As I have stated in previous blogs, third parties in criminal forfeiture cases are often treated worse than civil forfeiture litigants. 1/
In criminal forfeiture cases forfeitability of the property is determined in the criminal trial or guilty plea, and third parties are completely excluded from those processes. 2/ As a result:
- (a) they have no right to intervene in the criminal case to raise a defense that is not being raised by the criminal defendant; 3/
- (b) they have no right to confront and cross-examine prosecution witnesses in the government’s case in chief against their assets;
- (c) they are never allowed discovery about the basis for the government’s forfeiture case;
- (d) third parties are generally not permitted to file suppression motions (a right afforded civil forfeiture litigants); 4/
- (e) they are not allowed to object to the criminal defendant’s plea bargain agreeing to forfeit their property;
- (f) even when they get to their third party hearing process, third parties are not allowed to challenge the factual basis (“nexus”) for the forfeiture at all; and
- (g) even if they win, they may not be entitled to attorney’s fees under CAFRA, though they may be entitled to attorneys fees under the Equal Access to Justice Act.
In short, third parties have their property tied up in court for years while the criminal defendant litigates his/her case. They are forced to wait until after the defendant is convicted, and after their property is forfeited, and after the criminal defendant is sentenced before they have any right to participate in any court proceedings at all.
Yes, you read that right: they have to wait until after the court forfeits their property before they have any right to participate in the forfeiture proceedings.
Why are these third party procedures so unfair?
Let’s face it, criminal procedure is designed to provide criminal defendants with their constitutional rights while aiding prosecutors and courts in efficiently prosecuting cases and forfeiting assets. It was not designed to protect the rights of people who are not parties.
Victims of the crime and third parties who own interests in the property being forfeited usually have their property interests tied up for years in a process in which they have no right to participate.
Their Due Process rights are ignored because they are not parties, yet they are prevented from filing separate lawsuits to protect their property rights.
Congress justified this by saying it does not matter that the third party is deprived of all of these rights, because it is only a temporary deprivation of their property and they will automatically get it back at the end of the third party hearing after they prove that some or all of the property belongs to them and not the criminal defendant, and the extent of their interests.
That is not true for everyone though, because in some situations third parties may not be able to prevail by merely showing they own an interest.
Under the statute, persons who acquire interests in property after it is tainted have to prove they are bona fide purchasers for value, without notice of the grounds for forfeiture, or else they have no rights at all in the criminal forfeiture process.
The straw owner principle can also deny even a registered owner the right to defend against forfeiture. If the prosecution claims the criminal defendant is the true owner of the property, and that the third party is a “straw owner” holding title, it becomes a factual issue who owns the property. Having a judge rather than a jury decide who is telling the truth about straw ownership can be a real handicap for third parties. 5/
Why do prosecutors use criminal forfeiture in such cases?
By offering the criminal defendants plea bargains in which they agree to forfeit property they do not own, the government can obtain a judgment of forfeiture without even having to prove the property is forfeitable. The details in the plea bargain are dictated by the prosecutor and presented to the defendant as a take it or leave it deal. What criminal defendant wouldn’t give up someone else’s property to reduce his sentence? I was told recently of a criminal defendant who tried to point out that he did not own the property the government wanted him to agree to forfeit. The prosecutor’s response was “you’re only forfeiting your interest, if any. If you don’t have any interest you aren’t forfeiting anything.” The prosecutor refused to change the plea bargain.
Criminal defendants who go to trial have no incentive to defend against the forfeiture of someone else’s property. Even if they want to do the right thing, the criminal defendant may have his own reasons to exercise his right not to testify, so the property that does not belong to him gets forfeited without challenge.
In three cases I have handled in recent years and two other cases friends of mine have defended, prosecutors have abused the criminal forfeiture process by targeting property the criminal defendants do not own. I’m not talking about a third party’s partial interest in property co-owned with the criminal defendant. I’m talking about property in which no criminal defendant owns any interest.
For example, in one case I had, my client and his land partner bought a parcel of real estate. His partner needed money and wanted out of the property ownership and my client couldn’t afford to buy him out on short notice so he sold his half-interest to someone my client didn’t know. And once he got to know him he did not like him. The unintentional partner was a bully and threatened my client to keep him away from the property, and then stopped paying his half of the mortgage and stopped communicating with him. My client filed a civil suit, and negotiated a buyout, through the guy’s attorney. Some months after he obtained financing to buy out the other guy, he learned the other guy was in prison, and that a criminal forfeiture action had been filed against the property. We obtained a title search and it showed my client bought out the criminal defendant’s interest in the property before the criminal defendant was indicted. I told this to the U.S. Attorney’s Office but they didn’t respond. My client had to hire me to file a third party petition. We filed our petition and continued trying to talk to the prosecutor (only getting his paralegal, who said she would talk to her boss and get back to us, but never did). The government did not file any response to our petition, and the court did not schedule hearings on it. I repeatedly sent letters to them, with no response. Over a year later the prosecutor filed a motion to dismiss the forfeiture against the property, and the court granted it.
I thought that inappropriate use of criminal forfeiture was a fluke, and that the prosecution may have just made a mistake, until I got two cases in a row in which the criminal forfeiture involved property in which the criminal defendant never owned an interest. In one of those cases, the title report showed the property belonged to my clients and there was no mention of the criminal defendant anywhere in the chain of title. In the other, personal property was seized from my client’s locked safe, and none of the criminal defendants had access.
The fact that two such cases would arise at the same time suggests to me that someone at the main Justice department, or some lecturer in a DOJ asset forfeiture training for AUSAs gave them the brilliant idea of using criminal forfeiture in this way – because of all of the procedural advantages it gave the prosecution.
I think the prosecutors in those three cases learned their lessons – or I hope they did. But it could happen again, especially if this was a tactic advocated at a DOJ training seminar or in a DOJ memo.
Criminal forfeiture is only supposed to target the interests of the criminal defendant
Even if they have evidence that the property is traceable to proceeds of crime or was used to facilitate the offense – if the defendant does not own an interest in the property, the criminal court does not have jurisdiction over it. The government would have to file a separate civil forfeiture case to try to forfeit it.
Fed. R. Crim. Proc. Rule 32.2, from which prosecutors take certain language (out of context) to justify this short-cut, does not say the government can use criminal forfeiture against property in which no criminal defendant owns an interest. The Advisory Committee Notes to the 2000 amendment to Rule 32.2 make it clear that the rule:
… combines and preserves two established tenets of current law. One is that criminal forfeitures are in personam actions that are limited to the property interests of the defendant. (This distinguishes criminal forfeiture, which is imposed as part of the defendant’s sentence, from civil forfeiture which may be pursued as an action against the property in rem without regard to who the owner may be.) …
… Courts impose criminal forfeiture as punishment following conviction of a substantive criminal offense. Libretti v. United States, 516 U.S. 29, 39 (1995). Criminal forfeiture operates in personam against a defendant to divest him of his title to proceeds from his unlawful activity as a consequence of his criminal conviction. United States v. Nava, 404 F.3d 1119, 1124 (9th Cir. 2005).
United States v. Lazarenko, 476 F.3d 642, 647 (9th Cir. 2007). “Because the principal criminal forfeiture statute for drug offenses, 21 U.S.C. § 853, acts in personam, it permits the forfeiture of the defendant’s interests only, not the property of innocent parties.” United States v. Nava, 404 F.3d 1119, 1124 (9th Cir. 2005).
When the government files criminal forfeiture actions against property not owned by any criminal defendant, it can tie up the hapless third party for years, forcing many to settle despite the strength of their cases. Often clients cannot afford to litigate such complex (and expensive) issues, especially knowing that, win or lose, there will probably be an appeal.
Rule 32.2 should be amended to require the court to determine that a criminal defendant owns some interest in property at the beginning of the case, before making the third party wait out several years of criminal litigation to which they are not invited. This is especially burdensome when the property is detained pending trial. If a third party comes forward and asserts ownership, but a defendant or the government disputes it, an evidentiary hearing should be held then and there – not years later – to determine whether the defendant owns an interest which would make it appropriate to use criminal forfeiture.
1. See my November 30, 2014 blog, Criminal forfeiture laws need to be reformed too, and my December 6, 2014 blog, The way they are enforcing criminal forfeiture laws against third parties is just plain criminal.
2. Even criminal defendants who go to trial with codefendants and are acquitted sometimes lose their property, depending on the court. An acquittal is supposed to mean that the acquitted defendant’s property interests cannot be forfeited. The problem is, some jurisdictions where case precedent dictates that a spouse cannot own an interest in alleged proceeds of crime, for example, the acquittal did not exonerate his/her property. The acquitted defendant is immediately dismissed from the case, before the criminal forfeiture phase of trial begins. Thus they lose their ability to participate in the criminal forfeiture phase of the trial. If precedents in their Circuit do not automatically require exoneration of their property because of the acquittal, their only recourse is to go through the third party process. This is exactly what happened to the acquitted defendant who posted a comment to my blog Criminal forfeiture laws need to be reformed too. See the comment posted by “Folly” beneath that blog.
3. Sometimes the third party would have defenses that were not available to the criminal defendant – for example, if the evidence was seized in violation of the Fourth Amendment, but the criminal defendant did not have standing to challenge the search and seizure because he did not have a reasonable expectation of privacy with regard to the property, he cannot win a suppression motion. The third party who owned the property and had a reasonable expectation of privacy would ordinarily have standing to move to suppress, but the statutory procedures do not allow third parties to challenge the legality of the search and seizure.
4. The Fourth Amendment exclusionary rule applies to civil and criminal forfeitures, and generally speaking, property owners may move to suppress illegally seized evidence. Plymouth Sedan v. Pennsylvania, 380 U.S. 693 (1965). The problem is, criminal forfeiture procedures lock the third party out of the entire process prior to the criminal defendant’s sentencing. The grounds for forfeiting the property are litigated in the criminal trial (or agreed to in the plea bargain). Third parties are not allowed to later challenge the forfeitability of the property, so it is doubtful that they can challenge an illegal search and seizure, but it is worth a try.
5. In United States v. Nava, 404 F.3d 1119, 1124 (9th Cir. 2005), the third party was the daughter of the criminal defendant. He was convicted at trial and the jury forfeited his interests in three real properties for facilitating drug offenses. The defendant’s daughter filed a third party petition asserting ownership of two of the properties, both of which were titled in her name. She had been given both properties by her grandmother, who put them in the name of her uncle until she reached majority. Her father did not appear anywhere in the chain of title, nevertheless the district court denied her third party petition because she did not pay value for the properties. On appeal, in a divided decision, the Ninth Circuit reversed and remanded for further proceedings, holding that she owned a legal right or interest, but did not address whether she was a bona fide purchaser for value.