The government uses criminal asset forfeiture to help combat crime by depriving criminals of the proceeds and instrumentalities of illegal activities. At the federal level, the authority for criminal asset forfeiture can be found in the Comprehensive Crime Control Act of 1984, the Racketeer Influenced and Corrupt Organizations (RICO) Act, and the Department of Justice’s Asset Forfeiture Program policies.
During criminal asset forfeiture proceedings, the government must prove the property’s connection to criminal activity beyond a reasonable doubt, the same standard used in the underlying criminal case. The “beyond a reasonable doubt” standard used for criminal asset forfeiture is higher than the “preponderance of the evidence” standard used in civil asset forfeiture. As a practical matter, most criminal defenants enter plea agreements where the forfeiture issues are negotiated as part of the plea.
Criminal asset forfeiture is classified as an “in personal” action against the person accused of the crime. Notice of the intent to forfeit property must be included in the criminal indictment or a bill of particulars. A conviction is first required since the forfeiture is part of the defendant’s sentence.
Criminal forfeiture is limited to the defendant’s interest in the property, including any proceeds earned by the defendant’s illegal activity. Criminal forfeiture is generally limited to the property involved in the particular counts on which the defendant is convicted. As part of sentencing, a court may order the forfeiture of a specific property listed in the indictment, a sum of money as a money judgment, or other property as substitute property.
The government must establish the requisite connection between the crime of conviction and the asset. Furthermore, in criminal asset forfeiture, the property owner typically has greater due process protections than in a civil asset forfeiture case.
As part of the sentence, the court enters a preliminary order of forfeiture (POF). Any interested third party can then file a claim in a separate ancillary proceeding. After the ancillary hearing, the court orders the final order of forfeiture (FOF).
Attorneys for Civil Asset Forfeiture
If your property was seized for criminal asset forfeiture, contact an experienced attorney at Sammis Law Firm. We represent the person accused of the crime or others impacted by the seizure of property. We represent innocent owners, lien holders, sellers for value, and bona fide purchasers.
Criminal asset forfeiture allows the government to seize assets and property it suspects is connected to criminal activity as part of a criminal prosecution against the property owner. Let us protect you against a wrongful seizure of property for criminal forfeiture.
Call 813-250-0500.
Two Procedural Stages of Criminal Asset Forfeiture
The term criminal asset forfeiture refers to the process created by Congress which authorizes the “authorized the government to seek forfeiture of a defendant’s ill-gotten gains as part of the defendant’s sentence.” McIntosh v. United States, 601 U.S. 330, 333, 144 S. Ct. 980, 218 L. Ed. 2d 307 (2024).
Criminal forfeiture unfolds in two procedural stages set out in 21 U.S.C. § 853 and Fed. R. Crim. P. 32.2. During the first stage, before entering a preliminary order of forfeiture, the Court must “adjudicate the government’s interest vis-à-vis the defendant ‘without regard to any third party’s interest in the property.'” United States v. Daugerdas, 892 F.3d 545, 549 (2d Cir. 2018) (quoting Fed. R. Crim. P. 32.2(b)(2)(A)).
During the second stage, before entering a final forfeiture order, the Court must “resolve[] any third-party petitioner’s interests vis-à-vis the defendant,” Daugerdas, 892 F.3d at 549, with the government “stand[ing] in the defendant’s shoes,” United States v. Egan, 811 F. Supp. 2d 829, 838 (S.D.N.Y. 2011).
Any third party who wishes to assert “a legal interest in property which has been ordered forfeited to the United States” must make a timely claim and may “petition the court for a hearing to adjudicate the validity of his alleged interest in the property.” 21 U.S.C. § 853(n)(2).
If a petitioner establishes by a preponderance of the evidence that “the petitioner has a legal right, title, or interest in the property, and such right, title, or interest renders the order of forfeiture invalid in whole or in part because the right, title, or interest was vested in the petitioner rather than the defendant or was superior to any right, title, or interest of the defendant at the time of the commission of the acts which gave rise to the forfeiture of the property,” “the court shall amend the order of forfeiture in accordance with its determination” and return the seized property to the petitioner. Id. § 853(n)(6).
“State law determines a petitioner’s legal interest in the property at issue.” Willis Mgmt. (Vt.), Ltd. v. United States, 652 F.3d 236, 242 (2d Cir. 2011). A legal “interest ‘in’ property must be an interest in a particular, specific asset, as opposed to a general interest in an entire forfeited estate or account.” United States v. Ribadeneira, 105 F.3d 833, 836 (2d Cir. 1997). To that end, “general creditors” of a defendant — who by definition have only a generalized, unsecured interest in the defendant’s estate — cannot establish a superior interest to that of the government. Id. at 837.
The Preliminary Order of Forfeiture (POF) in a Federal Criminal Case
“Criminal forfeiture statutes empower the Government to confiscate property derived from or used to facilitate criminal activity.” Honeycutt v. United States, 137 S. Ct. 1626, 1631, 198 L. Ed. 2d 73 (2017). For example, the government may seek forfeiture of criminally obtained proceeds. See 18 U.S.C. § 982.
In that circumstance, a district court “shall order that the person forfeit to the United States any property constituting, or derived from, proceeds the person obtained directly or indirectly, as the result of such violation.” Id. § 982(a)(2).
Forfeitable property “vests in the United States upon the commission of the act giving rise to forfeiture.” U.S.C. § 853(c).
The Federal Rules of Criminal Procedure and 21 U.S.C. § 853 provide the procedural framework for criminal forfeiture. See 18 U.S.C. § 982(b)(1). The district court must first “determine what property is subject to forfeiture under the applicable statute.” Fed. R. Crim. P. 32.2(b)(1)(A). “If the government seeks forfeiture of specific property, the court must determine whether the government has established the requisite nexus between the property and the offense.” Id.
Ancillary Hearings for Third Parties
Third parties can petition the court for the return of their property under Rule 32.2 of the Federal Rules of Criminal Procedure. First, the third party must file a petition with the court, asserting their legal interest in the forfeited property. This petition must be filed within the timeframe specified by the court, typically 30 days after the government’s notice of forfeiture is served.
In the petition, the third party must explain their legal interest in the property as the owner, a lien holder, or the holder of a security interest. At the ancillary hearing, the third party must present evidence supporting their claim, including documentation of their legal interest in the property and any evidence showing their lack of knowledge of the criminal activity.
Substitute Property Subject to Forfeiture under 21 U.S.C. § 853(p)(1)
As part of that adjudication, the government must establish that the property at issue “constitute[s] or [is] derived from[] any proceeds” of the defendant’s crime. 21 U.S.C. § 853(a)(1). If the government alleges the defendant consumed or disposed of the criminal proceeds, the court may order the forfeiture of any other “substitute property” that he owns, up to the value of his proceeds. Id.
As explained in Section 853(p)(1), the government may establish a superior interest in substitute property by demonstrating that the defendant caused the proceeds of his crime to become unavailable. See Fed. R. Crim. P. 32.2(e)(1)(B).
21 U.S.C. § 853(p)(1) identifies the statutory criteria for when substitute property becomes subject to forfeiture.
Traceability Issues in Forfeiture Proceedings for Trusts
Third party claimants in criminal asset forfeiture proceedings, when alleging a constructive trust, often have the burden of proving both elements of traceability and that evidence can often be found through the discovery process.
In forfeiture cases, the courts have developed special rules on traceability. Generally, [w]here the property is simply money, which is fungible, the imposition of a trust requires the [claimant] to trace the funds sought to be recovered back to those that were stolen.” Fed. Ins. Co., 882 F.3d at 373.
Tracing the asset becomes complicated when the defendant has “co[]mingled the money of two or more persons.” 5 William F. Fratcher, Scott on Trusts § 519 (1987). The lower courts are often “guided by applicable rules concerning co[]mingled funds” as articulated in Scott on Trusts. Schwimmer, 968 F.2d at 1584.
If the defendant still has possession of the comingled funds in monetary form, then “the claimants have an interest in the mingled fund in proportion to their contributions to the fund.” Id.
Alternatively, if the defendant has used the comingled funds to purchase other assets, then the claimants are entitled to a pro rata share of those “traceable proceeds.” In Fratcher, supra, § 519, the issue is explained this way: “As between the claimants and the wrongdoer or his creditors, the claimants are entitled to priority with respect to the fund and its traceable proceeds . . ., and therefore they share pro rata in the profits or the losses.” As a result, any constructive trust would “extend[] only to the portion [of the purchased asset] traceable to the misappropriated funds.” Wilde v. Wilde, 576 F. Supp. 2d 595, 605 (S.D.N.Y. 2008).
So when a claimant who seeks a constructive trust on assets purportedly bought with comingled funds, they might be required to show the following two elements of traceability:
- that the asset was purchased with comingled funds including the claimant’s funds; and
- which portion, if any, of the asset is actually traceable” to the comingled funds.
Fed. Ins. Co., 882 F.3d at 373.
