Tag: due process

An Illustrated Guide to Civil Asset Forfeiture

This cheerfully drawn comic from the Daily Signal does an excellent job highlighting the insanity of civil asset forfeiture.  It begins with a quintessentially American premise: a young person setting out on his own, all wordly possessions in hand, to start a new life as an adult.  Far be it from me to spoil the rest:


Arresting your property


If such stories seem unbelievable (it is a cartoon after all), be sure and check out the recent all-too-real stories of Joseph Rivers and Charles Clarke, for whom this cartoon surely hits too close to home.  Even they are only the tip of the iceberg.

New Mexico has taken the initiative to end this inherently abusive practice once and for all, and there are active reform efforts underway in California, Michigan, Montana, Oklahoma, Maryland, and others. But until every other state and the federal government join in, these incredible tales of legalized theft and policing for profit will continue.

FreedomWorks recently released a handy map accompanying their report on state forfeiture laws. How does your state stack up?  



Governor Hogan, Civil Asset Forfeiture Is Inherently Abusive

Despite recent gains around the country, civil asset forfeiture reform suffered a setback in Maryland when Gov. Larry Hogan (R) vetoed a bill that would have placed restraints on the state’s civil forfeiture regime.

Civil asset forfeiture is a process by which the government is able to seize property (cash, vehicles, homes, hotels, and virtually any other item you can imagine) and keep the proceeds without ever charging the victim with a crime.  The bill, SB 528, would have established a $300 minimum seizure amount, shifted the burden of proof to the state when someone with an interest in the seized property asserts innocent ownership (e.g. a grandmother whose home is taken when her grandson is suspected of selling drugs out of the basement), and barred state law enforcement agencies from using lax federal seizure laws to circumvent state law.

In vetoing the measure, Gov. Hogan claimed that restraining civil asset forfeiture “would greatly inhibit” the war on drugs in the midst of a heroin epidemic and interfere with joint federal/state drug task forces. Gov. Hogan admitted that asset forfeiture laws “can be abused,” but that their utility outweighed the risk of abuse. 

Each of these assertions is misguided.

FERC’s Prosecutorial Tactics

Joseph Rago of the Wall Street Journal reports on an outrageous enforcement action by the Federal Energy Regulatory Commission against brothers, Rich and Kevin Gates.  Excerpt:

[FERC] began demanding information and taking depositions in fall 2010. At first, the Gates brothers tried to adhere to the insider playbook and hired an attorney from White & Case, a D.C.-based law firm that does frequent business in front of FERC. The insular Washington energy bar trafficks in political connections, but those aren’t so useful for clients who maintain their innocence.

Things started to turn for Kevin Gates, he recalls, during his second full-day deposition with the lead FERC enforcement lawyers on the Powhatan matter, Steven Tabackman and Thomas Olson. “I would suggest that it was intimidation tactics, aggressive behavior, which I guess is natural for a federal prosecutor, maybe what you would expect,” he says. “But there were also a lot of questions asked and behavior that suggested to me that we were seeing the world very differently and—I would suggest—they didn’t know what they were talking about.”

Mr. Gates was asked to leave the room and sat in the hallway while his lawyer conferred with the feds. The lawyer emerged to relate what the FERC enforcement team had proposed: “Kevin’s a businessman, isn’t he? He knows that it’s cheaper to settle than it is to fight this investigation.” Right then, Mr. Gates says, “I realized that we had a big problem on our hands. This was unlike anything we’d ever seen before at a regulatory agency.”

The Gates brothers fired the white-shoe practice and brought on Bill McSwain of Drinker Biddle, a Philadelphia-area lawyer who “didn’t interface much with FERC. He also used to be a Marine sniper, so he had a different approach to the world.” Mr. McSwain introduced himself to FERC by calling their conduct contrary to “established law, as well as common sense,” and that was one of his subtler letters…

[FERC’s regulators] have specialized in retroactive punishments for conduct that was legal at the time. Most of these cases never go to court and end with settlements against politically disfavored defendants like J.P. Morgan (that one, like Powhatan, was led by Mr. Olson). Most companies roll over because their future business interests depend on preserving good regulatory graces and favorable FERC rulings. The Gates brothers are unusual in that their livelihoods are elsewhere, but the illogic, intimidation tactics and erosion of due process in their investigation are typical. [Emphasis added].

Read the whole thing.  As the article notes, most business people surrender to the bullying tactics of regulators.  By taking their case public and fighting back, the Gates brothers may not only win their case, but might establish some favorable legal precedents that will help others in the future.  And for that, they deserve our thanks.

For related Cato work on the erosion of due process, go here, here, here, and here.

NSA: Keeping Us Safe From…Dope Peddlers

The Justice Department says it is reviewing the Drug Enforcement Administration’s “Special Operations Division”—the subject of an explosive report published by Reuters on Monday. The SOD works to funnel information collected by American intelligence agencies to ordinary narcotics cops—then instructs them to “phony up investigations,” as one former judge quoted in the story put it, in order to conceal the true source of the information. In some instances, this apparently involves not only lying to defense attorneys, but to prosecutors and judges as well.

DEA is taking a predictable “nothing to see here” stance in its public responses to the story, but on its face this seems like a fairly brazen violation of the right to due process. As several legal experts quoted in the Reuters article point out, the accused in our criminal justice system cannot effectively defend themselves unless they know how evidence against them was obtained, and this program is clearly designed to deprive them of that knowledge. Moreover, at least some of the information channeled to police derives from FISA electronic surveillance, and 50 USC §1806 explicitly requires the government to notify persons whenever it intends to use information “derived from” such intercepts against them in any legal proceeding. Flouting that requirement is doubly troubling because, in light of the Supreme Court’s recent ruling in Amnesty v. Clapper, the only way for any court to review the constitutionality of intelligence programs is for a defendant to raise a challenge after being informed that they’ve been subject to surveillance.

One way they’re able to get away with this is by exploiting the fact that our justice system relies so heavily on plea bargains. Prosecutors stack up charges against defendants in hopes of effectively coercing them into waiving their constitutional right to a jury trial and accepting a plea deal, which even for the innocent may make more sense than risking a conviction that could lead to an enormously longer jail sentence. Conveniently, avoiding a trial also greatly reduces the risk that one of these “phonied up” investigations will be exposed.

Statutes of Limitations Apply Especially to Government Agencies

Statutes of limitations exist for good reason: Over time, evidence can be corrupted or disappear, memories fade, and companies dispose of records. Moreover, people want to get on with their lives and not have legal battles from their past come up unexpectedly. Plaintiffs thus have a responsibility to bring charges within a reasonable time of injury so that the justice system can operate efficiently and effectively – and that’s doubly so when the would-be plaintiff is the government, with all its tools for investigation and enforcement.

There’s a general federal statute of limitations, therefore, 28 U.S.C. § 2462, which protects liberty by prohibiting government actions “for the enforcement of any civil fine, penalty, or forfeiture … unless commenced within five years from the date when the claim first accrued.” In April 2008, however, the Securities & Exchange Commission sued the managers of Gabelli Funds LLC, a mutual fund, for civil penalties relating to conduct that ceased in August 2002, more than five years earlier. The SEC alleged that Gabelli Funds defrauded investors by failing to disclose that the fund was allowing a favored investor to engage in “market timing” – buying and selling mutual fund shares in a manner designed to exploit short-term price swings.

The U.S. Court of Appeals for the Second Circuit ruled that the SEC’s claim was nevertheless valid because courts should read into § 2462 an implicit “discovery rule” – a common exception to statutes of limitations that prevents fraud-based claims from accruing (“stops the clock” on the limitations period) until the plaintiff discovers, or with reasonable diligence should have discovered, the basis for the claim. Because of the allegedly fraudulent nature of the defendants’ actions, the court found that the government’s claim accrued not when their conduct ceased but a year later, when the violation was actually discovered.

The Supreme Court decided to review the case, and Cato filed an amicus brief supporting the defendants. We make three points:

First, Congress could not have intended a discovery rule to be implicit here because at the time the operative language in § 2462 was enacted, case law explicitly rejected a discovery rule – and since then Congress enacted numerous statutes with explicit discovery rules that would be superfluous if a discovery rule had already existed implicitly.

Second, reading a discovery rule into § 2462 violates the principle of separation of powers by judicially changing the statute’s meaning: When judges rewrite laws, those laws fail to meet the constitutional requirement of bicameralism and presentment (“how a bill becomes a law”).

Third, even if courts could alter rather than merely interpret the meaning of statutes, there’s no basis for creating a discovery rule for government enforcement actions. Government agencies with broad investigatory powers – indeed, whose purpose is to monitor regulatory compliance – don’t face the same difficulty as private plaintiffs in identifying causes of action which give rise to the discovery rule. Adding a discovery rule to § 2462 would create an indefinite threat of government lawsuits and invite agencies to review decades of past conduct of selectively disfavored companies and individuals – inevitably chilling innocent and valuable economic activity.

To preserve individual liberty in the face of an ever-burgeoning regulatory state and ensure constitutional separation of powers, we urge the Court to reverse the Second Circuit’s decision and hold that no discovery rule applies in Gabelli v. SEC.  The case will be argued at the Supreme Court on January 8.

Lawyers Can’t Game the Class-Action System at the Expense of Would-Be Plaintiffs

To discourage plaintiffs’ lawyers from trying to keep class-action lawsuits in state courts that have a reputation for trial awards and settlements that benefit those same lawyers, Congress passed the Class Action Fairness Act of 2005.

In relevant part, CAFA provides defendants with the right to move class actions to federal court where the claim for damages against them exceeds $5 million.  But can clever lawyers keep these cases out of federal court by simply “stipulating” that potential damages are less than $5 million — and before the named plaintiff is even authorized to represent the alleged class?

In The Standard Fire Insurance Co. v. Knowles, the named plaintiff in a putative insurance-recovery class action in Arkansas state court tried to avoid that removal to federal court by stipulating that his not-yet-certified class would not seek more than $5 million in damages at trial.  Notably, the stipulation is worded in such a way that it will not apply if the class definition is later altered.  Treating this stipulation as “binding,” however, implicates the Fifth Amendment due process rights of the would-be class members who are thus far absent from and unaware of the lawsuit.

After the lower federal courts denied removal, the Supreme Court took the case to determine whether a plaintiff in a class action may indeed defeat a defendant’s statutory right to federal removal under CAFA simply by stipulating to a limit on the amount in controversy.  On Monday, Cato filed an amicus brief arguing that the plaintiff and his attorneys are violating the due process rights of absent class members who would be bound by the judgment in a lawsuit that, if allowed to proceed, would end their right to sue over the same claims while simultaneously limiting their compensation under those claims.

CAFA was enacted specifically to discourage attorneys from “forum shopping” (seeking friendlier courts) and attempting to keep cases out of federal court. Lawyers who game the system by agreeing to cap damages in an effort to keep cases in more favorable state courts violate the federal due process rights of absent would-be class members, thereby flouting CAFA.

The Supreme Court will hear the case in early 2013.

Attorney General Holder and Executive Power

AG Eric Holder gave an address on Monday where he offered a legal rationale for the power of the president to kill American citizens who are outside of the United States and who are suspected of terrorist activity.  George Washington University Law Professor Jonathan Turley responds:

On Monday, March 5, Northwestern University School of Law was the location of an extraordinary scene … U.S. Attorney General Eric Holder presented President Barack Obama’s claim that he has the authority to kill any U.S. citizen he considers a threat. It served as a retroactive justification for the slaying of American-born cleric Anwar al-Awlaki last September by a drone strike in northeastern Yemen, as well as the targeted killings of at least two other Americans during Obama’s term.

What’s even more extraordinary is that this claim, which would be viewed by the Framers of the U.S. Constitution as the very definition of authoritarian power, was met not with outcry but muted applause. Where due process once resided, Holder offered only an assurance that the president would kill citizens with care. While that certainly relieved any concern that Obama, or his successor, would hunt citizens for sport, Holder offered no assurances on how this power would be used in the future beyond the now all-too-familiar “trust us” approach to civil liberties of this administration.

Read the whole thing.

Previous coverage here.   And Colbert’s segment, “Due or Die,” is here.