Jay Shapiro on United States v. Kaley: The Supreme Court Examines Challenges to Pre-conviction Forfeiture Seizures

In Kaley v. United States  [lexis.com subscribers may access Supreme Court briefs for this case], argued early in this new Term of the Court, the Supreme Court will have the opportunity to resolve a split amongst the Circuits concerning what a defendant may do to challenge a pre-conviction forfeiture seizure.  In this analysis, Jay Shapiro, a partner in the New York office of White and Williams LLP, writes:

“It is not uncommon for the defense of a white collar prosecution to require substantial legal fees. Nor is it unusual for government to seek to seize and forfeit assets held by the defendant in cases in which the prosecution claims that the defendant has obtained significant sums of money illegally. This confluence of circumstances does, of course, often provide for a difficult road for defendants and their counsel. In a case argued early in this new Term of the Court, the Supreme Court will have the opportunity to resolve a split amongst the Circuits concerning what a defendant may do to challenge a pre-conviction forfeiture seizure.

“On October 16, 2013, the Supreme Court heard oral argument in Kaley v. United States. The prosecution that underlies this appeal is still in the pre-trial stage. Kerri Kaley, who had been a sales representative for a subsidiary of Johnson & Johnson, and her husband first learned in 2005 that they were under investigation by the United States Attorney in the Southern District of Florida. The investigation concerned what the government believed was a scheme by which the defendants would obtain prescription medical devices from hospitals that had purchased them and then re-sell them at a profit. The Kaleys determined that they needed to obtain separate counsel to represent them. Based upon an estimate that the legal fees would be at least $500,000, the Kaleys obtained a line of credit in that amount based upon the equity in their home; they then used that money to purchase a certificate of deposit.

“The Kaleys were finally indicted in 2007, charged with conspiracy to transport the devices in interstate commerce and substantive crimes related to the transportation of the devices, in addition to one count of obstruction of justice. Additionally, through the indictment the Government sought forfeiture of assets in excess of $2.1 million, including the certificate of deposit, which the Government asserted were traceable to the crimes. The day after the indictment, the Government filed an ex parte action to restrain the Kaleys from transferring or otherwise disposing of certain assets, including the CD and their home. A federal magistrate found that those assets were 'traceable' to the crimes charged in the indictment. The court concluded that the seizure was authorized by the civil forfeiture statute, 18 U.S.C. § 981(a)(1)(C). This section allows for forfeiture of property actually 'traceable to' the specific crimes alleged against a defendant.

“The matters before the Supreme Court have their genesis in the Kaleys' efforts to challenge the seizure of their funds.”

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