Considerations For Defending Against Federal Civil Asset Forfeiture Action

• Published date: 16 February 2024
• Subject Matter: Real Estate and Construction, Criminal Law, Real Estate, White Collar Crime, Anti-Corruption & Fraud
• Law Firm: Cohen & Gresser
• Author: Mr Jeffrey I Lang and Luke Appling

The federal asset forfeiture program is a significant component of the Department of Justice's strategy for disrupting alleged criminal activity, and increasingly is being used in corporate fraud and other financial crime cases. See, e.g., Dep't of Justice, Asset Forfeiture Program, FY 2021 Performance Budget Report to Congress, at p. 10.

Asset forfeiture, however, is not confined to criminal proceedings. Under the federal forfeiture statutes, the Department of Justice is authorized to seek civil forfeiture of property connected to a range of unlawful activities.

A civil forfeiture proceeding poses an immediate and permanent threat to the property rights of everyone with an interest in the subject property, regardless of culpability or even awareness of any alleged criminal activities, as well as unique procedural challenges and complexities.

Federal civil forfeiture practice raises far too many issues and complexities to be comprehensively addressed in this article. Instead, we'll focus on the critical issues that property owners and their counsel ought to be aware of at the outset of an action.

A Brief Background of Forfeiture

The Department of Justice maintains that criminal and civil forfeiture not only "serve the same purposes," but that they also "have similar procedural safeguards." Civil Asset Forfeiture: Purposes, Protections, and Prosecutors Money Laundering and Asset Recovery Section, Criminal Division, U.S. Department of Justice, Dep't of Just. Manual Comment. 9-119.000A.

While criminal and civil forfeiture are founded on the same purpose of disrupting unlawful activity, they are governed by very different substantive and procedural mechanisms'and the effectiveness of civil forfeiture procedural safeguards are hardly commensurate with the protections in the criminal context. Criminal forfeiture represents a post-conviction punishment, and therefore is imposed only after the defendant has been convicted beyond a reasonable doubt. And criminal forfeiture is limited to the convicted defendant's interest in the subject property. See 21 U.S.C. '853, 982.

In contrast, a civil forfeiture action is not directed at alleged criminals, nor even the owners of the property at issue. Instead, a civil forfeiture proceeding is an action in rem against property which allegedly is connected to or derived from some specified unlawful activity.

The proceeding is not limited to the interests of the persons who committed, participated in, or even knew about the unlawful acts. See 18 U.S.C. '981.

The premise of a civil forfeiture action is that any and all ownership interests in the named property were vitiated at the time of the unlawful activity, whether or not the property owners themselves were culpable. ("All right, title, and interest in property described in subsection (a) of this section shall vest in the United States upon commission of the act giving rise to forfeiture under this section."); see also United States v. PetroSaudi Oil Servs. (Venezuela) Ltd., 70 F.4th 1199, 1210 (9th Cir. 2023) ("in civil forfeiture actions, a court exercises in rem jurisdiction and must 'adjudicate the rights of the government to the property as against the whole world'") (citation omitted).

The government need not convict anyone, nor prove that the property owners were even aware of unlawful activities, to prevail in a forfeiture action. In general, if the government establishes that the property at issue was involved in unlawful activity, the property owners will lose their interests unless they prove the affirmative defense of innocent ownership.

In effect, the typical presumption of the American legal tradition'that the government must prove culpability to deprive ownership rights'is turned on its head, as the property owner is required to prove innocent ownership simply to retain their property interests. Moreover, federal civil forfeiture claims are subject to unique procedural rules, which have significant implications and present serious pitfalls.

The Risks and Complexities of Civil Forfeiture Actions

A civil forfeiture action poses an array of risks that must be carefully navigated. A thorough understanding of the substantive and procedural issues arising from a civil forfeiture action is critical.

And because property is subject to forfeiture only if it is traceable or substantially connected to alleged unlawful activity, it often is important to dissect related financial transactions.

Finally, counsel should look for strategic opportunities, not only to defeat a civil forfeiture action on the merits, but to minimize impairment of property rights during the pendency of the action.

The Scope of Civil Forfeiture May Be Broader Than the Alleged Damages or Unjust Enrichment Arising From the Unlawful Activity. The scope of a forfeiture claim may be significantly broader than the alleged damages or unjust enrichment attributable to unlawful activity. For example, Section 981(a)(1)(A) authorizes forfeiture of property involved...