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January 14, 2019

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Supreme Court to Decide Whether Government can Freeze a Defendant’s Lawful Assets Pre-Conviction

Whether the government can freeze all of a defendant’s assets before trial, even where those assets are not tainted by any connection to alleged federal offenses, thereby preventing a defendant from paying for his own defense, will be decided by the U.S. Supreme Court in Luis v. United States, No. 14-419.

The federal Mandatory Victims Restitution Act of 1996 (“MVRA”) requires that defendants convicted of crimes committed by “fraud or deceit” compensate victims for the full amount of the victims’ losses. Often, however, by the time there is a conviction, criminal defendants do not have any assets to satisfy those judgments. Seeking to address this problem, the United States has invoked the Fraud Injunction Act to freeze legitimate assets pre-conviction to pay a later judgment.

The Fraud Injunction Act statute authorizes a “restraining order” against assets when a person is “alienating or disposing of property, or intends to alienate or dispose of property” that is “obtained from” or “traceable to” certain federal offenses. In such cases, the statute permits a court to prohibit the use of tainted property “or property of equivalent value” before trial to ensure that sufficient assets are available to satisfy any judgment.

In 2012, the federal government charged Sila Luis with conspiracy to commit Medicare fraud – a scheme allegedly amounting to over $45 million, stemming from claims for home health services that were neither medically necessary nor actually performed. Using the Fraud Injunction Act, the federal government asked the district court to freeze all of Luis’s assets, including those that were not even allegedly obtained through fraud, totaling approximately $15 million. The district court agreed to impose the freeze. .

Luis then requested that the district court release her untainted assets so she may retain her lawyer. The district court denied the request, explaining that, because the government could locate “only a fraction of the assets” Medicare had paid Luis’s companies, her “untainted” assets also could be frozen. The district court likened Luis’s situation to that of a bank robber indicted for stealing $100,000; That is, if the robber has already spent the allegedly stolen money which he could not use to hire his preferred lawyer in any case, he also should not be able to spend a different $100,000 he “just happens” to have to hire the lawyer he wants.

Luis appealed the district court’s decision, arguing she was being deprived of her Fifth Amendment right to due process of law and her Sixth Amendment right to counsel of her choosing. The Court of Appeals for the Eleventh Circuit, in Atlanta, upheld the district court’s denial of her request to release her legitimate assets, stating that Luis’s arguments were foreclosed by the U.S. Supreme Court’s decision in Kaley v. United States (2014) and other decisions.

In Kaley, the Supreme Court held that when the government, following a grand jury indictment, restrains tainted assets needed to retain a lawyer, the Fifth and Sixth Amendments do not require a pretrial hearing at which the defendant can challenge a grand jury’s finding of probable cause.

Luis asked the Supreme Court to review the case. The Court agreed to do so and recently heard argument. A decision is expected by next June.

Jackson Lewis P.C. © 2019

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About this Author

Ramsay C. McCullough, Jackson Lewis, Affirmative Action Counseling Lawyer, Employment Discrimination Attorney
Associate

Ramsay C. McCullough is an Associate in the Norfolk, Virginia, office of Jackson Lewis P.C. His labor and employment counseling and litigation practice includes wage and hour laws, employment discrimination laws, the National Labor Relations Act, affirmative action and OFCCP counseling, white collar defense, False Claims Act and Qui Tam/Whistleblower defense, internal investigations, corporate governance and compliance issues, regulatory training, and asset recovery.

Mr. McCullough is an experienced trial attorney. He...

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