Alison Frankel On the Case – Until proven guilty? Freeing seized assets via pretrial hearing
When a former Johnson & Johnson pharmaceutical sales representative and her husband found out in 2005 that a federal grand jury was investigating them for reselling prescription medical devices, they did a smart thing and hired lawyers. Kerri and Brian Kaley were informed that it would cost $500,000 to defend them through trial, so they took out a home equity line of credit on their house and purchased a certificate of deposit with the proceeds. They later added about $63,000 from other sources to the CD.
The Kaleys were indicted in 2007 for transporting stolen medical devices and money laundering. Prosecutors claimed that their house and the rest of their money were the spoils of their crime and moved to freeze their assets. The Kaleys challenged the seizure, arguing that it violated their Sixth Amendment right to counsel of their choice. The trial judge, U.S. District Judge Kenneth Marra of West Palm Beach, Florida, freed up the $63,000, but twice found that the government was justified in restraining the Kaleys’ assets. On the Kaleys’ first trip to the 11th Circuit Court of Appeals, they won an interlocutory ruling that essentially directed Marra to grant them an evidentiary hearing on the seizure. But Marra subsequently found that the only issue before him was whether the frozen assets were traceable to the crime alleged in the indictment – not whether the grand jury improperly found probable cause for the indictment in the first place. A three-judge 11th Circuit panel laterupheld the trial court’s determination.
On Monday, the U.S. Supreme Court granted the Kaleys’ request to review the 11th Circuit holding that defendants whose assets have been frozen aren’t entitled to an evidentiary hearing on the strength of the indictment against them. That question has split the federal appellate courts, as even the Justice Department conceded in its brief in response to the cert petition. The 2nd, 9th and District of Columbia Circuits have all held that defendants must be permitted to argue that the government had no probable cause to justify asset forfeiture. The 10th and 11th Circuits have ruled otherwise. The Justice Department joined the Kaleys in calling on the Supreme Court to resolve the split, although the department argued that the 10th and 11th Circuits have ruled correctly; the Kaleys and their counsel at Black, Srebnick, Komspan & Stumpf obviously contend that appeals courts on the other side of the divide got it right.
The Kaley case is procedurally complicated, since their probable cause argument is predicated on the acquittal of a co-defendant whose assets were not seized, but the principles at stake are not. The Supreme Court has held in Caplin & Drysdale v. United States and United States v. Monsanto that attorneys’ fees are not exempt from forfeiture – but in both of those cases defendants had already been determined to be guilty. Here, by contrast, the Kaleys have not been adjudicated and have insisted for eight years that the medical devices they resold were not stolen but given to them by hospitals. Do they and other criminal defendants have the pretrial right to convince courts that the seizure of their assets was improper? Otherwise, they argue, they’re being deprived of their Fifth and Sixth Amendment rights. As the National Association of Criminal Defense Attorneys put the matter in an amicus brief in support of the Kaleys’ cert petition, “Because this issue implicates a structural right critical to the nation’s adversarial system of criminal justice, this court should clarify that a grand jury’s probable cause determination does not relieve the government of any of its usual burden, when it seeks to restrain or seize property, of showing at a prompt, adversarial hearing that it has good cause to do so.”
In a way, of course, the Kaleys are lucky, at least in the universe of people facing federal criminal charges. The NACDL amicus brief notes that few defendants enjoy the “uncommon level of advocacy” that the Kaleys’ private attorneys have displayed through the long and complex history of this case. (I called lead defense counsel Howard Srebnick, partly because I was wondering if the firm is now representing the Kaleys without pay, but I didn’t hear back.) Exceedingly few defendants burdened with what the NACDL calls “the millstone of a pretrial restraint on assets” make it to the Supreme Court.
For that matter, exceedingly few criminal defendants at all attract the attention of the court. It’s probably an accident of timing that the court granted cert in the Kaley case on the 50th anniversary of its landmark ruling in Gideon v. Wainwright that all criminal defendants are entitled to counsel even if they can’t afford to pay. That right is increasingly endangered, according to a National Law Journal examination of three jurisdictions struggling to provide counsel for indigent defendants. Here’s hoping that the justices use the opportunity of the Kaley case to reaffirm that whether you can pay or not, you have the right to a lawyer who will stand up and say you’re not guilty.
(Reporting by Alison Frankel)