The law of asset forfeiture is complex and arcane and thought I’d excerpt this section from a recent law review article By Catherine McCaw in the Spring 2011 American Journal of Criminal Law that I thought provided a pretty good synopsis.
Catherine E. McCaw, Asset Forfeiture as a Form of Punishment: A Case for Integrating Asset Forfeiture into Criminal Sentencing, 38 American Journal of Criminal Law 181 (2011)
I. The Law of Asset Forfeiture
The laws that govern asset forfeiture are extremely complicated. The statutes do not straightforwardly describe which crimes give rise to forfeiture, nor which types of assets. There are also three different types of asset forfeiture, each with its own procedural requirements. First, the government may confiscate assets administratively without resort to court procedures if a property owner does not contest a forfeiture. If a property owner does contest the forfeiture, the government may pursue the forfeiture through two separate judicial channels: (1) criminal forfeiture and (2) civil forfeiture. This section explains both the substantive and the procedural law of asset forfeiture.
A. Substantive Forfeiture Law
In order to gain title to an asset through asset forfeiture, the government must fulfill two substantive requirements. n41 First, the government must demonstrate that the property to be forfeited has the requisite relationship to criminal activity. Second, the government must show that the law allows it to obtain property when the property bears that relationship to a particular crime.
The government may demonstrate that property has the requisite relationship to criminal activity under three theories. First, the government may argue that the property constitutes the proceeds of a crime. In general, the government proves that property constitutes criminal proceeds through the use of circumstantial evidence. The government most frequently argues that a defendant has assets and had no legitimate income with which to purchase those assets. The government might also argue that large sums of cash seized from individuals who seem to be drug couriers constitute criminal proceeds, pointing, for example, to the fact that the money was stored with fabric softener sheets to conceal the money from drug dogs, that the money was transported from a drug capital, or that it was stored in a hidden compartment in a vehicle.
The second theory the government may advance is that the property was an “instrumentality” of a crime, meaning that someone used the property while committing the crime. Third, the government may argue that the property “facilitated” a crime, meaning that the property enabled the crime in a broader sense. For example, in United States v. Smith, a farmer was growing marijuana on his property. He was required to forfeit not only the land on which he actually grew marijuana, but also surrounding tracts of land that facilitated his commission of the crime by concealing his marijuana growing operation from public view. The government must demonstrate that there is a “substantial connection between the property and the offense” if the government is arguing the property facilitated a crime.
Determining the second step in the analysis, that a crime can give rise to forfeiture, is a surprisingly difficult task. Congress initially enacted piecemeal statutes that authorized asset forfeiture for specific offenses. For example, 21 U.S.C. § 853(a)(1) authorizes the criminal forfeiture of drug proceeds, whereas 21 U.S.C. § 881(a)(6) authorizes their civil forfeiture. In 2000, Congress enacted the Civil Asset Forfeiture Reform Act (CAFRA). One of its provisions authorizes forfeiture of proceeds for a lengthy list of crimes, including mail and wire fraud, which had not previously given rise to asset forfeiture. Other statutes also authorize forfeiture of instrumentalities or facilitating property. Prior to CAFRA, certain types of crimes could give rise to civil forfeiture but not criminal forfeiture. CAFRA ended this confusion by authorizing criminal forfeiture wherever civil forfeiture was authorized.
After the government demonstrates that property is subject to forfeiture, it must demonstrate that the forfeiture of this property does not constitute an excessive fine. The Supreme Court has held that an Eighth Amendment excessive fines analysis is constitutionally necessary for all criminal forfeitures and for civil forfeitures that are not predicated upon the guilt of the property, such as when the because the property was the instrumentality of a crime. CAFRA expanded this rule by requiring an excessive fines analysis for all civil forfeitures. Most courts have held that forfeiture of criminal proceeds can never be excessive. For example, in United States v. Betancourt, a defendant used criminal proceeds to [*188] purchase a lottery ticket and ended up winning $ 5 million. The Fifth Circuit held that the defendant must forfeit all of his lottery winnings because they were the proceeds of a drug transaction, even though the statutory maximum fine was only $ 152,000.
Courts usually conduct a more extensive excessive fines analysis when the property is forfeited as facilitating property or an instrumentality. Most circuits determine excessiveness by comparing the value of the property to the statutory maximum fine for the underlying crime. This test can end up being relatively harsh. For example, in von Hofe v. United States, the government attempted to divest both a husband and a wife of their interest in their home because the husband was growing marijuana in the basement. When the police searched their home, they found sixty-five marijuana plants in the basement but no evidence that anyone was participating in the drug trade (such as small plastic bags for packaging drugs, large amounts of cash, or firearms). The husband stated that he had been growing marijuana in his basement for about a year. During that time, he had bartered some of the marijuana for landscaping and roofing services and shared it with his neighbors.
The government conceded that the husband’s activity did not “rise to the level of a major marijuana cultivation operation” and characterized the harm the husband had caused as “perhaps difficult to quantify in objective terms.” The Second Circuit nonetheless noted that federal law authorized a fine of up to $ 1 million and went on to hold that the forfeiture of the husband’s interest in the house was not disproportionate. But the court declined to hold that the government could constitutionally obtain the wife’s interest. It noted that her “offensive conduct boils down to her joint ownership of [her marital home] and silence in the face of her husband’s decision to grow marijuana in their basement almost thirty years into their marriage.” It reasoned that it was unfair to punish the wife as if she had been personally involved in growing marijuana and held the [*189] forfeiture to be constitutionally excessive. Thus, the Eighth Amendment provides some check to asset forfeiture, but its protections can be meager.
B. Asset Forfeiture Procedure
Once the government decides to seize an asset, it must decide between several procedures at its disposal to carry out the forfeiture. There are two broad categories of forfeitures: administrative and judicial. Administrative forfeitures proceed without any involvement of the courts. Judicial forfeitures encompass two categories: civil and criminal forfeitures. These forms of forfeiture all have different procedural requirements and different benefits and drawbacks for the government.
1. Administrative Forfeitures
When the government uses administrative forfeiture, it obtains title to the property without any intervention from the courts through a procedure that resembles a default judgment. Law enforcement agencies like the FBI and DEA pursue forfeiture against property on their own, without the assistance of the DOJ. An agency seizes property and then sends a notice of intention to forfeit to parties that might have some claim to the property. The government generally must provide notice within sixty days of seizing the property. If no one challenges the forfeiture within thirty days, title to the property transfers to the government. If a party does contest the forfeiture, the government must pursue the forfeiture action in court rather than relying on administrative forfeiture. Once property is forfeited administratively, the owner may challenge the forfeiture in court only on procedural grounds. In other words, a party may argue that she did not receive proper notice but may not argue that she was an innocent owner.
The government may rely upon administrative forfeiture in most, but not all, cases. The government may use administrative forfeiture if the property is valued at less than $ 500,000, if the property may not be legally imported into the United States, if the property was used to transport a controlled substance, or if the property is a monetary instrument. Even if the property falls into one of the above categories, the government may not use administrative forfeiture to gain title to real property.
Approximately 80% of forfeiture actions are uncontested. It is unclear why this number is so high, but it is clear why the government prefers administrative forfeitures. The Department of Justice advises agencies to pursue administrative forfeiture whenever possible because of the increased “speed and efficiency” of administrative forfeitures. In some cases, parties may not contest forfeitures because doing so would tie them to illegal activity. Others may calculate that the expense of contesting the forfeiture exceeds the value of the property. Still, these explanations are speculative, and the amount of information available about administrative forfeiture is limited.
2. Judicial Forfeitures
If a party contests the government’s administrative forfeiture, the forfeiture must proceed before a judge. Once a forfeiture becomes a judicial forfeiture, litigating attorneys from the DOJ take over. If someone files a claim against property that the government attempted to obtain through administrative forfeiture, government attorneys must commence a judicial forfeiture within ninety days or return the property to the claimant.
There are two types of judicial forfeitures: civil forfeitures and criminal forfeitures. Civil forfeitures proceed against the property itself and [*191] do not require an underlying criminal conviction. Criminal forfeitures proceed against a particular criminal defendant and are considered part of that defendant’s punishment. In many cases, attorneys will file both civil and criminal forfeitures against the same property simultaneously.
3. Civil Forfeitures
In civil forfeiture actions, the government proceeds in rem against the property to be forfeited, claiming that the property is subject to forfeiture because it has been tainted by its connection with criminal activity. In the parlance of civil forfeiture, the property itself is guilty. Those who claim that they have an interest in the property may intervene to prevent the forfeiture from going forward. The Supreme Court has held that civil forfeiture is not a punitive action for the purposes of Double Jeopardy, so the government is free to file a civil forfeiture action even after the property’s owner is prosecuted criminally. The Seventh Amendment entitles claimants to a jury trial in forfeiture proceedings.
If the forfeiture goes to trial, it proceeds in two stages. First, the government must prove by a preponderance of the evidence that the property is subject to forfeiture. In doing so, it must demonstrate that the property on trial – and not merely the owner – has a connection to criminal activity. In the case of physical items, that process is relatively straightforward. The process can be more complicated for fungible assets such as money. As an illustration, imagine the government wants to demonstrate that $ 100,000 were the proceeds of a drug transaction. In the same bank account, a drug dealer has $ 100,000 that were the proceeds of a drug transaction and another $ 100,000 that the drug dealer earned legitimately. The drug dealer then spends $ 50,000. Civil forfeiture law allows the government to seize the $ 100,000 involved in drug transactions, but not the innocent $ 100,000. Tracing which dollars are tainted can be difficult. Congress has made the task of determining which assets are tainted by crime somewhat easier in the case of fungible assets. If the [*192] government commences a forfeiture action within a year of the offense, the government need not show that the specific fungible assets were tainted. Instead, “any identical property found in the same place or account as the property involved in the offense that is the basis for the forfeiture shall be subject to forfeiture … .”
After the government establishes that the property is subject to forfeiture, claimants may contest by asserting an innocent owner defense. Claimants may demonstrate innocent ownership in several ways. The claimants may show that they had no knowledge that the property was being used for illegal purposes. The claimants may also show that they knew of the illegal activity, but “did all that reasonably could be expected under the circumstances to terminate such use of the property.” The statute provides an example of “all that reasonably could be expected”: an owner must both notify law enforcement and attempt to get the perpetrator to stop using the property for illegal purposes.
Claimants to property may also demonstrate innocent ownership by demonstrating that they were bona fide purchasers for value who, at the time of purchase, “did not know and was reasonably without cause to believe that the property was subject to forfeiture.” An attorney who is paid with tainted assets is likely to have difficulty satisfying this standard. The statute creates a very limited “innocent owner” defense for claimants who received their property as part of a divorce settlement or inheritance. These claimants must satisfy four conditions to assert the defense: the property must be a primary residence; deprivation of the property must render the claimant homeless; the property must not have been purchased with the proceeds of a criminal transaction; and the claimant must, in fact, be an “innocent owner” – that is, the claimant must not have known and could not have known of the property’s involvement in crime at the time of acquisition. After the government establishes that property is subject to forfeiture, the burden shifts to the claimants if they wish to assert an “innocent owner” defense.
4. Criminal Forfeitures
Criminal forfeiture does not proceed against the property itself, but rather proceeds against a specific criminal defendant and is considered a part of that defendant’s criminal punishment. The government begins criminal forfeiture proceedings by including forfeiture allegations in a criminal indictment. The government must then demonstrate either at trial or through a guilty plea that the defendant is guilty of a crime. Defendants are not subject to criminal forfeiture unless they have been convicted of a crime.
If a defendant opts for a trial, the trial may have two separate phases: a guilt phase and a forfeiture phase to determine whether there is “the requisite nexus between the property and the offense committed by the defendant.” Still, in most instances both parties waive their right to a jury trial for the forfeiture phase and instead allow the judge to determine forfeitability. Although the government must establish a defendant’s guilt beyond a reasonable doubt, the government need demonstrate only by a preponderance of the evidence that the property is subject to forfeiture.
Because criminal forfeiture depends on the criminal defendant’s wrongdoing rather than the property’s taint, the government does not need to establish as strong a tie between the crime and the property as it does in civil forfeiture proceedings. Criminal forfeiture requires a defendant to forfeit the proceeds of a criminal transaction and property that facilitated a criminal transaction. The government may also require a defendant to satisfy a forfeiture judgment by forfeiting substitute assets. If, for example, the government can prove that a defendant earned $ 100,000 in drug proceeds, but it cannot locate those specific drug proceeds, it may seize other property worth up to $ 100,000. If the government cannot identify substitute assets at the time of trial, it may identify them later as they become known to the government. In other words, criminal forfeiture functions much like a judgment for damages. In contrast, the government must prove that the particular property to be forfeited is tainted by crime in a civil forfeiture proceeding.
Criminal proceedings are focused on the guilt of the criminal defendant and do not consider the claims that third parties might have to the property. After the government establishes that the defendant must forfeit the property, third parties may petition the court to hold an ancillary proceeding where the court considers whether the third party has a right to the property. Third parties may defeat forfeiture by establishing one of two things. First, they may establish that they were the legal owner of the property when the defendant committed the crime that rendered the property subject to forfeiture. In other words, if a drug dealer borrows a friend’s car to transport drugs, the government may not confiscate the car through a criminal forfeiture proceeding. It might, however, be able to confiscate the car through civil forfeiture because civil forfeiture depends on the guilt of the property rather than the guilt of the party. Second, they may establish that they were bona fide purchasers for value after the property became subject to forfeiture and were “reasonably without cause to believe that the property was subject to forfeiture … .”
This rule has important consequences for defense attorneys. Under the statute, “all right, title, and interest in property … vests in the United States upon the commission of the act giving rise to forfeiture … .” As a consequence, the defendant may not pass legitimate title to the property to other parties. The statute does not create an exception for attorney’s fees. The fact that defendants may not pay for their attorneys with assets that are subject to forfeiture may make it more difficult for a defendant to afford an attorney. But the Supreme Court has held that this potential difficulty does not violate the Sixth Amendment. The Court reasoned that “[a] defendant has no Sixth Amendment right to spend another person’s money for services rendered by an attorney, even if those funds are the only way that that defendant will be able to retain the attorney of his choice.” The Court also observed that Congress crafted asset forfeiture statutes in part to deprive criminal organizations of their economic influence. One manifestation of criminal organizations’ economic influence is their ability [*195] to pay for high quality legal representation. As long as the defendant may still obtain a public defender, the Sixth Amendment is satisfied.
Even though criminal forfeiture is technically a part of a defendant’s sentence, the fact that a defendant has forfeited property does not generally affect his or her prison sentence. Courts do not grant defendants a downward departure from the sentencing guidelines because they have had property forfeited. In addition, the courts do not have the discretion to adjust the amount of a forfeiture to take into account the length of a defendant’s prison sentence.
Criminal forfeiture does not affect the size of the fine that a criminal defendant must pay. Such fines are determined in accordance with the sentencing guidelines, and it follows that if defendants cannot receive lower sentences in exchange for hefty forfeitures, then defendants may also not pay their fines with assets that they have forfeited. Under the relation back doctrine, title to the forfeited property transfers to the government as soon as the property becomes tainted by its involvement in criminal activity. At the time the defendant is paying a fine, the property belongs to the government rather than the defendant.
5. Civil vs. Criminal Forfeitures
Civil forfeiture and criminal forfeiture are not exclusive remedies. The government may file separate actions against the same piece of property under both theories. If the government loses in one of its actions, it is not precluded from trying to gain title to the property under the other theory.
Both types of forfeiture have advantages and disadvantages. Criminal forfeiture can be more efficient because it enables the government to dispose of the asset forfeiture and the criminal conviction in a single proceeding. The government may obtain what is essentially a money judgment against a criminal defendant if it proceeds through criminal forfeiture. In addition, criminal forfeiture can seem more legitimate because the government is not punishing crime through a civil remedy. The main disadvantage of criminal forfeiture for the government is that it must [*196] obtain a criminal conviction before it can obtain assets through criminal forfeiture. In addition, if a defendant chooses to go to trial, the government could have to try two cases: the guilt case and the asset forfeiture case.
The main advantage of civil forfeiture is that it does not require an underlying federal criminal conviction. This fact may strike some as sinister, but it also allows the government to pursue lesser punishments as the equities may demand. The government may pursue civil forfeiture as an alternative to criminal punishment when it judges that criminal punishment would be too harsh. For example, the government might confiscate a crack house in order to abate a nuisance even though it might not be fair to prosecute the owner for a crime. Similarly, if a juvenile were using his cell phone to disseminate naked pictures of an under-aged classmate, a prosecutor might choose to punish him by requiring him to forfeit his cell phone as the instrumentality of a crime rather than saddling him with a charge of distributing child pornography.
The government might pursue civil forfeiture to deprive the owner of property when the case against the owner is too weak to sustain a criminal conviction. If the government is depriving someone of property to which she has no legal right, this procedure might not be so bad. For example, the government can use asset forfeiture to return stolen archeological artifacts to museums. Surely, the ability of the government to seize and return these artifacts should not turn on whether the government can make out a criminal case against the thief. The federal government also uses civil forfeiture against defendants who have been convicted in state court. The federal government cannot use criminal forfeiture in these so-called adoptive forfeitures because federal criminal forfeiture requires a federal criminal conviction. Of course, others might consider it unfair for the government to impose a sanction on someone for criminal behavior it has not proven beyond a reasonable doubt.
The disadvantage from the government’s perspective of civil forfeiture is that it must tie the property more directly to the criminal activity. It does not have the option of demonstrating that a defendant has received a certain amount of money in proceeds and seeking substitute assets to satisfy that award.
The doctrines surrounding asset forfeiture are complicated in part because asset forfeiture is designed to serve a variety of different purposes. It is meant to punish, to serve remedial purposes, and to raise money for the government. Given that the doctrine is meant to serve such disparate purposes, it is not surprising that the doctrine ended up being extremely complicated. If the asset forfeiture system is modified, it is important to respect the diverse goals that asset forfeiture aims to achieve.