The U.S. Supreme Court on Tuesday rejected a Miami attorney's constitutional challenge to the government's practice of seizing a defendant's assets before trial, especially common in white-collar fraud cases.
The high court’s 6-3 decision would have had widespread implications — including testing the very basis of a federal grand jury indictment that allows such seizures — if it had gone the other way.
Associate Justice Elena Kagan, who wrote the majority opinion, ruled that the Supreme Court had already “cast the die” on Miami criminal defense attorney Howard Srebnick’s appeal when it previously rejected a similar challenge to U.S. forfeiture law. Kagan said allowing Srebnick’s clients to “relitigate” a grand jury’s probable cause finding to challenge the government’s pre-trial seizure of their property would lead to “destructive consequences.”
But Chief Justice John Roberts sided with Srebnick’s argument, calling the majority’s decision “fundamentally at odds with our constitutional tradition and basic notion of fair play.”
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Srebnick is representing a New York couple indicted in 2007 on charges of illegally profiting from the resale of older medical devices in South Florida’s “gray market.”
He expressed disappointment in the high court’s ruling: “I don’t know how I will explain to my students at the University of Miami Law School that the Supreme Court ruled that an innocent client cannot use her own money to hire an attorney to defend her in court.”
Srebnick argued that the seizure of the couple’s assets violated the constitutional protections of due process and right to counsel. With their assets frozen until a trial’s outcome, Kerri and Brian Kaley were effectively being stripped of the ability to hire the defense lawyer of their choice, he argued before the Supreme Court in October.
Srebnick, who worked on the appeal with Miami attorney Richard Strafer, argued that defendants should be allowed to keep their bank accounts and other worldly possessions unless prosecutors can show before trial that the evidence supporting an indictment justifies the seizure of those assets.
For decades, prosecutors have only needed to point to a federal grand jury indictment to argue that defendants’ assets are traceable to the criminal allegations and therefore can be seized. And judges have almost always ruled in the prosecution’s favor because of the presumption that the grand jury found “probable cause” that a crime was committed.
Eventually, depending on whether a defendant is found guilty or innocent, frozen assets are either kept or returned by the government.
Srebnick asked the Supreme Court to allow a hearing that would test the strength of the prosecution’s evidence before an actual jury hears the government’s case against his two clients, the Kaleys.
The New York couple obtained a $500,000 equity line of credit on their home so they could pay projected legal fees to their “preferred” defense lawyers, Srebnick, and colleague, Susan Van Dusen, who claimed the government’s case was “baseless.” But after the couple’s indictment, prosecutors obtained a judge’s order to seize their home and other assets valued at nearly $2.2 million, leading to the Supreme Court case.
There have been other recent, high-profile asset grabs as well: The U.S. attorney’s office seized millions of dollars of bank deposits, waterfront property and jewelry that once belonged to notorious Fort Lauderdale Ponzi schemer Scott Rothstein, who was charged in late 2009 and eventually sentenced to 50 years in prison.