme Court confronted the issue of whether a court can freeze “innocent” funds unconnected to any violation before there is a verdict in the prosecution of Sila Luis. She was accused of a number of health care offenses, which prosecutors claim resulted in close to $45 million being fraudulently obtained, almost all of which she had spent.
The government filed a civil asset forfeiture action to prevent Ms. Luis from spending $2 million she had available that was not connected to any of the crimes charged because those funds would be needed to pay any restitution or penalties after a conviction. The order effectively prevented her from hiring a lawyer to defend the criminal case.
This is not the first time the justices have confronted the issue of whether an asset freeze violates a defendant’s Sixth Amendment right to counsel when a court keeps a defendant from using money in their possession to retain a lawyer.
In 2014, in Kayley v. United States , the court held that the defendants, a wife and husband, could not challenge before trial an indictment accusing them of theft of medical devices and money laundering that prosecutors used as evidence to secure an order freezing a $500,000 certificate of deposit they owned. The court found that the money was traceable to the underlying crimes charged, so because a grand jury had determined there was probable cause the defendants committed the offenses, the freeze order was valid.
The Supreme Court reached a different conclusion for Ms. Luis because her money was not derived from any criminal violation, as the government conceded. In an opinion for four members of the Court, Justice Stephen G. Breyer wrote that a line must be drawn “between a criminal defendant’s (1) tainted funds and (2) innocent funds needed to pay for counsel.”
The Sixth Amendment includes the right to hire a lawyer of the defendant’s choosing, at least as long as the person has the money to pay for it. Justice Breyer stated that this interest outweighed the government’s need to preserve assets to pay a fine or restitution. “To permit the government to freeze Luis’s untainted assets would unleash a principle of constitutional law that would have no obvious stopping place” because the right to counsel of choice could be easily circumvented through a court order.
In an opinion concurring with the result, Justice Clarence Thomas stated that the Sixth Amendment right was paramount to any need to consider the government’s interest in seeking an asset freeze and therefore required that the order be rejected.
The line between “tainted” and “innocent” assets may not always be easy to discern. Justice Breyer asserted that “the constitutional line we have drawn should prove workable,” but a dissenting opinion by Justice Anthony M. Kennedy complained that “the true winners today are sophisticated criminals who know how to make criminal proceeds look untainted.”
It is the rare drug dealer who has funds that can be shown to be the product of a legitimate business venture untainted by illegal narcotics trades, so the distinction will not be difficult for a court to apply in that kind of case.
The greater impact of the Luis decision will be in white-collar crime cases, especially those involving highly compensated individuals who are accused of misconduct in their business or on behalf of a corporate employer. Figuring out whether salary and benefits might be related to potential misconduct or were just ordinary compensation may be difficult.
The Supreme Court established that innocent assets can be used to pay for a lawyer, but that does not mean they can be used for any other purpose.
The recent arrest of Andrew Caspersen, who was a partner at the Park Hill Group and is accused of stealing at least $25 million from investors, illustrates how difficult it could be to determine how far an asset freeze might reach.
Prosecutors and the Securities and Exchange Commission say that Mr. Caspersen lost most of the money through aggressive options trading. As described in The New York Times, he had a privileged upbringing and was well-compensated at his Wall Street firm before running afoul of the law.
The Supreme Court’s decision in Luis will allow Mr. Caspersen to use money unrelated to the fraud charges to pay for lawyers to defend himself. How much he can spend is unclear, however, because at the end of his opinion Justice Breyer wrote that a defendant has a “right to use her own ‘innocent’ property to pay a reasonable fee for the assistance of counsel.” What constitutes a “reasonable fee” was not explained.
Moreover, other uses of the defendant’s money might not be permissible because they would not be a means to assert the Sixth Amendment right to counsel of choice.
Prosecutors in a case like Mr. Caspersen’s could ask the court for a freeze order restricting the use of assets for personal reasons while permitting a certain amount to be available for lawyers. That would present an interesting issue about how closely the legal fees would be monitored and whether the court wants to oversee a defendant’s accounts to make sure money is not being used for improper purposes.
The Supreme Court has described the right to counsel as fundamental to the legal system, especially when a defendant has the means to retain a particular lawyer. How much the government can interfere with that right now turns on where the money comes from and what it would be used for, because a thief cannot use stolen money to pay for a lawyer but can use what’s already in his bank account to do so.
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