SERVING BUSINESS LAWYERS IN TEXAS
The Ends Do Not Justify the Means: Pre-trial Asset
Freezes Increasingly Paralyze the Defense
By Jeff Ansley
Special Contributing Writer to The Texas Lawbook
March 6, 2014 – Imagine the following:
You are a businessman and licensed professional
for decades. You have labored hard and
honestly to provide for yourself and your family,
accumulating both significant tangible assets
and a hard-earned reputation for being honest,
reliable and good at what you do. Your employers
and co-workers, past and present, like and respect
you. Throughout your long and successful career,
you’ve never been accused of misconduct of any
kind, much less has anything of the kind ever
been proven against you.
Overnight your life changes: The federal
government accuses you of committing a fraud
that, if ever proven, resulted in improper profits
to you. You learn what you’ve been accused
of through the local newspaper. Without any
warning to you, or having proven anything to
anyone, the government also convinces the court,
based solely on its allegations, to freeze all of your
and your family’s assets. While Mark Cuban had
billions of dollars at his disposal to fight these
allegations, you, unfortunately, do not and have
been stripped of everything.
Immediately, every bank account and credit card
you and your wife use for any expense, from the
family groceries to the mortgage to the gas in
your car, is useless. You now must borrow money
to pay for your child’s daycare. That, of course,
is an option only if anyone will lend you money.
After all, you’ve already been lambasted in
the paper, on the evening news, by your fellow
coworkers and in the government’s one-sided
and self-serving press release when they charged
you but, as yet, they have proven nothing.
Perhaps most amazing to you, the secret global
asset freeze has stripped from you of hard earned
income that easily surpasses the total amount of
your alleged ill-gotten gains.
© 2014 The Texas Lawbook
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Your nightmare, however, is just beginning.
The next day, FBI agents knock on your door.
Executing a pre-indictment seizure warrant, the
agents take away your car and other physical
assets that you need for work and daily life –
claiming you bought them
with funds traceable to
illegal activity. Keep in
mind, however, that you
have not yet even been
indicted by a grand jury,
much less been shown to
have done anything wrong.
The criminal authorities
then spend the following
months
building
their
case against you. If successful, that case will
undoubtedly send you to federal prison for
years, breaking apart your family and effectively
ending your career. In the meantime, you have
been fired because of the allegations and the
civil authorities continue to pursue their case
against you. Meeting with your lawyer, you
quickly learn the other problem caused by the
government’s unilaterally-secured asset freeze:
you have no funds whatsoever to defend yourself.
After working and earning a legitimate income for
twenty years, the government’s mere accusation
of having broken its rules has rendered you a
pauper, unable to put up any resistance against
the most powerful government in the world.
Jeff Ansley
Everyone knows the celebrated folk tale of
Robin Hood: the original redistributor of wealth,
he nobly stole from the entitled and hated
rich to give to the desiring and sympathetic
poor. However, everyone does not – or at least
should not – view the U.S. federal government as
such a figure. >
www.bellnunnally.com
SERVING BUSINESS LAWYERS IN TEXAS
In recent years, the government, the richest and
most powerful entity in the world, increasingly
has begun following its own redistribution plan.
In this adaptation of the folk tale, the federal
government uses a myriad of yet-to-be-proven
allegations of misconduct (securities fraud and
health care fraud now sit atop an expanding list)
to deprive charged – but, critically, presumed
innocent – citizens of the very financial resources
that are increasingly necessary to defend those
liberties against allegations. The end result is
as much planned as it is predictable. In a word,
charges become indefensible not based on the
facts, the law, or even the vagaries of a contested
trial, but simply because defendants have
been stripped of the resources necessary to
mount a defense.
Moreover, the government has taken matters
beyond anything Robin Hood ever would have
imagined. Unlike the mythical inhabitant of
Sherwood Forest, celebrated for liberating from
the wealthy what they presumably could afford to
lose, the government’s growing practice is, quite
simply, to take it all when it is needed the most.
As a starting point, the Sixth Amendment to the
U.S. Constitution promises citizens who have
been accused of criminal charges the right to
the assistance of counsel in the defense of those
charges. The government and, unfortunately,
the U.S. Supreme Court, increasingly have
decided that this right is only illusory.
In criminal fraud cases, the federal government,
at an alarming rate, is pursuing asset forfeiture
remedies when defendants are merely indicted
by a grand jury. These pre-trial asset forfeitures
are imposed by a grand jury at the unilateral and
unchallenged request of prosecutors – neither
the defendant nor his counsel may be present.
Consequently, they are denied the opportunity
to contest any of the government’s allegations
against them or the inevitable forfeiture that
results. Of even greater significance, although
no charges have been proven (even experienced
prosecutors recognize the grand jury as little
© 2014 The Texas Lawbook
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more than a rubber stamp in the hands of the
sovereign, showing mere probable cause of a
crime to a captive audience), such asset forfeitures
commonly strip defendants of their financial
assets at the very moment they are needed the
most, namely, to contest criminal charges leveled
against them by a federal government intent on
convicting and sending them to prison.
Unfortunately, the Supreme Court last week
missed a golden opportunity to hold this
growing and dangerous practice in check.
In Kaley v. United States, the Court, by a 6 to 3
ruling, held that defendants whose assets have
been frozen, on the mere suspicion of illegal
activity, have no constitutional right to a pretrial evidentiary hearing to contest that forfeiture
in order to mount a defense against pending
but unproven charges. Despite the fact that
the defendants had specifically set aside
substantial funds to defend themselves (with
assets that had not been shown to be tainted by
illegality), the majority declined to “invade the
province of the grand jury” by permitting the
trial court to hold a hearing examining the
merits of the forfeiture.
Tellingly, Chief Justice Roberts – who hardly
could be construed as part of the court’s
liberal wing – authored a compelling dissent
challenging the fundamental fairness of using the
imprimatur of the grand jury to strip defendants
of the resources necessary to defend themselves
before the battle even begins. The unfortunate
result, however, is that the government has
further eroded the playing field at the expense of
our basic right to defend ourselves.
It starts with an investigation, increasingly
coordinated by both the civil and criminal
authorities. Typically, the government receives
an almost insurmountable head start. It can
devote nearly unlimited resources, often over
the course of years, investigating a potential
civil or criminal matter without any notice to
its target. >
SERVING BUSINESS LAWYERS IN TEXAS
At the conclusion of its criminal investigation,
the government presents its case to a nonadversarial grand jury that would, quite possibly,
indict a ham sandwich. As part of this grand jury
proceeding, the government will often present
evidence for a criminal forfeiture action.
The process in a civil investigation is similar,
although arguably even less protective of the
rights of its target. If investigators determine that
regulatory charges are warranted, the results
of the investigation are presented to agency
decision makers in, again, a non-adversarial
process that typically culminates in the filing
of charges. Increasingly, civil regulators are
pursuing ex parte and pre-trial global freezes of
defendants’ assets at the instant they commence
those charges.
The effect of this, of course, is chilling.
Such pre-trial asset freezes immediately render
a defendant, criminal or civil (oftentimes
both), helpless to fund a defense and makes
him easy prey for an unduly burdensome
plea agreement or unfavorable settlement.
© 2014 The Texas Lawbook
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Importantly, no charges have been proven.
A grand jury has found no more than probable
cause to put a criminal defendant to trial.
Alternatively, a regulatory agency simply has
exercised its delegated authority to sue someone.
The natural and obvious consequence of these
pre-trial seizures, however, is that the charged
defendants are denied the basic opportunity
to defend themselves before the firing of the
first shot at trial. Too often, this results in the
inevitable capitulation to charges that, if put
through the adversarial process of a fair and
contested trial, would fall short on the evidence.
And that is perhaps the greatest tragedy of all.
Jeff Ansley is a former federal prosecutor
and former enforcement lawyer with the U.S.
Securities and Exchange Commission. He is
now a partner at Bell Nunnally and specializes
in white-collar criminal and securities defense.
Jeff can be reached at [email protected].
Please visit www.texaslawbook.net for more articles
on business law in Texas.