|9-120.100||Policy Limitations on Application of Forfeiture Provisions to Attorney Fees|
|9-120.101||Attorney Fee Forfeiture Guidelines|
|9-120.102||Forfeiture of Assets Transferred to an Attorney in a Fraudulent or Sham Transaction|
|9-120.103||Forfeiture of Assets Transferred to an Attorney for Representation in a Civil Matter|
|9-120.104||Forfeiture of Assets Transferred to an Attorney for Representation in a Criminal Matter|
|9-120.105||Discussion of Actual Knowledge and/or Reasonable Cause to Know|
|9-120.106||At the Time of the Transfer|
|9-120.107||Actual Knowledge of Forfeitability|
|9-120.108||Knowledge that the Government has Asserted that a Particular Asset is Subject to Forfeiture|
|9-120.109||Knowledge that the Asset in Fact is from Criminal Misconduct|
|9-120.110||Reasonable Cause to Know that an Asset is Subject to Forfeiture|
|9-120.111||Policy Concerning Issuance of Notification Letters to Attorneys|
|9-120.112||Discovery of Information Concerning an Asset Transferred to an Attorney as Fees for Legal Services|
|9-120.113||Compelled Disclosure of Confidential Communications During the Course of the Representation|
|9-120.114||Subpoenas Issued to Attorneys to Obtain Fee Information|
|9-120.115||Post-Judgment Discovery Proceedings Under the Criminal Forfeiture Statutes|
|9-120.116||Agreements to Exempt from Forfeiture an Asset Transferred to an Attorney as Fees for Legal Services|
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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]