What we really need in a federal forfeiture reform bill– part 3A: an overhaul of the criminal forfeiture third party process

(c) 2015 Brenda Grantland – short link http://wp.me/p5xzo0-5H

While we are going through the effort to try to reform civil asset forfeiture laws we need to take a look at criminal forfeiture as well. Third parties in criminal forfeiture cases are often treated worse than civil forfeiture litigants.  They certainly are not afforded the same level of due process protection.

I have previously reported on various abuses of criminal forfeiture process, especially as it affects third parties who are not charged with any crime.  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.

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 frequently see their interests tied up for years in a process in which they do not get to participate, and in which their Due Process rights are ignored because they are not parties.

Under the current system, criminal forfeiture third parties are not entitled to a jury trial in defense of their property. They have no right to intervene in the criminal case to: confront and cross-examine prosecution witnesses or move to suppress illegally seized evidence (a right afforded civil forfeiture litigants).  If the case drags on for years, with the third party damaged by the loss of use of their property, they cannot force a prompt-post-seizure hearing to adjudicate their interests and CAFRA’s hardship release provisions do not apply to them.  Worst of all, the forfeitability of the property is determined in the criminal case,  by the defendant’s plea bargain or trial — processes from which they are excluded — and the third party is not allowed to challenge the factual basis (“nexus”) for the forfeiture in the third party process.

How could anyone think this process is constitutional?

Congress and the Criminal Rules Advisory Committee’s rationale was that the deprivation is only temporary and they will automatically get their interest back in the third party hearing, after proving they own an interest and the extent of that interest.

However, a temporary deprivation of valuable property can violate the third party’s Due Process rights and it certainly causes great distress to the innocent people it affects.

Third parties do not always get their property back that easily.  They may miss their deadline for filing a petition and lose by default (especially when the government engages in shoddy notice practices).

Third parties who acquired their interests after the tainting act have to prove they are bona fide purchasers for value without knowledge that the property was forfeitable (like the innocent owner defense in civil forfeiture cases).  If the government claims the third party is a mere straw owner and that the criminal defendant is the true owner, the third party can lose their entire interest.  The judge who heard the criminal case or plea determines the bona fide purchaser issue and the straw owner issue — third parties are not entitled to a jury trial.  They are also denied the right to challenge the determination of forfeitability, which is made in the criminal’s case, and may be established by the criminal’s guilty plea agreeing to forfeit the property.

1.  No right to intervene in the criminal proceedings to get interim relief

It is understandable that third parties are not allowed to participate in criminal trials and motions proceedings, as it would vastly complicate matters and could intrude on the criminal defendant’s constitutional rights.

However there is no justification for a blanket rule that excludes them from obtaining a hearing before the court if their property is detained pending trial and their property rights are being impinged.

As I explained in my blog Criminal Forfeiture Laws Need to be Reformed Too, a criminal defendant may own a tiny portion of the property, yet tie up the majority owners for years of litigation.

If the property is seized pending trial the third parties suffer loss of use — often while they are forced to continue making payments on the property, and the property may also be depreciating in value.

Even if the property is real estate and the third parties are allowed to continue using it pending trial, if third parties need to sell or refinance their interests, the courts typically refuse to grant them any relief while the criminal case is pending.

Congress needs to create interim remedies for third parties, allowing them to obtain release of the property for hardship, under the same standards as CAFRA hardship releases in civil forfeiture cases.  If the property is declining in value, the third party is having to make payments on it, the third party should be able to petition for interlocutory sale, a right that would have been afforded in a civil forfeiture case.

2.  Denial of the right to jury trial

Having a judge instead of a jury decide who is telling the truth about ownership (or one of the other factual issues third parties must establish) deprives the third party of Due Process rights they would have had in a civil forfeiture action.

Some of the evidence on which the court may rely can come from the plea bargain or evidence submitted in the criminal defendant’s trial, which the third party was not allowed to confront or question.

In civil forfeiture cases claimants have a Seventh Amendment right to a jury trial.  United States v. Lincoln Navigator, 328 F.3d 1011, 1014 n. 2. (8th Cir. 2003).   But if the prosecutor decides to prosecute the forfeiture as a criminal forfeiture instead, the third parties are not so entitled.

Courts determine whether the Seventh Amendment requires a jury trial by finding the most analogous action which was around in 1791 (when the Seventh Amendment was enacted), and determining whether English courts tried those cases with or without a jury. Courts have reasoned that the most analogous action to a third party hearing is an equitable action to quiet title, which was tried without a jury. United States v. McHan, 345 F.3d 262, 280-81 (4th Cir. 2003); United States v. Messino, 122 F.3d 427, 430 (7th Cir. 1997). Since criminal forfeiture is a process that can permanently deprive the person of property, truly the most analogous proceeding is civil forfeiture. However, the courts do not see it that way.

To remedy this Congress will have to give third parties the right to demand a jury trial.

3.  No right to participate in the hearing or plea that determines forfeitability

Although it is justifiable that third parties be excluded from the criminal trial and plea bargaining process, it flies in the face of Due Process to allow factual determinations made in the criminal’s case to be used against third parties who were denied the right to confront and cross-examine the evidence and raise defenses.

Any factual determinations made in the criminal’s trial or guilty plea should not be binding on the third party.  If they contest the basis for forfeiture, they should be entitled to a trial on those issues, even if it means retrying the same factual contentions.

They also should be able to move to suppress evidence on Fourth Amendment grounds, whether or not the criminal defendant raised the issue. It may be that the criminal defendant lacked standing to challenge the search and seizure, while the third party had standing.

These rights that are routinely afforded civil forfeiture litigants should also  be afforded to third parties, especially since the prosecutor decides at his whim which process to use in a particular case.

4.  Criminal forfeiture is sometimes used against property in which the defendants own no interest

In the past two years I have handled three cases in which the government named property for criminal forfeiture which the criminal defendant did not own. In one my client had bought out the criminal defendant’s interest and recorded his deed before the defendant was indicted. In the other two, no defendent ever owned any interest in them. In all of these cases the defendants pleaded guilty and agreed to forfeit the property — without proving or even asserting that they owned an interest. Other attorneys have told me of two other cases in which this has happened – it cannot be inadvertant.

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 ever having to prove the property is forfeitable.  What criminal defendant wouldn’t gladly give up someone else’s property to reduce his sentence? I was told recently of a criminal defense attorney who tried to point out that the defendant did not own the property the government wanted him to agree to forfeit.  The prosecutor’s response was “he’s only forfeiting his interest, if any. If he doesn’t have any interest he isn’t losing 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 want to exercise his right not to testify, so the property that does not belong to him gets forfeited without rebuttal.

This short cut the government uses to avoid giving claimants due process is  not authorized by the law.  Criminal Rule 32.2, from which prosecutors take certain language (out of context) to justify this short-cut, says in subdivision (c)(2) that if no one files a claim in the third party process, the court has to make “an independent finding that at least one of the defendants had an interest in the property such that it was proper to order the forfeiture of the property in a criminal case.”  The Advisory Committee Notes to the 2000 amendment also states:

This subdivision 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.)

The rule should be written more clearly, and a remedy should be spelled out to give third parties early release. When property is seized and the third party contends the defendants lack any interest in it, they should be given a prompt-post-seizure hearing to adjudicate their interests, and let them out of the case early.  There is no reason to tie them and their property up in the criminal’s case if the criminal owns no interest to forfeit.

Brenda Grantland

Brenda Grantland is a private attorney in Mill Valley California, with 30 years' experience primarily in asset forfeiture defense, as well as federal criminal appeals and victims rights and restitution. Brenda handles federal cases throughout the country, and frequently works with other attorneys or legal teams as a consultant or co-counsel.

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