SCOTUS Holds Pre-Trial Freeze Of Defendant’s “Untainted” Assets A Violation Of Sixth Amendment

Posted On Thursday, April 14, 2016

In 2012, a federal grand jury indicted Sila Luis, along with two other individuals, for paying and conspiring to pay kickbacks for patient referrals and conspiring to defraud Medicare. Allegedly, Luis was orchestrating a Medicare fraud scheme that involved giving kickbacks to nurses for recruiting patients who enrolled with her home healthcare companies. Patients who did enroll were also allegedly paid a kickback. Moreover, Luis’ home healthcare companies allegedly billed Medicare for either unnecessary or unprovided medical services to patients in the home healthcare network. The government alleged that, even though Medicare had paid out an astonishing $45 million to Luis over the course of her alleged fraudulent activity, her total assets were valued at just $2 million at the time of her indictment.

Hoping to preserve the availability of Luis’ assets for potential restitution and the payment of fines if Luis was convicted, the government brought a civil action under 18 U.S.C. 1345, which allows for a pretrial motion to restrain assets of a defendant accused of particular types of criminal fraud, such as those underlying Luis’ indictment. Accordingly, upon the government’s request, the District Court for the Southern District of Florida issued a pretrial order to restrain all of Luis’ assets, including those substitute assets not directly connected to the alleged crimes. Luis appealed to the Eleventh Circuit Court of Appeals, arguing that restraining her “untainted” assets prevented her from hiring a criminal defense attorney of her choosing, in violation of her right to counsel under the Sixth Amendment to the Constitution. In arguing that the order was constitutional, the government asserted that Luis’ Sixth Amendment rights do not give her a right to counsel that she cannot afford, and that the government has a strong interest in ensuring money is available to fulfill a criminal judgment, whether from directly forfeitable assets or substitute assets.

The Eleventh Circuit affirmed the district court’s decision, and the Supreme Court granted a writ of certiorari on June 8, 2015 to resolve the circuit court split on the question of whether the pretrial restraint of assets that are not directly related to the underlying fraud and are needed to retain defendant’s counsel of choice violate the Fifth and Sixth Amendments. In a plurality opinion with a 5-3 ruling, Chief Justice Roberts and Justices Breyer, Ginsburg, and Sotomayor voted to upend the judgment, and Justice Thomas concurred in a separate opinion. Writing for the Court’s main opinion, Breyer reasoned that although a defendant’s right to counsel is not unlimited, it is fundamental and protects Luis from a court freezing her “untainted” assets. According to the Court, Luis’ right to counsel should not be undermined or outweighed by the governmental interest of ensuring a defendant’s assets are available to pay fines or restitution.

The impact of the Luis ruling remains unclear, however, considering that the government remains free to restrain assets connected to the underlying crime, and courts remain free to use tracing rules to differentiate tainted from untainted assets if and when they appear intermingled. Nonetheless, the Luis decision remains a win for the criminal defense bar.