(c) 2014 Brenda Grantland
In the past few years I’ve seen a lot of bank account seizures based on the allegations that the money was “traceable proceeds” of fraud – or proceeds of Specified Unlawful Activity (“SUA”) 1/– without any criminal charges being filed against the property owner.
In many such cases we have successfully resolved the forfeiture case – and my clients have gotten back most if not all of the money – without any criminal charges ever being filed. How did we do it? It required diligent investigation, aggressive pursuit of discovery, research, and a great deal of effort, but often in the end I found the government just didn’t have a case.
With fraud and white collar crime being such a big problem in the U.S. today, why would the government seize a bank account for forfeiture based on a fraud or SUA proceeds theory and not prosecute the property owner with the underlying crime?
There are several reasons.
1. Financial incentives. When they forfeit assets the seizing law enforcement agencies get to keep the proceeds. Forfeiture seizures are skyrocketing because police agencies have grown to depend on forfeiture revenue to pay for law enforcement needs – gear, police cars, police dogs, training, informant rewards, urban assault vehicles and weapons, etc. Sometimes they also get away with using it for things they’re not supposed to be spending it on – officer overtime, expensive “training” junkets to vacation destinations, fancy cars for agency higher-ups, “morale-building” parties with Marilyn Monroe impersonators, etc.
2. The burden of proof is lower in forfeiture cases. Prosecutors will tell you the reason they file civil forfeiture cases but no criminal charges is because there is a lower burden of proof in forfeiture cases. Civil forfeiture cases only require the government to prove by a preponderance of the evidence that the facts alleged in the complaint show grounds for forfeiture of the property, while criminal charges require proof beyond a reasonable doubt that the criminal defendant is guilty. But, generally, those burdens of proof only have an impact at trial, when the case goes to the jury. 2/ Most cases are resolved long before trial, so in many civil forfeiture cases there is never the protection of a jury applying the burden of proof to actual evidence, presented by both sides, in a court of law.
3. Seizing property is a lot easier than getting an indictment. It’s really easy to seize a bank account based on ex parte allegations in an affidavit by a law enforcement agent, which can be based on hearsay and even “information and belief.” 3/ The bank account owner doesn’t get to find out about it before the seizure, and therefore can’t reply to the accusations – which may be false and/or misleading – before the judge signs the seizure warrant. Once the account is seized the owner has to hire a lawyer and defend a forfeiture case to get it back. Even when the police obviously know they don’t have a solid case, they cling to the property as if it were already theirs, and have to be forced by the court to let go of it. There are many layers of civil procedure the forfeiture claimant has to comply with before the case gets to the point where the government has to show actual evidence to support its case.
4. Civil forfeiture cases can be filed on allegations that someone other than the property owner committed a crime involving the property. This is the number one reason why civil forfeiture cases go forward without a criminal prosecution of the property owner. Civil forfeiture cases, depend on a “legal fiction” (that is, something that isn’t really true, but which is deemed true by the law for convenience) that the property itself is on trial. Under case law which traces back to Colonial times, in rem civil forfeitures are based solely on the property’s “guilt” — and, the Supreme Court has said, it is not unconstitutional for guilty property to be forfeited notwithstanding the innocence of the property owner; unless the forfeiture statute contains an innocent owner defense, the Constitution does not require one.
If there is an innocent owner defense in the statute – as federal forfeiture cases now have under the Civil Asset Forfeiture Reform Act of 2000 (“CAFRA”) – the property owner can save his/her property from forfeiture by proving that he/she is innocent of the underlying crime, and that he/she did not know of or consent to the illegal use of his/her property. The innocent owner defense is more complicated than that, but the important factor is that the owner has to prove innocence in order to get property back. Innocent ownership is a highly factual matter, and no matter how hotly the owner contests it, there is generally no way to force the issue to be decided until the actual trial, which could be years after the property is seized.
After thoroughly investigating the government’s allegations, I often find that many of the allegations in the Complaint and police reports are exaggerated or even outright falsehoods. They often omit evidence favorable to the property owner which tends to disprove the government’s allegations. 4/ Quite often the affidavit and the forfeiture complaint use vague allegations to suggest guilt by association; make conjectures of “suspicious activity” on transactions which turn out to have reasonable, lawful explanations; and employ creative math and confusing accounting to make the numbers look larger or more suspicious by double- and triple-counting figures. The accusations are sometimes further buttressed by bogus government “expert” reports that contain legal fallacies, misstate figures, rely on sloppy or dishonest accounting, and employ legal tests and standards that are not consistent with prevailing law. I have found some of the same bogus “expert reports” recycled in subsequent cases years later.
How does this get past judges, when they have to approve a seizure warrant? A better question is, how often do judges thoroughly read the typical 30 to 50 page affidavit containing tedious accounting figures and convoluted factual allegations involving many people other than the property owner – and actually make sense of the detailed allegations — before approving the warrant?
How do innocent people get dragged into this?
When there is a crime committed by someone else, and the agents suspect there are more proceeds of crime hiding somewhere, they search FinCEN 5/ for the bank accounts over which the suspect has signature authority, and the recipients of bank transactions by the suspect, as well as the bank accounts of relatives, spouses and former spouses, business partners, friends, and even the victims of the alleged fraud. When they find a large bank account they often jump to the conclusion that the account owner was somehow in on the fraud or SUA offense, and that they are hiding the proceeds, or that they knowingly accepted payment from proceeds of crime. Because it is so easy, they often seize first and ask questions later.
You would think that it should be easy to just go to the prosecutor and explain how they jumped to the wrong conclusions and explain how their facts or legal theories are wrong, and get the property back. I often do that, but it’s never easy to get them to dismiss the case — even when they are blatantly wrong. Once the government bags a valuable asset, the agents are very reluctant to just give it back, even if their allegations are proven to be false. In one of my cases, after I provided the prosecutor a clear paper trail showing all of the money in the seized accounts came from undeniably legitimate sources, he told me “make me a settlement offer I can’t refuse.” We still had to litigate to get it back. In another case the prosecutor told the settlement judge “our policy is to never accept a settlement offer below 15% even for innocent owners.” The settlement judge was disturbed by this for a minute, then urged us to settle any way.
The seizing law enforcement agencies often tenaciously fight to keep the seized property, even if they clearly don’t have grounds. This is especially true when state and local police seize the property under the “equitable sharing” a/k/a/ “federal adoption” program, which promises the seizing state or local agency up to 80% of the proceeds of the federal forfeiture. In cash-strapped communities, state and local law enforcement agencies are using equitable sharing forfeiture revenue to supplement and even supplant a large portion of their budgets.
In many cases where I’ve been able to disprove the key allegations, the prosecutors have said they would like to give it back, but the law enforcement agents were opposed to it. I find it appalling that the seizing agencies have so much control over the case. Federal prosecutors are officers of the court, and they have an ethical duty to ensure that the pleadings they file are well grounded in fact and law, as well as a duty to “do justice.” The seizing agencies have too much influence on prosecutors. Prosecutors often don’t have the courage to defy them, and require a judge’s ruling before they will act reasonably.
We need to get this corrupt system back into the proper balance. Asset forfeiture should not be used as a way to extort money out of a few targeted people in order to fund government services without raising taxes.
1. The federal criminal code uses the term “Specified Unlawful Activity” to describe a laundry list of federal crimes which trigger forfeiture. As the FEAR.org website explains: “The largest number of the incorporated by reference statutes were incorporated through 18 U.S.C. § 981(a)(1)(C), which incorporates by reference “any offense constituting ‘specified unlawful activity’ as defined by 18 U.S.C. § 1956(c)(7)(B). Section 1956(c)(7)(B) names numerous specific criminal statutes and incorporates by reference the racketeering offenses listed in 18 U.S.C. § 1961(1), which in turn lists a large number of specific criminal statutes as well as several broad categories of crimes. Any crimes from those lists can be prosecuted as a civil forfeiture under § 981.”
2. The burden of proof does impact motions for summary judgment, but that procedure only applies in civil cases.
3. Ex parte means one-sided. The prosecutor and his/her law enforcement agents write up their side of the facts, and present them to the judge in secret. The judge then makes a decision of whether probable cause exists to believe the property is forfeitable without hearing from the defense. The affidavit and complaint are filed under seal until the assets can be grabbed by the government.
4. When a search warrant affidavit makes misrepresentations of fact, or omits facts tending to disprove guilt — either deliberately or with reckless disregard for the truth — and those misrepresentations would have made a difference in whether the judge approved the warrant in the first place, that would be grounds for suppression of evidence under Franks v. Delaware, 438 U.S. 154 (1978). But it would not require dismissal of a civil forfeiture case, courts have ruled.
5. FinCEN, which stands for Financial Crimes Enforcement Network, is a government agency that maintains a huge database of every financial transaction that gets reported to the government. All cash transactions forms and Suspicious Activity Reports filed by banks under the Bank Secrecy Act are fed into the FinCEN database, where they are available to any law enforcement agency on request, without a warrant. See my earlier blog post, “Is the NSA monitoring your cellphone, email, data you stored ‘in the cloud’ and your banking records without a warrant?” FinCEN’s own website states:
“The basic concept underlying FinCEN’s core activities is ‘follow the money.’ The primary motive of criminals is financial gain, and they leave financial trails as they try to launder the proceeds of crimes or attempt to spend their ill-gotten profits. FinCEN partners with law enforcement at all levels of government and supports the nation’s foreign policy and national security objectives. Law enforcement agencies successfully use similar techniques, including searching information collected by FinCEN from the financial industry, to investigate and hold accountable a broad range of criminals, including perpetrators of fraud, tax evaders, and narcotics traffickers.”