Articles Posted in Forfeitures

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The process of asset forfeiture, at least in principle, allows law enforcement to seize property used in the commission of a crime. Officials can sell the property at auction, with the proceeds often going back into law enforcement budgets. As the use of this procedure has grown, however, it has produced many unjust results. During the Obama administration, the Department of Justice (DOJ) sought to limit the use of asset forfeiture by federal law enforcement. The new Attorney General (AG), however, has rescinded the previous administration’s policy and issued a new order that could expand the use of the procedure. This has brought opposition from both parties in Washington, but it is not yet clear to Texas criminal attorneys what impact this order will have.

The principle behind asset forfeiture is to deprive criminals of property used in the commission of crimes, applying the value of that property toward law enforcement activities. In practice, asset forfeiture often strays far from this noble purpose. Criminal asset forfeiture requires a level of proof that is at least somewhat close to the state’s burden of proof in a criminal prosecution. See 18 U.S.C. § 981. Civil asset forfeiture, on the other hand, has a lower burden of proof, does not require an actual conviction for an actual crime in many cases, and does not necessarily require the joinder of the property owner as a party. Id. at § 982. A civil forfeiture case might be styled, for example, United States v. $50,000 in Cash, with the owner of that money nowhere to be found.

A particularly controversial element of federal asset forfeiture is a process known as “adoption.” When state or local police seize property and turn it over to federal authorities, adoption provides for “equitable sharing” of the proceeds of the ensuing forfeiture case. See 28 U.S.C. § 524(c). Most of the proceeds can end up back with state or local law enforcement under this program, creating an incentive for local authorities to use federal forfeiture procedures whenever possible instead of state forfeiture laws that might have more built-in protections for property owners.

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Civil forfeiture, the process by which the government can seize and take title to property allegedly involved in criminal activity, has become a widespread—and controversial—practice around the country. Some states have enacted laws requiring a criminal conviction before the state can initiate a forfeiture claim, but federal law and the laws of Texas still allow civil forfeiture even when the underlying criminal act does not result in any convictions. A study released in late 2015 by the Institute for Justice (IJ) offers a rather incendiary set of statistics regarding forfeiture by federal law enforcement agencies. It alleges that the Department of Justice (DOJ) and Department of the Treasury (DOT) obtained more property through forfeiture than was stolen by burglars during 2014. While this comparison is far from perfect, it illustrates the scale of forfeiture at the federal level.

Federal law allows the government to bring a civil forfeiture claim to take title to “any property, real or personal…constituting, derived from, or traceable to” various federal criminal offenses. 18 U.S.C. § 981(a)(1). The provisions for civil forfeiture in Texas are similar to the federal statute. A property owner can prevent the forfeiture by appearing at the forfeiture hearing and establishing that the property in question was used “without [their] effective consent,” or was stolen before the commission of the alleged offense. Tex. Code Crim. P. Art. 59.02(h)(1). This often proves difficult, however, since the property owner is not necessarily a required party to a forfeiture proceeding, and therefore is not entitled to notice of the hearing. The names of many forfeiture cases demonstrate this. See, e.g., One 1991 Chevrolet Blazer, et al v. State, 905 S.W.2d 443 (Tex. App.—Amarillo 1995); $18,800 in U.S. Currency, et al v. State, 961 S.W.2d 257 (Tex. App.—Houston [1st Dist.] 1997).

Nothing in federal or state law requires a criminal conviction prior to, or in conjunction with, a civil forfeiture proceeding. The U.S. Supreme Court has even held that an acquittal does not preclude the forfeiture of property related to the alleged offense. United States v. One Assortment of 89 Firearms, 465 U.S. 354 (1984). That court and Texas’ highest criminal court have also held that the Double Jeopardy Clause of the Sixth Amendment does not bar a civil forfeiture action after a conviction. United States v. Ursery, 518 U.S. 267 (1996); Fant v. State, 931 S.W.2d 299 (Tex. Crim. App. 1996).

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The Sixth Amendment states that the government may not deny a person representation by counsel in a criminal proceeding. The U.S. Supreme Court recently issued a decision in a case brought by someone who could afford an attorney but was unable to access funds to pay legal fees because the government had frozen their assets before trial. Luis v. United States, 578 U.S. ___ (2016). Prosecutors even admitted that the funds in question were not tied to any alleged criminal activity. The court held that this violated the Sixth Amendment right to counsel.

Federal criminal law allows the government to obtain an injunction freezing a defendant’s assets in cases involving alleged health care or banking offenses. 18 U.S.C. § 1345(a)(2). An injunction issued under this section is not necessarily limited to assets that prosecutors can demonstrate are derived from, or otherwise connected to, an alleged offense. A defendant may also be enjoined from using “property of equivalent value” to any assets allegedly linked to an offense. Id. at § 1345(a)(2)(B)(i).

Prosecutors must file a separate civil action in order to obtain an injunction under § 1345. This type of proceeding bears some similarities to civil forfeiture under federal law. 18 U.S.C. § 981. Both types of cases involve civil claims aimed at assets, but the goal of a forfeiture proceeding is for the government to take title to property involved in a criminal offense. An injunction under § 1345 prevents a defendant from disposing of assets that might be needed as evidence in a prosecution, or to satisfy a future judgment against a defendant. Unfortunately, this type of injunction can potentially prevent a defendant—who has not been convicted of a crime—from accessing any funds at all.

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The forfeiture process allows law enforcement agencies to take possession of and claim title to property associated with criminal activity. Critics claim that some police departments rely on forfeiture as a source of revenue for their own operations, often referred to as “policing for profit.” Civil forfeiture proceedings are the subject of most of the current opposition. Unlike a criminal forfeiture case, a civil forfeiture case in many jurisdictions does not require a criminal conviction. This means that the state can take title to property that is in no way connected to criminal activity. Lawsuits currently pending in courts around the country are challenging various aspects of this system.

Texas civil forfeiture law allows for the forfeiture of “contraband,” broadly defined to include property used or “intended to be used” in the commission of various felony and misdemeanor offenses, the “proceeds” from certain offenses, and property obtained with those proceeds. Tex. Code Crim. P. Art. 59.01(2). Texas courts have held that the state does not have to prove that the property owner intended to commit an offense, or even that they knew anything about an offense involving their property. El-Ali v. Texas, 388 S.W.3d 890 (Tex. App.—Houston [14th Dist.] 2012); pet. denied 428 S.W.3d 824 (Tex. 2014).

Police reportedly justify seizing large amounts of cash that they find by claiming that the mere possession of cash is indicative of drug trafficking. A story out of Tennessee from early 2016 suggested how a “profit motive” might drive police behavior in ways that threaten people’s civil rights. A Nashville news station has reported on drug interdiction operations along Interstate 40 that appear to target vehicles with out-of-state license plates. A husband and wife claimed that they were stopped on that highway as they were returning home to California, after attending a funeral in Virginia. They allege that police tried to pressure them to consent to a search of their vehicle. The husband, who is reportedly a federal police officer in San Diego, claimed that a drug dog was then cued to alert on the vehicle, and the entire purpose of the search was to look for cash.

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Asset forfeiture, by which the government seizes and takes title to property allegedly involved in criminal activity, has become a major revenue-generating activity for law enforcement agencies around the country. This has led to widespread criticism of the practice, since critics say that it often fails to protect property owners’ rights. A woman who was convicted of conspiracy to commit fraud and money laundering filed a lawsuit against the federal government in late 2015, claiming that law enforcement fraudulently enhanced the allegations against her in order to make a case for asset forfeiture. Scott v. United States, No. 1:15-cv-00173, pet. to vacate judgment (D. Wyo., Oct. 5, 2015). The court dismissed the suit on procedural grounds, finding it to be an improper collateral attack on the sentence. The case offers an interesting view of how people perceive the practice of asset forfeiture, and of the complexity of post-conviction motions in federal criminal cases.

Federal and state criminal statutes authorize forfeiture in criminal cases or in separate civil actions. See, e.g. 18 U.S.C. § 981 et seq., Tex. Code Crim. P. Art. 59.01 et seq. In many, possibly most, jurisdictions around the country, a court can grant prosecutors’ forfeiture claims even if no defendant is convicted of an actual crime. Property owners are not even entitled to notice of a forfeiture action in many cases, and forfeiture cases are often styled as the government “versus” a description of the asset.

The other notable aspect of the Scott case involves post-conviction challenges to a verdict or sentence. The law surrounding habeas corpus petitions is quite vast and complicated, but the current case specifically involves petitions filed within one year of the conviction, alleging that the sentence is unconstitutional or unlawful, that the sentencing court lacked jurisdiction to impose the sentence, that the sentence exceeds the legal maximum sentence, or that the sentence “is otherwise subject to collateral attack.” 18 U.S.C. § 2255. Before filing a “second or successive” petition under § 2255, a petitioner must request certification from an appellate court that the petition involves new evidence or a new constitutional rule made retroactive by the U.S. Supreme Court. 28 U.S.C. §§ 2255(h), 2244(b)(3).

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The owner of a Texas-based chain of retail stores, along with multiple store managers and others, is facing federal drug charges arising from an investigation by the Drug Enforcement Administration (DEA) into the alleged production, importation, and sale of synthetic marijuana. United States v. Gas Pipe, Inc., et al., No. 3:14-cr-00298, superseding indictment (N.D. Tex., May 6, 2015). The investigation became public last year, and an indictment was filed under seal at some point in 2014. In addition to drug-related charges, the defendant is charged with conspiracy to defraud the United States and money laundering.

The defendant owns and operates a chain of stores known as the Gas Pipe, which has locations in the Dallas/Fort Worth area, Austin, and Albuquerque, New Mexico. He opened his first location in Dallas in 1970 as a head shop, which sells smoking-related products. He and his company have reportedly had problems with law enforcement at various times since then, usually involving drug paraphernalia allegations. He faced forfeiture actions in 1981, 1982, and 1994. Each time, he recovered most or all of the seized property. A forfeiture lawsuit filed by federal prosecutors in 2006 resulted in a settlement.

DEA agents seized 10 of the chain’s 14 locations last year, along with almost $3 million from company bank accounts, after claiming that undercover agents purchased synthetic marijuana at those locations. “Synthetic marijuana” refers to a number of chemical substances that can mimic the effect of marijuana. They are often sprayed onto plant material and packaged under names like “K2” and “Spice.” Law enforcement officials state that synthetic marijuana has been connected to numerous hospitalizations and several deaths. Officials claimed that the product labeling identified it as “incense” and stated that it was “100% cannabinoid free” and “Not fit for human consumption.”
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Civil asset forfeiture has received a significant amount of attention recently, and for good reason. If law enforcement believes that property has been used in the commission of a crime, or obtained with the proceeds of a crime, civil forfeiture allows the state to seize that property and divest its owner of title. See Tex. Code Crim. P. Art. 59.01 et seq., 18 U.S.C. § 981 et seq. This has resulted in many law enforcement agencies, according to various news reports, using civil forfeiture as a means of generating revenue, and even creating “wish lists” of items to seize. Some states are now scaling back on this practice by requiring a criminal conviction in forfeiture cases. The federal government announced that it was scaling back on parts of its forfeiture programs, although it still engages in practices that are widely criticized.

Federal law allows law enforcement agencies to seize property based on suspicion of criminal activity. In January 2015, then-Attorney General (AG) Eric Holder announced that the Department of Justice (DOJ) and the Department of Treasury (DOT) would cease a practice known as “federally adopted forfeiture,” by which a federal agency takes custody of property seized by state or local law enforcement at their request and commences federal forfeiture proceedings.

The extent to which the AG’s announcement changes actual practice by federal law enforcement remains to be seen. Prior to the announcement, the DOJ’s apparent policy was that “[f]orfeiture is one of the most effective weapons in the law enforcement arsenal and its use should be encouraged.” DOJ, Asset Forfeiture Policy Manual (PDF file) at 42 (2013). Even after the AG’s announcement, federal agencies are still expressly authorized to use forfeiture in joint federal-state and purely federal operations.
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Federal prosecutors indicted the owner of a now-closed chain of colleges for conspiracy to defraud the federal government and theft of government property. United States v. Amor, et al (“Amor I“), No. 1:14-cr-20750, indictment (S.D. Fla., Sep. 30, 2014). The government alleges that the defendants operated the schools primarily as a means of defrauding federal student aid programs, rather than educating students and preparing them for careers. The principal owner also faces a civil lawsuit under the False Claims Act (FCA), originally filed by a former admissions employee and now joined by the government and the state of Florida. United States ex rel Peña v. Amor, et al (“Amor II“), No. 1:12-cv-21431, complaint in intervention (S.D. Fla., Dec. 2, 2014).

The defendants operated FastTrain College, a for-profit college with seven campuses in the state of Florida. According to the indictment, it “awarded career diplomas and industry certifications” in various medical and computer fields. Amor I at 1. The school received approval from the U.S. Department of Education (DOE) to receive loans from the Federal Direct Loan Program and grants from the Federal Pell Grant Program. Both programs are administered by the DOE’s Office of Federal Student Aid. To receive either type of financial aid, students complete the Free Application for Federal Student Aid (FAFSA).

The federal government alleges that the defendants recruited students who did not have high school diplomas or GEDs, and therefore did not meet the qualifications for federal student aid, to enroll in the school. Efforts to attract students allegedly included hiring exotic dancers as recruiters. In some cases, the government claims, the defendants falsely represented that prospective students could “obtain a high school diploma for a fee.” Id. at 8. They allegedly caused about 1,300 students to submit FAFSAs falsely stating that they had graduated high school. This allegedly resulted in the receipt of more than $6.5 million in Direct Loans and Pell Grants.
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A federal judge in Minnesota granted a default judgment in a civil forfeiture case involving cash seized at the airport, which the government kept for a seemingly long time while it tried to build a case. The final judgment was, legally speaking, based on the failure of the money’s alleged owner to file an answer or a verified claim. The case began, however, with claims by agents of the Department of Homeland Security (DHS) that the money “had an overwhelming smell of marijuana.” United States v. $138,121.00 in U.S. Currency, No. 0:14-cv-00198, verif. complaint at 4 (D. Minn., Jan. 21, 2014). DHS agents did not find any drugs during the search at the airport. It took another nine months to find any connection to actual drugs, during which time the money remained in the government’s custody. By the time prosecutors filed the forfeiture complaint, more than a year had passed since the search.

According to the government’s complaint, filed on January 21, 2014, DHS began investigating Robert Casteel on suspicion of marijuana trafficking in January 2013. Investigators learned that he would be traveling through the Minneapolis/St. Paul Airport on January 17, 2013, and the complaint claims that they knew he would be carrying a large amount of cash constituting proceeds from drug trafficking. Police officers approached Casteel, who reportedly had a duffel bag and two carry-on roller bags in his possession, in a gate area. He allegedly admitted to having “between $120,000 and $200,000 in cash.” Id. at 3.

Carrying a large amount of U.S. currency is not, by itself, a crime. The officers brought a drug-sniffing dog to the gate area, and prosecutors alleged that it alerted to Casteel’s duffel bag and one of the roller bags. They seized the two bags and allowed Casteel to board his flight, which was bound for Phoenix, Arizona. The bags allegedly contained $138,121 in cash, multiple documents, a laptop computer, and an iPad. The documents allegedly contained information “related to marijuana cultivation and distribution,” id. at 4, and the cash allegedly had the aforementioned smell.
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Civil forfeiture is a type of legal proceeding that allows the state to seize assets it believes have been used in the commission of a crime. Police and prosecutors can pursue a civil forfeiture action regardless of whether the property owner or anyone else is convicted of the suspected offense. A law enacted in Minnesota in May 2014 protects the rights of property owners by making a conviction of the underlying offense a prerequisite for a civil forfeiture claim. Although the property owner does not need to be the person convicted, the law provides an important check on the state’s ability to seize assets.

In most states and under federal law, civil forfeiture is an in rem proceeding brought against one or more pieces of property, and it is therefore completely separate from any criminal prosecution. The owner of the property and the criminal defendant, if there is one, are not always considered necessary parties. Property owners must affirmatively assert their rights in court, which can involve substantial time and expense. An acquittal of the crime allegedly associated with the property does not necessarily affect the forfeiture case.

A common example of a civil forfeiture proceeding involves a police officer finding a large amount of cash during a search of a vehicle, impounding it based on suspicion that carrying cash means involvement in drug dealing, and bringing an action for forfeiture of the cash. Since civil forfeiture proceedings are not criminal in nature, the state must prove by a preponderance of the evidence, or sometimes by clear and convincing evidence, that the property at issue was used in the commission of a crime. This is a much lower burden of proof than the requirement of proof beyond a reasonable doubt in criminal matters, and it has resulted in people losing substantial amounts of money, their cars, or even their homes.
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