United States. Congress. House. Committee on the J.

Civil Asset Forfeiture Reform Act : hearing before the Committee on the Judiciary, House of Representatives, One Hundred Fourth Congress, second session, on H.R. 1916 ... July 22, 1996 online

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Online LibraryUnited States. Congress. House. Committee on the JCivil Asset Forfeiture Reform Act : hearing before the Committee on the Judiciary, House of Representatives, One Hundred Fourth Congress, second session, on H.R. 1916 ... July 22, 1996 → online text (page 30 of 37)
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W^hile purporting elsewhere to raise the burden of proof to a preponderance, this
presumption would effectively lower it again — to a level below probable cause .

Section 201.

Standard of Proof for Criminal Forfeiture.

Rather than lowering the burden of proof in all criminal forfeitures to a
preponderance. Congress should clarify that the burden of proof under 21 U.S.C. 853 is
beyond a reasonable doubt. At the very least, clear and convincing standard of proof is

Section 203.

Nonabatement of Forfeiture When Defendant Dies Pending Appeal.

We would limit this provision to forfeiture of the defendant's ill-gotten gains, which
can be fairly characterized as remedial, not punitive. Where the forfeiture is basically
punishment, no purpose is served except to punish the defendant's innocent heirs. While
they should not profit from her wrongdoing, neither should they be punished for it.

Section 205.

Motion and Discovery Procedures for Ancillary Hearings.

This is a useful codification of the case law that has developed. We would modify'
Section 205(c) to provide: "the court shall permit the parties to conduct discovery in
accordance with the Federal Rules of Civil Procedure to the extent necessary to reliably
resolve factual issues before the hearing." The denial of needed discovery would be a denial
of due process in this non-criminal context.


Section 206.

Pretrial Restraint of Substitute Assets.

While the government understandably wants the power to restrain substitute assets
prior to trial, we are against it because of our continued doubts about the wisdom and
constitutionality of substitute asset forfeiture and its large potential for abuse. The same
Congress that enacted the landmark 1984 forfeiture act refused to authorize substitute asset
forfeiture because of the same grave doubts. (Substitute asset forfeiture only passed in 1986,
at the height of the War on Drugs.) If forfeiture is now to be vastly expanded to all title 1 8
offenses and "proceeds" is to be broadly defined, as proposed by the government, then it is
all the more imperative that some limitations to be placed on the availability of substitute
asset forfeiture. One such limitation is to make it impossible for the government to seize or
freeze substitute assets until the government gets an order forfeiting the tainted property as
to which substitution is sought. Uncontrolled pretrial seizures and freezes of substitute assets
allow the government to pauperize most defendants precisely when they are most in need of
assets to defendant themselves, support their families and post bond.

Congress should consider other limitations on the availability of substitute asset
forfeiture. For example, it should clarify that substitute assets may not be forfeited merely
because the defendant has spent the tainted assets, which is the government's theory in many
cases. It should be available only when a defendant or his agent takes some action /or the
purpose of making the tainted property unavailable for forfeiture.

Congress should also provide that the defendant's primary homestead, up to a value
of $250,000, may not be forfeited as a substitute asset. This humanitarian limitation will
prevent substitute asset forfeiture from becoming, in effect. Forfeiture of Estate - the terrible
common law practice that the Framers abolished more than 200 years ago.

Section 207.

Defenses Applicable to Ancillary Proceedings in Criminal Forfeiture Cases.

This provision would limit third parties to the innocent owner defense spelled out in
proposed 1 8 U.S.C. §983. While that sounds reasonable and logical, it isn 't. If a third party
owns the property - rather than the criminal defendant ~ then the property simply cannot be
forfeited in an in personam criminal proceeding against the defendant in which the third
party has no opportunity to be heard. The ancillary "hearing" is no substitute for a civil
forfeiture proceeding. In a civil forfeitiu-e proceeding against the third party's property, the



property owner enjoys many valuable rights he does not have in a post-conviction ancillary
proceeding. He has a right to full civil discovery under the Federal Rules, and a righ to trial
by jury, at which the government will have the burden of proof by a preponderance of the
evidence. In the ancillary hearing, by contrast, there is no right to discovery, no right to a
jury trial and the third party has the burden of proof. This severe limitation of third party
rights is professedly justified (and we do not think it can be justified at all) on the theory that
the criminal trial jury has found that the property belongs to the criminal defendant and is
subject to forfeiture. But once a third party establishes that he is in fact the true owner of the
property, the justification for the criminal forfeiture order against the criminal defendant
vanishes — and this is so without regard to whether the third party is "innocent. "

The government's remedy, if it still wants to forfeit the third party's property, is to
bring a civil forfeiture action against the property. Then the third party will have to establish
his innocence or some other defense to forfeiture. The government should not be allowed
to destroy the constitutional rights of third parties by letting the ancillary hearing serve as a
substitute for a full-fledged civil forfeiture proceeding.

Recognizing these problems, DOJ proposes to deal with them in Section 216 of its
bill. Section 216 would deem the juicillary proceeding an in rem proceeding for the purpose
of adjudicating the third party's interest. DOJ would place the burden of establishing
forfeitability on the government, where it belongs. However, there is no provision for
discovery under the Federal Rules (discovery would be granted only in the discretion of the
judge) and no provision for trial by jury. We would support Section 216 if it is modified to
require opportunity for ample discovery and provide a right to trial by jury.

Section 209.

Criminal Seizure Warrants.

This little provision would vastly expand the government's ability to seize property
in criminal forfeiture cases. If enacted, the government would routinely seize all allegedly
forfeitable property prior to indictment or at the time of indictment. It should be kept in mind
that the criminal forfeiture statutes also allow substitute assets to be forfeited, a drastic
remedy not available in civil forfeiture cases. Because of the broad and loosely worded
substitute asset provisions of our forfeiture laws, the government would regularly be able to
seize all of a criminal defendant's property prior to indictment, thereby destroying his ability
to defend himself and support his family. We should not entrust prosecutors with this
awesome power. Indeed, as we explained above, prosecutors should not even be granted the
power to restrain substitute assets prior to trial, much less to seize them. Rather, Congress



should clarify that current 21 U.S.C. §853(0 does not authorize pre-trial seizure of substitute
assets - something the courts hav. assumed from the fact that Congress did not authorize
pre-trial restraint of substitute assets.

The government has been using civil forfeiture mechanisms to seize property for
ultimate criminal forfeiture. It can continue to do that.

We note that the government has included a provision (Section 212(a)(2)) attempting
to deal with some of these concerns. It provides that if substitute assets are restrained, "the
court may exempt from the restraining order assets needed to pay attorney fees, other
necessary costs of living expenses, and expenses of maintaining the restrained assets.'" If the
word "may" was changed to "shall" the provision would blunt some but by no means all of
my concerns about the pre-trial restraint of substitute assets.

Section 212.

Hearing on Pretrial Restraining Orders; Assets Needed to Pay Attorney's Fees.

Like so much of this bill, section 212 tracks the language of the aborted Forfeiture Act
of 1994 (§130). Our detailed critique of §130 of the 1994 bill is still valid and need not be
repeated here. See Attachment B. Even with respect to assets needed to obtain counsel,
the DOJ proposal would give a defendant far less protection than the courts have held to be
constitutionally required. £^, United States v. Monsanto . 924 F.2d 1 186 (2d Cir.) (en
banc), cert, denied . 1 12 S.Ct. 382 (1991); United States v. Michelle's Lounge . 39 F.2d 684
(7th Cir. 1994).

Section 214.

Appeals in Criminal Forfeiture Cases.

The government wishes to be able to appeal from every order denying a criminal
forfeiture except where the Double Jeopardy Clause prohibits an appeal. Rather than
awaiting and trusting the Supreme Court to apply double jeopardy principles sensibly in this
context. Congress should explicitly provide that the government may not appeal from a no-
forfeiture verdict by the trier of fact, and may not appeal from an order granting a Rule 29
motion which prevents the forfeiture issue from going to the jury. In other words. Congress
should ensure that a "no forfeiture" verdict is treated exactly the same as a "not guilty"
verdict for double jeopardy purposes.



Section 216.

Ancillary Proceeding as in rem for Purposes of Third Party Interests.

See the discussion above, under Section 207.

Section 301.

Forfeiture of Proceeds of Federal Offenses.

In its 1994 analysis, NACDL did not oppose the concept of forfeiting ill-gotten gains
(net profits) of all criminal offenses provided that forfeiture procedure is made fair and there
are adequate protections for innocent owners. See Attachment B. We see no reason to
change that position. DOJ still would define '"proceeds" in the broadest possible fashion {see
Section 302 of the bill), making the provision highly punitive and unreasonable. See our
1994 analysis at pages 2 1-22 for a critique of this proposal. Attachment B. The unfairness
of forfeiting gross proceeds (as opposed to net profits) is greatly aggravated by the substitute
asset provisions and the judicially developed concept of joint and several liability. Each
defendant in a criminal venture or conspiracy becomes jointly and severally liable for the
entire amount of the gross proceeds received by all participants in the criminal venture -
usually a staggering sum that allows the government to wipe out the assets, clean or not, of
every defendant.

One possible compromise would be to place the burden of going forward with respect
to the cost of goods sold on the claimant/defendant and to disallow any deduction for indirect
or overhead costs. The defendant or claimant is in the best position to know what his costs
were, not the government. The government would not need to prove the absence of direct
costs in a case in which the defendant or claimant has not pointed to costs that should be
deducted from his gross proceeds. See United States v. Ofchinick . 883 F.2d 1 172, 11 82 (3d
Cir. 1989), cert, denied . 1 10 S.Ct. 753 (1990).

If we support a vast expansion of the concept of proceeds forfeiture, DOJ should
support an amendment to the excessively broad money laundering statutes. DOJ would no
longer have to prove so-called "money laundering" to obtain forfeiture of criminal proceeds
so there would be no reason to retain the money laundering statutes in their present absurd
form. They should be limited to what is actually money laundering and should not
criminalize (and severely punish) the mere act of depositing tainted money in a bank account
(18 U.S.C. 1957) or the mere deposit of such money "with the intent to promote the carrying
on" of the underlying unlawful activity (18 U.S.C. 1956(a)(1)(A)). These provisions have



been routinely abused to tremendously escalate the punishment of those who engage in the
underlying ii lawful activity at the whim of line prosecutors.

One other problem with the term "proceeds" is its application to certain offenses that
do not generate any ill-gotten gains. The best example is the obtaining of a bank loan based
on an application containing one or more false statements in violation of 18 U.S.C. 1014.
The entire "proceeds" obtained from such a bank loan are currently subject to civil forfeiture
under §982(a)(2), whether or not the owner ever defaulted on the loan. This statute is so
obviously unfair that the government has seldom used it, but it remains available for abuse.
Congress should examine each section of Title 18 carefully to determine whether the
adoption of "proceeds" forfeiture across the board would create similar problems.

Section 303.

Forfeiture of Firearms Used in Crimes of Violence and Felonies.

How would 1 8 U.S.C. 924(d) mesh with proposed 1 8 U.S.C. 98 1 (a)( 1 )(D)? Wouldn't
§924(d) be completely superseded by §98 1 (a)( 1 )(D)? What is the purpose of proposed
§924(d)(4)? We don't see what it accomplishes.

Section 308.

Forfeiture for Violations of Section 60501 and 1960.

We adhere to our 1994 critique of this provision. See NACDL Section by Section
Analysis of DOJ's Proposed Forfeiture Act of 1994 at pages 18-19. Attachment B. In

our view, current 18 U.S.C. 981(a)(l)(A)'s language is far too broad and invites abuse. As
explained in David Smith's forfeiture treatise, at ^5.01[1]: the broad language of that
provision has been held to authorize seizure and civil forfeiture of entire legitimate
businesses simply because the business's bank account was involved in a so-called "money
laundering" or structuring offense. At most, the entire bank account involved in the offense
should be subject to forfeiture, not the entire business that owns the bank account.

Section 313.

Forfeiture of Criminal Proceeds Transported in Interstate Commerce.

This provision would allow forfeiture of "any property involved in" a violation of 18
U.S.C. 1952(a)(1), which prohibits interstate or foreign travel or use of the mail to distribute



^ 327


the proceeds of any unlavvftil activity listed in § 1952(b). Congress should limit the forfeiture
to the actual proceeds. The extremely 1 road '"any property involved in" language would
allow forfeiture of any conveyance used to transport the proceeds or perhaps any bank
account into which the proceeds are deposited. If the proceeds were distributed at someone's
residence, prosecutors would argue that the residence is subject to forfeiturf^ since 't
"facilitated" the offense. Some courts might agree with that interpretation, s-aujin^ unuuc
hardship on persons unfortunate enough to fall within those jurisdictions.

Section 403.

Minor and Technical Amendments Relating to 1992 Forfeiture Amendments.

The DOJ would amend 18 U.S.C. 984(b) to extend the period of time in which an
action to civilly forfeit substitute flinds may be commended. Currently the forfeiture suit
must he filed within a year of the offense that is the basis for the forfeiture. DOJ would
merely require a seizure within two years of the offense. This change would undercut the
rationale of §984. As the legislative history of §984 explains, the purpose of the short
limitations period is to provide some basis for believing that the substitute funds are likely
to be tainted.

Section 409.

Statute of Limitations for Civil Forfeiture Actions.

We can see why the government would want the limitations to run from the time the
involvement of the property in the offense was discovered, rather than from the time the
offense is discovered. But the government doesn't need, and shouldn't be given, five years.
Three years is more than enough time. The statutory language should also reflect the explicit
requirement (being read into the statute by case law) that the government exercise reasonable
diligence in investigating the case. The courts have iield that under § 1 62 1 , the time begins
to run as soon as the government is aware of facts that should trigger an investigation leading
to discovery oft! c offense.

Section 416.

Fugitive Disentitlement.

This section of the bill would overrule the Supreme Court's unanimous decision in
Degenv. United States . 1996 WL 305720 (June 10, 1996). Before the ink on the decision



is dry, DOJ is asking Congress to overrule it! This seems to be DOJs (over)reaction to everN
adverse decision on a rule of law. Maybe it ought to stop and think ab ut whether the
decision makes sense (or is constitutionally based), before running to Congress. Moreover,
while in Degen. the Supreme Court did not have to decide whether disentitlement of a
fugitive forfeiture claimant would violate due process, there is a strong argument that it
would. For instance, the Seventh Circuit previously so held. See United Stales — V'v.v, ,,^?
m I inited States Currencv . 32 F.3d 1151 (7th Cir. 1994).





I. Section 101 . Timing of Notice of Intent to Forfeit.

A. Subsection (d)(1). There is no valid reason why the time requirements proposed by
DOJ should not also apply to United States Customs. Customs seizures include most currency
seizures at or near borders and at most major airpons around the country', pursuant to Title 31
United States Code. Customs is also involved in seizures based on Title 19 violations.

B. Subsection (d)(2). This provision is reasonable and we have no objection to the
proposed amendment, subject to the proposed changes to sec.ion (d)(3). below.

C. Subsection (d)(3). While we agree that a 60 day notice provision is appropriate,
DOJ's proposal is actually a substantial step backu'ard from current DOJ policy. Pursuant to
DOJ Executive Office for Asset Forfeiture Directive 93-4 (Januar\' 14. 1993; effective March
1. 1993), if the seizing agency does not give notice withm 60 days, then it must renim the
property and cannot proceed with the forfeiture ("Where a reasonable effon of notice has not
been made within the 60 day period and no waiver has been obtained, the seized property must
be reain.ed and the forfeiture proceeding terminated .").

Contrary to the position assened by DOJ in its section-by-section analysis (at page I).
the changes to the statute proposed in this section should confer substantive rights on claimants.
Indeed, DOJ acknowledges in Directive 93-4 that prompt notice is a fundamental aspect of due
process ("A fundamental aspect of due process in any forfeiture proceeding is that notice be
given as soon as practicable to apprise interested persons of the pendency of the action and
afford them an opportunity to be heard.") As currently proposed by DOJ, a claimant would
have no real remedy for a violation of the time limit, other than the return of the property while
the forfeiture is pending. This is patently unfair. There is no valid justification for not
confemng substantive rights on claimants, because DOJ's proposed amendment contains
adequate safeguards to protect the seizing agency where it can establish good cause for an
extension of time. See Section (d)(2), above. Indeed, DOJ offers no explanation of why the
proposed amendment should not confer substantive rights.

Simply returning the property to the owner does not remedy the problems caused by
lengthy delays in instituting forfeiture proceedings. If the government is free to pursue the
forfeiture at any time up to five years from the date of discovery that the property is subject to
forfeinire (the applicable statute of limitations), the owner of the property is left in an untenable
position. For example, the owner doesn't know whether to continue making payments, repairs
or improvements to the property. The problem will be exacerbated if the statute is further
amended to provide for the forfeiture of assets traceable to such property (See Section 203,
infra. )

35-668 96-12


Accordir jly. DOJ's proposed amendmeni should itself be amended to read as loUows

(d)(3) It [he seizing agency fails to provide notice to the pany
from whom the propeny was seized within the time limits set forth
in this subsection and no extension is granted pursuant to
subsection (d)(2). the seized anicle shall be returned to that pany
pending funhcr forfeiture proceedings and the foifeiture may not
take place unless (A) the property consiitutoG the proceeds ot q
crimina l offenao. (B) (A) an independent basis exists to retain the
anicle as evidence of a violation of law, or {€) (B) the anicle
constimtes contraband or other property the possession of which
would be illegal.

2. Section 102 . Time to File Claim and Cost Bond; Waiver.

A. While the expansion of the time in which to file a claim is "velcomed. there is no
reason to expand the content of the claim to require "the time and circumstances of the
claimant's acquisition of the interest in the propeny." 19 U.S.C. §1608 currently requires only
that the claim state the claimant's interest in the propeny (e.g., ownership, possessory,
leasehold, etc.). Tliere is no valid reason to expand this requirement, and DOJ does not offer
any explanation justifying this proposed change.

B. The requirement of a cost bond [subsection (b)] should be eliminated in its entirety,
rather than simply creating exceptions. The cost bond requirement has long since outlived it5
usefulness. There is no real danger of frivolous claims being filed, because of the high cost of
hiring counsel and litigating forfeimre claims. The only reason DOJ is unwilling to see this
provision eliminated is because it knows through experience that the bond requirement poses a
serious impediment to the average claimant to contest a forfeiture. Under current law. if no
bond is posted, the claimant forever waives his or her right to contest the forfeiture in coun.

Given that the Supreme Coun has held that forfeitures constinite punishment {Austin v.

United States. 509 U.S. , 125 L.Ed.2d 488, 113 S.Ct. 2801 (1993)). a propem' owner

cannot constitutionally be required to post a cost bond as a condition of contestmg the forfeiture
in coun. (See DOJ analysis. Section 110: "Such a change is warranted in light of the
recognition by the couns that the civil forfeimre actions are punitive in namre and serve as
adjuncts to criminal law enforcement") The right of free access to the courts should not be
dependent on the claimant's wealth. Many people of modest m.eans, who do qualify as indigent,
are nevertheless unable to raise sufficient cash to post a bond within the shon amount of time
allowed, and thus no bond should be required to contest a forfeiture in coun.

C. The "waiver" language in subsection (b) "all supponing infonnation as required bv
the agency " is ambiguous and overly broad. Further, the proposed amendment vests too much
discretion in the Attorney General and Secretary of the Treasury with regard to waiver (or
reduction) of the cost bond. There are no provisions for judicial review of the denial of a


There are also no provisions to de^' with the problem of the seizing agency requiring
multiple bonds where multiple items of property are seized, even though there will only be one
coun proceeding. What often results is that the claimant must file several bonds, amounting to
several, or even tens of thousands of dollars, which far exceeds the amount of costs that may
be incurred.

.Accordingly, NACDL strongly urges Congress to completely do away wuh the cost bond
requirement as proposed in the Hyde bill.

3. Section 103 . Time to File Action in District Court.

A. A time limit imposed on the govemrrjf^nt for filing forfeimre actions is long overdue,
and we strongly suppon the concept. However, §(k)(l) siiould require the action to be instimted
within si.xty (60) days, not ninety (90) days. If the government has trouble instimting the action
within 60 days, it has the protections set forth in §(k)(2).

B. Section (k)(2) should be amended by inserting the word "good" before cause on the
third line.

C. Like DOJ's proposed Section 101, this amendment is not intended to confer any
substantive rights on claimants, and provides the claimant with linle or no remedy if the
government does not file the action within 90 days. We strongly urge that Section (k)(3)
confirm substantive rights, and that it be amended as follows:

(3) If the Attorney General fails to instimte a forfeiture action
within the requisite time period and no extension is granted, the
propeny shall be remmed to the party from whom it was seized
unless (A) the property constitut e s the proceoda of a criminal

Online LibraryUnited States. Congress. House. Committee on the JCivil Asset Forfeiture Reform Act : hearing before the Committee on the Judiciary, House of Representatives, One Hundred Fourth Congress, second session, on H.R. 1916 ... July 22, 1996 → online text (page 30 of 37)