A federal appeals court in Washington today refused to expand the U.S. Justice Department's ability to restrain assets in the United States based solely on a foreign official's allegation of a violation of the laws of a foreign country.
Three judges of the U.S. Court of Appeals for the D.C. Circuit unanimously ruled against the government's interpretation of a forfeiture provision that was part of the Patriot Act of 2001.
DOJ attorneys want to freeze assets of individuals, including Brazilian financier Daniel Dantas, and entities that include the Opportunity Fund and Tiger Eye Investments. At the request of Brazilian officials, the Justice Department in 2008 and again last year filed applications in federal district court in Washington seeking to restrain hundreds of millions of dollars.
Judge John Bates of the U.S. District Court for the District of Columbia ruled against the government in orders in March and May last year, saying he lacked the authority to sign off on the restraining orders. DOJ challenged the rulings on appeal and lost. The appeals court unanimously ruled today against the government.
The opinion was written by Judge Brett Kavanaugh and joined by Judges Judith Rogers and Merrick Garland. The opinion is here. (The National Law Journal wrote about the case here.)
The central issue in the case was whether a federal district judge has the power to enter a restraining order in the absence of a final judgment of forfeiture in the foreign country. DOJ attorneys argued that trial judges could freeze assets without first having a final judgment. The D.C. Circuit disagreed, saying that Congress understands the difference between "subject to forfeiture" and "subject to a forfeiture judgment."
"So under the Government’s interpretation, a U.S. citizen’s assets could be frozen for years—without any meaningful substantive judicial review in a U.S. court—based merely on the request of a foreign official and the prospect that the property owner might one day be found guilty or liable in a foreign court,” Kavanaugh wrote.
Kavanaugh said it would be difficult for Congress to enact such a significant measure without clearly articulating the purpose to do so. “Congress does not typically hide elephants in mouseholes, and the Government’s assertion of authority in this case qualifies as such an elephant,” the judge said.
In seeking reversal, the Justice Department made a policy argument that if the United States is unable to help other countries freeze assets, the government should expect the same treatment abroad. The provision at question has been used about a dozen times since it was created. It is not used in the national security cases.
If the Justice Department wants an expansion of power, talk to Congress, Kavanaugh said. DOJ attorney Jean Weld of the Asset Forfeiture and Money Laundering Section, who argued for the government in the appeals court, said in court that DOJ is working on draft legislation.
Nixon Peabody partner Kelly Kramer argued for the Opportunity Fund in the D.C. Circuit, and Andrew Lourie, a partner at Kobre & Kim, argued for Tiger Eye.
Assets of United States citizens can be seized and held without any "substantive judicial review" for years if seized for forfeiture under mere probable cause. (the courts have ruled that "4 years is not too long to wait" US v Phillips).
Forfeiture is becoming more and more pervasive in this country. To see the 700+ pages of property seized by our Government that it hopes to keep see "forfeiture.gov"
Posted by: folly | July 23, 2010 at 10:33 AM