The Civil Asset Forfeiture Reform Act of 2000 (CAFRA)--signed into law on April 25, 2000, by President Clinton and effective on August 23 of that year1--was characterized by a leading commentator as "the first significant reform of civil forfeiture procedure since the dawn of the Republic."2 This dramatic language is not surprising: Civil asset forfeiture is an area of the law that engenders considerable controversy. Indeed, the very concept of civil asset forfeiture evokes heated debate, which was on display during the consideration of CAFRA by Congress before its enactment. At a hearing on CAFRA, Congressman Henry J. Hyde, the chairman of the House Judiciary Committee, noted:
Civil asset forfeiture is a relic of a medieval English practice whereby an object responsible for an accidental death was forfeited to the king, who would provide the proceeds for masses to be said for the good of the dead man's soul. It is the inanimate object itself that is "guilty" of wrongdoing. Thus, you never have to be convicted of a crime to lose your property. You never have to be charged with any crime. In fact, even if you are acquitted by a jury of criminal charges, your property can be seized.3
Although CAFRA increased the due process safeguards for owners whose property has been seized and imposed limitations on the government's forfeiture power, it also significantly increased the number of statutes under which the government can seek civil forfeiture and enhanced the government's ability to add forfeiture claims to criminal indictments. With CAFRA's expansion of the government's authority to seek forfeiture, it is naive to think that only the traditional forfeiture targets--for example, money launderers and drug dealers--need worry about the forfeiture statutes.
Federal civil forfeiture is an unusual area of law, requiring application of the special rules for admiralty and maritime claims, the rules of civil procedure, and substantive criminal law. Moreover, until recently, the "claimant" fighting for return of his or her property always bore the burden of proving the property was not subject to forfeiture--and, under CAFRA, that burden remains on the claimant today in an important minority of substantive law areas.
Federal civil forfeiture is big business. It is a lucrative profit center for government, which recovers about one-half billion dollars annually in cash and property. The vast majority of forfeitures are not contested, for a variety of reasons: 1) the frequency and perils of parallel criminal investigations or prosecutions (which divert the claimant's attention and resources), 2) the modest amount of property involved in many forfeitures (which may allow for only Pyrrhic victories after protracted litigation), 3) the high percentage of contraband--particularly narcotics--forfeitures (the proceeds of which can never be retained even if the claimant avoids conviction), and 4) the daunting prospect of litigation itself (which involves federal issues and procedures unfamiliar to many lawyers).
Practitioners should not be deterred, however, by the novel federal civil forfeiture procedures. When a client has a significant asset seized by the federal government for forfeiture--whether that asset is a bank account, an automobile, a parcel of real property, or any other item of personal or real property--counsel should navigate through the process of seeking release and return of the asset. A forfeiture claimant cannot afford for his or her counsel to remain a stranger in this strange land. Many procedural deadlines are strict, and the consequences of missing those deadlines can be severe.
The Historical Roots
Federal civil forfeiture is based on the legal fiction that an inanimate object can itself be guilty of wrongdoing.4 In the early nineteenth century, federal forfeiture statutes were used to permit the government to seize maritime vessels that were engaged in piracy. Ships and cargo in violation of the customs laws were also the frequent subject of federal civil forfeitures.5 During Prohibition, the forfeiture statutes were used to confiscate the equipment and automobiles used for the manufacture and transportation of alcoholic beverages.6 Beginning in 1970, Congress passed a series of statutes that made civil and criminal forfeiture increasingly potent and commonly used law enforcement tools.7 These statutes were intended to impose economic sanctions on criminals and to remove the profit incentive from crime.8
Unlike criminal forfeitures--which require a prior criminal conviction9--a civil forfeiture does not even require that anyone be charged with a crime. Pre-CAFRA civil forfeiture turned traditional notions of due process upside down. To seize an asset, the government needed only "probable cause"--that is, reasonable grounds to believe the property was connected to illegal activity and subject to forfeiture. Probable cause could be established through hearsay and was typically supported by the affidavit of a law enforcement agent. The property was forfeited unless the owner, by a preponderance of admissible evidence, either showed that the connection to criminal activity did not exist or established a defense. Claimants fighting for return of their property bore the burden of proving their property was not subject to forfeiture10 and were required to post a "cost bond" to preserve the right to contest the forfeiture.11
Although civil forfeiture seemed to run counter to traditional notions of due process, the U.S. Supreme Court repeatedly rejected constitutional challenges to state and federal forfeiture statutes. In Calero-Toledo v. Pearson Yacht Leasing Company,12 a 1974 case, the Supreme Court upheld the forfeiture of a yacht owned by a leasing company after an apparently minuscule amount of marijuana--perhaps as little as one cigarette--was found onboard. The Court rejected the argument that the forfeiture was a taking without just compensation. The decision traced the history and application of forfeiture statutes and noted that "the innocence of the owner of property subject to forfeiture has almost uniformly been rejected as a defense." The Court acknowledged that a constitutional claim might have been raised if the owner was not only unaware of the wrongful conduct regarding its property but also had done all that could be expected to prevent the proscribed use of its property. Nevertheless, in this case, although the Court found that the yacht's owner was unwitting, the forfeiture was upheld because the owner had not shown it had done all it reasonably could to avoid having its property put to an unlawful use.
Twenty-two years later, in Bennis v. Michigan, the Supreme Court again rejected a due process challenge to a forfeiture scheme.13 Police arrested John Bennis after they observed him engaged in a sexual act with a prostitute while parked in an automobile he coowned with his wife. Bennis's wife argued against the forfeiture of her interest in the vehicle by asserting that she was unaware her husband would use their car to violate Michigan's indecency law.
The U.S. Supreme Court granted certiorari to review whether Michigan's forfeiture scheme deprived Bennis's wife of due process and whether the forfeiture was an unconstitutional taking. The Court reviewed the "long and unbroken line of cases [that] hold an owner's interest in property may be forfeited by reason of the use to which the property is put even though the owner did not know that it was to be put to such use."14 It then rejected the constitutional challenges, stating "the cases authorizing actions of the kind at issue are ‘too firmly fixed in the punitive and remedial jurisprudence of the country to be now displaced.'"15
In a concurring opinion, Justice Thomas wrote, "[E]vasion of the normal requirement of proof before punishment might well seem ‘unfair'….One unaware of the history of forfeiture laws and 200 years of this Court's precedent regarding such laws might well assume that such a scheme is lawless–a violation of due process…."16 He also observed that "[i]mproperly used, forfeiture could become more like a roulette wheel employed to raise revenue from innocent but hapless owners whose property is unforeseeably misused, or a tool wielded to punish those who associate with criminals, than a component of a system of justice."17
However, in 1998, only two years after Bennis, Justice Thomas wrote the majority opinion in United States v. Bajakajian,18 which held that a criminal forfeiture violated the Eighth Amendment's prohibition of excessive fines. In Bajakajian, U.S. Customs inspectors arrested Hosep Bajakajian as he was about to board an international flight while carrying $357,144 in cash that he failed to report.19 Bajakajian pleaded guilty, and the district court then held a bench trial on the forfeiture count of the indictment, which sought the forfeiture of "any property, real or personal, involved in such offense, or any property traceable to such property."20
The district court found that the entire $357,144 was "involved in" the offense of failing to report the cash but also found the money was not connected to any other criminal offense and Bajakajian was transporting it to repay a lawful debt. The district court found that a full rather than partial forfeiture would be "grossly disproportionate to the offense in question" and would therefore violate the excessive fines clause of the Eighth Amendment. As a result, the district court ordered a forfeiture of only $15,000.
The Supreme Court reached the same conclusion, finding Bajakajian's crime was solely a "reporting offense" that deprived the government only of information.21 However, Bajakajian was a criminal case, so the decision left unanswered the question of whether the same Eighth Amendment analysis could apply in a civil forfeiture action.
While the federal courts wrestled with the constitutional limits to forfeitures and, on occasion, rebuked the government's overreaching use of civil forfeiture statutes,22 a number of legislators, led by Congressman Henry Hyde, believed that the federal civil asset forfeiture scheme was too harsh and too unfair to innocent property owners in certain instances. During a series of hearings before the House Judiciary Committee, many innocent victims of civil forfeiture schemes told their horror stories.23 CAFRA--the culmination of the efforts and concerns of Hyde and others--was intended "to make federal civil forfeiture procedures fair to property owners and to give owners innocent of any wrongdoing the means to recover their property and make themselves whole after wrongful government seizures."
CAFRA added new statutes,24 amended certain other forfeiture statutes,25 left many others untouched, and superimposed itself on many of the existing procedures.26 Whatever one's views on the merits of its changes, there is no denying that CAFRA has dramatically changed the nature of federal civil asset forfeiture.
Property Subject to Civil Forfeiture
CAFRA subjects different classes of property to civil forfeiture. Some sections of the act look backward (seizing property that is the proceeds of past crimes),27 some look forward (seizing property intended to be used to commit or finance future crimes),28 and some look at the present (seizing property involved in or furthering ongoing crimes).29 "Proceeds" forfeitures are now extremely broad, because the list of crimes of which the tainted fruits can be seized includes virtually every serious federal crime.30 Thus, although CAFRA was a response to what certain legislators saw as an overreaching and abusive use of the civil forfeiture statutes, it has vastly expanded the number of cases in which the government can exercise civil forfeiture authority.
Consider, for example, an individual who operates a successful business that regularly imports clothing and textiles. A customs and border protection inspector intensively examines one of the many regularly scheduled shipments and makes a determination that the valuation of the goods on the entry documents is understated. The business owner assumes that, at worst, he will be notified that he owes additional duty on his goods.
One year later, federal agents appear at his home and business and seize his personal cars and the trucks used in his business as well as his business records. Later that day he discovers both his personal and business bank accounts have been frozen, and a notice is nailed to the door of his house notifying him of a lis pendens. Several days later he receives a certified letter from the U.S. Bureau of Customs and Border Protection notifying him that his seized property is subject to forfeiture because it constitutes or is derived from proceeds traceable to a violation of federal statutes prohibiting the entry of goods into the United States by means of false statements31 as well as the money laundering statutes.32 Ten days later, the U.S. Attorney's Office notifies him that he is the "target" of a criminal investigation and his wife, the bookkeeper for the business, is the "subject" of a criminal investigation. The reforms enacted under CAFRA touch nearly every aspect of his case.
To avoid joining the uncontested majority of civil forfeitures33 and to preserve his home and the chance of reclaiming any portion of his frozen accounts or seized vehicles, the business owner in the example must file a claim with "an appropriate official" within 35 days of the mailing of the certified letter.34 The claim must identify the specific property, state the nature of the claimant's interest, and be made under oath.35
It is important that all persons who have cognizable interests in a seized property file claims. Some claimants--for example, a spouse--may have defenses that are not available to other claimants and will thereby preserve some interest in a property. Fortunately, CAFRA eliminated the "pay to play" provision in prior forfeiture law, so claimants need not file a cost bond to contest a forfeiture.36
Once a claim is filed, the government has 90 days to file a civil forfeiture complaint.37 However, that complaint also must be filed within five years after the discovery of the offense giving rise to forfeiture or two years after the discovery that particular property was involved in the offense--whichever is later.38 The limitations period begins to run when the government learns of facts that should trigger an investigation leading to discovery of the property's involvement in the offense giving rise to forfeiture.39
A one-year limitations period applies when the government seizes fungible assets--that is, "cash, monetary instruments in bearer form, funds deposited in an account in a financial institution…or precious metals"--that do not constitute direct proceeds of a crime.40 These types of forfeitures are addressed in 18 USC Section 984. In Section 984 forfeitures, the government need not prove the seized property was the "identical" property involved in an offense; the government need only show the seized property was "found in the same place or account as the property involved in the offense that is the basis for the forfeiture."41 The shorter one-year limitations period in Section 984 was a tradeoff for eliminating the traditional link between the property seized and criminal activity, which must be proven in an action for proceeds forfeitures under 18 USC Section 981.42
The power to forfeit fungible property--typically cash--under Section 984 can have surprising consequences. Assume the business owner in the example retired six months before his bank accounts were frozen and had spent whatever funds remained in his accounts, yet later deposited new "clean" money into the accounts from the sale of stock that he and his wife purchased 30 years ago. Although the funds might not be the proceeds of criminal activity, Section 984 allows the government to seize some or all of the cash in the accounts, up to the amount of any "dirty" money that passed through the accounts within the year preceding the filing of the forfeiture complaint.
When the government decides to a file a forfeiture complaint, it must comply with the Supplemental Rules for Certain Admiralty and Maritime Claims.43 As one court noted, the "standard for the particularity of [forfeiture] complaints is more stringent than the pleading requirements of the [Federal Rules of Civil Procedure]."44 The required pleading must include the facts about the crime that is giving rise to forfeiture and describe the property to be forfeited "with reasonable particularity."45
When the government's theory is that the seized property constitutes criminal proceeds, the government must prove the underlying crime and the seized property's status as a tainted fruit of that crime. If the theory is that the seized property was used to commit a criminal offense, or facilitated or was involved in the commission of a criminal offense, the government also must prove "a substantial connection between the property and the offense."46 Thus, post-CAFRA federal forfeiture statutes are less likely to generate a Calero-Toledo scenario in which a leased yacht was forfeited because of one marijuana cigarette.47 This new standard is sure to generate heated disputes in many cases.
A civil forfeiture action is litigated under the Federal Rules of Civil Procedure, like any other federal civil litigation, with the exception of compliance with the Supplemental Rules for Certain Admiralty and Maritime Claims.48 However, a claimant is often faced with a parallel criminal investigation or prosecution. By the time a civil forfeiture case is filed, the government may have assembled a substantial amount of evidence for a criminal action, including grand jury testimony. CAFRA permits an attorney for the government in a civil forfeiture action to use any information obtained through a grand jury without first obtaining a court order.49
Discovery is frequently problematic when a claimant faces parallel civil forfeiture and criminal proceedings. It is nearly certain that a claimant in a civil forfeiture action will have to respond to interrogatories, document requests, and deposition questions. But submitting to such discovery while a target of a potential criminal indictment can be hazardous. If a claimant asserts the Fifth Amendment privilege against self-incrimination at a deposition in the civil forfeiture action, the government may obtain an order preventing the claimant from testifying in the forfeiture action, effectively making it impossible to defend the case.50 Also, the Ninth Circuit has held that "it is even permissible for the trier of fact to draw adverse inferences from the invocation of the Fifth Amendment in a civil proceeding."51 On the other hand, submitting to a deposition may provide the criminal prosecutor with discovery and statements that the prosecutor would not otherwise be able to obtain.
Civil discovery is theoretically a two-way street, and a claimant may use all the civil discovery devices to learn the basis of the government's position in the civil forfeiture action and a parallel criminal action. But CAFRA requires the district court to stay the civil forfeiture action if the government shows the civil discovery process "will adversely affect the ability of the Government to conduct a related criminal investigation or the prosecution of a related criminal case."52 Thus claimants may find themselves in the unenviable position of having their property seized and their bank accounts frozen, yet be unable to litigate a civil forfeiture action because the government has obtained a stay while it develops a related criminal case.
Fortunately, there is symmetry to CAFRA's stay provisions. A claimant can move to stay a forfeiture action if "continuation of the forfeiture proceeding will burden the right of the claimant against self incrimination."53 It remains to be seen just how much protection this will afford claimants in actual practice.
With or without a stay, parallel proceedings can result in a devastating blow for the claimant, because the Fifth Amendment's double jeopardy clause does not apply to civil forfeitures.54 A claimant could be convicted in a criminal action and then face resumption of the stayed civil forfeiture action. But the probability of a civil forfeiture action following a related criminal case may be remote, if only because CAFRA permits criminal forfeiture wherever civil forfeiture is authorized.55 In other words, CAFRA will likely lead to a greater number of criminal indictments that include forfeiture counts.
CAFRA does contain some unalloyed good news for claimants. One of CAFRA's most significant changes is a uniform "innocent owner" defense. The statute provides that "[a]n innocent owner's interest in property shall not be forfeited under any civil forfeiture statute."56 This is an affirmative defense that the claimant must prove by a preponderance of the evidence.57 To qualify to use the defense, a claimant who had an interest in the property before the alleged offense must show that the claimant did not know of the unlawful conduct and upon learning of the conduct did all that could reasonably be expected to stop it.58 A claimant with an interest in the property acquired after the alleged offense must be able to show that the claimant is a bona fide purchaser for value and "did not know and was reasonably without cause to believe that the property was subject to forfeiture."59
CAFRA explicitly provides that if an innocent owner has a partial interest in an otherwise forfeitable property, or a joint tenancy or tenancy by the entirety interest, the court may sever or liquidate the property so the government may gain possession of its forfeitable interest.
At a minimum, the innocent owner defense may serve to protect a leasing company's interest in a Calero-Toledo scenario and allow a future spouse like Bennis's wife and the spouse of the business owner in the example to preserve marital interests in seized property.
CAFRA also aids claimants by codifying the constitutional "excessive fines" defense that Bajakajian recognized in criminal forfeiture actions. The claimant has the burden of proving to the judge (not a jury) by a preponderance of evidence that the extent of the forfeiture is "grossly disproportional" to the gravity of the offense.60 If that proof is established, the trial court "shall reduce or eliminate the forfeiture as necessary to avoid a violation of the Excessive Fines Clause of the Eighth Amendment of the Constitution."61
Because forfeiture of the fruits of criminal activity can never be unconstitutionally "excessive," it is likely this defense is viable only in cases seeking forfeiture of property "involved in" or "facilitating" an offense (for example, a car, boat, or structure that is used in smuggling or narcotics trafficking). Since this type of forfeiture requires the government to prove a "substantial" connection between the seized property and the offense giving rise to forfeiture,62 claimants may find it beneficial to scrutinize the specific facts of their cases and identify extenuating and attenuating circumstances.
Given the complicated nature of many civil forfeiture cases, the economics involved in contesting a civil forfeiture can be daunting. Depending on the nature and amount of the seized property, the attorney's fees incurred to litigate a forfeiture action may be significant and could exceed any benefit that might be gained. Moreover, claimants may be hard pressed to pay their attorney's fees, particularly when their bank accounts have been frozen and the property they use to operate their businesses has been seized. Claimants may be equally wary of spending their money on defending a civil forfeiture action when they are concerned with a looming criminal indictment.
Although a civil forfeiture action is often punitive and thus quasi-criminal, there is no Sixth Amendment right to counsel.63 CAFRA provides some--but not much--relief. It authorizes a district court to appoint counsel to represent a claimant in a civil forfeiture proceeding if the claimant is unable to afford counsel and if the claimant has appointed counsel in a related criminal case.64
A claimant also may obtain pretrial release of the claimant's seized property if the claimant can demonstrate that 1) the property will be available at the time of trial, 2) the government's continued possession of the property will result in hardship to the claimant (such as preventing the functioning of a business or preventing the claimant from working), and 3) the hardship outweighs the risk that the property will be "destroyed, damaged, lost, concealed, or transferred if it is returned to the claimant during the pendency of the proceeding…."65 However, currency is excluded from a hardship release unless it "constitutes the assets of a legitimate business which has been seized."66
If the business owner in the example has the financial ability to contest the forfeiture, litigate the action to conclusion, and the good fortune to "substantially prevail," CAFRA permits the claimant to recover "reasonable attorney fees and other litigation costs reasonably incurred…."67 In cases involving seized currency, the government also is obligated to reimburse a successful claimant with interest from the date of seizure.68
Of course, claimants may recover their seized property if the government fails to prevail on its forfeiture claim. Still, property in federal storage facilities for lengthy periods of time tends to deteriorate. Although it may be cold comfort, CAFRA amends the Federal Tort Claims Act to permit vindicated claimants to recover damages for injury to their property.69
For those facing a looming civil forfeiture proceeding, a "take the money and run" approach is not the answer. CAFRA expands an obstruction of justice statute to make it a crime to take any action to impair the court's in rem jurisdiction over any property that is subject to civil forfeiture.70 Nor can a claimant defend a civil forfeiture action from abroad; CAFRA codifies the fugitive disentitlement doctrine.71
Although CAFRA represents a substantial and overdue overhaul of federal civil forfeiture law, its provisions, while providing a measure of relief for claimants, will benefit prosecutors as well. Some of the harsher aspects of forfeiture procedure have been ameliorated, but the types of crimes and properties to which forfeiture applies have been significantly expanded. Because of that expansion, because law enforcement has a direct financial interest in the forfeiture of property, and because the government need only link that property to criminal activity by a preponderance of the evidence, more people and companies than ever before will likely find themselves in that strange area of the law in which civil proceedings address criminal offenses, "guilty" properties, and "innocent" owners.