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United States v. Peter Monsanto

decided: July 1, 1988.

UNITED STATES OF AMERICA, APPELLEE,
v.
PETER MONSANTO, DEFENDANT-APPELLANT



Rehearing in banc of appeal from order entered in the United States District Court for the Southern District of New York, Robert J. Ward, J, denying appellant's motion regarding the restraint and "relation back" provisions of Comprehensive Forfeiture Act of 1984, 21 U.S.C. §§ 853(c), 853(e)(1)(A). Monsanto challenges the order on the ground that it deprived him of funds needed to retain defense counsel of choice. Vacated and remanded.

Feinberg, Chief Judge, Oakes, Meskill, Newman, Kearse, Cardamone, Pierce, Winter, Pratt, Miner, Altimari and Mahoney, Circuit Judges.

Author: Per Curiam

Per Curiam:

This is an appeal from an order of the United States District Court for the Southern District of New York, Robert J. Ward, J., denying a motion to vacate or modify an ex parte post-indictment restraining order entered pursuant to a provision of the Comprehensive Forfeiture Act of 1984 (CFA), 21 U.S.C. § 853(e)(1)(A) and for a declaration that fees paid to appellant's defense counsel would be exempt from post-conviction forfeiture pursuant to the "relation back" provision of the CFA, 21 U.S.C. § 853(c). The appeal was originally heard by a panel of the court, 836 F.2d 74 (2d Cir. 1987), and has been reheard in banc.

The relevant facts of this case, which are described in greater detail in the panel opinion, are as follows. In an indictment unsealed in July 1987, Peter Monsanto was indicted on various RICO, narcotics, continuing criminal enterprise and firearms charges. The indictment specified two parcels of residential real property, valued at $335,000 and $30,000, as well as $35,000 in cash, as "constituting and derived from the proceeds" of violations of Title III of the Comprehensive Drug Abuse Prevention and Control Act of 1970, 21 U.S.C. § 801 et seq., and thus subject to forfeiture pursuant to 21 U.S.C. § 853(a). The district court entered an ex parte restraining order pursuant to 21 U.S.C. § 853(e)(1)(A) prohibiting Monsanto from transferring or encumbering the residential properties.

In August 1987, Monsanto moved to vacate or modify the restraining order, seeking use of the restrained assets to retain private trial counsel and a declaration that fees paid to such counsel would be exempt from post-trial forfeiture. He argued that Congress did not intend the CFA to apply to property needed to pay legitimate attorney's fees and that if the statute did apply to such property it would violate his sixth amendment right to counsel of choice. He challenged not only the post-indictment restraint provision, 21 U.S.C. § 853(e)(1)(A), but also the post-conviction "relation back" provision, 21 U.S.C. § 853(c), which allows the government to seek post-conviction forfeiture of property transferred to third persons, unless such persons establish that they were bona fide purchasers for value who at the time of the purchase were reasonably without cause to believe that the property was subject to forfeiture.

The district court refused to vacate the restraining order, although it acknowledged that the effect of the order was to render Monsanto indigent. The court ruled that it was not prepared to find the forfeiture provisions of the CFA unconstitutional as applied to attorney's fees and that Congress did not intend to exempt such fees from application of the statute. It also denied Monsanto's request for a declaration that fees paid to defense counsel would be exempt from post-conviction forfeiture. The court indicated, however, that it would allow invasion of the forfeitable assets to pay Monsanto's counsel of choice to the extent of the rates established by the Criminal Justice Act, 18 U.S.C. § 3006A (CJA).

Monsanto brought an expedited appeal and a panel of this court issued an opinion in December 1987, with one judge dissenting. 836 F.2d 74 (2d Cir. 1987). The panel concluded that the post-indictment restraint and post-conviction forfeiture provisions of the CFA can apply to funds needed to pay legitimate attorney's fees. The panel held, however, that notice and a pre-trial hearing--at which the government has the burden of demonstrating the likelihood that the assets the government seeks to restrain are forfeitable--are constitutionally required for the government to restrain assets needed to pay a defendant's counsel of choice. The panel held that where the government fails to meet such a burden any funds used to pay legitimate attorney's fees would be exempt from post-trial forfeiture. 836 F.2d at 84.

The case was remanded and the district court held a hearing as required by the panel opinion. Following the hearing, the district court ruled that the government had met its burden of demonstrating the likelihood that the restrained assets were forfeitable and that the restraining order therefore need not be lifted. Monsanto's trial commenced in February 1988 and is still in progress in the district court. We are told that at trial Monsanto is represented by counsel appointed under the CJA.

In January 1988, this court voted to rehear the appeal in banc, and we heard oral argument on March 30, 1988. As is indicated by the separate concurring opinions, a majority of the members of the in banc court, albeit for varying reasons, agree that the order of the district court denying Monsanto's motion should be vacated and the case remanded with instructions to modify the restraining order to permit Monsanto access to restrained assets to the extent necessary to pay legitimate (that is, non-sham) attorney's fees in connection with the criminal charges against him. A majority of the members of the court also agree that any such fees paid to Monsanto's defense counsel are exempt from subsequent forfeiture pursuant to 21 U.S.C. § 853(c).

The order of the district court is vacated and the matter is remanded to the district court for further proceedings consistent with this opinion.

FEINBERG, Chief Judge, with whom Oakes and Kearse, Circuit Judges, join, concurring:

I concur in the holding of the court because I believe that the post-indictment restraint and post-conviction "relation back" provisions of the CFA conflict with the right of criminal defendants to select their own counsel. To the extent these provisions prevent an indicted defendant who would otherwise be able to retain counsel of choice from doing so, they are unconstitutional. I do not believe that the hearing envisioned in the panel opinion, 836 F.2d 74, is sufficient to overcome the constitutional infirmities.

The sixth amendment right to counsel of choice is a fundamental right that serves to protect other constitutional rights. It is a key element in our system of criminal justice and distinguishes that system from others that do not allow individuals the chance to resist in a meaningful way the imposition of government power upon them. Therefore, the right to counsel of choice cannot be infringed unless a compelling governmental purpose outweighs it. Many of the cases that allow limitations on the right to counsel of choice deal only with partial limitations or infringements, such as preventing a defendant from substituting counsel once the trial has begun, see, e.g., United States v. Paone, 782 F.2d 386, 392 (2d Cir.), cert. denied, 479 U.S. 882, 107 S. Ct. 269, 93 L. Ed. 2d 246 (1986), or disqualifying a particular lawyer, see, e.g., United States v. DiTommaso, 817 F.2d 201, 219-20 (2d Cir. 1987). In contrast, the right in this case is destroyed almost completely by depriving the defendant of the means to retain counsel of choice prior to the commencement of trial. Therefore, one would suppose that the governmental justification for such drastic action is overwhelmingly persuasive.

The fact is just to the contrary. The suggested governmental interests that are served by restraining, and permitting the ultimate forfeiture of, assets that are needed to pay attorney's fees are not all that compelling. The government's interests are that assets it seeks to obtain not be dissipated in the relatively brief period from indictment to possible conviction and that an alleged criminal not be able to use his economic power obtained from illegal activities. As to the former, the government's claim to the disputed assets at the time of restraint is only conditional, since under the CFA the government's ownership interest in the assets is not determined until the outcome of the criminal prosecution. This is not to say that the government has no claim to these assets at all, but only that the claim is not sufficiently strong to prevent those assets from being spent on an accused's defense when the accused has no other funds available. Moreover, it must be remembered that in this sixth amendment context, the government is not prevented from freezing an indicted defendant's other assets--those not necessary for payment of counsel--so that there will be no dissipation or concealment of those.

To the extent that the government seeks to strip an accused of the economic power he obtained from alleged illegal activities, this interest is weak in the context before us. As I have just indicated, defendants' assets generally are a fair target for the government. We are concerned here with only one aspect of economic power, the power to hire an attorney in relation to the criminal prosecution. Of course, weakening the ability of an accused to defend himself at trial is an advantage for the government. But it is not a legitimate government interest that can be used to justify invasion of a constitutional right. Our holding does not allow a criminal to retain his illgotten economic power after conviction. It frees assets only when they are used to pay legitimate attorney's fees and when no other assets are available. It does not allow defendants to shelter untainted assets by paying a lawyer with tainted property first. Thus, if the accused is ultimately convicted, the only assets our holding will have saved from forfeiture are assets that have been spent on defense. Admittedly, the government does have some interest in preventing criminals from using ill-gotten economic power to hire attorneys, but that interest simply does not outweigh an accused's constitutional right to counsel of choice.

The government argues that since United States v. Salerno, 481 U.S. 739, 107 S. Ct. 2095, 95 L. Ed. 2d 697 (1987), held that a defendant may be detained pending trial, the restraint on a defendant's property here (as opposed to his liberty) must be permissible. The argument seems persuasive at first blush, but on further analysis it is not. Salerno stands for the proposition that an accused's liberty interest may sometimes be overcome by the compelling government interest in coping with an immediate threat to public safety. Here there is no government interest anywhere near as compelling as that. Nor is the restraint here on property alone. The restraint affects the right to counsel of choice, which in turn affects important liberty interests.

Therefore, the statute as applied below is unconstitutional. The sixth amendment mandates that the district court, in evaluating a restraining order, permit a defendant access to sufficient funds to pay the legitimate costs of his defense. On remand, the court must permit invasion of the restrained assets to the extent necessary to provide Monsanto with sufficient funds to retain counsel of choice. The government must also be prohibited from later seeking forfeiture of fees paid to Monsanto's counsel of choice. On the facts before us, the "relation back" provision of 21 U.S.C. § 853(c) has the same effect as a restraining order when applied to attorney's fees, since practical considerations will keep an attorney from accepting fees based upon the contingency of success at the criminal trial.

Our holding does permit some who have engaged in criminal activity to obtain a particular attorney solely because they have gained economic power through crime. And, it may be true (although unfortunate) that greater financial power frequently buys the ability to present a stronger and more thorough defense. The small societal cost of allowing criminals to use their illegally obtained wealth to hire an attorney, however, is the price we must pay for protecting the rights of the innocent, who might otherwise be deprived of legitimate economic power in waging a full defense. It is a cost of our adversarial system, which places great value on protecting the rights of the accused. The trouble with the statute, as applied in this case, is that it deprives defendants of their economic power to hire an attorney before they are proven to be criminals.

It is true, as the dissenting opinion of Judge Mahoney points out, that other circuits, although not without disagreement within the circuit, have held the statute as applied here constitutional. For the reasons set forth above, I respectfully disagree with the reasoning of those opinions.

The government must prove that an accused is guilty beyond a reasonable doubt. It must do this by obtaining convincing evidence of the defendant's guilt, not by preventing the defendant from retaining counsel of choice. As Judge Rubin said concurring in United States v. Thier, 801 F.2d 1463, 1477 (5th Cir. 1986), modified, 809 F.2d 249 (1987):

The Government should not be permitted to cripple the defendant at the outset of the [trial] by depriving him of the funds he needs to retain counsel. . . .

I agree.

WINTER, Circuit Judge, with whom Judges MESKILL and NEWMAN join, concurring:

I believe it unnecessary to address the constitutional issues reached by my colleagues because I conclude that: (i) the statute in question does not permit the pre-conviction restraint of funds needed by a defendant to make ordinary lawful expenditures, including expenditures to retain private legal counsel; and (ii) expenditures expressly authorized by the district court for such purposes are not subject to post-conviction forfeiture.

The relevant provisions of the Comprehensive Forfeiture Act, Pub. L. No. 98-473, 98 Stat. 2040 (1984), are drafted in permissive--"may"--rather than mandatory--"shall"--terms. See 18 U.S.C. § 1963(e) (Supp. IV 1986); 21 U.S.C. § 853(e)(1)(A) (Supp. IV 1986). Because of the "may" language and the lack of any evidence of congressional intent to the contrary, I read the Act to vest district courts with the discretionary power to restrain assets identified in an indictment as subject to forfeiture. The exercise of that discretion is to be guided by traditional equitable principles that balance the relative hardships to the parties. The government has no interest derived from the Act in preventing a defendant from making ordinary lawful expenditures during the period from indictment to conviction, including expenditures for the retention of private counsel. Similarly, the forfeiture provisions governing transfers to third parties are also discretionary, 18 U.S.C. § 1963(a)(3) (Supp. IV 1986); 21 U.S.C. § 853(c) (Supp. IV 1986), and at the very least, must exempt from forfeiture any payments authorized by the court under Section 853(e)(1). If that interpretation is correct, the due process and sixth amendment issues need not be addressed. I therefore concur in the judgment of the court. My reasons follow.

I

The so-called restraint provision of the Act, 21 U.S.C. § 853(e)(1) provides in pertinent part:

Protective orders

(1) Upon application of the United States, the court may enter a restraining order or injunction, require the execution of a satisfactory performance bond, or take any other action to preserve the availability of property described in subsection (a) of this section for forfeiture under this section--

(A) upon the filing of an indictment or information charging a violation of this subchapter or subchapter II of this chapter for which criminal forfeiture may be ordered under this section and alleging that the property with respect to which the order is sought would, in the event of conviction, be subject to forfeiture under this section; . . .

(emphasis added).

I am frankly puzzled why a statutory provision with such permissive language has been read by so many courts to authorize as a routine matter, much less require, the most draconian of restraints on a defendant's assets without giving any consideration to the hardship such a restraint imposes. Indeed, the established canon of statutory construction is to favor the retention of full equitable powers by courts absent a clear statement of a contrary legislative intent. Unless Congress "in so many words, or by a necessary and inescapable inference, restricts the court's jurisdiction in equity, the full scope of that jurisdiction is to be recognized and applied." Porter v. Warner Holding Co., 328 U.S. 395, 398, 90 L. Ed. 1332, 66 S. Ct. 1086 (1946); accord, e.g., Amoco Prod. Co. v. Village of Gambell, 107 S. Ct. 1396, 1402-03, 107 S. Ct. 1396, 94 L. Ed. 2d 542 (1987); Brown v. Swann, 35 U.S. (10 Pet.) 496, 503 (1836) ("The great principles of equity, securing complete justice, should not be yielded to light inferences, or doubtful construction."). We thus should not lightly presume that Congress, in enacting the Act, intended to dispense with "the requirements of equity practice" and their "background of several hundred years of history," Hecht Co. v. Bowles, 321 U.S. 321, 329, 88 L. Ed. 754, 64 S. Ct. 587 (1944), a history "of which Congress is assuredly well aware." Weinberger v. Romero-Barcelo, 456 U.S. 305, 313, 72 L. Ed. 2d 91, 102 S. Ct. 1798 (1982).

Even if Congress had used the word "shall" instead of "may," there is caselaw holding that an exercise of equitable discretion would still be required. For example, the Emergency Price Control Act of 1942 provided that in certain circumstances "a permanent or temporary injunction, restraining order, or other order shall be granted without bond." Brown v. Hecht Co., 78 U.S. App. D.C. 98, 137 F.2d 689, 690 (D.C. Cir. 1943), rev'd sub nom. Hecht Co. v. Bowles, 321 U.S. 321, 88 L. Ed. 754, 64 S. Ct. 587 (1944). Nevertheless, the Supreme Court concluded "that 'shall be granted' is less mandatory than a literal reading might suggest." 321 U.S. at 328. The Court noted "that if Congress had intended to make such a drastic departure from the traditions of equity practice, an unequivocal statement of its purpose would have been made." Id. at 329.

In addition, the legislative history of the Act supports the conclusion that courts retain their full equitable powers in issuing orders under Section 853(e)(1). The Senate Report expressly indicates that district courts may hold hearings concerning restraints on a defendant's assets imposed under that Section. See S. Rep. No. 225, 98th Cong., 1st Sess. 191, 203, reprinted in 1984 U.S. Code Cong. & Admin. News 3374, 3386 ("This provision does not exclude . . . the authority to hold a hearing subsequent to the initial entry of the order and the court may modify the order or vacate an order that was clearly improper . . . ."). The legislative history is clear, however, that this hearing is not to inquire into the evidentiary strength or weakness of the government's case on criminality. Immediately after noting that a hearing may be held and "the court may modify the order," the Senate Report states :

However, it is stressed that at such a hearing the court is not to entertain challenges to the validity of the indictment. For the purposes of issuing a restraining order, the probable cause established in the indictment or information is to be determinative of any issue regarding the merits of the government's case on which the forfeiture is to be based.

S. Rep. No. 225, at 203, reprinted in 1984 U.S. Code Cong. & Admin. News at 3386.

It seems almost self-evident that if the purpose of the hearing is not to test the government's evidence of criminality, then its purpose must be to allow an informed balancing of the relative hardships on the parties according to traditional principles of equity with regard to pre-conviction restraints upon a defendant's assets. For reasons stated below, that balance should be struck so as to allow a defendant to continue to make ordinary lawful expenditures, including expenditures to retain private legal counsel. These expenditures should be controlled, however, to prevent the defendant from making unusual expenditures for luxuries in anticipation of a conviction and forfeiture, from executing sham transfers, and from using assets for criminal purposes. In short, the court may seize the assets of a defendant but should allow controlled ordinary lawful expenditures.

The Act authorizes preconviction restraint in order to protect the government's right to a postconviction forfeiture. In weighing the potential hardship on the government with regard to a preconviction restraint on a defendant's assets, therefore, we must scrutinize its interest under the Act in ultimately obtaining a forfeiture of those assets. Although the Act's relation-back forfeiture provision gives the government a nominal property right in potentially forfeitable assets, this property right is derived solely from the government's interest in crime control. For example, the government expressly disclaimed at oral argument any interest in criminal forfeitures under the Act as a means of raising revenue.*fn1 The mere fact that the assets ultimately forfeited after conviction may be less than if a total pre-conviction restraint had been imposed does not, therefore, contravene any purpose of the Act. Cases involving the seizure of property where revenue raising purposes are implicated are thus inapplicable. Similarly, United States v. Salerno, 481 U.S. 739, 107 S. Ct. 2095, 95 L. Ed. 2d 697 (1987), which upheld a restraint on the person of a defendant, was based on the government's interest in preventing that defendant from committing crimes in the pre-conviction period.

The Act provides for forfeiture only as a penalty designed to eradicate certain criminal organizations and to deter racketeering and narcotics trafficking. As the Senate Report explained:

Profit is the motivation for this criminal activity, and it is through economic power that it is sustained and grows. More than ten years ago, the Congress recognized in its enactment of statutes specifically addressing organized crime and illegal drugs that the conviction of individual racketeers and drug dealers would be of only limited effectiveness if the economic power bases of criminal organizations or enterprises were left intact, and so included forfeiture authority designed to strip these offenders and organizations of their economic power.

Today, few in the Congress or the law enforcement community fail to recognize that the traditional criminal sanctions of fine and imprisonment are inadequate to deter or punish the enormously profitable trade in dangerous drugs which, with its inevitable attendant violence, is plaguing the country. Clearly, if law enforcement efforts to combat racketeering and drug trafficking are to be successful, they must include an attack on the economic aspects of these crimes. Forfeiture is the mechanism through which such an attack may be made.

S. Rep. No. 225, at 191, reprinted in 1984 U.S. Code Cong. & Admin. News at 3374 (footnote omitted).

There is nothing in the language or legislative history of the Act indicating that Congress hoped to eradicate criminal organizations or to deter racketeering or narcotics trafficking by imposing financial penalties upon defendants before conviction and forfeiture. In the only passage remotely supporting a contrary view, the Senate Report stated that the restraint provision was intended only "to preserve the availability of a defendant's assets for criminal forfeiture and, in those cases in which he does transfer, deplete, or conceal his property, to assure that he cannot as a result avoid the economic impact of forfeiture." Id. at 196, reprinted in 1984 U.S. Code Cong. & Admin. News at 3379 (emphasis added). The "depletions" with which Congress was concerned were thus only those that enable a defendant to avoid the economic impact of a post-conviction forfeiture. Unlike unusual lavish expenditures to accelerate consumption in the pre-trial period, transfers to friends or relatives as a desirable alternative to forfeiture, or transfers for purposes of concealment, ordinary lawful expenditures do not enable a defendant to avoid the economic impact of a post-conviction forfeiture, because such expenditures would have been made without regard to the prospect of such a forfeiture. A pre-trial restraint on ordinary lawful expenditures on the other hand irreparably imposes the economic impact of forfeiture before conviction. Read as a whole, the legislative history ...


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