In a major victory for defendants accused of criminal violations of False Claims statutes, federal health care laws and banking laws, on March 30, 2016, the United States Supreme Court in Luis v. United States, 578 U.S. ___ (2016), struck down the Court of Appeals for the Eleventh Circuit's affirmation of a trial court order freezing untainted, “substitute” assets. The Supreme Court ruled that preventing defendants from using untainted property to pay defense counsel violated the Sixth Amendment’s right to secure their counsel of choice. As a result, defendants are now better able to use assets unrelated to criminal allegations to hire defense counsel and mount a strong defense.
Before the Luis ruling, prosecutors used their broad statutory authority for pretrial asset restraint as a tactical advantage. When indictments alleged false claims against the government, health care fraud, or banking violations, 18 U.S.C. § 1345 allowed courts, before trial, to freeze not only the proceeds of the alleged crime and assets traceable to the crime, but also the defendant’s wholly unrelated assets that amounted to “property of equivalent value” to the tainted assets. In banking, false claims, and health care indictments—which often allege multi-million dollar losses—pretrial freeze orders covering these “substitute” assets often precluded defendants with meager unfrozen assets from retaining qualified defense counsel.
In a 5-3 plurality opinion, Justice Stephen Breyer recognized the dire strategic disadvantage such freeze orders created for criminal defendants. The Court held that “the pretrial restraint of legitimate, untainted assets needed to retain counsel of choice violates the Sixth Amendment.” The Court recognized the important difference between assets traceable to the alleged crime and, thus, subject to pretrial freezing, and other, unrelated assets belonging to the defendant. It explained that “[t]he property at issue here, however, is not loot, contraband, or otherwise ‘tainted.’ It belongs to the defendant.” Justice Breyer further held that this distinction “… is thus an important one, not a technicality. It is the difference between what is yours and what is mine.”
As a result of the Luis decision, defendants facing indictment for False Claims, health care, and banking violations will be much better able to retain counsel of their choice and advance a formidable defense. Likewise, defense counsel should be prepared to demand strict, evidence-based tracing of all assets subject to a freeze order to ensure that only “tainted” assets are restrained from use for retaining counsel.