9-120.100
Policy Limitations on Application of Forfeiture
Provisions to Attorney Fees
|
While there are no constitutional or statutory prohibitions
to application of the third party forfeiture provisions to
attorney fees, the Department recognizes that attorneys, who
among all third parties uniquely may be aware of the possibility
of forfeiture, may not be able to meet the statutory requirements
for relief for third party transferees without hampering their
ability to represent their clients. In particular, requiring an
attorney to bear the burden of proving lack of reasonable cause
to believe that an asset was subject to forfeiture may prevent
the free and open exchange of information between an attorney and
a client. The Department recognizes that the proper exercise of
prosecutorial discretion dictates that this be taken into
consideration in applying the third party forfeiture provisions
to attorney fees. Accordingly, it is the policy of the Department
that application of the forfeiture provisions to attorney fees be
carefully reviewed and that they be uniformly and fairly
applied.
[new May 2010]
9-120.101
Attorney Fee Forfeiture Guidelines
|
The purpose of these guidelines is twofold. First, it is to
insure that any forfeiture of assets transferred to attorneys as
fees for legal services has been reviewed carefully. Second, it
is to insure that the public's interest that those convicted of
certain offenses do not realize any economic benefit from their
illegal activity is pursued fairly and with due consideration for
the individual's right to counsel in a criminal matter.
These guidelines are set forth solely for the purpose of
internal Department of Justice guidance. They are not intended
to, do not, and may not be relied upon to create any rights,
substantive or procedural, enforceable at law by any party in any
matter civil or criminal, nor do they place any limitations on
otherwise lawful litigative prerogatives of the Department of
Justice.
[new May 2010]
9-120.102
Forfeiture of Assets Transferred to an Attorney in a Fraudulent or
Sham Transaction
|
Forfeiture of an asset transferred to an attorney as fees for
legal services may be pursued where there are reasonable grounds
to believe the transfer was a fraudulent or sham transaction
designed to shield from forfeiture assets which otherwise are
forfeitable.
The mere fact that an attorney has received a forfeitable
asset as payment for legal fees by itself does not provide
reasonable grounds to believe the transfer was a fraudulent or
sham transaction. There must be reasonable cause to believe the
asset was transferred for the purpose of impeding or defeating
the government's ability to forfeit it. Generally, there should
be some proof that a scheme existed to maintain the client's
interest in the asset or ability to use it to his/her benefit.
This may be shown, for example, by proof that the value of
services actually rendered was disproportionately low compared to
the value of the asset transferred and that there was agreement
by the attorney to transfer the asset or some portion of it back
to the client. In other situations there may be evidence that the
attorney agreed to transfer the asset to another third party for
the benefit of the client or to an account or corporation that is
controlled by the client. The evidence, however, need not
establish that the attorney was a participant in the criminal
activity giving rise to the forfeiture or that he/she otherwise
violated any law.
[new May 2010]
9-120.103
Forfeiture of Assets Transferred to an Attorney for Representation
in a Civil Matter
|
Forfeiture of an asset transferred to an attorney as payment
for legal fees for representation in a civil matter may be
pursued, notwithstanding the fact that the asset may have been
transferred for legitimate services actually rendered, when there
are reasonable grounds to believe that the attorney had
reasonable cause to know that the asset was subject to forfeiture
at the time of the transfer.
[new May 2010]
9-120.104
Forfeiture of Assets Transferred to an Attorney for Representation
in a Criminal Matter
|
Forfeiture of an asset transferred to an attorney as payment
for legal fees for representation in a criminal matter may be
pursued, notwithstanding the fact that the asset may have been
transferred for legitimate services actually rendered, where
there are reasonable grounds to believe that the attorney had
actual knowledge that the asset was subject to forfeiture at the
time of the transfer. However, such reasonable grounds must be
based on facts and information other than compelled disclosures
of confidential communications made during the course of the
representation.
[new May 2010]
9-120.105
Discussion of Actual Knowledge and/or Reasonable Cause to Know
|
The principal issue to be addressed in the application of
these guidelines is what constitutes "actual knowledge" or
"reasonable cause to know" that an asset is subject to forfeiture
"at the time of the transfer." This issue must be resolved on a
case-by-case basis. However, the following principles shall be
applied in determining whether the prerequisite of actual
knowledge or reasonable cause to know exists in a particular
case.
[new May 2010]
9-120.106
At the Time of the Transfer
|
For purposes of these guidelines, a transfer occurs at the
time an attorney becomes entitled to the asset free from any
claim by the defendant or others. For example, if an asset is
transferred to an attorney to be held in trust for the defendant,
with the understanding that the attorney shall be entitled to a
portion of the asset for legal services rendered, the time of the
transfer will be the time at which the attorney renders the
services and becomes entitled to the asset. If he/she has the
requisite knowledge at that time, the asset may be subject to
forfeiture.
[new May 2010]
9-120.107
Actual Knowledge of Forfeitability
|
For purposes of these guidelines, actual knowledge refers not
simply to knowledge that some of a client's assets are either
subject to forfeiture or from criminal misconduct. Rather, an
attorney must have actual knowledge that the particular asset
he/she received was subject to forfeiture. The guidelines require
that there be reasonable grounds to believe that actual knowledge
exists.
Reasonable grounds exist for believing that an attorney has
actual knowledge that an asset is subject to forfeiture when
there is evidence that it was known to the attorney at the time
of the transfer either: (a) that the government had asserted that
the particular asset is subject to forfeiture or (b) that the
particular asset in fact is from criminal misconduct.
[new May 2010]
9-120.108
Knowledge that the Government has Asserted that a Particular Asset
is Subject to Forfeiture
|
Generally an attorney will have actual knowledge that the
government has asserted a claim that an asset is subject to
forfeiture based upon some proceedings instituted by the
government. Normally the government will do this by initiating
civil forfeiture proceedings against the asset, filing a lis
pendens against real property, applying for pre-indictment or
pre-conviction restraining orders under a criminal forfeiture
statute, or obtaining an indictment containing a forfeiture
count.
A civil forfeiture proceeding, if known to an attorney, will
establish actual knowledge of the forfeitability of any assets
which are the subject of the proceeding since such assets must be
specifically identified in the complaint. This is because in a
civil forfeiture proceeding the res is the defendant and it must
be sufficiently identified to allow seizure. A defendant, in most
cases, will not be able to transfer an asset which is the subject
of a civil forfeiture action to an attorney because the asset is
actually seized as soon as the proceeding is instituted. However,
in the rare case where a transfer takes place after the suit is
initiated but before the seizure occurs, an attorney who has
knowledge of the civil forfeiture action has actual knowledge
that the particular asset is subject to forfeiture.
For the same reason an attorney has actual knowledge of the
forfeitability of any asset which he/she knows is subject to a
restraining order based upon a forfeiture allegation in a
criminal proceeding. However, when the government asserts a claim
only by including a forfeiture count in an indictment and no
assets have been restrained, the return of the indictment by
itself will not necessarily establish actual knowledge that a
particular asset is forfeitable. It will depend upon how
specifically the asset is described in the forfeiture allegation.
There are essentially three means by which an indictment can
describe property that is alleged to be subject to forfeiture. It
may specifically describe the property, such as "ten shares of
stock in XYZ Corp. certificate nos. 1-10, purchased on January 1,
1985" or "account 12345 at First National Bank, Downtown Branch
in the name of the defendant." It can set forth a generic
description of certain property by amount and/or type, such as
"ten shares of stock in XYZ Corp." or simply "$200,000." Finally,
it can allege a broad all-inclusive description of property
subject to forfeiture by incorporating statutory language, such
as "any and all proceeds or profits of the criminal
enterprise."
If property is specifically described, an attorney
undoubtedly has actual knowledge of its forfeitability if he/she
is aware of the contents of the indictment. However, if property
is included in the forfeiture count only under a generic
description or by the inclusion of the all-inclusive statutory
language, an attorney does not have actual knowledge based on
that fact alone that any particular asset is forfeitable.
Instead, reasonable grounds to believe that an attorney has
actual knowledge that the asset is subject to forfeiture would
have to be based on evidence that the attorney knew the asset in
fact was from criminal misconduct. Of course, the fact that an
all-inclusive forfeiture allegation or a generic description was
included in the indictment would be relevant evidence to
establish such knowledge.
[new May 2010]
9-120.109
Knowledge that the Asset in Fact is from Criminal Misconduct
|
Regardless of whether any criminal or civil proceedings have
been instituted or whether a forfeiture count specifically
describes an asset, an attorney may have actual knowledge that an
asset in fact is from criminal misconduct. Evidence that the
attorney learned from the client or another involved in the
criminal activity that the asset was from an illegitimate source
would be compelling proof of the attorney's knowledge. Except
when the use of such communications involves compelled disclosure
of a confidential communications made during the course of
representation, such communications may be relied upon to
establish actual knowledge that the asset came from criminal
misconduct. For example, a client's testimony at trial or
voluntary disclosure of his/her communications with his/her
attorney may be relied upon to establish actual knowledge.
While generic or all-inclusive descriptions of property
alleged to be forfeitable by themselves do not establish actual
knowledge that a particular asset has been alleged to be
forfeitable, such descriptions are probative and relevant
evidence to prove that an attorney had actual knowledge that an
asset was from criminal misconduct. Also relevant is evidence of
the method or manner of payment and the attorney's knowledge of
the client's means of livelihood, so long as it is based on
information other than compelled disclosure of confidential
communications during the course of the representation.
Additionally, the presence or absence of an order restraining
assets is relevant. The existence of actual knowledge that an
asset is from criminal misconduct will have to be determined on a
case-by-case basis, taking into consideration all of the relevant
evidence. For example, if an indictment alleges that "all profits
and proceeds, including $200,000" are subject to forfeiture and
$200,000 has been restrained, there would have to be other
evidence of an attorney's knowledge of the source of his/her fee
to prove that he/she had actual knowledge that other cash he/she
received is from the criminal misconduct. In any event, if the
government sought to forfeit a fee in such a case without direct
evidence of the attorney's knowledge, the attorney could probably
obtain equitable relief. The attorney may be able to rely on the
fact that sufficient cash was restrained to establish that the
attorney reasonably was without cause to believe that other cash
is not subject to forfeiture.
On the other hand, if there were no order restraining a
sufficient amount of cash and the fee was paid in cash,
circumstantial evidence may establish that the attorney had
actual knowledge that the fee was paid from the proceeds of
criminal misconduct. For example, actual knowledge might be
established if a forfeiture count was based on a drug felony
charge, the fee was paid in a manner suggesting that it was the
proceeds of drug trafficking and there was evidence--other than
from confidential communications--that the attorney knew the
client had no legitimate source of income. This latter evidence
might exist where a pauper's petition was filed by the attorney
for the client in other proceedings, and the client had not been
gainfully employed since that time.
[new May 2010]
9-120.110
Reasonable Cause to Know that an Asset is Subject to Forfeiture
|
The standards set forth herein concerning proof of reasonable
cause to know express no opinion concerning the Department's
position as to what proof constitutes that a third party was
"reasonably without cause to believe that the property was
subject to forfeiture." Rather, the standards herein apply only
to the Department's policy of not seeking forfeiture in certain
cases unless there is evidence that an attorney had reasonable
cause to know. "Reasonable cause to know that an asset is
subject to forfeiture" means that there is information known to
an attorney which if known to a reasonably prudent attorney would
cause such attorney to believe that the asset is forfeitable.
Just as with actual knowledge, the starting point for deciding if
an attorney has reasonable cause is an examination of the
evidence of the attorney's knowledge of any legal proceedings
instituted by the government for forfeiture of assets.
If civil proceedings have been instituted by the government
to forfeit a particular asset or if a particular asset has been
restrained, as discussed above, an attorney who has knowledge of
the proceedings has actual knowledge of forfeitability. The same
is true if the asset is specifically described in an indictment
and the attorney knows the contents of the indictment. In these
situations, any requirement under these guidelines that there be
reasonable cause to know that an asset is forfeitable is met.
In other situations, all of the facts known to the attorney
will have to be considered. The quantum of evidence required to
establish reasonable cause to know will be substantially less
than that needed to establish actual knowledge. However, the mere
fact that an indictment alleges that "all profits or proceeds of
the criminal activity" are subject to forfeiture will not meet
the level of proof required to demonstrate reason to know.
Similarly, forfeiture allegations which describe assets
generically are sufficient to put an attorney notice that any
assets of the type described potentially are subject to
forfeiture, but they are not sufficient by themselves to
establish reasonable cause to know. An attorney who accepts any
such assets acts at his or her peril, and circumstantial evidence
may establish that there was reasonable cause to know. Perhaps
the only fact that prima facie would negate reasonable cause is
the presence of a restraining order. For example, if an
indictment alleges that $200,000 is subject to forfeiture, the
existence of a restraining order applying to that same amount of
cash could negate reasonable cause to believe that other money is
forfeitable. If the government sought to forfeit a fee in such a
case without direct evidence of the attorney's knowledge, the
attorney could probably obtain equitable relief. He/she may be
able to rely on the fact that sufficient cash was restrained to
establish that he/she reasonably was without cause to believe
that other cash is subject to forfeiture.
[updated October 2010]
9-120.111
Policy Concerning Issuance of Notification Letters to Attorneys
|
There may be cases where there are reasonable grounds to
believe that all of a defendant's assets are subject to
forfeiture. Under these guidelines, however, the only assets
which an attorney conclusively would be held to have actual
knowledge of forfeitability are those specifically named in the
indictment or subject to a restraining order or civil forfeiture
proceeding. There would have to be some evidence in addition to
the forfeiture allegations to establish actual knowledge of the
forfeitability of those assets which are not specifically
described or subject to restraint. As a result, it may be
extremely difficult in cases where all of a defendant's
illegitimate assets have not been discovered to prove actual
knowledge, even though there are grounds to believe no legitimate
assets exist. Although this may limit the cases in which actual
knowledge may be established, the Department believes it is
inappropriate to give written notice to an attorney that a
particular asset or that all assets belonging to a defendant are
from an illegitimate source or subject to forfeiture simply to
meet the requirement of actual knowledge imposed by these
guidelines.
Sending written notice of the forfeitability of assets that
are not specifically described or under restraint no doubt would
be attacked as impermissibly interfering with the qualified right
to counsel of choice. The argument could be made that if the
notice is not based upon a probable cause determination that the
assets are subject to forfeiture, it was sent only to harass the
attorney or cause him/her to abandon the case and not because the
asset legitimately is subject to forfeiture. Thus, the government
may be sidetracked into prolonged litigation which is only
ancillary to the criminal charges. Additionally, if there is
probable cause that a particular asset or all of a defendants
assets are forfeitable, the written notice is unnecessary. The
assets which are known to the government at the time of
indictment can be specifically described in the forfeiture count.
Including the assets in the indictment would not only have the
benefit of establishing knowledge, but also would allow a
restraining order to be obtained without a further showing.
Additional assets discovered after return of the indictment can
be included in a superseding indictment or can be subjected to a
restraining order by making an appropriate showing to the court.
Therefore, actual knowledge will be established by the
restraining order or the specific description in the indictment.
Perhaps the only situation in which some forfeitable assets
would not be covered in this manner is when there is evidence
that all assets belonging to a defendant are from criminal
activity, but the government has not been able to locate all of
them. In such cases, if there is probable cause to establish that
all of the defendant's assets acquired after a particular date
were from the criminal misconduct, the evidence could be
presented to the grand jury and an allegation to that effect
could be included in the forfeiture count. This allegation would
be relevant and probative to prove that an attorney had actual
knowledge that an asset he/she received was forfeitable. Actual
knowledge could be established by evidence, from sources other
than confidential communications, that the attorney knew the
asset he/she received was obtained by the defendant after the
date alleged in the indictment.
Another reason cautioning against written notice is that if
it is not routinely and uniformly given, it will be argued that
the government is targeting certain attorneys and attempting to
prevent them from representing criminal defendants in certain
cases. The Department does not have or endorse such a policy and
believes it is unwise to create even an appearance that such a
policy exists.
The limitation herein does not apply to written notice of the
government's intent to seek forfeiture of an asset when it has
been concluded that an attorney has actual knowledge--based on
facts and information other than that contained in the written
notice--that the asset is subject to forfeiture. However, where
the criminal case giving rise to the forfeiture has not been
concluded, such notice should be given only in extraordinary
cases and may not be given without the approval of the Assistant
Attorney General, Criminal Division.
[new May 2010]
[cited in USAM 9-119.010]
9-120.112
Discovery of Information Concerning an Asset Transferred to an
Attorney as Fees for Legal Services
|
Proceedings to forfeit an asset transferred to an attorney
may be instituted only after the requirements of these guidelines
and the approval of the Assistant Attorney General, Criminal
Division have been obtained. Of course, this requires that a
certain amount of information concerning the transfer of the
asset be known. The discovery of information concerning the
payment of a fee may be carried out as set forth in these
guidelines.
[new May 2010]
[cited in USAM 9-119.010]
9-120.113
Compelled Disclosure of Confidential Communications During the
Course of the Representation
|
As set forth above, actual knowledge of the forfeitability of
an asset, cannot be established by compelled disclosure of
confidential communications made during the course of the
representation. This limitation upon compelled disclosure of
confidential communications does not preclude the use of these
confidential communications when they are voluntarily disclosed.
For example, the testimony of the defendant at trial may be
relied upon. This limitation also does not preclude the use of a
subpoena to obtain non-privileged fee information, such as the
amount, source and method of payment. But the subpoena may not
seek to obtain any confidential communications.
This limitation on compelled disclosures does not recognize
or imply that all confidential communications between a client
and an attorney are protected either by that attorney-client
privilege or the constitutional right to counsel. Only those
confidential communications which meet all the requirements for
privilege or which relate to defense preparation are protected.
See, e.g., United States v. Carrillo, 16
F.3d 1046, 1050 (9th Cir. 1994); In re Auclair, 961 F.2d
65, 69-70 (5th Cir. 1992); United States v. Melvin, 650
F.2d 641, 645 (5th Cir. 1981); United States v. King, 536
F. Supp. 253, 264-65 (C.D.Cal. 1982). The Department imposes this
limitation in recognition of the fact that the need for clients
to make full and free disclosure to their attorneys outweighs the
detriment of placing limitation on the use of some non-privileged
communications in certain limited situations.
[new May 2010]
9-120.114
Subpoenas Issued to Attorneys to Obtain Fee Information
|
The Department requires that any grand jury or trial
subpoenas to an attorney for information relating to the
representation of a client must be authorized by the Assistant
Attorney General, Criminal Division. See USAM 9-13.410.
Information concerning the amount, source and method of payment
of a fee paid to an attorney is information "concerning the
representation of a client." Consequently, before a subpoena may
be issued for such information, each of the requirements of that
policy must be met. Most of these requirements should be easily
met when issuing a subpoena to an attorney for fee
information.
The requirements that the information be non-privileged and
relevant can be satisfied when the subpoena calls for fee
information. Generally, courts have held that fee information is
not privileged. See, e.g., Vingelli v. U.S.,
Drug Enforcement Agency, 992 F.2d 449, 452-54 (2d Cir. 1993);
In re Shargel, 742 F.2d 61 (2d Cir. 1984); In re
Ousterhoudt, 722 F.2d 591 (9th Cir. 1985); In re Special
Grand Jury (Harvey), 676 F.2d 1005 (4th Cir.), vacated and
withdrawn, 697 F.2d 112 (1982) (en banc); In re Grand Jury
Subpoena (Slaughter), 694 F.2d 1258 (11th Cir. 1982); In
re Grand Jury Proceedings, United States v. Jones, 517 F.2d
666 (5th Cir.), cert. denied, 449 U.S. 1083 (1981);
United States v. Strahl, 590 F.2d 10 (1st Cir. 1978),
cert. denied, 440 U.S. 918 (1979); United States v.
Haddad, 527 F.2d 537 (6th Cir. 1975), cert. denied,
425 U.S. 974 (1976). They also have recognized that fee
information may be relevant to a criminal case or investigation.
It may prove unexplained wealth which is relevant to show that a
defendant obtained substantial income from his/her illegal
activities. It may show that the fee for one or more alleged
conspirators was paid by another co-conspirator which is relevant
to prove "association in fact" or may lead to the discovery of
other co-conspirators. Finally, it may show the disposition of
forfeitable assets or lead to the discovery of forfeitable assets
which have been hidden by a defendant. The requirement that
reasonable attempts to obtain the information from alternative
sources must be exhausted will have to be considered on the facts
of each case, but it should pose no special problem. The
remaining two requirements, however, do involve some special
considerations.
The requirement that there be "reasonable grounds to believe
that the information sought is reasonably needed" is straight-
forward when the fee information is sought to prove association
in fact or unexplained income. But where the purpose of a
subpoena is solely or principally to obtain evidence relevant to
a forfeiture count, this requirement translates into reasonable
grounds to believe that the fee information is evidence of or
will lead to evidence either of the disposition of forfeitable
assets or the existence of hidden assets. This means that there
must be a basis to conclude that there are assets subject to
forfeiture which have not been identified or located. This may
exist, for example, if there is evidence that a defendant either
had no legitimate income or derived all of his/her income from an
illegitimate source at the time the fee was paid. It may also
exist if there is evidence that a defendant derived a certain and
substantial amount of income from his/her illegal activity, the
disposition or whereabouts of which are unknown, and he/she had
no substantial legitimate income at the time the fee was paid.
The final requirement is that the need for the information
must outweigh the potential adverse effects on the attorney-
client relationship. If the fee information is sought solely or
principally to obtain evidence concerning a forfeiture count, the
availability of post-judgment discovery may mean that the need to
subpoena the information, particularly at trial, does not
outweigh the potential for disqualification.
[new May 2010]
9-120.115
Post-Judgment Discovery Proceedings Under the Criminal Forfeiture
Statutes
|
The criminal forfeiture statutes provide that the court may
order that depositions be taken or that records be produced after
an order of forfeiture is entered in order to identify and locate
property declared forfeited. See 18 U.S.C. § 1467(k);
18 U.S.C. § 1963(k); 18 U.S.C. § 2253(l); 21 U.S.C.
§ 853(m); and, incorporating 21 U.S.C. § 853(m) by
reference, 18 U.S.C. § 982(b)(1); and 18 U.S.C. §§
793(h)(3) and 794(d)(3). Consequently, if an order of forfeiture
is entered covering property which is described generically or by
incorporation of the statutory language, the government may make
application to the court to obtain records, documents or
testimony concerning the identity and location of that property.
When an application is made for the deposition of an attorney or
the production of records by an attorney concerning the transfer
of assets for legal services, the requirement that there be
reasonable grounds to believe that the fee information will be
evidence either of the disposition of forfeited assets or lead to
the discovery of forfeited assets shall apply.
It should be noted that since these statutory proceedings
will occur after trial, the likelihood for any adverse impact
upon the attorney-client relationship will be diminished
substantially. In particular, the potential for disqualification
of the attorney from representation of the client because of the
need to testify at trial should not arise. Therefore, when fee
information is sought solely for purposes of forfeiture and it is
feasible, the discovery of such information should be deferred to
the post-trial proceedings rather than proceeding by way of grand
jury or trial subpoena.
[new May 2010]
9-120.116
Agreements to Exempt from Forfeiture an Asset Transferred to an
Attorney as Fees for Legal Services
|
Agreements may be entered into to exempt from forfeiture an
asset transferred to an attorney as fees for legal services, but
only with the prior approval of the Assistant Attorney General,
Criminal Division. Agreements may be approved only if: (1) there
are reasonable grounds to believe that the particular asset is
not subject to forfeiture; and (2) the asset is transferred in
payment of legitimate fees for legal services actually rendered
or to be rendered.
Efforts should be made to assist in identifying the assets,
if any, belonging to a defendant which are not subject to
forfeiture. In this regard, any proffer of evidence by an
attorney as to the source of the assets may be relied upon.
However, an agreement to exempt fees based on such a proffer must
contain an express condition that the agreement is not binding if
full and accurate disclosure has not been made or if the proffer
is false or misleading.
In determining whether an asset is being transferred in
payment of a legitimate fee, the amount of the fee may be taken
into consideration. However, the focus should not be on whether
the fee is reasonable. The focus must be on whether it is a
legitimate transaction or a sham transaction designed to shield
assets from forfeiture. If the transaction is legitimate, the
fee, even if it appears exorbitant, may be exempted if it is paid
from a source that meets the first requirement. Conversely, a
fee, even if reasonable, may not be exempted from forfeiture by
agreement if the first requirement is not met. Any agreement to
exempt a fee from forfeiture, however, may be limited to a
specific amount if there is a basis to believe that only assets
in that amount are not subject to forfeiture.
[new May 2010]
[cited in USAM 9-119.010]
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