Criminal Practice – No More Pretrial Seizure of ‘Innocent’ Assets

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U.S. v. Chamberlain (Lawyers Weekly No. 001-175-17, 15 pp.) (Wynn, J.) No. 16-4313, Aug. 18, 2017; USDC at Raleigh, N.C. (Howard, J.) 4th Cir.

Holding: The en banc 4th Circuit overrules its prior precedent permitting pretrial restraint of a defendant’s innocent property under the federal criminal forfeiture statute, and joins other federal courts of appeal in holding that 21 U.S.C. § 853 does not authorize such restraint; Section 853(e) permits the government a pretrial restraining order over only those assets directly subject to forfeiture as property traceable to a charged offense.

Substitute Assets

The challenged order at issue in this case arises out of defendant’s alleged participation in a conspiracy to defraud the government while serving abroad in the armed forces. According to the government, while overseas in Afghanistan from 2009 to 2010, defendant and other team members conspired to steal approximately $200,000 of federal funds earmarked for specific military purposes.

On June 25, 2014, the government charged defendant and two co-conspirators with conspiracy and embezzlement of federal property. The government sought a restraining order under 21 U.S.C. § 853(e)(1)(A) to prevent the sale of real estate owned by defendant and his wife and valued at $200,000. Defendant acknowledged that the 4th Circuit has been unique in allowing pretrial restraint of substitute assets, but argued this rule has been abrogated by the recent decision in Luis v. U.S., 136 S. Ct. 1083 (2016). The district court disagreed and ruled for the government, and this interlocutory appeal followed.

For most offenses, federal law provides for the forfeiture upon conviction of property associated with a defendant’s crimes. Although § 853(e) explicitly refers only to property described in § 853(a), we have long interpreted this provision to permit the pretrial restraint of both tainted property subject to forfeiture under § 853(a) and untainted property – § 853(p) substitute property – that bears no direct relationship to the defendant’s alleged offense. This appeals court alone has concluded that § 853(e) permits the government to restrain a criminal defendant’s untainted substitute property before trial.

Prior Cases Overruled

We hereby overrule In re Billman, 915 F.2d 916 (4th Cir. 1990), and U.S. v. Bollin, 264 F.3d 391 (4th Cir. 2001). In Luis, the Supreme Court all but rejected our expansive reading of its earlier holdings. The Luis plurality explained that, unlike tainted assets – the defendant’s ownership of which is necessarily “imperfect” – untainted assets belong to the defendant, pure and simple. The plain language of the statute provides no authority to restrain substitute assets prior to trial.

Although we have interpreted § 853(a) to permit courts to issue money judgments covering a convicted defendant’s substitute assets, it does not follow that § 853(e) is similarly permissive. In sum, the Supreme Court has signaled that there is a firm distinction between the government’s authority to restrain tainted and untainted assets in construing § 853 and related restraint provisions. Lacking express authorization, § 853(e) does not by its terms permit pretrial restraint of substitute assets.

Our contrary precedents are overruled, and the district court order is vacated.