by Arnold Spencer
In a time of strained government budgets, civil and criminal forfeitures are skyrocketing. In 2011, the Justice Department forfeited $1.2 billion dollars, and the Treasury Department forfeited an additional $989 million dollars. That represents increases of 240 percent and 370 percent from 2003. And law enforcement is forfeiting property from an increasingly broad range of defendants. Whereas forfeiture was once reserved for high-dollar assets of drug kingpins and illegally imported goods, law enforcement now routinely brings forfeiture proceedings in investigations of tax, white collar fraud, gambling, foreign corrupt practices act investigations or any business transactions remotely tied to money laundering.
Even though forfeitures are increasing, many sophisticated criminal defense attorneys are not familiar with the patchwork of statutes that control forfeiture. Attorneys advising clients on forfeiture issues first need to identify the seizing agency and the prosecuting entity, as different statutes and procedures will apply depending on these circumstances.
State forfeiture procedures differ substantially from federal forfeiture procedures. Under state statutes, almost all forfeitures are handled as civil proceedings. In contrast, federal forfeiture proceedings can be administrative, civil or criminal. The Justice and Treasury Departments strongly prefer administrative forfeitures, and most federal forfeiture cases are resolved administratively.
Step One: Seizures. Forfeiture cases typically start with an asset seizure. Law enforcement can seize property with or without a seizure warrant, based on probable cause. If the government intends to forfeit the seized property, the government must notify all persons that may have an interest in the property. The deadline for the notification is typically 30 days after the date of seizure, but may be extended depending on the circumstances of the seizure, the seizing agency and whether the forfeiture will prosecuted by state or federal authorities.
Step Two: Notice and Claims. Once a party receives notice, that party must file a claim to the property timely, typically within 30 days after receiving notice. Again, the type of claim varies based on the seizing agency. Under a federal law, if an interested party fails to submit a valid claim within the prescribed time, the party waives any interest in the property, and title to the property will be transferred to the government. This is an administrative procedure; no hearing will be held nor facts considered.
If a client receives a forfeiture notice, it is critical that the client consider making a timely and valid claim. A party that receives notice and fails to make a claim will lose (forfeit) any interest or rights in the property. However, before making a claim, a party should consider the criminal implications of asserting a claim. As with all parallel proceedings, exercising rights in one proceeding may affect rights in another proceeding. For example, a party claiming an interest to a seized asset may be admitting that he possessed contraband or had control of assets used in a criminal enterprise and such admissions can be used against him in a subsequent criminal prosecution.
Step Three: Administrative Proceedings. If a party makes a valid claim in the administrative process, the administrative process is closed. The party effectively defeats the administrative forfeiture, and the government must proceed with a non-administrative, judicial proceeding. This can take the form of a civil or criminal lawsuit, and the government must file within 90 days.
Step Four: Judicial Proceedings. In a civil forfeiture proceeding, the government carries the burden of proving, by a preponderance of evidence, that the assets at issue are either (i) proceeds of criminal activity, or (ii) assets used to facilitate criminal activity. Civil forfeiture proceedings are in rem proceedings. So the assets in question are named as defendants. Importantly, the civil proceeding against assets is independent of any criminal proceeding against individuals. Accordingly, civil forfeiture cases can proceed whether or not a criminal indictment has been returned by the Grand Jury, and final judgments forfeiting the property can be entered even if there are no criminal convictions.
Criminal forfeiture proceedings are in personam matters, and the forfeiture is theoretically a punishment assessed against the defendant. Therefore, the forfeiture phase is bifurcated from the guilt-innocence phase of the trial and only occurs if a punishment is to be assessed. Similar to civil forfeiture, the government carries the burden of proof, and must prove that there was a nexus between the property and the offense committed by the defendant. Because forfeiture is part of the sentencing phase, hearsay evidence can be introduced at the forfeiture phase of the trial. If the jury determines that the criminal defendant’s interests are to be forfeited, then the court subsequently conducts an ancillary hearing to resolve any other parties’ claims to the assets.
Conclusion: Like any regulatory scheme, an attorney must understand the entire process to effectively protect the client’s rights in a forfeiture proceeding. But the first thing a client must do to preserve his interest is make a claim. If an owner fails to make a valid and timely claim, the other procedures, rules and deadlines will not matter. There are other pitfalls throughout the forfeiture process, and counsel should understand each step of the forfeiture process to protect the clients’ interests.
Arnold Spencer is a partner and Haynes and Boone, LLP. He can be reached at Arnold.Spencer@haynesboone.com.