Late last year, an Emerging Issue Analysis [enhanced version available to lexis.com subscribers] described the issues presented to the Supreme Court in Kaley v. United States [enhanced version available to lexis.com subscribers], an appeal that was argued on October 16, 2014. Kaley came before the Supreme Court because of a pretrial dispute over whether the defendants were entitled to judicial review of probable cause that they had committed an offense permitting forfeiture of assets. The Kaleys, a husband and wife, knew that they were under criminal investigation concerning the re-sale of medical devices so they obtained a certificate of deposit of $500,000 to be used for defense fees. When the Kaleys were indicted in 2007, they were 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. 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 court concluded that the seizure was authorized by the civil forfeiture statute, 18 U.S.C. § 981(a)(1)(C) [enhanced version available to lexis.com subscribers] which permits forfeiture of property actually "traceable to" the specific crimes alleged against a defendant.
The defendants initially challenged whether the assets were traceable to the crimes charged and the district court found that the case agent's affidavit provided probable cause that the Kaleys' home was "involved in" the money laundering offense charged in a superseding indictment. The district court also found that the funds in the CD, except for $63,007.65 which was added later, were "traceable to" the residence." Finally, the district court ruled that the magistrate did not err when it denied the Kaleys' application for a pretrial evidentiary hearing.
After the Court of Appeals for the Eleventh Circuit recognized that the Kaleys should be permitted to argue before the District Court the claim that they were denied their right to retain private counsel the case was remanded. The district court held that if the restraint was wrongful it would deprive the Kaleys of the ability to retain counsel of their own choosing. At the hearing, the Kaleys argued that they could challenge the question of whether there was probable cause that they had committed the crimes charged, maintaining that they were voluntarily given the medical devices by the hospital and were not obligated to return the devices to the supplier. They supported this argument with transcripts from the trial of a codefendant who had been acquitted
The Supreme Court's ruling was directed at the conclusion of the district court, affirmed by the Court of Appeals for the Eleventh Circuit, that the Kaleys had impermissibly sought to contest "the validity of the indictment," rather than address whether the assets were "traceable to or involved in the" crimes charged. In affirming, the appellate court articulated its concern that the Kaleys' position would "undermin[e] the grand jury system" and could result in a "mini-trial" after the grand jury's action and then the trial.
Jay Shapiro is a partner in the New York office of White and Williams LLP. Jay has more than 30 years experience concentrating his practice in litigation matters. He began his legal career as a prosecutor in the Bronx County District Attorney's Office (1980-1988) and later joined the King's County District Attorney's Office (1990-2002) where he became the Deputy District Attorney in charge of the Rackets Division before going into private practice. Mr. Shapiro has tried more than thirty-five cases in state and federal court. In private practice, he has handled litigation involving insurance fraud, white collar crime and Lanham Act (trademark) violations.
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