The Supreme Court left intact a defendant's right to challenge whether seized funds are traceable to alleged misconduct.

The U.S. Supreme Court recently weakened a criminal defendant's ability to challenge the Government's pretrial seizure of assets that a defendant has allocated for mounting a defense. In Kaley v. United States,¹ the Court eliminated a defendant's right to challenge a grand jury's finding of probable cause, which underlies pretrial seizure orders² to restrain such funds. The Court left intact a defendant's right to challenge whether seized funds are traceable to alleged misconduct.

In this case, a grand jury indicted Kerri and Brian Kaley, a married couple, on charges related to an alleged conspiracy to steal and resell outmoded, surplus prescription medical devices. But the Kaleys learned of the grand jury investigation before the indictment. They hired counsel and began mounting a defense. (The Kaleys continue to maintain that their actions could not amount to a crime and tried to convince the Government not to pursue the case.) To pay their attorney's fees, the Kaleys applied for a $500,000 equity line of credit on their home and used the funds to purchase a certificate of deposit (C.O.D.).

Based on the grand jury's finding of probable cause underlying the indictment, the Government sought a restraining order to freeze the Kaleys' assets. The Government alleged the $500,000 C.O.D. constituted "proceeds" of the alleged crimes, despite the fact that it could trace only $140,000 of the $500,000 back to the alleged criminal activity. The Kaleys challenged any pretrial restraint of the C.O.D. because they needed the funds to pay for counsel of their choice and because they questioned the grand jury's finding of probable cause. The Court granted the Government's restraining order without a hearing.

The Kaleys appealed to the U.S. Court of Appeals for the Eleventh Circuit. Notably, while the Kaleys' appeal was pending, an alleged co-conspirator was tried and acquitted on all charges—suggesting that the Kaleys, too, would be acquitted. But the appellate court affirmed the restraining order. The Kaleys sought and obtained a writ of certiorari from the Supreme Court for further review.

Justice Kagan, writing for the majority, affirmed the restraining order on basis of the Supreme Court's decision in United States v. Monsanto,³ which held that assets may constitutionally be restrained pretrial "whenever there is probable cause to believe that the property is forfeitable."⁴ While recognizing that this holding would result in denying a defendant the right to use funds to retain counsel of his or her choice based solely on an ex parte determination of probable cause, Justice Kagan found "'no Sixth Amendment right to spend another person's money' for legal fees—even if that is the only way to hire a preferred lawyer."⁵ Furthermore, the majority found no basis for a pretrial challenge to the sacrosanct grand jury determination of probable cause.

The Government has breathtaking power to investigate and make criminal allegations. On top of that, the Supreme Court has now enhanced the Government's ability to effectively prevent (without so much as a court hearing) people accused of crime from mounting a defense with his or her choice of counsel. This decision, in the view of the dissent authored by Chief Justice Roberts, paid "insufficient respect to the importance of an independent bar as a check on prosecutorial abuse and government overreaching."⁶ The Chief Justice expressed concern that the ruling would "hamstring" criminal defendants and "raise[] substantial concerns about the fairness of the entire proceeding."⁷ In light of this decision, it is essential for those under government scrutiny to seek legal counsel promptly so that preparations for a defense may be explored and pursued before government actions effectively remove a potential defendant’s ability to engage their choice of counsel.

For Further Information

If you have any questions about this Alert, please contact Robert H. Dietrick, Meghan E. Claiborne, any of the attorneys in our White-Collar Criminal Defense, Corporate Investigations and Regulatory Compliance Practice Group or the attorney in the firm with whom you are regularly in contact.

Notes

1. No. 12-464, 2014 WL 700097 (U.S. Feb. 25, 2014).
2. Orders granted under 21 U.S.C. § 853(e)(1) (2009).
3. 491 U.S. 600, 615 (1989).
4. Kaley, 2014 WL 700097, at *3 (citing Monsanto, 491 U.S. at 615).
5. Kaley, 2014 WL 700097, at *4 (quoting Caplin & Drysdale, Chartered v. United States, 491 U.S. 617, 618 (1989)).
6. Kaley, 2014 WL 700097, at *18 (Roberts, C.J., dissenting).
7. Id., at *15.

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