In Kaley v. United States the US Supreme Court held that, upon indictment by a grand jury and the issuance of a restraint order against their assets, the defendant were not entitled to vacate this order so as to use the funds to pay for their legal fees. The Court explained that the rationale behind granting orders of forfeiture is to ensure ‘crime does not pay’, to deter future illegality and to compensate victims. This replicates the position in the UK and will impede any argument in favour of change.
Kaley v. United States No. 12-464, 2014 BL 49923 (U.S. Feb. 25, 2014) concerned an appeal from petitioners Kerri and Brian Kaley, who were indicted by a grand jury for reselling stolen medical devices and laundering the proceeds. While criminal proceedings were pending, the US Government obtained a § 853(e)(1) restraining order against their assets. The Kaleys sought to vacate the order as they wished to use a portion of the disputed assets to pay for their defence.
US Law Title 21 U. S. C. § 853(e)(1) empowers a US court to enter pre-trial restraining orders to "preserve the availability of [forfeitable] property" while criminal proceedings are pending. Such restraint orders have been deemed constitutionally permissible whenever probable cause exists that a defendant has committed an offence permitting forfeiture and that the assets in dispute are traceable or otherwise sufficiently related to the crime charged (United States v. Monsanto, 491 U. S. 600).
The question for the Supreme Court to determine in this case was whether an indicted defendant has a constitutional right to contest the grand jury's prior determination of probable cause. The Kaleys did not contest that the assets in question derived from, or were used in committing, the alleged offences. Their argument was instead about who should have the last word as to probable cause. The Supreme Court, in upholding its prior decision in Monsanto, decided that the Government may seize assets before trial that a defendant intends to use to pay an attorney, so long as probable cause exists “to believe that the property will ultimately be proved forfeitable”.
Noting that a grand jury's probable cause finding may affect a pre-trial restraint on a person's liberty (Gerstein v. Pugh, 420 U. S. 103, 117), the Court found that the same result follows when it works to restrain a defendant's property. In very strong terms the Court endorsed the role of the grand jury in the indictment and confiscation process, and held that a challenge to the reliability or competence of the evidence supporting a grand jury's finding of probable cause simply would not be heard. According to the Supreme Court “The grand jury gets to say — without any review, oversight, or second-guessing — whether probable cause exists to think that a person committed a crime.”
Therefore, the Supreme Court ultimately held that when challenging the legality of a § 853(e)(1) seizure, a criminal defendant is not constitutionally entitled to contest a grand jury's determination of probable cause to believe the defendant committed the crimes charged. An asset freeze order will be found to be erroneous only when unsupported by a finding of probable cause.
The Supreme Court took the time to outline the rationale behind pre-trial forfeitures of this kind. It explained that forfeitures “help to ensure that crime does not pay: They at once punish wrongdoing, deter future illegality, and lessen the economic power of criminal enterprises”. The US Government uses the forfeited property to recompense victims of crime, improve conditions in crime-damaged communities, and support law enforcement activities like police training.
Despite conceding that sometimes a defendant will be unable to retain the attorney of his choice, if he cannot use forfeitable assets, the Court still found against the petitioners. The Supreme Court reasoned that a defendant has no right to spend money that is “not rightfully theirs” on legal fees, even if that is the only way to hire their preferred lawyer. Therefore, the Government will not violate the Constitution if it seizes the “robbery proceeds” and refuses to permit the defendant to use them to pay for their lawyer.
This decision unsurprisingly was not warmly received in the US and caused controversy as a result of its interference with a defendant’s right to employ an attorney of his choosing.
Meanwhile, in the UK there have recently been similar discussions over whether defendants in this jurisdiction should be permitted to use frozen funds to pay for legal fees. Sections 40, 41 and 42 of the Proceeds of Crime Act 2002 (POCA) govern the granting of restraint orders in the UK. Under POCA a restraint order may be granted (among other conditions) where proceedings for an offence have been started and where there is reasonable cause to believe that the alleged offender has benefited from his criminal conduct. Section 41 of POCA permits restraint orders to be made subject to exceptions, however, section 41(4) does not allow for exceptions to be made for legal expenses.
The rationale behind the granting restraint orders is outlined in section 69(2) and 69(3) of POCA. Section 69 explains that such orders are granted in order to ensure that there is no diminution of assets and that confiscation orders can be made against the defendant. In addition, these powers are exercised with a view to allowing victims to retain or recover the value of any interest they hold in the property.
There are many who believe that there is a strong argument that defendants should be permitted to use frozen funds to pay his legal fees in order to prevent the State bearing the cost of their defence through the provision of legal aid. However, whether or not one may sympathise with this argument, allowing this to occur would undermine the rationale of section 69 (POCA) and the whole purpose for which a restraint order is granted. If a defendant is permitted to use frozen funds to fund his legal defence, this would dissipate the funds and could leave nothing left over with which to make a confiscation order and compensate victims. A paradigm example of this situation arose in R (on the application of Dechert Solicitors) v Southwark Crown Court  EWHC Admin 477 where after allowing the defendant to use previously frozen money, there were no disposable assets left for the purposes of a Confiscation Order.