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Crime in the Suites An Analysis of Current Issues in White Collar Defense
How Poking the Bear Gets Your Assets Kicked
August 23, 2017

How Poking the Bear Gets Your Assets Kicked

By: James Trusty

For many decades, the 4th Circuit Court of Appeals was viewed as a very conservative place, where prosecutors were usually quite comfortable with the status quo, a largely “law and order” kind of venue.  During the Obama presidency, the Court’s makeup changed dramatically, with a batch of younger, more liberal judges joining the “old guard” from Virginia, North Carolina, and South Carolina.  Consequently, this particular appellate court has become less predictable and often starkly divided.  That is, until the government messed with Will T. Chamberlain, the center of a long-running controversy surrounding pretrial restraint of a defendant’s assets.

The facts in Mr. Chamberlain’s case are deceptively simple:  After the defendant was indicted for stealing $200,000 from the government, the U.S. Attorney’s Office sought to prevent him from selling some real property worth about $200,000.  They had properly included a forfeiture provision in their indictment, and the allegation concluded by referring to an intent to pursue “substitute assets” if others could not be used to satisfy an eventual judgment.  Until this case, Fourth Circuit precedent has been clear that the government can seek a restraining order to prevent liquidation of substitute assets, which is the term of art for property which does not fall into the categories of criminal proceeds, facilitating property, or property associated with an ongoing criminal enterprise – in short, untainted property belonging to a criminal defendant.  Other Circuit Courts of Appeal have regularly read Title 21 U.S.C. § 853(p) as only applying to those “tainted” forms of property, and particularly so in the face of defendants seeking to engage in financial transactions that allow them to hire their counsel of choice.  The Fourth Circuit, however, relied upon legislative intent analysis from a 1989 Supreme Court opinion[1] that dealt with tainted assets, but included a general admonition that “federal restraint provisions must be construed liberally to prevent defendants from moving assets beyond the reach of the court in order to evade their forfeiture upon conviction.”  United States v. McKinney (In re Billman), 915 F.2d 916, 919 (4th Cir. 1990).

While the facts and issues were relatively simple, the procedural history in Mr. Chamberlain’s case was flat out ugly for the government.  So ugly that it led to a rare moment of complete unanimity within the Fourth Circuit.  At briefing, the government acknowledged that the subject property was untainted and that following recent Supreme Court precedent, the pretrial restraint of innocently-obtained property was unconstitutional when the property was needed by the defendant to obtain counsel.[2]  Here, however, the government had defense counsel on record saying this particular fund was not needed for legal fees.  After the initial briefing, the defense submitted a government brief from another pending Supreme Court matter[3] in which the government specifically asserted that under Luis, 21 U.S.C. § 853 does not permit pretrial restraint of substitute property.  The government then moved the Fourth Circuit panel to remand the case upon representation that they would no longer seek pretrial restraint of any of Mr. Chamberlain’s assets.  Instead, the now fully-poked bear voted unanimously to set the matter for immediate en banc review.  The government’s supplemental brief for the looming en banc disaster agreed with the defendant’s position and led to last week’s rare-as-an-eclipse en banc published opinion without any oral argument from the parties.  Referring to the reach of 21 U.S.C. § 853, the Fourth Circuit expressly overruled prior Circuit precedent and found that “[t]he plain language of the statute, therefore, provides no authority to restrain substitute assets prior to trial.  United States v. Chamberlain, 2017 WL 3568493, at *5 (4th Cir. 2017).

The opinion has two interesting side streets.  First, for a case that is ultimately predicated on Sixth Amendment issues regarding whether right to counsel means right to counsel of choice, there are precious few words devoted to that underpinning. Maybe the perceived maneuvering of the government, including its starkly inconsistent positions between a Supreme Court filing and Fourth Circuit position, made this a particularly easy rally-cry for the usually divided court.

The other interesting aspect is the case’s effect on the RICO forfeiture provisions, which had previously been cited as support for the Court’s pre-Chamberlain position on freezing substitute assets.  Most likely, the RICO provisions will be deemed a “related restraint provision” and subject to the exact same ruling.  Interestingly, the DOJ attorneys responsible for supervising and advising RICO prosecutions across the country, the Organized Crime and Gang Section,[4] had a long history of preaching caution to Assistant U.S. Attorneys who sought to seize or freeze assets which the defendant needed for obtaining counsel.  While the RICO statute and Fourth Circuit precedent permitted the action, a now-retired forfeiture expert for the Section consistently tried to talk AUSA’s into compromise or release of the funds in those circumstances.  His usual admonition to these prosecutors was a prescient one — “don’t poke the bear.”

[1] United States v. Monsanto, 491 U.S. 600 (1989).

[2] Luis v. United States, 136 S. Ct. 1083 (2016)

[3] Honeycutt v. United States, 137 S. Ct. 1626 (2017)

[4] Full disclosure—I was Chief of that Section from 2010-2017.