Justices Say No Challenges to Grand Juries on Frozen Assets

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U.S. Supreme Court Justice Elena Kagan
U.S. Supreme Court Justice Elena Kagan

An indicted criminal defendant has no constitutional right to challenge the government's pretrial freezing of assets needed to hire a lawyer, a divided U.S. Supreme Court ruled on Tuesday.

"If judicial review of the grand jury's probable cause determination is not warranted (as we have so often held) to put a defendant on trial or place her in custody, then neither is it needed to freeze her property," Justice Elena Kagan wrote for a 6-3 majority. "The grand jury that is good enough— reliable enough, protective enough—to inflict those other grave consequences through its probable cause findings must needs be adequate to impose this one too.

"The grand jury gets the final word," she concluded in Kaley v. United States.

The high court's ruling stemmed from the 2007 indictment of Kerri and Brian Kaley, along with another sales representative, for conspiring to traffic in stolen prescription medical devices and money laundering.

In January 2005, the Kaleys found they were targets of a federal grand jury investigation in the Southern District of Florida. The government claimed the Kaleys and other Johnson & Johnson sales representatives were taking used prescription medical devices from hospitals that had purchased them from Johnson & Johnson and were reselling them on the gray market.

The Kaleys retained counsel to represent them during what became a two-year investigation. When settlement talks failed, they applied for a $500,000 line of credit on their home to pay their lawyers for a looming trial. They used the line of credit to purchase a certificate of deposit. In 2007, they deposited an additional $63,000 into the C.D. from other income. The subsequent indictment, however, included a forfeiture count and the government obtained an ex parte order that froze the Kaleys' assets, including their home and the C.D.

The U.S. Court of Appeals for the Eleventh Circuit held that, although the federal forfeiture statute authorizes a court to restrain property subject to criminal forfeiture without a hearing following an indictment, due process requires a hearing when the frozen assets prevent a defendant from hiring counsel of choice. In that hearing, the appellate court added, the Kaleys could not challenge the evidence supporting the underlying indictment against them, but only whether the assets were traceable, or involved, in the charged crime.

On appeal to the Supreme Court, the Kaleys argued they had Fifth and Sixth amendment rights to a postindictment hearing during which they could challenge the evidence supporting the grand jury's probable-cause decision.

In Tuesday's ruling, Kagan noted that the high court in its 1989 decision in United States v. Monsanto approved the constitutionality of court orders freezing an indicted defendant's assets prior to trial as long as the order was based on probable cause to believe the property ultimately would be proven forfeitable. And the court has held that that standard applies even when the defendant wants the disputed property to pay for a lawyer, she added.

Since the Monsanto decision, Kagan wrote, courts have uniformly allowed defendants to litigate whether the seized property has the required connection to the charged crime, but they have divided over whether defendants can challenge the probable cause underlying the criminal charge.

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