[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
LEGISLATIVE PROPOSALS BEFORE THE 110TH CONGRESS TO AMEND FEDERAL
RESTITUTION LAWS
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HEARING
BEFORE THE
SUBCOMMITTEE ON CRIME, TERRORISM,
AND HOMELAND SECURITY
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
APRIL 3, 2008
__________
Serial No. 110-138
__________
Printed for the use of the Committee on the Judiciary
Available via the World Wide Web: http://judiciary.house.gov
----------
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COMMITTEE ON THE JUDICIARY
JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California LAMAR SMITH, Texas
RICK BOUCHER, Virginia F. JAMES SENSENBRENNER, Jr.,
JERROLD NADLER, New York Wisconsin
ROBERT C. ``BOBBY'' SCOTT, Virginia HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina ELTON GALLEGLY, California
ZOE LOFGREN, California BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas STEVE CHABOT, Ohio
MAXINE WATERS, California DANIEL E. LUNGREN, California
WILLIAM D. DELAHUNT, Massachusetts CHRIS CANNON, Utah
ROBERT WEXLER, Florida RIC KELLER, Florida
LINDA T. SANCHEZ, California DARRELL ISSA, California
STEVE COHEN, Tennessee MIKE PENCE, Indiana
HANK JOHNSON, Georgia J. RANDY FORBES, Virginia
BETTY SUTTON, Ohio STEVE KING, Iowa
LUIS V. GUTIERREZ, Illinois TOM FEENEY, Florida
BRAD SHERMAN, California TRENT FRANKS, Arizona
TAMMY BALDWIN, Wisconsin LOUIE GOHMERT, Texas
ANTHONY D. WEINER, New York JIM JORDAN, Ohio
ADAM B. SCHIFF, California
ARTUR DAVIS, Alabama
DEBBIE WASSERMAN SCHULTZ, Florida
KEITH ELLISON, Minnesota
Perry Apelbaum, Staff Director and Chief Counsel
Sean McLaughlin, Minority Chief of Staff and General Counsel
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Subcommittee on Crime, Terrorism, and Homeland Security
ROBERT C. ``BOBBY'' SCOTT, Virginia, Chairman
MAXINE WATERS, California LOUIE GOHMERT, Texas
WILLIAM D. DELAHUNT, Massachusetts J. RANDY FORBES, Virginia
JERROLD NADLER, New York F. JAMES SENSENBRENNER, Jr.,
HANK JOHNSON, Georgia Wisconsin
ANTHONY D. WEINER, New York HOWARD COBLE, North Carolina
SHEILA JACKSON LEE, Texas STEVE CHABOT, Ohio
ARTUR DAVIS, Alabama DANIEL E. LUNGREN, California
TAMMY BALDWIN, Wisconsin
BETTY SUTTON, Ohio
Bobby Vassar, Chief Counsel
Caroline Lynch, Minority Counsel
C O N T E N T S
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APRIL 3, 2008
Page
OPENING STATEMENT
The Honorable Robert C. ``Bobby'' Scott, a Representative in
Congress from the State of Virginia, and Chairman, Subcommittee
on Crime, Terrorism, and Homeland Security..................... 1
The Honorable Louie Gohmert, a Representative in Congress from
the State of Texas, and Ranking Member, Subcommittee on Crime,
Terrorism, and Homeland Security............................... 3
The Honorable Steve Chabot, a Representative in Congress from the
State of Ohio, and Member, Subcommittee on Crime, Terrorism,
and Homeland Security.......................................... 4
WITNESSES
The Honorable Byron Dorgan, a United States Senator from the
State of North Dakota
Oral Testimony................................................. 11
Prepared Statement............................................. 22
Mr. Jonathan Turley, J.B. and Maurice C. Shapiro Professor of
Public Interest Law, George Washington Law School, Washington,
DC
Oral Testimony................................................. 27
Prepared Statement............................................. 30
Andrew Weissmann, Esquire, Jenner & Block LLP, New York, NY
Oral Testimony................................................. 46
Prepared Statement............................................. 47
David B. Smith, Esquire, English & Smith, Alexandria, VA
Oral Testimony................................................. 52
Prepared Statement............................................. 54
Mr. Paul G. Cassell, Professor, S.J. Quinney College of Law,
University of Utah, Salt Lake City, UT
Oral Testimony................................................. 69
Prepared Statement............................................. 71
APPENDIX
Material Submitted for the Hearing Record........................ 141
LEGISLATIVE PROPOSALS BEFORE THE 110TH CONGRESS TO AMEND FEDERAL
RESTITUTION LAWS
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THURSDAY, APRIL 3, 2008
House of Representatives,
Subcommittee on Crime, Terrorism,
and Homeland Security
Committee on the Judiciary,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:08 p.m., in
room 2141, Rayburn House Office Building, the Honorable Robert
C. ``Bobby'' Scott (Chairman of the Subcommittee) presiding.
Present: Representatives Scott, Johnson, Davis, Gohmert,
Chabot, and Lungren.
Staff Present: Bobby Vassar, Subcommittee Chief Counsel;
Karen Wilkinsen, AOC Detailee; Veronica Eligan, Majority
Professional Staff Member; Mario Dispenza (Fellow), ATF
Detailee; and Caroline Lynch, Minority Counsel.
Mr. Scott. Good afternoon. I am pleased to welcome you to
this hearing on the legislative proposals before the 110th
Congress to amend Federal restitution laws.
We are here at the Subcommittee on Crime, Terrorism, and
Homeland Security to hear testimony about the proposed
legislation that would make sweeping changes to the Federal
restitution laws aimed at reversing the trend of the increasing
backlog of unpaid restitution of crime victims, which the
Government Accountability Office estimated to be $25 billion at
the end of 2005.
We will hear testimony about S. 973, sponsored by the
Senator from North Dakota, Mr. Dorgan, and H.R. 4110, sponsored
by the gentlelady from New Hampshire, Ms. Shea-Porter, in the
House of Representatives, each titled, the ``Restitution for
Victims of Crime Act.''
We will also hear testimony about H.R. 845, the ``Criminal
Restitution Improvement Act,'' sponsored by the gentleman from
Ohio, Mr. Chabot, which was also introduced in the House.
[The bills referred to are printed in the Appendix of this
publication.]
Mr. Scott. The bills would widen the number and type of
Federal laws that would trigger mandatory restitution to a
victim of crime and broaden the definition of a victim. They
also would increase the type of victim costs that may be
included in restitution orders, such as the victim's attorney
fees. And they enhance enforcement of the restitution orders,
such as mandating payment while a case is pending, and by
delegating enforcement authority to prison officials through
inmate financial responsibility.
Each of these changes is intended to get more compensation
to more victims. But, by far, the most far-reaching changes in
the proposals that they share in common is that they would
authorize the U.S. Attorney to freeze the assets of suspects
even before they are charged with any crime. The objective is
to prevent defendants from hiding their assets, to keep them
available to pay restitution to victims if and when the court
orders restitution.
However, proponents of the measure have concerns about
whether the objective behind freezing assets would actually be
met and whether it would prevent a person from being able to
hire counsel. Thus, this proposal is not only the most far-
reaching but also needs the most discussion.
Under the proposals, the U.S. Attorney would be able to get
an ex parte restraining order, freezing a suspect's assets, by
showing a judge that the suspect, if indicted and if convicted,
would be liable for victim restitution. The suspect would have
no notice that the U.S. Attorney is applying for the order and,
thus, would not be able to offer argument against it before it
would take place.
Opponents of the measure consider it a Government seizure
with no conviction and no linking to frozen assets as fruits of
a crime or even tools to commit a crime, such as the Government
must show in a typical asset-forfeiture procedure. The person
may be entitled to a hearing after their assets are seized;
however, to meet this burden of proof to get a hearing, the
person must show that the seizure has hindered his ability to
hire a lawyer or that the seizure has deprived him of the basic
necessities of life.
Yet, even if a person gets a hearing, the court must deny
his request to release his assets if the court finds that it is
probable that he must pay restitution if convicted. Thus, his
claim that the seizure has hindered his ability to hire counsel
would, in essence, apparently have no effect on the court's
decision.
If opponents to the measure are correct, this is not only
likely to be an unconstitutional encroachment on one's sixth
amendment right to counsel but also an unconstitutional
violation of due process, which is why this measure needs full
vetting.
Proponents to the proposals point out that restitution is
already mandated in most instances of victim loss in Federal
criminal cases. In 2001, the Government Accountability Office
reported, quote, ``The Mandatory Victims Restitution Act of
1996, requiring the court to order full restitution to each
victim in the full amount of each victim's losses without
regard of the offender's economic situation, has not resulted
in significantly more restitution being collected but only a
dramatic increase in the balance of reported uncollected
criminal debt.''
Also the GAO report indicated that, even in the few
instances where the defendant does have some money or assets,
it is difficult to collect restitution, noting that criminal
defendants may be incarcerated with little earning capacity,
and therefore their assets acquired through criminal activity
may be seized by Government prior to the conviction. Thus, by
the time fines and restitution are assessed, offenders may have
no assets left for making payments on restitution.
Now, if, as the GAO report indicates, the vast majority of
offenders are broke when they come into prison, going out and
trying to find a job with a felony record seems unlikely to
improve their ability to have money to meet their own need to
survive, the survival of their dependents, and have any money
left over for restitution.
So, although everyone is in favor of more restitution,
mandatory restitution, in even more cases, may or may not be
the solution to meet that end, because we might be violating
the old English maxim that you can't squeeze blood out of a
turnip.
However, there are alternatives that may, in fact, meet the
goal of getting more restitution to victims. And we would like
to discuss them today, as we discuss the legislative proposals
before us.
It has been my observation that restitution works best when
it is an alternative to the incarceration, which results in the
loss of employment income and assets that accompany such
incarceration.
I believe that we should consider biting the bullet and
establishing a victims' restitution fund from Federal
appropriations and payments we can easily collect or reasonably
collect from offenders. We should then refocus the Federal
victim restitution collection efforts on areas where it may
have more impact, such as going after assets of white-collar
offenders who profit handsomely from their crimes and may have
a means of paying. That way, victim restitution is neither
dependent on the vagaries of an offender's ability to pay or
Government's collection efforts.
So, as we discuss legislative proposals, I would like to
discuss alternatives so that we may come together and establish
the best mechanism for meeting our common goal.
It is now my pleasure to recognize the esteemed Ranking
Member of the Subcommittee, the gentleman from Texas, Mr.
Gohmert.
Mr. Gohmert. Thank you, Chairman Scott. I appreciate your
holding this hearing on a problem that Congress can and should
correct, providing restitution to victims of crime.
Every 30 minutes, there is a murder in this country; every
5 minutes, a rape; every minute, a robbery; and every 36
seconds, an aggravated assault. Nearly 16 million Americans
were the victims of crime in 2006.
These victims suffer a tremendous loss at the hands of
their assailants. In addition to physical and emotional trauma,
victims endure financial loss, including medical expenses, lost
earnings and property damage. Annual losses for crime victims
have been estimated at $105 billion.
Restitution has been part of our criminal justice system
for nearly a century. It plays an important role in
rehabilitating offenders by holding them accountable to their
victims. Restitution also attempts to make victims closer to
being whole by compensating their financial loss caused by the
offender's criminal conduct, though it is clear the victims of
violence are never really put back to the place they were
before an attack.
Although Congress granted Federal courts explicit authority
to order restitution in 1925, this authority was infrequently
used for decades. Congress responded in 1982 with the Victim
and Witness Protection Act, which vested Federal courts with
the general discretion to order restitution in any criminal
case.
In the Violent Crime Control and Law Enforcement Act of
1994, Congress established mandatory restitution for sexual
abuse, sexual exploitation of children, and domestic violence
cases. In the Mandatory Victim Restitution Act, Congress made
restitution mandatory for most serious Federal crimes,
including crimes of violence and property crime.
Despite these Federal laws promising restitution to crime
victims, the Government has failed to make payment on its
promise. As much as 87 percent of criminal debt--restitution
and fines, that is--is uncollected each year. The Justice
Department estimates that the amount of uncollected Federal
criminal debt increases with each passing year, jumping from
$41 billion in fiscal year 2005 to nearly $46 billion in fiscal
year 2006 and over $50 billion in fiscal year 2007.
In California, there is over $6 billion in uncollected
Federal criminal debt for fiscal year 2007. In my home State of
Texas, there is over $3 billion of uncollected debt, and over
$1 billion in Michigan and Ohio.
That is why today's hearing is so important. I wish to
thank Senator Dorgan and my colleague, Congressman Chabot, for
their leadership on this issue. The legislation each has
sponsored will come closer toward fulfilling Congress's promise
of restitution for crime victims.
I would also like to add that, as a State district judge
handling felony cases, often one of the considerations of
whether or not to give somebody probation included whether or
not, by giving them probation, there was an opportunity for a
victim to become closer to being made whole. And if that were a
possibility, then as a condition of probation, I could lock
somebody up for as much as 2 years through different programs.
But if there was a chance we could require restitution, then
that would be ordered and made reasonable to where it could be
met. And if it wasn't met, that was a breach of the conditions
of probation. Might as well lock them up in prison if they
weren't going to try to pay their restitution.
There is a different system here with the Federal
authorities, but we have the authority here in Congress to fix
things. It is one of the reasons I left the bench, because I
didn't want to legislate from the bench. And I saw that through
innovations, such as Senator Dorgan has proposed here, that we
could literally try to fix things that we actually thought
through and came up with a solution toward.
So, Senator, thank you, again, for your time and being here
today. I look forward to hearing your testimony.
And yield back the balance of my time, Mr. Chairman.
Mr. Scott. Thank you.
Does the gentleman from Georgia have a comment?
The gentleman from Ohio is the chief sponsor of one of the
bills, and we would call on him to describe his legislation at
this time.
Mr. Chabot. Thank you very much, Mr. Chairman. And I would
like to thank you for holding this important hearing today and
our witnesses for taking the time to testify.
And I want to thank you, Senator, for your leadership in
this area of restitution.
Last year, at this time, the full Judiciary Committee was
considering the Second Chance Act, which, among other things,
reauthorized $360 million for re-entry programs for offenders.
As the Committee considered the bill, I pointed out that it was
missing a critical section, one that would have made the bill
fairer and more just, and that is making the payment of
restitution to the victims of criminal offenses mandatory.
In 2004, this Committee, the House, the Senate and the
President recognized the need to bring greater fairness to our
criminal justice system, particularly for crime victims.
Through the Justice for All Act and the enactment of the Crime
Victims' Bill of Rights, we gave victims a stronger voice in
our criminal justice process. Included among these rights is
the right to full and timely restitution as provided by law.
Yet victims continue to bear the brunt of crime in this
country. According to the Department of Justice, crime costs
victims and their families more than $105 billion, as was
mentioned, in lost earnings, public victim assistance, and
medical expenses. Moreover, despite a victim's right to, quote,
``full and timely restitution,'' unquote, it remains one of the
most under-enforced victims' rights within our just system. In
fact, 87 percent, as has been mentioned, of criminal debt,
including restitution and fines, goes uncollected each year.
And the amount of outstanding criminal debt is only expected to
increase, ballooning from $269 million to almost $13 billion.
In fact, in my own State of Ohio, as was mentioned, more than
$1.25 billion in criminal debt remained uncollected at the end
of fiscal year 2007.
The Criminal Restitution Improvement Act of 2007, which I
introduced last year, would fulfill the promise that we made to
victims in 2004 and let them know that they have not been
forgotten. H.R. 845 would make the payment of restitution
mandatory in all Federal offenses for which monetary losses are
identifiable.
In making restitution mandatory, this bill takes into
account a defendant's economic circumstances and those that
depend on the defendant when restitution decisions are made.
Moreover, the bill allows the Attorney General to collect
unreported or newly discovered assets above the payment
schedule, which currently cannot be applied.
H.R. 845 is supported by the leading crime victims'
organizations, including Parents of Murdered Children, the
National Organization for Victims Assistance, and the National
Center for Victims of Crime, just to name a few.
I would ask unanimous consent, Mr. Chairman, to enter
additional letters of support for H.R. 845 by various crimes
victims' rights organizations into the record.
Mr. Scott. Without objection, so ordered.
Mr. Chabot. Thank you, Mr. Chairman.
[The letters follow:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Chabot. Senator Dorgan has also introduced similar
legislation, which he will describe in a few moments if we quit
talking up here very soon. But I think it is safe to assume
that we both believe that it is not too much to ask of our
criminal system that it ensure that offenders repay their
debts. Moreover, I believe the compliance with restitution
orders is a strong measure of a prisoner's willingness to
successfully re-enter our communities.
If we are willing to spend more than $360 million a year on
offenders, doesn't fairness and justice dictate that victims
should be able to receive what they lost, at a minimum? Why
should these innocent individuals continue to bear the brunt of
someone else's actions--criminal actions, I might add?
Again, I thank the Chairman for holding this hearing and
our witnesses, particularly Senator Dorgan and Judge Cassell,
for taking time out of their busy schedules to be with us here
today. And I yield back the balance of my time.
Mr. Scott. Thank you. Thank you very much.
Our first witness is the Senator from North Dakota, the
Honorable Byron Dorgan, sponsor of S. 973. He has a long and
distinguished career as a Member of Congress, serving 6 years
in the House and currently in his third term as Senator
representing North Dakota. He earned a Bachelor of Science
degree from University of North Carolina and Master's of
Business Administration from the University of Denver.
Senator, your written statement will be made part of the
record in its entirety, and we ask you to make whatever
statement you would like to make now, hopefully staying within
5 minutes, but we will see. The lighting device is at the
table.
TESTIMONY OF THE HONORABLE BYRON DORGAN, A UNITED STATES
SENATOR FROM THE STATE OF NORTH DAKOTA
Senator Dorgan. Mr. Chairman, thank you very much.
It is actually North Dakota, not North Carolina, but it is
north in any event.
And I am really pleased to be back and pleased, Chairman
Scott, that you have called these hearings.
And I want to say first that Senator Grassley, the lead
cosponsor on the bill that we introduced in the Senate, has
asked to add a letter as part of this testimony. I ask consent
that that be done.
[The letter follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Dorgan. The National Center for Victims of Crime, I
would like to ask consent that their statement in support of
the bill also be a part of the hearing record.
[The information referred to follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Dorgan. And then I would like to commend
Congressman Chabot and Congresswoman Carol Shea-Porter, who
have worked on this issue. So, especially thanks to them.
You know, this is really interesting, because I was
thinking about it a while ago, if you owe money these days, you
would probably want to owe it to the U.S. Justice Department.
If you're going to owe money to anybody, owe it in the form of
something that is a court-ordered restitution to be collected
by the Justice Department, because they are only collecting 4
cents on the dollar.
There is $50 billion owed. Now, why is that the case?
Because, in most cases, it is the back room at the U.S.
Attorney's Office that is asked to collect these things, and
they are working up in the front room on prosecutions and so
on, and precious little attention is paid to restitutions and
fines.
But it is also the case that they are hampered, because the
fact is those that have been ordered to provide restitution for
victims in many cases have been given ample opportunity to
dissipate those assets.
So I just think it is Byzantine that we have any real
debate over whether something should be done. My hope is that
whatever questions arise would be over what should be done,
rather than whether. If, with $50 billion owed to victims, we
don't do something, then we don't recognize a problem when it
is right in front of us.
So let me mention a couple of things about where we are.
At my request, the GAO reviewed five major white-collar
financial fraud cases with outstanding, unpaid restitution.
They took a look at the details of five of them. Here is what
they found. I have a couple of charts to show you what these
folks have been doing.
White-collar crime perpetrators who have been judged guilty
and ordered restitution: expensive trips overseas, jewelry,
fancy cars, million-dollar homes, spending thousands of dollars
a month on entertainment. These are people who have been
ordered by the court to pay restitution, who haven't done so,
and yet have found ways to spend this money on overseas trips
and fancy homes and so on.
All of us ought to be outraged by that, because who are the
victims? They are the victims who were victimized previously
for which there was ordered restitution.
Now, the fact is many years can pass between the date a
crime occurs and the date that a court might order restitution,
and that gives criminal defendants ample opportunity to spend
or hide their ill-gotten gains.
I have worked for some long while with the Justice
Department to try to figure out how you can put together a
system that works and one that provides protection for those
who have been ordered restitution, because they need some
protection to be able to appeal rulings and so on, but
especially one that addresses the rights of victims. And I
think we have done that.
Let me just describe--I have a number of cases; I will just
describe one. A $3.2 billion restitution judgment--that is a
big one--entered against defendants. But these defendants were
pretty smart, actually. They had some time and they had some
opportunity, so they transferred to their wives liquid assets,
which they had titled solely in their name previously,
transferred cash and securities worth more than $24 million.
Another one transferred to his wife $14 million, real and
personal property of $6.7 million. Both created irrevocable
trusts during the time they knew they were under criminal
investigation. One transferred his trust real estate and liquid
assets worth more than $20 million. The other funded his trust
with real property currently valued at more than $5 million.
That money, of course, should have gone to victims. That is
what the court intended. But because the system doesn't work,
they got by with dissipating assets. And we shouldn't--none of
us should allow that to happen.
Last fall, the U.S. Senate took up and passed the piece of
legislation that Senator Grassley and I offered. We made a
couple of changes, but I want you to know that the Senate has
passed this legislation. I have visited with the Chairman of
the full Committee and with you, Mr. Chairman, Chairman Scott,
asking you to consider moving the legislation, as well.
It is supported by the Department of Justice, with whom we
have worked, the National Center for Victims of Crime, Mothers
Against Drunk Driving, National Organization for Victims
Assistance, National Alliance to End Sexual Violence, Parents
of Murdered Children, Justice Solutions, and the list goes on.
I would like to put the complete list in the record.\1\
---------------------------------------------------------------------------
\1\ The complete list referred to is contained in Senator Dorgan's
prepared statement which is printed in this published hearing.
---------------------------------------------------------------------------
But it is pretty clear, A, we have a problem, and it is a
big problem, $50 billion. One can make a case that perhaps some
of these people will never pay a cent because they are
destitute. I understand that. But that is not the reason that
brings me to this hearing room.
What brings me to this hearing room is a system which
allows some folks with a lot of money to be ordered by the
court to provide restitution and, instead, they are taking
trips to Europe. They are dissipating their assets. They are
giving their money to the kids to start a business. And the
victims are told to, ``Go fly a kite'' and the court doesn't
seem to be able to do much about it, because those assets are
not protected to be saved for the victims.
Now, Mr. Chairman, you said, and you are absolutely
correct, you can't get blood from a turnip. That is true. But
we ought to be able to squeeze a little money from those people
who have been ordered to provide restitution and who are
traveling to Europe for a vacation. We ought to be able to
squeeze a little money out of those folks ordered to pay a
restitution who are living in a million-dollar house. We ought
to be able to squeeze a little money out of those folks who
have been ordered to pay restitution to victims who have
decided that they want to divert their assets to their spouse
and their kids for the purposes of establishing trusts or
starting a new business.
And I believe that if we all work together and do the right
thing, provide adequate protection with the capability of a
judge and the capability of having an attorney for defendants,
provide the right protection, I believe we will come to the
right conclusion. And that is, victims ought to expect that
this Government and the order of restitution from a court will
mean something to victims, especially when it is ordered
against those that have significant assets. That has been the
case, and yet victims go wanting. This Congress should not
allow that to happen.
The question isn't whether we do something. We should. The
question is, what do we do? Can this be improved upon?
Probably. But I certainly hope that this Committee will do what
the full Senate has done. The full Senate has passed my
legislation, the Dorgan-Grassley bill. My hope is the House
will do the same.
Mr. Chairman, you are good to allow me the opportunity to
come back over to the House and spend a bit of time with you,
and I thank you very much for convening this hearing.
[The prepared statement of Mr. Dorgan follows:]
Prepared Statement of the Honorable Byron Dorgan, a U.S. Senator from
the State of North Dakota
Chairman Scott and Ranking Member Gohmert, I would like to thank
you for holding a hearing today to examine proposals to improve the
collection of unpaid federal court-ordered restitution, including
bipartisan legislation I have authored with Senator Grassley in the
Senate called the Restitution for Victims of Crime Act, S. 973.
Representative Chabot and Representative Carol Shea-Porter have
introduced related measures in the U.S. House.
As all of us know, victims of crime and their families often face a
significant challenge trying to rebuild their lives and recover a sense
of emotional and financial security after a crime has been perpetrated
against them. By law, victims of federal crimes are entitled to ``full
and timely restitution'' for losses from a convicted offender.
Unfortunately, new data from the Department of Justice shows that
the amount of uncollected federal criminal debt is still spiraling
upward--jumping from $6 billion in 1996 to more than $50 billion by the
end of fiscal year 2007. That's a more than eight-fold increase in
uncollected criminal debt owed to the victims of federal crimes.
Government Accountability Office (GAO) investigators found that
federal criminal justice officials collected an average of only four
cents on every dollar of criminal debt that was owed to crime victims
in 2000, 2001 and 2002.
These figures are disheartening, and the victims of crime in this
country deserve better. Crime victims should not have to worry if those
in charge of collecting court-ordered restitution on their behalf are
making every possible effort to do so before criminal offenders have
the opportunity to fritter away their ill-gotten gains on lavish
lifestyles and the like. This matter is not mere speculation.
At my request, the GAO reviewed five white collar financial fraud
cases with outstanding unpaid restitution. GAO found:
Crime perpetrators who owed restitution taking
expensive trips overseas.
Convicted criminals living in million dollar mansions
in upscale neighborhoods, but not making their court-ordered
restitution payments.
Criminals who fraudulently obtained millions of
dollars in assets were using those assets to buy expensive
clothing instead of paying restitution they owed.
Criminals spending thousands of dollars per month in
entertainment, even though court ordered restitution went
unpaid.
Convicted criminals who had taken their ill-gotten
gains and established businesses for their children in order to
avoid the payment of court ordered restitution.
S. 973 will give Justice Department officials the tools they have
requested to help them do a better job collecting court-ordered federal
restitution and fines. Our bill includes provisions that will remove
many existing impediments to increased collections. For example,
Justice Department officials have described a circumstance where they
were prevented by a court from accessing $400,000 held in a criminal
offender's 401(k) plan to pay a $4 million restitution debt to a victim
because that court said the defendant was complying with a $250 minimum
monthly payment plan, and that payment schedule precluded any other
enforcement actions. S. 973 would remove impediments like this in the
future.
This legislation also addresses a major obstacle identified by the
GAO for officials in charge of criminal debt collection; that is, many
years can pass between the date a crime occurs and the date a court
orders restitution. This gives criminal defendants ample opportunity to
spend or hide their ill-gotten gains. That is why S. 973 provides for
pre-conviction procedures for preserving assets for victims'
restitution. This will help ensure that financial assets in control of
a criminal defendant are available when a court imposes a final
restitution order on behalf of a victim.
As a safeguard, our bill allows a criminal defendant to challenge a
court's pre-judgment asset preservation order. For example, a defendant
may challenge a post-indictment restraining order if he or she can show
that there is no probable cause to justify the restraint. In a similar
manner, our proposal includes language that guarantees that an accused
party will have access to adequate resources for attorney fees or
reasonable living expenses from the time of indictment through the
criminal trial.
These pre-conviction procedures for preserving assets for victims'
restitution will prevent criminal defendants from spending or hiding
their ill-gotten gains and other financial assets. These tools are
similar to those already used successfully in some states, by federal
officials in certain asset forfeiture cases, and upheld by the courts.
Key provisions of S. 973 would do the following:
Clarify that court-ordered federal criminal
restitution is due immediately in full upon imposition, just
like in civil cases, and that any payment schedule ordered by a
court is only a minimum obligation of a convicted offender.
Allow federal prosecutors to access financial
information about a defendant in the possession of the U.S.
Probation Office--without the need for a court order.
Clarify that final restitution orders can be enforced
by criminal justice officials through the Bureau of Prisons'
Inmate Financial Responsibility Program.
Ensure that if a court restricts the ability of
criminal justice officials to enforce a financial judgment, the
court must do so expressly for good cause on the record. Absent
exceptional circumstances, the court must require a deposit,
the posting of a bond or impose additional restraints upon the
defendant from transferring or dissipating assets.
Help ensure better recovery of restitution by
requiring a court to enter a pre-conviction restraining order
or injunction, require a satisfactory performance bond, or take
other action necessary to preserve property that is traceable
to a charged offense or to preserve other nonexempt assets, if
the court determines that it is in the interest of justice to
do so.
Permit the Attorney General to commence a civil
action under the Anti-Fraud Injunction Statute to enjoin a
person who is committing federal offense that may result in a
restitution order; and permit a court to restrain the
dissipation of assets in any case where it has power to enjoin
the commission of a crime, not just in banking or health care
fraud as permitted under current law.
Allow the United States under the Federal Debt
Collections Procedure Act to use prejudgment remedies to
preserve assets in criminal cases that are similar to those
used in civil cases when it is needed to preserve a defendant's
assets for restitution. Such remedies, including attachment,
garnishment, and receivership, are not currently available in
criminal cases because there is no enforceable debt prior to an
offender's conviction and judgment.
Clarify that a victim's attorney fees may be included
in restitution orders, including cases where such fees are a
foreseeable result from the commission of the crime, are
incurred to help recover lost property or expended by a victim
to defend against third party lawsuits resulting from the
defendant's crime.
Allow courts to order immediate restitution to those
that have suffered economic losses or serious bodily injury or
death as the result of environmental felonies. Under current
law, courts can impose restitution in such cases as a condition
of probation or supervised release, but this means that many
victims of environmental crimes must wait for years to be
compensated for their losses, if at all.
The Restitution for Victims of Crime Act has been endorsed by a
number of organizations concerned about the well-being of crime
victims, including: The National Center for Victims of Crime, Mothers
Against Drunk Driving, the National Organization for Victims Assistance
(NOVA), the National Alliance to End Sexual Violence, Parents of
Murdered Children, Inc., Justice Solutions, the National Network to End
Domestic Violence, the National Association of VOCA Assistance
Administrators (NAVAA) and the National Crime Victim Law Institute.
United States Attorney Drew Wrigley in Fargo, North Dakota has said
this legislation ``represents important progress toward ensuring that
victims of crime are one step closer to being made whole.''
Last fall, the Senate passed by unanimous consent a Dorgan-Grassley
amendment on the Senate floor. This amendment contained all of S. 973
except the bill's environmental crimes title. I hope that members of
the House Judiciary Crime Subcommittee and the members of the Full
Committee will also agree that the current state of our federal
criminal debt collection effort is not acceptable, and that this
legislation is a serious effort to improve it.
April 13 marks the beginning of National Crime Victims' Rights
Week, an annual commemoration that has been observed since the early
1980s to honor crime victims and call attention to their plight. One
way to show our support would be to pass legislation to ensure that
victims of crime and their families are given the compensation they are
rightly owed.
Mr. Chairman and Ranking Member Gohmert and other members of
subcommittee, I look forward to working with you to address any
questions about our legislation and to send a clear message to white
collar and other criminals: if you commit a crime you will be held
accountable and will not be allowed to benefit in any way from your
criminal activity and ill-gotten gains.
Mr. Scott. Thank you very much.
Are there any questions of the Senator?
If not, thank you very much, Senator.
Mr. Gohmert. Would he like any questions?
Senator Dorgan. Just positive questions, if you have.
[Laughter.]
But I did, Mr. Chabot, reference your work and the work of
your colleague. I appreciate the work that has been done in the
House, and I hope perhaps you will be able to move this
legislation.
And, again, Mr. Chairman, I know you have other witnesses,
so let me thank you for allowing me to come over.
Mr. Scott. Thank you very much.
The gentleman from Georgia?
Mr. Johnson. I move to strike the last word.
Mr. Scott. Is this a question for the witness? The process
would be he testifies, we ask questions.
Mr. Johnson. Not really a question. I would just like to
make an observation.
Mr. Scott. The gentleman is recognized to ask questions or
to make a comment or whatever.
Mr. Johnson. Yes, with all due respect, Senator, I would
say that the norm for defendants having been convicted and
sentenced to pay restitution and, often, to serve mandatory
lengthy prison sentences, that the number of those who have any
assets are miniscule. It is mostly poor people, people without
assets, who actually fall into the criminal justice system and
wind up having committed crimes and convicted of crimes that
require them to pay restitution.
And so, it just seems that the legislation, though the
purpose is worthy, is like a mallet being used to subdue a
mosquito and may be a little harsh to the average--to the
overwhelming number of defendants who it would apply to.
And basically I am talking about the pre-charge ability of
prosecutors to assess or to impose a freeze on whatever assets
there might be, a car or a bank account with a couple ofhundred
or a couple of thousand dollars, that kind of thing. So it
gives prosecutors a lot of discretion prior to the individual
even being charged. And then it ties the hands of the judges,
further limiting their discretion to be able to assess a
reasonable amount for restitution payments or even to allow a
defendant to come out from under the pre-conviction freeze.
And so I just wanted to make those observations.
I think there are a number of reasons why the Justice
Department would be behind on collecting restitution, as well,
such as they are overworked and overburdened pursuing more
important matters. Perhaps we can staff them up a little bit
more adequately so that they can do a better job of collecting
restitution.
And maybe it is because the defendants who have been
assessed the restitution don't have the money. Maybe that is
the reason why there is so much money owed under restitution.
So, with all due respect, those are my observations.
Senator Dorgan. Mr. Chairman, if I might?
Your point is well-taken. In many ways, you are winning a
debate we are not having, because my point isn't coming here to
suggest that someone who commits a crime, is sentenced to a
lengthy period in a facility for incarceration and comes out
with nothing, my point isn't that Justice or anybody else is
going to be able to get that from them. The Chairman said you
can't get blood from a turnip; I agree with that.
But I would say this. Look at the newspaper in the morning
and evaluate what scandals surround us these days, with
unbelievable speculation, white-collar crime that is
unbelievable. And then ask yourself this: When we send those
folks to prison, as we should if they have violated the law,
should we also allow them to send their money to an account
someplace to be able to them when they come out of prison, or
should some of that ill-gotten gain be retrieved by the Federal
Government and go to the victims? That is the point.
Your point is an adequate point. You can debate--I don't
have time and you don't have time--to debate the provisions of
this bill to make certain the concern that you have is not a
concern.
But I would say this. I don't think there is anybody on
this Committee or in Congress who wishes to stand up and say,
with respect to high-flying white-collar crime--and just take a
look at the five that I asked GAO to look at--we believe it is
important that victims should go wanting, even when the court
has ordered restitution, while those folks are living in
million-dollar homes or taking European vacations. I don't
think anyone believes that is appropriate. All of us believe we
ought to fix it.
So I accept your point and hope that we can solve the
problem that does exist.
Mr. Chairman, thank you very much.
Mr. Scott. Thank you.
Gentleman's----
Mr. Johnson. Mr. Chairman?
Mr. Scott. Does the gentleman yield back?
Mr. Johnson. Well, if I could, before I yield back, I would
like to make the observation that transfers of property by
those who would defraud someone who is entitled to it under a
restitution order by a court is certainly avoidable. In other
words, I think current law would allow for a court to void a
transfer made to defraud a creditor, if you will, a victim.
Senator Dorgan. That, too, is a fair point, but once it is
transferred and the asset is gone, there is nothing for a
victim or a court to retrieve.
Mr. Johnson. Thank you. I will yield back.
Mr. Scott. Thank you.
Mr. Gohmert. Mr. Chairman, that stirred up a question I
would like to ask the Senator, if you don't mind.
Mr. Scott. He has to leave, so----
Mr. Gohmert. I will be very quick.
My friend Mr. Johnson mentioned we don't need a mallet to
kill a mosquito. And I haven't read the whole bill, but there
is nothing mandatory, in every case, that must be done to
collect. Isn't there discretion in your bill, Senator?
Senator Dorgan. There is. And the issue here is the
restraint of assets. And Congressman Johnson raises, I think, a
very important point, which is why we have tried to deal with
that in a very important way in this bill.
It is not the case that somebody can come in and restrain
the assets pre-conviction without any appeal. But it is also
the case that, if you don't have some tools in circumstances
where you believe it is going to be completely dissipated and
the victims will end up with nothing, you at least ought to
give the court the opportunity to have those tools.
Mr. Gohmert. So you are not advocating using a mallet to
kill a mosquito. You are just saying, if a bear is coming,
let's don't hand him insect repellant.
Senator Dorgan. It is not a long distance from the Senate
to the House, but I didn't walk all the way over here because I
was concerned about mosquitoes. I am very concerned about
people who are taking European vacations who owe victims. I am
concerned that the victims get what they are due.
Mr. Gohmert. Thank you.
Mr. Chabot. Mr. Chairman? The Senator is free to go, if he
would like. I just wanted to make one comment in response to--
--
Mr. Scott. Well, let's let him leave before we get some
other questions. [Laughter.]
Thank you, Senator.
Senator Dorgan. We have a vote at 2:45, so I have a great
excuse. Thank you very much.
Mr. Scott. Thanks so much.
The gentleman from Ohio?
Mr. Chabot. Just very briefly, in response to my friend
from----
Mr. Scott. The next witnesses will come up.
Go ahead.
Mr. Chabot. The bill--and ours are somewhat different. But
our bill, H.R. 845, it does take into account the defendant's
economic circumstances, so if they can't--if they have nothing,
you are not going to, obviously, squeeze blood from a turnip,
as the Chairman said. So it takes into account the defendant's
economic circumstances, whether he or she has assets or not, in
making the restitution mandatory.
And it also takes into account the dependents of the
defendant also, so what circumstances would that put the
defendant's family in, as well. So those are all taken into
consideration.
But in a case where somebody has assets and could
contribute to the victim, they ought to. And that is what our
bill does.
Mr. Scott. And those where the judge has discretion, is
there discretion on the freezing of assets pre-trial?
Mr. Chabot. Thank you for the question. It is the judge's
determination on that. So it is an issue, and----
Mr. Scott. Okay. Well, let's see what the panelists have to
say.
Our first witness on the second panel is going to be
Jonathan Turley of George Washington University Law School. He
teaches courses in constitutional law, constitutional criminal
law, environmental law litigation, and torts. He is a frequent
witness before the House and Senate on constitutional and
statutory issues, as well as tort reform legislation. He earned
his BA from the University of Chicago and JD from Northwestern
University.
Our next witness will be Andrew Weissmann of the law firm
of Jenner & Block. He was the director of the Enron Task Force,
the Chief of the Criminal Division of the United States
Attorney's Office for the Eastern District of New York, and
Special Counsel to the Director of the Federal Bureau of
Investigation. He earned his bachelor's degree from Princeton
and law degree from Columbia.
Our next witness will be David Smith of the firm English &
Smith. Prior to entering private practice, he was a prosecutor
in the Criminal Division of the U.S. Department of Justice and
at the U.S. Attorney's Office in Alexandria, Virginia. He
earned a bachelor's degree from University of Pennsylvania and
a law degree from Yale.
Our final witness will be judge Paul Cassell, professor of
law at the University of Utah College of Law. He has been an
Assistant U.S. Attorney for the Eastern District of Virginia,
professor of law for the University of Utah, and U.S. District
Court Judge for the District of Utah, and has returned to full-
time at the College of Law, where he teaches criminal
procedure, crime victims' rights, criminal law and related
classes. He has a bachelor's and law degree from Stanford.
Again, our witnesses' statements will all be entered in the
record in their entirety. And I would ask each of our witnesses
to summarize your testimony in 5 minutes or less. And the
lighted device will turn from green to yellow when you have 1
minute left in your time, and will turn to red when your 5
minutes have expired.
Professor Turley?
TESTIMONY OF JONATHAN TURLEY, J.B. AND MAURICE C. SHAPIRO
PROFESSOR OF PUBLIC INTEREST LAW, GEORGE WASHINGTON LAW SCHOOL,
WASHINGTON, DC
Mr. Turley. Thank you, Chairman Scott, Ranking Member
Gohmert, Members of the Subcommittee. It is an honor to appear
again before you to talk about a subject that we can all agree
is very important.
Restitution is very important to a criminal system, and it
plays a role not just in deterrence, it even plays a role in
rehabilitation. I think we can all agree on that. We can also
agree that the current rate of recovery of restitution dollars
is insufficient.
However, on these three bills, you see a great number of
interstitial changes in the restitution laws. And on the
initial read, I think there is obviously much that has to be
done. Many of these provisions are vague, and that vagueness
will cause grave problems if these were to become law.
But I am going to talk today about the most troubling
aspects of the bill. And even though I count friends among the
sponsors and the supporters of this bill, I must come and say
that I believe it would be a mistake to enact this legislation.
I have grave reservations about the necessity and the
equity and the constitutionality of these provisions.
Restitution has traditionally been a matter for courts to
exercise discretion. And they have done it fairly well, and I
think we would agree, however, that they have not done it
enough. The question is, what is the solution?
The solution is not, in my view, to require restitution in
all Federal cases. As we have already heard, Federal defendants
are largely indigent. It is about an 85 percent rate. From what
I could see with this legislation, it would succeed only in
pushing the remaining 15 percent into indigent status. It would
not, in my view, increase significantly restitution to victims,
which I is believe what we all want.
It is true there is $46 billion that appears to be
uncollected. But I believe it is also clear that much of the
reason for that is that it can't be collected, that we are
issuing restitutional orders against people who are indigent.
And we are also doing a very bad job in collecting from those
who are the not.
One of my greatest concerns about this legislation is the
reduction of discretion for courts. I testified a few years ago
with a Federal judge who told me on the side during one of the
breaks that he had spent his entire life trying to become a
Federal judge by having a distinguished career as a lawyer. He
became a partner, he became a well-known trial lawyer, and the
minute he became a judge he was told not to use any of that
experience or background in the sentencing of a defendant. And
he said he felt like he was a race horse tied to a plow. He
could not use a thing that he had distinguished himself
learning throughout his career.
Our Federal bench is remarkably talented. I have been a
critic of many judges, but, pound for pound, it is a very good
bench. And they should be given some discretion. I have never
met a pro-criminal judge or an anti-victim judge. The reason
that you don't impose restitution in some cases is a balancing
of factors, to try to find the right mix so that you can punish
this individual, maybe even rehabilitate this individual, while
trying to give the victim back something of what was lost. I
don't believe the solution is to take away all discretion when
it comes to restitution.
I also encourage you to think about the impact of these
laws on this legal system. It may look like these are modest
tweaks, but they are not. In my view, they will trigger some
cascading failures within that system. There are displacement
impacts that occur when you impose a new layer of procedural
requirements upon the court. I believe this legislation would
prolong litigation in the Federal courts. It would actually
hurt victims. And I honestly believe that it would be a
mistake.
It would increase the burden upon courts and the public
defenders' offices that are already limited. As a litigator, I
can tell you, the dockets are getting longer. It is very common
for me to tell my clients they will have to wait for years for
a final decision in a civil case. They are getting longer in
criminal cases. This would add to that already-overburdened
court system, and it would achieve very little, in my view.
I strongly oppose some of the provisions that are contained
here, particularly the pre-trial, even pre-indictment freezing
of assets. I believe that that would discourage lawyers and
pressure plea agreements and requirea defendant to essentially
defend himself over a charge that has not been made, over
counts that are not confirmed for trial.
I also strongly oppose the provision that says you can
require restitution before the completion of an appeal. There
is a system under Rule 68 that works very, very well for that.
I list all of the objections I have here, but what I would
strongly encourage my friends on the other side to consider is
that sometimes roads paved with good intentions take us places
we don't want to be. I believe this legislation will take us to
one of those places. I think it will slow the courts, make them
less efficient, make them less equitable, make them less fair.
I don't think any of us want that.
And I believe that there are alternatives, and I would love
to work with my friends and with this Committee to achieve
those worthy ends.
Thank you.
[The prepared statement of Mr. Turley follows:]
Prepared Statement of Jonathan Turley
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Scott. Thank you.
Mr. Weissmann?
TESTIMONY OF ANDREW WEISSMANN, ESQUIRE,
JENNER & BLOCK LLP, NEW YORK, NY
Mr. Weissmann. Chairman Scott, Ranking Member Gohmert,
Members of the Subcommittee and staff, the proposed Restitution
for Victims of Crime Act of 2007 would, in my opinion, result
in the unwarranted skewing of power in favor of the prosecution
without the concomitant benefit to the public that would
justify that result.
I am going to focus on two aspects of the bill. First, the
means by which the proposed bill would expand prosecutorial
authority would set the bar too low for the prosecution to
seize assets and the bar inordinately high for the defense to
challenge that seizure.
Second, the bill would virtually eviscerate in many
corporate criminal investigations the protections supposedly
afforded by the Department of Justice in its recent McNulty
Memorandum governing corporate charging decisions. Such a
result, I believe, would be both unwarranted and truly
unintended.
The bill authorizes the prosecution to make an ex parte
application to restrain any assets belonging to an individual
or a corporation even before indictment. Further, the bill
directs that the prosecutor must demonstrate only probable
cause to believe that the defendant, if convicted, will ordered
to satisfy a restitution penalty in the case of a felony. Upon
that showing, the legislation directs the court to take action
in favor of the prosecution to secure the assets or substitute
assets. Moreover, if it determines that it is in the interest
of justice to do so, the court shall issue an order necessary
to preserve any nonexempt assets of the defendant that may be
used to satisfy such restitution order.
This is a dramatic departure from current law with
significant potential for abuse. One example: Pre-conviction, a
prosecutor could exert enormous leverage over a current or even
prospective corporate defendant by freezing all of its assets
that may be used to satisfy a restitution order. Such a result
is particularly draconian when one remembers that corporate
criminal liability can be triggered based on the actions of a
single low-level employee.
Furthermore, because current law permits defendants to be
held jointly and severally liable for the full amount of
restitution, the bill would enable the prosecution to obtain ex
parte an order freezing all assets of a company or individual
based on the alleged conduct of other people.
Such consequences are particularly unfair when one
considers the myriad procedural safeguards missing from the
bill. The bill sets an initial pre-conviction threshold
standard to seize a person's or a company's assets that could
always be met by the prosecution. The bill would enable a
prosecutor to show that a person, if convicted of a felony,
would be required to pay restitution. That showing could be
made simply by pointing to the indictment or complaint and
reading the statute. That would be all that the prosecution
would have to do.
There would be no benefit of the adversary system. There
would be no requirement to establish a likelihood of success on
the merits. There would be no requirement to show that a
defendant is likely, probable or even suspected of dissipating
assets to be restrained. And with that, the prosecution can
freeze all assets that may be subject to restitution upon
conviction.
This standard, bizarrely, is far lower than that that
currently exists in the civil arena. And when you consider
that, you have to consider that, concomitantly, the defense is
then given no opportunity under this bill to challenge that
order. The bill suggests that there is that opportunity, but,
in fact, if you look at it, it is virtually impossible to meet
the threshold.
A defendant can only obtain the possibility of a hearing if
he or she shows, by a preponderance of the evidence, that there
are no assets to obtain counsel or to pay for necessary
expenses and--not or--and make a prima facie showing that there
is a bona fide reason to believe that the court's ex parte
finding of probable cause was in error.
So let's assume that, after the ex parte order that the
defendant is rendered completely penniless, that is
insufficient. Because what the defendant would have to show is
that the initial restraining that the prosecution received ex
parte was invalid or there is some reason to believe that. That
could never be met, given how easy it is for the prosecution to
meet the initial threshold.
Finally, even if the court then decides to hold a hearing,
the current bill says that the defendant is not entitled to any
discovery that he or she would not otherwise get. And because
that stage of the proceeding under current law, there is no
ability to obtain any evidence from the Government with respect
to the names of witnesses, the much-sought-after hearing would
basically be illusory.
Thank you very much.
[The prepared statement of Mr. Weissmann follows:]
Prepared Statement of Andrew Weissmann
Good morning Chairman Scott, Ranking Member Gohmert, and members of
the Committee and staff. I am a partner at the law firm of Jenner &
Block in New York. I served for 15 years as an Assistant United States
Attorney in the Eastern District of New York and had the privilege to
represent the United States as Director of the Department of Justice's
Enron Task Force and Special Counsel to the Director of the Federal
Bureau of Investigation. I also am an adjunct Professor of Law at
Fordham Law School where I teach Criminal Procedure. I am also here
today testifying on behalf of the U.S. Chamber of Commerce.
H.R. 4110, the proposed ``Restitution for Victims of Crime Act of
2007'' would, if passed in its current incarnation, result in the
severe and unwarranted skewing of power in favor of the prosecution,
with no concomitant benefit to the public that would justify that
result. The bill would afford prosecutors sweeping authority over
defendants' assets--and consequently over defendants--without necessary
due process guarantees or sufficient regard for the presumption of
innocence, which we all cherish.
I make several points in my remarks. First, the bill would greatly
expand the scope of the assets that can be restrained pre-conviction.
The bill would provide sweeping authority to restrain pre-conviction
assets unconnected to any wrongdoing by the defendant. The bill runs
contrary to the long tradition and jurisprudence of pre-conviction
asset restraint and forfeiture, which are grounded exclusively in the
recognition that the funds to be seized are ``tainted.''
Second, the means by which the proposed bill would enable this
expansion of prosecutorial authority applies fundamentally unfair
standards, which set the bar far too low for the prosecution to seize
assets, and the bar inordinately high for the defense to challenge that
seizure.
Third, the confluence of these two problems in the proposed bill
would virtually eviscerate in many corporate criminal investigations
the protections supposedly afforded by the Department of Justice in its
recent McNulty Memorandum governing corporate charging decisions. Such
a result would be both unwarranted and, surely, unintended.
Finally, there is insufficient evidence that the current lack of
pre-conviction restitution provisions applicable to untainted assets is
the cause of the growing number of uncollected restitution judgments
entered in criminal cases. Thus, the proposed bill is unnecessary to
remedy this perceived problem.
a. the abolition of the taint requirement
The proposed bill would make several important changes to current
forfeiture law. First, it authorizes the United States to make an ex
parte application to a federal judge in order to restrain, without
limitation, any asset of an individual or corporation even before the
individual or corporation is indicted.\1\ Further, the bill directs
that the prosecutor must demonstrate only ``probable cause to believe
that [the] defendant, if convicted, will be ordered to satisfy an order
of restitution for an offense punishable by imprisonment for more than
1 year.'' Section 202(a)(a)(1) (emphasis supplied). Upon that showing,
the legislation directs that ``the court . . . shall (i) enter a
restraining order or injunction; (ii) require the execution of a
satisfactory performance bond; or (iii) take any other action necessary
to preserve the availability of any property traceable to the
commission of the offense charged.'' Section 202(a)(a)(1)(A). Moreover,
``if it determines that it is in the interests of justice to do so,
[the Court] shall issue any order necessary to preserve any nonexempt
asset . . . of the defendant that may be used to satisfy such
restitution order.'' Section 202(a)(a)(1)(B) (emphasis added).
---------------------------------------------------------------------------
\1\ See Section 202(a)(a)(1). Notably, the fact that such restraint
of any asset--even those untainted by wrongdoing--may occur before
indictment renders all persons subject to the prosecutor's reach and
eliminates the initial safeguard of the grand jury. See Section
202(a)(b)(1) (referring to ``the case of a preindictment protective
order'').
---------------------------------------------------------------------------
This scheme is a significant departure from current asset restraint
practice and policy. These pre-conviction restraint provisions are
divorced from the long-established requirement that the restrained
property bear the taint of the defendant's wrongdoing. For decades,
federal prosecutors have had the ability to freeze the tainted assets
of persons pre-trial in order to ensure that these assets are properly
forfeited to the government upon conviction. Key to this prosecutorial
power has been the requirement that the assets that are subject to
seizure are traceable to the crime itself. To freeze (and subsequently
obtain) forfeitable property or funds, prosecutors have been required
to show that such property is tainted.\2\ This requirement has cabined
prosecutorial discretion by limiting the universe of restrainable funds
to those traceable to the crime committed.
---------------------------------------------------------------------------
\2\ Indeed, what is known as in rem civil forfeiture was an action
at common law customarily used to proceed against the tainted property
itself on the theory that it was guilty. As the Supreme Court wrote in
United States v. Sowell, as soon as the criminal used the property
unlawfully, ``forfeiture under those laws took effect, and (though
needing judicial condemnation to perfect it) operated from that time as
a statutory conveyance to the United States of all the right, title and
interest then remaining.'' 133 U.S. 1, 19 (1890). Statutory enactments
have added numerous criminal forfeiture provisions that permit the
recovery of tainted property as punishment for the wrongdoing.
---------------------------------------------------------------------------
The bill completely removes this ``taint'' nexus. Indeed, the
government may freeze all of an individual's or corporation's assets if
they ``may'' be used to pay a restitution order. The bill directs that
``if it determines that it is in the interests of justice to do so,
[the Court] shall issue any order necessary to preserve any nonexempt
asset . . . of the defendant that may be used to satisfy such
restitution order.'' Section 202(a)(a)(1)(B) (emphasis added). The bill
thus expressly brings all non-tainted assets under the control of the
prosecutor whenever those assets ``may'' be used at some point in the
future to satisfy a restitution order.
This is a dramatic departure from current forfeiture policy, with
enormous potential for abuse. For instance, pre-conviction, a
prosecutor could exert enormous leverage over a current or even
prospective corporate defendant by obtaining an order freezing all of
its assets that ``may'' be used to satisfy a restitution order. Such a
result is particularly unfair and Draconian when one remembers that
criminal corporate liability can under current law attach based on the
errant acts of a single low-level employee--even if the employee's
actions are in contravention of a strong corporate compliance
program.\3\ Furthermore, because 18 U.S.C. Sec. 3664(h) permits courts
to make defendants jointly and severally liable for the full amount of
restitution, the proposed bill would enable the prosecution to obtain
ex parte an order wiping out all assets of a defendant completely,
based on the alleged conduct of other people.
---------------------------------------------------------------------------
\3\ A corporation can be held criminally liable as a result of the
criminal actions of a single, low-level employee if only two conditions
are met: the employee acted within the scope of her employment, and the
employee was motivated at least in part to benefit the corporation. No
matter how large the company and no matter how many policies a company
has instituted in an attempt to thwart the criminal conduct at issue,
if a low-level employee nevertheless commits such a crime, the entire
company can be prosecuted. New York Central & Hudson River Railroad v.
United States, 212 U.S. 481 (1909) (upholding constitutionality of
statute that permitted imputation of agents' conduct to create criminal
liability for the carrier itself); Dollar S.S. Co. v. United States,
101 F.2d 638 (9th Cir. 1939) (affirming steamship corporation's
conviction for dumping refuse in navigable waters despite the company's
extensive efforts to prevent its employees from engaging in that very
conduct); United States v. Twentieth Century Fox Film Corp., 882 F.2d
656 (2d. Cir. 1989) (affirming conviction despite the fact that bona
fide compliance program was in effect at company); United States v.
George F. Fish, Inc., 154 F. 2d. 798 (2d Cir. 1946) (affirming
corporation's conviction based on criminal acts of a salesman); Riss &
Co. v. United States, 262 F.2d 245 (8th Cir. 1958) (clerical worker);
Texas-Oklahoma Express, Inc. v. United States, 429 F.2d 100 (10th Cir.
1970) (truck driver); United States v. Dye Constr. Co., 510 F.2d 78
(10th Cir. 1975). See generally Weissmann, Andrew, ``Rethinking
Criminal Corporate Liability,'' Indiana Law Journal, Vol. 82, No. 2,
Spring 2007, available at SSRN: http://ssrn.com/abstract=979055.
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Such consequences of the bill are particularly unfair when one
considers the myriad procedural safeguards that are missing from the
bill, a subject to which I now turn.
B. Procedural Unfairness in the Bill
The bill sets an initial threshold standard to seize a person's
assets pre-conviction that could always be met by the prosecution. By
its terms, the proposed bill would enable a prosecutor to show, ex
parte and merely by ``probable cause,'' that a person, if convicted,
would be ordered to satisfy an order of restitution for an offense
punishable by imprisonment for more than one year. Section
202(a)(a)(1). This minimal ``showing'' could always be satisfied by (a)
reference to the indictment or criminal complaint--both of which
conclusively establish probable cause--and (b) reading the statutory
penalties for the offense. Moreover, the bill would forbid the district
court from choosing in its discretion not to take action in favor of
the prosecution, mandating that ``the court . . . shall (i) enter a
restraining order or injunction; (ii) require the execution of a
satisfactory performance bond; or (iii) take any other action necessary
to preserve the availability of any property traceable to the
commission of the offense charged.'' Section 202(a)(a)(1)(A) (emphasis
added).
Accordingly, without the benefits of the adversary system, without
establishing a likelihood of success on the merits, and without any
showing that a defendant is likely, probable, or even suspected to
dissipate the assets to be restrained, the prosecution can freeze all
assets that may be subject to restitution upon conviction. This
standard is, bizarrely, far less than that required of civil litigants
seeking to restrain assets pre-verdict.
Making matters worse, this minimal prosecutorial ex parte threshold
showing is combined with a dearth of any meaningful defense opportunity
to challenge the ex parte seizure. The proposed defense standard is so
restrictive, and has so many hurdles, that in effect once the
prosecution has met its initial minimal showing, the restraint is final
until the end of the criminal case.
The bill provides that post-indictment a defendant may be granted a
post-restraint hearing regarding the ex parte restraint order only if
the defendant ``establishes by a preponderance of the evidence that
there are no assets, other than the restrained property, available to
the defendant to retain counsel in the criminal case or to provide for
a reasonable living allowance for the necessary expenses of the
defendant and the defendant's lawful dependents'' and ``makes a prima
facie showing that there is bona fide reason to believe that the
court's ex parte finding of probable cause . . . was in error.''
Section 202(a)(b)(2) (emphasis added). Even then, the bill does not
require a hearing: the Court ``may hold a hearing to determine whether
there is probable cause to believe that the defendant, if convicted,
will be ordered to satisfy an order of restitution for an offense
punishable by imprisonment for more than one year, and that the seized
or restrained property may be needed to satisfy such restitution
order.'' Section 202(a)(b)(3)(A) (emphasis added). During any such
hearing, however, the defendant may not obtain disclosure of evidence
or the identities of witnesses earlier than otherwise provided by
existing law. Section 202(a)(b)(5) (``In any pretrial hearing on a
protective order . . . [t]he court shall ensure that such hearings are
not used to obtain disclosure of evidence or the identities of
witnesses earlier than required by the Federal Rules of Criminal
Procedure or other applicable law.'').
This standard is virtually insurmountable. First, a defendant has
to have ``no'' assets left to pay counsel or to provide for
``necessary'' living expenses. A defendant with any assets to retain
counsel or pay necessary expenses--even if clearly insufficient funds
for either or both--could be found to fail this test. Second, and more
importantly, even the defendant who is left completely indigent after
the ex parte restraint will not prevail in challenging the restraint.
In order to obtain a hearing, the proposed bill requires in addition
that the defendant establish that there is a bona fide reason for
finding the restraint order to be in error. Given that the initial
threshold standard that the prosecution has to meet is virtually
automatic--and will certainly be met upon almost any indictment for an
offense allowing restitution--this standard simply cannot be found by a
court to be satisfied. Thus, even if the ex parte restraining order
renders a defendant penniless to care for her family and to obtain even
the most modest retained defense counsel, that defendant still cannot
obtain relief. Finally, even, if a defendant surmounts these obstacles,
a hearing is not guaranteed under the bill, and even if a hearing is
afforded in the discretion of the court, at that hearing the defense is
prohibited from having access to evidence or witnesses that it would
not otherwise have under existing law. Given that under existing law, a
defendant has minimal rights to discovery--and could never obtain a
list of government witnesses at this stage of a criminal proceeding--
the much-fought for hearing would be all but illusory.
c. impact on the debate regarding the mcnulty memorandum
The proposed bill could also serve, perhaps unintentionally, as an
end run around the protections of the Department of Justice's (``DOJ'')
McNulty Memorandum. That Memorandum, issued by DOJ in December 2006 to
forestall legislation that would have had more far-reaching
consequences, placed severe restrictions on when the government could
consider whether a corporation is paying fees for its employees. The
Memorandum basically prohibited DOJ from weighing in on that private
decision in all but the rarest case. The Memorandum also placed limits
on when DOJ is supposed to request a waiver of the attorney-client
privilege.
The proposed bill jeopardizes the effectiveness of these
provisions. First, because the bill would enable DOJ in myriad
corporate criminal investigations to obtain sweeping ex parte restraint
orders against a company, it could render it virtually impossible for a
company to pay legal fees for its employees. In other words, the
Department would not have to weigh in on what the company intended to
do regarding the payments of fees, as it was found for instance to have
done in the so-called KPMG case.\4\ Instead, DOJ could engage in self-
help, and simply freeze all of a company's available assets ex parte
that may be needed to pay restitution. In large corporate cases, such
as KPMG, or Enron, Tyco or WorldCom, that enormous power would be
palpable.
---------------------------------------------------------------------------
\4\ United States v. Stein, 435 F. Supp. 2d 330 (S.D.N.Y. 2006).
District Judge Lewis Kaplan found that prosecutors had invoked the
Department's then-existing corporate charging guidelines, the Thompson
Memorandum, at the very outset of its investigation to pressure KPMG to
break its long-standing tradition of paying its employees' legal fees.
KPMG's payment of legal fees was at the top of the prosecutors' agenda
from their very first discussions with KPMG, and the court found that
the prosecutors had indicated that the government would not look
favorably on the voluntary advancement of legal fees. Judge Kaplan
concluded that by causing KPMG to cut off legal fees to employees, the
Thompson Memorandum violated the Fifth Amendment's due process clause
and the Sixth Amendment right to counsel.
---------------------------------------------------------------------------
Second, by causing a seismic shift in the already disproportionate
power of the prosecution in corporate cases, any company subject to an
ex parte asset restraint would waive any and all rights in order to
survive such a freeze. The current congressional interest in
legislative responses to the McNulty Memorandum would be rendered
meaningless. Once prosecutors have the power to seek control of all or
a significant portion of a corporation's assets pre-conviction and ex
parte, the corporation will take any steps to have the government avoid
that result or remove that restraint. Thus, the proposed bill, by
giving unprecedented powers to the prosecutor before a defendant is
convicted or even indicted, tips the scale dramatically and unfairly in
the government's favor.
d. disregard of current prosecutorial powers
The proposed bill fails to recognize the existing tools prosecutors
possess for restraining assets in order to preserve them for
restitution.
Current forfeiture law assists those wrongfully deprived of their
property in obtaining it via the government's forfeiture tools. Many
federal statutes contain explicit provisions allowing property owners
to make claims on forfeited assets before they are obtained by the
prosecution. In that sense, restitution aims are achieved through the
traditional means of freezing and seizing tainted assets. Moreover, by
statute, the Attorney General's ability to enforce restitution awards
is linked to its forfeiture tools. Under 21 U.S.C. Sec. 853(i)(1), the
Attorney General is authorized to ``grant petitions for mitigation or
remission of forfeiture, restore forfeited property to victims of a
violation of this title, or take any other action to protect the rights
of innocent persons which is in the interest of justice and which is
not inconsistent with the provisions of this section.'' The Attorney
General may also direct the sale of property ordered forfeited and
direct the disposition of those funds, as well as to ``take appropriate
measures necessary to safeguard and maintain property ordered forfeited
under this section pending its disposition.'' 21 U.S.C. Sec. 853(i)(5).
Importantly, both the federal RICO statute, 18 U.S.C. Sec. 1963(m),
and the federal criminal forfeiture statute, 21 U.S.C. 853(p), permit
the government to obtain the forfeiture of substitute assets post-
conviction,\5\ when the defendant transferred the tainted property to a
third party, placed the property beyond the court's jurisdiction, has
been commingled with other property which cannot be divided without
difficulty, or has been substantially diminished in value. Attempting
to frustrate the government's effort to forfeit property has been held
to be punishable as obstruction of justice. See United States v. Baker,
227 F.3d 955 (7th Cir. 2000). This is a significant weapon in the
government's arsenal, because it ensures that guilty defendants cannot
put forfeitable property or funds beyond the government's grasp. In
short, current law satisfies the government's need to obtain property
without giving the prosecutor the power to freeze any and all assets
held by a corporation or an individual.
---------------------------------------------------------------------------
\5\ One Circuit permits the pre-trial restraint of substitute
assets, see In re Billman, 915 F.2d 916 (4th Cir. 1990), but that view
is not shared by other Circuits.
---------------------------------------------------------------------------
Finally, there is scant evidence that the large amount of
uncollected restitution payments--cited as a reason for the proposed
bill--is a result of defendants' improperly dissipating assets pre-
conviction. An equally plausible reason for the growing size of
uncollected restitution orders is that courts are currently required to
enter such orders regardless of a defendant's ability to pay, and thus
impose large restitution orders but set reasonable payment schedules.
That scheme, which currently governs restitution orders, would of
course result in what currently appears to be a large unpaid
restitution bill, when in reality it may bear no resemblance to a
defendant's avoiding restitution payments at all. In short, the
proposed bill may be seeking to remedy a problem that does not exist,
and does so by a means that fails to accord procedural safeguards to
protect the public.
Thank you for the opportunity to testify.
Mr. Scott. Thank you.
Mr. Smith?
TESTIMONY OF DAVID B. SMITH, ESQUIRE, ENGLISH & SMITH,
ALEXANDRIA, VA
Mr. Smith. Good afternoon, Mr. Chairman and distinguished
Members of the Committee.
Much of what I was going to say in my opening statement has
been already said by my distinguished colleagues at this table.
And I really thank them for the excellent job that they have
obviously done. I didn't get a chance to read their submissions
before I came here, but I see that they are excellent.
I am a leading authority on forfeiture, and I am the author
of a two-volume Matthew Bender Treatise on the subject which
also covers restitution law. And I have served, for a couple of
decades now, as co-chair of the Forfeiture Abuse Task Force for
the National Association of Criminal Defense Lawyers. And I
helped the House Judiciary Committee and the Senate Judiciary
Committee draft the Civil Asset Forfeiture Reform Act of 2000,
which many of you on this Committee fought for, and it was a
big victory for the reformers.
I have been asked to address the pre-trial asset restraint
provision of these bills, but I would like to make it clear
that my concerns about these bills are not limited to that
provision. I agree with the points made in the excellent letter
filed by Thomas Hillier on behalf of the public defender
community, which I did get a chance to read, and I wish I had
time to address those issues as well. But I think the other
folks here, as well as myself, have focused on what we think is
the most serious problem of all in this bill, or these bills,
and that is the pre-trial asset restraining provision.
Basically, we don't need a pre-trial asset restraining
provision specifically directed toward restitution. And that is
because the courts already have the power to freeze forfeitable
assets prior to trial, under the forfeiture statutes. And once
forfeited, those assets are normally turned over to crime
victims to compensate them for their losses.
Whether this is called restitution or restoration of the
proceeds of crime to the victims, which is another way that the
Justice Department styles it, doesn't really matter. The money
gets back to the victims already. That is the policy of the
Department of Justice--that is, to compensate crime victims out
of forfeited funds.
So the only thing that these new restitution bills actually
add to the picture is an unfair and totally ill-conceived
provision allowing the court to freeze legitimate assets--that
is, clean funds, not tainted by association with any crime--for
the purpose of increasing the amount of money available for
restitution, if that was ordered at the end of the day by the
court.
Now, there are better ways to do this than a provision
which trenches so heavily on the sixth amendment right to
counsel of choice and the basic assumptions of our adversary
system of justice. And one of those better ways, or two of
them, I've suggested in my statement, and that is to take money
that is now earmarked for law enforcement purposes, and instead
of putting it in a forfeiture fund, which is used to buy police
cruisers and to pay the salaries of sheriffs' departments and
so forth. Why not useg those funds exclusively to make
restitution to victims?
That proposal is actually consistent with the Justice
Department's supposed policy of favoring restitution to victims
over other uses for forfeiture funds. The problem is that that
policy is not always followed in the field by Department
prosecutors, who have other constituencies, let's put it that
way. They want to keep the State and local folks happy, who
assisted in the prosecution, by giving them a portion of the
money to fund their own law enforcement budgets. And so you can
understand why they are pulled in different directions.
But Congress has the power to make a decision to direct
these funds to the place where they are most needed, and that
is for restitution to the victims. And I suggest that that is a
far better way to go about increasing the funds available for
restitution than the idea of freezing every defendant's assets
prior to trial.
I would also say that Senator Dorgan made the point that
there are some rich defendants who will fraudulently transfer
funds to their wives, to others, in order to avoid restitution
and other penalties. Well, Congressman Johnson was quite
correct to point out that current law allows the Government to
set aside those fraudulent transfers under State and Federal
fraudulent transfer statutes. And they do do that, and they
should do that, where a significant amount of money is
involved.
And another way that the Government can prevent such
fraudulent transfers before they even occur is to prohibit them
as a condition of bail. And that is done in quite a few cases
involving rich defendants. I am thinking of one in particular,
which I am involved in right now, where exactly that was done,
So, you know, the court has a lot of control over a
defendant's handling of his assets through the court's power to
set bail conditions. That same power has been used to force
defendants to repatriate assets from abroad which have been
transferred there. And so the court has already got
considerable flexibility and power over a defendant's ability
to transfer assets improperly to avoid restitution and other
penalties. So I just don't think this provision is needed, and
it is certainly not worth the candle, as I put it.
It gives prosecutors a nuclear weapon with which to
pauperize every single defendant, and abuse it they will. We
know that from experience in the forfeiture area. When
prosecutors are allowed to seize substitute assets, as they
have been in the 4th Circuit unfortunately, they have done so
repeatedly in an effort to force a defendant to be represented
by the public defender, which is not adequate in a complicated
white-collar case, and thereby force them to plead guilty
rather than go to trial. And I can cite you chapter and verse
on that later on.
Thank you very much. I see my time is up.
[The prepared statement of Mr. Smith follows:]
Prepared Statement of David B. Smith
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Scott. Thank you.
Judge Cassell?
TESTIMONY OF PAUL G. CASSELL, PROFESSOR, S.J. QUINNEY COLLEGE
OF LAW, UNIVERSITY OF UTAH, SALT LAKE CITY, UT
Mr. Cassell. Chairman Scott and distinguished Members of
the Subcommittee, I am pleased to be here today to testify in
support of improving our Nation's restitution statutes.
If there is one aspect of criminal justice policy which is
uncontroversial, it is the idea that a criminal who causes a
loss to a victim ought to have to pay that loss back to the
victim. Congress repeatedly has adopted this principle, and,
most recently, it has been mentioned in the Crime Victims'
Rights Act, which was passed just a couple of years ago.
Unfortunately, however, that goal of requiring criminals to
pay back losses to victims is not being achieved. And I would
like to recommend four specific reforms to our Federal
restitution statutes.
First, Federal judges should be given the authority to
award restitution for all losses suffered by crime victims, not
just narrow categories of losses. Right now, the main
restitution statutes limit a judge's power to award restitution
to lost property, medical expenses, lost income, funeral
expenses, and costs of participating in the investigation.
There is no general authorization for restitution, with the
result that when judges make a discretionary decision, such as
Professor Turley has talked about, to award restitution, all
too frequently the appellate courts have been forced to
overturn those decisions, because the statutes do not support
the award.
For example, in United States v. Reed, the 9th Circuit was
forced to overturn a restitution award to victims whose cars
were damaged when an armed felon fled police, because they were
not damaged by the crime of a felon being in possession of a
firearm.
In the United States v. Blake, the 4th Circuit was forced
to overturn a District Court order for restitution for victims
who had had their credit cards stolen and charges run up on
those cards because the crime of theft of the credit card is
not the same as the crime of spending money on the credit card.
The 4th Circuit said its decision represented, quote, ``poor
sentencing policy,'' but the law did not permit such an award.
The law should be changed. As the U.S. Judicial Conference
has recently recommended, Federal judges should be given
discretionary authority to award restitution when it is just
and proper under the circumstances of the case.
Second, Federal judges should be given the power to award
restitution for all Federal crimes, not just those that
happened to be listed in title 18 of the U.S. Code. An
illustration of the problem comes from United States v. Elias.
There, the defendants sent two young men with no protective
equipment into a tank to clean out toxic waste. While working
in the tank, one of the men was overcome by toxic fumes, and he
sustained very serious permanent brain damage that will require
expensive medical treatment for the rest of his life.
Again, the district judge exercised discretion and
concluded that a $6.3 million restitution award was
appropriate, but the 9th Circuit was forced to overturn the
award. Why? Because environmental offenses are listed in title
42 of the U.S. Code, not title 18 for which restitution is
authorized. This makes no sense, and Congress should give
judges authority to award restitution for all Federal crimes.
Third, judges should be given discretionary authority to
restrain defendants from dissipating assets that could be used
to satisfy a restitution award. And here I must, with all
respect, disagree with Mr. Weissmann who has simply
misdescribed the bills that are in front of this Committee. The
bills do not authorize the seizure of assets. They simply
authorize the judge, if the judge finds it appropriate, to
restrain transference of the assets.
So if the defendant wants to continue to live in his
million dollar home, he is entitled to do that under these
bills. But the bills would also authorize the judge to forbid
the defendant from transferring that home to his wife or
something like that that could preclude enforcement of
restitution. The General Accounting Office has found that this
is a serious problem and that assets acquired illegally are
often rapidly depleted on intangible and excessive lifestyle
expenses. There is no justification for letting a Federal
criminal steal money from a victim and then use that money to
live the high life before a final conviction could be obtained.
Federal judges should be given the authority on application
from prosecutors to restrain a defendant from dissipating
assets that could be used to satisfy a restitution award. Of
course such authority should include appropriate procedural
protections for defendants and innocent third parties. And the
proposed bills in front of this Committee do that. They would
allow a restraining order only on a finding of probable cause
and then only for assets that would be necessary for
restitution and defendants can obtain expenses for living
expenses or to pay legal counsel.
The provisions of the Act are modeled on a forfeiture
provision that has been upheld by the United States Supreme
Court. Crime victims deserve the same kinds of protections when
prosecutors are trying to get assets for them as the Federal
Government can use when it is trying to forfeit assets to the
U.S. Government.
Finally, Congress should also repeal the abatement ab
initio doctrine, which prevents a restitution award from being
entered when a convicted defendant dies before his appeals are
final. Again, this problem might be well highlighted by the
case that I believe Mr. Weissmann worked on. In the case of
United States versus Kenneth Lay, there was a 16-week jury
trial after which Mr. Lay was convicted of massive securities
frauds involving Enron. However, he died before the sentencing
hearing. And as a result, the district judge was prevented from
entering a $43 million restitution award that would have gone
to the victims of that crime.
The statute should be changed. Right now the statutes do
not allow a judge to award restitution unless the defendant has
finally exhausted all of his appeals. We should change the law
to allow the judge to impose the restitution order and then let
the defendants pursue any appeals that might be appropriate.
So in sum, I think the issues that are in front of this
Subcommittee are very simple. When a criminal causes a loss to
a victim, the criminal should be ordered to pay the victim for
that loss. I urge the Committee to move forward on the
legislation in front of it, which would help to implement this
principle in our Nation's Federal criminal justice system.
[The prepared statement of Mr. Cassell follows:]
Prepared Statement of Paul G. Cassell
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Scott. Thank you very much, professor. I recognize
myself for 5 minutes of questions. And in follow up, Judge
Cassell, as I understand your testimony, you want the judge on
a case-by-case basis to make these decisions not at automatic
pretrial in every case?
Mr. Cassell. I think it depends on what we are talking
about. But in general, the bills that are in front of the
Committee would authorize discretionary decisions by judges to
create more restitution opportunities.
Mr. Scott. Mr. Weissmann, your reading of the case, if the
U.S. attorney has probable cause of a case, can they get
order--does a judge have to enter an order freezing assets?
Mr. Weissmann. Under the language of the bill, yes, the
judge has very limited discretion. They have to----
Mr. Scott. What discretion?
Mr. Weissmann. First if the showing is made that there is
an indictment and that that statute----
Mr. Scott. Wait a minute. No indictment. Pre-indictment.
Mr. Weissmann. Okay. If there is pre-indictment, the judge
has to make the finding of probable cause. But if there is
probable cause for a crime for which restitution is a penalty,
then there is no discretion.
Mr. Scott. He has to enter the order at the request of the
U.S. attorney upon probable cause to freeze enough assets to
satisfy any potential restitution?
Mr. Weissmann. Yes. And it can cover any assets that may be
necessary.
Mr. Scott. And this is not just fruits of the crime asset,
any assets?
Mr. Weissmann. That is right. Unlike the current rule with
respect to forfeiture, where it only covers tainted asset this
is for any assets.
Mr. Scott. One of the problems with the criminal justice
system is that the same system applies to those that are guilty
and those that are innocent, it would be nice to have one set,
kind of streamline set for those we know are guilty and another
more burdensome process conviction for those who are innocent.
Unfortunately, everybody has to go down the same highway. Now,
if you are factually innocent of the charge and they come in
with probable cause, do your assets get freezed?
Mr. Weissmann. Yes.
Mr. Scott. When do you have an opportunity to present your
evidence of innocence?
Mr. Weissmann. Under this bill, it is hard for me to divine
a circumstance where a defendant would have the opportunity in
your hypothetical to have a hearing because if there is--a
probable cause determination by the court, whether it is pre-
or post indictment and it is for a crime for which restitution
is available, then it is impossible for that defendant to make
a showing that there is a bona fide reason to believe that
there was error at the time of the ex parte order, which is a
requirement in order for the hearing to be available. The court
has no discretion.
Mr. Scott. Professor Turley, do you see the same result? If
you are factually innocent, when do you get an opportunity to
reopen your bank account?
Mr. Turley. Well, on the ex parte, you get 10 days on the
ex parte and then you can request a hearing. But the problem
with the standards is we are talking probable cause that this
is a crime if proven that you would have to pay forfeiture. But
the bills, at least one of them, would make all crimes subject
to forfeiture. So the standard is somewhat misleading because
it is almost impossible to miss that target.
So when you finally get up in front of a hearing, you have
got very little basis under these laws to say you shouldn't
seize my assets. One possibility would be instead of making all
of these laws subject to forfeiture, it is one of the other two
that simply extends it to six more laws, and you could argue
that this isn't a law that is subject to assets being frozen.
But it is a hearing that begins with an ex parte filing which
obviously you have no role----
Mr. Scott. And if you have outstanding checks and they
start bouncing, when can you get access to your checking
account again?
Mr. Turley. It is even worse----
Mr. Scott. There is notice, right?
Mr. Turley. Yeah, it is even worse. I mean, as a criminal
defense attorney, I can tell you the most important part of a
case, in my view, is pre-indictment. It is when you know your
person is a target, you have got a lot of work to do. They need
counsel. That is probably when they are most vulnerable. But at
that very moment, their assets can be frozen. They will have a
hard time getting an attorney. But they are supposed to get an
attorney in order to contest the fact that they have no money
to hire an attorney.
Now, the reason they will have no money is since you are
expanding the definition of victims and because we still have
the original indictment, maybe a superseding indictment with
maybe a larger number of accounts if a judge is looking at
that, she is going to say, well, here is 20 counts which may or
may not be the ones at trial.
On those 20 counts, there is an expanded number of victims
now, each of which can seek your assets. You know, a blind
squirrel would find that nut as a prosecutor. It would be hard
not to get 100 percent of assets on that standard.
Mr. Scott. Thank you. The gentleman from Texas.
Mr. Gohmert. Thank you, Mr. Chairman. I do appreciate
y'all's testimony. And by the way, Professor Turley, I guess
this is the first time I have seen you since the Supreme
Court's recent decision about which you testified earlier. I
would say congratulations on being right, but I knew you were
right before. I would say congratulations, the Supreme Court
got it right.
Mr. Turley. God bless you.
Mr. Gohmert. And there is so much confusion as to what that
really meant and nobody is trying to protect anybody that is a
criminal. They are just trying to preserve the Constitution.
And I appreciate the points that people here have made about
their concerns in this bill. And I have not read the bill in
full. I guarantee you I will before you know we were to take it
up in mark up. But I can see like on preservation of assets for
restitution, this just says on the government's ex parte
application and a finding of probable cause that the defendant,
if convicted, will be ordered to pay an approximate amount of
restitution for an offense, then you could enter these orders
and immediately I am going wait a minute, that might be real
easy to say, well, yeah, if he is convicted then he is going to
certainly have to pay restitution.
So there is your finding and it doesn't have a requirement
that probable cause be found that he committed the offense. So
I can see a number of things that need to be worked on here.
But I am curious about some other things that have been brought
up. For example, yeah, there is a potential set-aside of
fraudulent transfers, and I am just trying to think out loud
based on some of the things that have been said. But what about
a provision that basically provided for a set-aside with a
presumption that if a transfer is made--and again, I am just
thinking out loud here--presumption that if a transfer is made
after the time someone has been named a target and up until so
many months, 6 months or something after conviction, that there
is a presumption that was a fraudulent transfer so the burden
is not there. Or if it is a purchase. Because it is not always
a transfer as you all know.
I mean, sometimes you buy an asset that you can hide
somewhere, or perhaps stick it in some purchase. But if you had
a presumption that was a fraudulent purchase, then maybe you
would have a set aside of not just transfers but purchases,
boy, it would put people on notice that if somebody is named a
target, you better feel real comfortable before you make the
sale or make the buy that this may not be set aside later on.
Anyway, I am wondering if something like that might be of
assistance. But Judge Cassell, you made some excellent
recommendations and some good points, and I will need to do
more looking to make sure that we adequately address the things
that you brought up.
But Professor Turley, you mentioned it reduces the
discretion for the judge and we shouldn't take away all
discretion, it would extend litigation and we have got dockets
getting longer. Of course I fought with my colleagues over the
patent law venue because we had some venues where they were
getting to trial in 18 months, like in the Eastern District of
Texas. But that is horrible because we need it in jurisdictions
where we can have 4 or 5 years to drag them out. Go figure. But
anyway, one of the things that has amazed me is I remember back
in the early '80's when the sentencing guidelines came in and
the Federal judges, you know, were furious that you took away--
the Congress took away all of that discretion and when within a
matter of 20 years, now they say, you know what, it makes it
easier because as a judge, some of my toughest decisions were
what to do on sentencing because I had tremendously broad
discretion.
But anyway, it seems like some have not minded having
discretion taken away. I don't want to see discretion taken
away from the courts. I would not want to see anything
mandatory, but I sure would like them to have the tools in the
appropriate cases. So anyway, can I get comments on the
possibility of a presumption of fraudulent transfer or
purchase, Professor Turley?
Mr. Turley. First of all, it is, once again, an honor to
appear before you. You are unique in that you have played a
role in both the judicial and legislative branch, which makes
your service on this Committee so valuable. And I actually was
thinking along the same lines in terms of what this body could
do to give courts not less discretion but simply more ability
to use that discretion. And actually a thing I was thinking of
was that we could look at--or actually you could look at the
possibility of----
Mr. Gohmert. We is okay. We welcome your input.
Mr. Turley. Look at the possibility of having a more
systemic approach to an early identification of assets of
targets, where the prosecutors can come in and require the
court to make a determination of asset worth, asset locations
and to put that into a court order. Because what you are
speaking of in terms of presumption is it actually achieves the
same thing. That if a court comes in and says, look, we have
identified this as a possibility for fraudulent transfer, and
we have a serious question about restitution for victims
because of the size of these allegations, you could have them
come in and say I want an identification, a sworn
identification of all assets.
Their identification, their amounts, joint bank accounts
and to put that into an order and to say that if there is
transfers from here, we are going to look at whether there is a
fraudulent effort. And you can also ask for the court to be
informed of any large transfers off that base. So the court
will have a chance to monitor it and so will the prosecutors
without freezing the assets but can--and then if there is a
violation--if you go and you submit that information to the
court and there is any hidden assets or any transfers without
informing the court, you would be in contempt, which would be
even better than a presumption. You know, those are
possibilities that I think that the Committee could look at.
Mr. Gohmert. Could I get one more comment from Judge
Cassell on that issue? What do you think about that?
Mr. Cassell. I think certainly a step forward is better
than no step at all. But the problem is that this presumption
of transfer isn't going to apply in many of the situations
where the problems are most serious. We heard from Senator
Dorgan about the problems of somebody taking a trip to Europe
or something like that. Of course, some presumption against
transfers isn't going to get money back on plane tickets or
hotel rooms or jewelry or whatever it is that has been spent
out there that has come and gone. So that is why more
comprehensive authority needs to be given to judges to address
this problem.
Mr. Gohmert. Thank you. Thank you, Mr. Chairman.
Mr. Scott. Thank you. The gentleman from Georgia.
Mr. Johnson. Thank you, Mr. Chairman. With the chart--they
say that a picture is worth a thousand words and the chart was
a wonderful picture of, I believe, a big mansion and the white
sand dunes of a far away beach in an exotic local and maybe an
exotic automobile or something like that, the rich and famous.
And that is the real target of this--of these pieces of
legislation, isn't it? I will ask you Professor Cassell; isn't
that correct?
Mr. Cassell. I think that is certainly the most serious
problem. I don't think prosecutors are going to try to get a
restraining order to prevent somebody from spending $500 on
something. As a practical matter, you are exactly right.
Mr. Johnson. But yet under all three proposals, isn't it a
fact that the prosecutor would indeed have that power over a
blue collar or a no-collar criminal defendant with little or
nor assets?
Mr. Cassell. Certainly it's the case, whenever there is a
crime committed, that prosecutors would have the power to use
the tools in this bill to protect assets. And let's remember,
it is not just--I think sometimes the mistake is to think about
low income criminals--and there are certainly low income
criminals--but who are they victimizing? Low income victims
because typically crimes are committed among the same social
class, many crimes are interracial for example.
So I think it is a mistake to focus just on the criminal
half of the equation and forget about the victim half of the
equation.
Mr. Johnson. When we are talking about restitution, though,
we are talking about that coming from the defendant and we are
talking about expanding the number of people who would be
entitled to restitution under these pieces of legislation. And
given that fact, Professor Cassell, I would like to do
something that I have always wanted to do ever since law
school, and that is to pose a hypothetical to a law professor.
Professor, I would like for you to assume that a man is
convicted of conspiracy to distribute marijuana, and I want you
to further assume that a girlfriend of a man who purchased
marijuana from the defendant claims to be a victim and to have
suffered loss because her boyfriend became abusive to her as a
result of smoking the marijuana. I want to ask you now, under
existing law, this victim, the female, would not be entitled to
restitution, correct?
Mr. Cassell. Correct.
Mr. Johnson. And assuming that she could prove her claim
under this new law, should it pass or any of these three
proposals should they pass, she would be entitled to
restitution; isn't that correct?
Mr. Cassell. I don't think the laws change the definition
of victim that broadly. You are talking about----
Mr. Johnson. Okay. Let me ask whether or not anyone would
disagree with that on the panel.
Mr. Turley. I am afraid I would disagree. I mean, the
hypothetical is less than a hypothetical because it is the
facts from the Sharp case, I believe. And in the Sharp case,
Professor Nowicki, who now teaches at Tulane, was the person
asking for precisely that type of victim status. And indeed,
the court said that it did not meet the standard of being
directly and proximately harmed under the definition of
victims. The definition of victims under these laws are
exceptionally broad. I must disagree with the suggestion that
it is a close matter.
In my view, they are almost without limitation when you
talk about identifiable person or entity that suffer pecuniary
loss is one--I reference. I can't see the significant
limitations of that definition, and I certainly can't see why
the Sharp case would not have fallen within it.
Mr. Johnson. Thank you, Professor. Mr. Weissmann.
Mr. Weissmann. I agree with that. Once you take out the
words direct and proximate, you are going to have significant
issues facing the courts as to who a victim is in any
particular case.
Mr. Johnson. And Mr. Smith?
Mr. Smith. I would agree with these gentlemen, but I think
it could be argued either way. I will concede that. But it
shouldn't be argued either way. I mean, to me there is no way
that that lady should be able to get status as a victim. And
remember there is a----
Mr. Johnson. Under current law or under the new law?
Mr. Smith. Under the new law, it could be argued either
way. And that just goes too far. Remember, there is also
provisions in all of these bills that the defendant has to pay
the victim's attorneys as well for their representation. And to
me that is another terribly ill-conceived provision which is
just going to get the courts bogged down in endless battles
over attorney fees, whether you are entitled to them and
whether the fees are reasonable.
And again, you know, as you said, Congressman, we are
talking about, you know, the Federal system here where 85
percent of the defendants are already deemed indigent and
represented by public defenders. And the most important point
about this entire bill is that you are going to take the
remaining 15 percent and put them into the public defender
system as well because, you know, this bill will make every
defendant subject to being pauperized at the whim of any
prosecutor. And if that is not done, that is because the
prosecutor was a nice guy and he exercised restraint. And there
are still good prosecutors around.
But the problem is you don't want to give this nuclear
weapon to every single line prosecutor with no supervision by
higher-ups and that is the case in today's Justice Department.
There is no supervision by higher-ups. You can't complain to
anybody up the chain and expect to get the AUSA's decision
reversed on anything.
So it is insane to give this much discretion to every
prosecutor. And that is what you are being asked to do. And it
is just--to me this is not even--you know, this is not
something that reasonable people can differ about. It is just
shockingly bad legislation, which has the potential--the very
likely potential to undermine the entire criminal justice
system that we have come to know and respect over centuries.
Mr. Johnson. Thank you.
Mr. Cassell. Could I exercise a point of personal
privilege? Because I guess I have just been called an
unreasonable person here. This legislation doesn't give any
power to prosecutors to do anything other than make
applications to judges who in the proper circumstances can then
issue appropriate orders. If prosecutors are making outlandish
requests, judges won't grant them.
Mr. Smith. But those requests are not going to be
outlandish under this legislation, because they are going to be
authorized. And, in fact, as was said by my colleagues at this
side of the table, the judge will be forced to grant these
restraint orders because he is not given discretion once the
prosecutor makes the probable cause showing, which is very easy
to do.
Mr. Johnson. So whether or not to do this or not vests the
discretion into the hands of the prosecutor as opposed to the
judge?
Mr. Smith. Exactly. And that is just what was wrong our
sentencing system before Booker, which probably Judge Cassell
would be the first one to agree with me about invest the
discretion in the hands of the prosecutors and not the judge.
And the prosecutor was really calling the shots about
sentencing, not judges. And by the way, even if you do vest
discretion in the hands of the judge, I am sorry, but I don't
have great faith in the average Federal judge to get it right
because, you know, based on my experience for 30 years, I have
just seen too many judges act as rubber stamps, particularly in
ex parte proceedings where--you know, where even the best of
judges unfortunately has to rely on everything that the
prosecutor or the case agent tells them because it is an ex
parte proceeding.
The problem with these proceedings is the defense doesn't
even get to know what the basis for the ex parte order is. This
is all done in secret and it is sealed. You don't have any
right to see what the basis was for that ex parte restraint
order that was entered, so how do you challenge it? It makes it
very difficult to challenge if you don't even know what the
factual basis for the order was.
Mr. Johnson. Thank you.
Mr. Scott. The gentleman's time has expired. The gentleman
from Ohio.
Mr. Chabot. I thank the gentleman for yielding. You just
indicated that you had little or no faith in the Federal judges
to set the bond and get this right--excuse me--not set the
bond--but set this right relative to this issue. But what is
your position on whether the judges should have the discretion
in criminal sentencing?
Mr. Smith. I am all in favor of that because look, it is
not an ex parte proceeding.
Mr. Chabot. So judges can get it right on the one but not
the other?
Mr. Smith. Yes. I think judges for the most part--as was
said before, you know, we have a very good Federal bench. If
they are given all the facts, they can get it right. But when
they are only given a one-sided presentation of the facts and
then the other side is then barred from even seeing what the
presentation was----
Mr. Chabot. Let me get on to my next question. I have only
a limited amount of time. Let me ask each of the witnesses, and
I will start with you, Professor, if I can. Relative to victims
rights, especially as it relates to restitution, do you think
that the Federal--at this time, the Federal laws relative to
restitution are sufficient or do you think that they should be
strengthened with respect to what victims can acquire? And If
you could be relatively brief because I am going just go down
the line.
Mr. Turley. I would say it could be improved. We had an
exchange. I think there might be some room for improvement, but
not with the mandatory aspects. I think where the improvement
needs to be is to ramp up the collection of restitution funds
and I think that is where you will see the most result for
victims.
Mr. Chabot. Mr. Weissmann?
Mr. Weissmann. I agree with that. I think there are ways to
improve what is going on. It can include having more people at
DOJ. It can include having provisions in the bail statute to
make it clear that this can be one of the factors for bail
assuming that it goes to risk of flight or dangerousness. You
can expand the definition of victims as one of the proposals. I
just think that the current bill is ill-advised because I don't
think it has the procedural protections for defendants that I
think are necessary for due process.
Mr. Chabot. Mr. Smith?
Mr. Smith. The question is can we find ways to improve
collection of----
Mr. Chabot. Do you think that restitution at the Federal
level is sufficient at this time or do you think there is room
for improvements?
Mr. Smith. Oh, I definitely think there is room for
improvement and I have suggested a couple of ways in which it
could be improved. And I think the Committee's staff suggested
another way which hasn't been talked about here. And that is on
the idea of making--setting up a restitution fund. I think the
Chairman talked about this in his opening statement, set up a
restitution fund where all the restitution money and maybe
funds from fines or forfeitures can also go and then it is sort
of like an insurance pool. The victims in one particular case
wouldn't be dependent on making a recovery from that defendant.
Instead they could share in the restitution monies that had
been collected in this entire restitution fund so that it
wouldn't be haphazard. Victims in one case may get 100 percent
restitution and in another case because the government wasn't
able to recover anything maybe because the defendant was
indigent, the victims get nothing. So it is a way of evening
out the benefits to the victims and I think that is an
excellent proposal.
Mr. Chabot. Thank you. Judge Cassell.
Mr. Cassell. There are ways we could improve the
restitution laws. And unfortunately at hearings like this, we
focus on the 10 percent that is controversial, not the 90
percent that is uncontroversial. The Justice Department
testimony, for example, lists a whole range of things that I
think just about everyone in this room could agree with, like
putting together a check list for judges on what should be
ordered, giving Federal prosecutors access to information that
the probation office has about the finances of a defendant,
extending terms of supervised release to collect restitution
and the list goes on and on.
Nobody has offered any objection to any of those things. So
I hope the Subcommittee will take those noncontroversial parts
of the bill and move forward on that regardless of what it
chooses to do on the other pieces of it.
Mr. Chabot. Let me follow up if I can, Professor Cassell.
This was described as going to undermine the criminal justice
system and being shocking and that type of thing. Could you--
getting back to what actually happens here, we are talking
about having a probable cause hearing in which there is a judge
that ultimately makes the decision. Whether or not we have
great faith in those Federal judges, there is going to be a
hearing before a judge before any of this occurs. Is that not
correct? And also, what about this issue about whether or not
the defendant is likely to not have any funds available to him
or her in order to acquire counsel? As a practical matter, you
know, what is likely to happen under those circumstances?
Mr. Cassell. Right. Well, I guess maybe I am a bit biased
on this. I got a chance to work with Federal judges for 5 years
while I was serving as a Federal district court judge in Utah
and I think I have great confidence that the men and women that
serve on the Federal bench around this country will take the
provisions of this bill, if it becomes law, and apply it in a
fair and appropriate way. They are going to look at situations
like the one you describe. And if there is an asset freezing
provision that is in place, they are then going to look and see
whether the defendant can make a showing that funds really are
needed to retain counsel.
And if so, the bill authorizes release of those funds if
the other conditions are met in order to secure counsel. So
this isn't going to be a situation where someone isn't able to
hire a lawyer because of the fact that there has been an asset
freezing provision entered.
Mr. Chabot. As Senator Dorgan described before, if the
defendant is talking about taking expensive trips to Europe or
putting money in trust accounts or starting new businesses to
the detriment of the victims, those are the types of things
that the judge is not likely to allow; is that correct?
Mr. Cassell. I think that is exactly right. I guess one of
the things I am a little bit disappointed about when I hear
some of the opposition testimony is they will find one word in
the bill and they will say this word is unclear. And it may be
there are some words that are unclear. But many of these things
can be simplified very quickly with some drafting. And with as
many smart people as there are on this panel, it is
disappointing to me that they haven't offered critiques of the
language and suggestions in the language in order to fix it. I
mean, Mr. Smith, Professor Turley, Mr. Weissmann, I think we
could take all of their concerns that they have raised today
and put a few tweaks into the bill and those problems would be
completely eliminated.
Mr. Chabot. Thank you very much. Yield back.
Mr. Scott. The gentleman from Alabama.
Mr. Davis. Thank you, Mr. Chairman. Gentlemen, part of what
strikes me as unusual about this legislation is that a lot of
it involves restraints on the liberty of a defendant or a
potential defendant. And I emphasize the word potential.
Obviously, once someone is indicted, there are a variety of
contexts on which we will allow restraints on their liberty. We
will allow them, for example, to be detained upon a showing of
flight risk or danger to the community, at least with certain
classes of cases.
We give the courts a fair amount of discretion and
authority to restrain assets for defendants, people who have
been indicted. What is unusual about this legislation is it its
very sharp focus on people who are suspects, people who have
not faced any determination of their guilt or innocence in
court.
Professor Turley, it has been 6 years since I walked in a
courtroom and argued a case. So refresh me a little bit. My
understanding of the law today is that for individuals pre-
indictment, criminal forfeiture proceedings are still
available; is that correct?
Mr. Turley. That is correct.
Mr. Davis. What is the standard of proof in a criminal
forfeiture proceeding pre-indictment?
Mr. Turley. First of all, the current law gives the Federal
judge the discretion to take steps to protect assets. And when
it comes to forfeiture, it is a probable cause standard. But
the judge actually has the ability to take steps today. We
might create new ways that might help her do that. But the
difference here is that it would be become a mandatory process
effectively.
Mr. Davis. Is there also one other distinction that the way
the forfeiture law works today, you have to make an allegation
that the proceeds are tainted in some way; is that correct?
Mr. Turley. That is correct. And that is the big difference
between restitution and forfeiture. When the Supreme Court said
in its famous statement that you don't have the right to use
other people's money, what they were saying was that a showing
has been made that what you claim is yours is tainted by your
crime. That is not what we are talking about with restitution.
We are talking about stuff that is yours that you have to make
people whole with. So it is a very different process. Because
with forfeiture, you are talking about grabbing a boat that was
used in a drug crime.
Mr. Davis. Let me stop you for 1 second because our time is
so limited. Judge Cassell, what I think Professor Turley has
just said may be the most important distinction and one that
needs to be underscored. It strikes me as being a very
Draconian power to give the prosecutors--to allow them to say
to someone who has not been indicted, someone who has not been
bound over to a grand jury, someone who has not met any weighty
standard of proof, that on a light showing of probable cause,
we are going to take assets that may be lawful--that is not
even part of the standard that they be unlawful--but we are
going to infringe on your use of lawful assets because under
the light standard of probable cause, you may owe damages to
someone. That strikes me as pretty Draconian. And let me put
the real world consequence around this. I agree with you that--
because I was a prosecutor. The majority of prosecutors make
reasonable, decent, prudent choices. A substantial number
don't. And it would seem to me that to give this new power to
the government to use against a class of people who have not
been indicted at all frankly becomes a very huge bargaining
chip for a prosecutor.
It, also as a practical matter, given that these are public
hearings--I haven't heard anything in these bills that suggest
that these hearings would be private hearings, they wouldn't be
hearings available to the public. It would seem to me that if I
were a prosecutor looking to pressure my defendant, going after
that defendant's assets pre-indictment might become a very good
tool. Professor Turley, am I on to something with this idea
that this becomes a major pressure lever for the government.
Mr. Turley. I agree entirely. I have got to tell you, there
will be many prosecutors who will drop the hammer on this as a
point of pressure.
Mr. Davis. And doesn't this also become a way for a
prosecutor to almost have a little pretrial, a way that in
effect will say to the press, look, we are really closing in on
this target, don't have enough yet for an indictment, don't
have enough for a criminal complaint, but I would like to do a
little bit of discovery? So what I am going to do is, in
effect, go after this person's assets on a probable cause
theory and that is the least weighty standard the judge ever
has to apply. And I know that when the person gets his hearing
to challenge that, my guys will get to cross-examine him.
So I have almost got a little mini trial. Does that
concern, Judge Cassell, the possibility of prosecutors using
this to generate mini trials to conduct discovery?
Mr. Cassell. No, I don't think it is going to create mini
trials. And I guess one of the things that----
Mr. Davis. Why wouldn't it?
Mr. Cassell. Well, one of the things to remember about this
bill is it doesn't take anyone's assets away. It simply
preserves those assets.
Mr. Davis. But you have got to have a hearing.
Mr. Cassell. That is true.
Mr. Davis. The defendant is entitled to contest that. There
will be a public hearing, will there not?
Mr. Cassell. Yes.
Mr. Davis. There will be an opportunity to cross-examine or
to question the defendant's witnesses because the defendant has
got to make a showing. The defendant can't sit silent, can he?
Mr. Cassell. No.
Mr. Davis. So the defendant has got to make a showing. That
means cross-examination, doesn't it, Professor Turley?
Mr. Turley. It does. And it is true it doesn't take your
assets away. But by freezing them, it is like saying we are not
taking your house, you just can't go inside.
Mr. Davis. But, Judge, my point is by doing something to
the defendant and making the defendant have to meet a burden to
keep control of his assets, you have a hearing. The defendant
has got to put some showing as a burden of production and
persuasion. That subjects that defendant to cross-examination
and to questioning. If I am a diligent, aggressive prosecutor,
I would love to have been able to do that because it would give
me a shot at free discovery. Do the other three of you
gentlemen see my point about free discovery?
Mr. Cassell. You could bring the same defendant in right
now, though, into the grand jury room and ask questions----
Mr. Davis. He could invoke his fifth amendment right.
Mr. Cassell. Or he could invoke his fifth amendment right
if this hearing----
Mr. Davis. But that means he would be sacrificing his
assets. He would be giving up his property or control of his
property.
Mr. Cassell. And then I guess the one other point I would
emphasize, Congressman, is you think the probable cause showing
is some light showing. I think it is difficult to show that
someone is probably a serious Federal criminal and probably has
taken assets that should rightly go to a victim.
Mr. Davis. We can argue about that. But if the Chair would
indulge me to make one last quick point. I have another big
broad concern, Judge. We struggle right now to collect
restitution under the law that we have today. We have $46
billion unpaid Federal restitution. And by the way, most of it
is not owed by small fish; it is owed by big major corporate
defendants who have resources and get around it. So let me tell
you what I have some instinct may be motivating these bills. It
is almost as if we have a reverse--we have some kind of
redistribution here of the burden because we are not getting
all of these resources from our big well-heeled defendants. It
is almost as if we are broadening the category of restitution.
So If I am a prosecutor in a typical midsized U.S.
Attorney's office that has to get our numbers on restitution up
to show DOJ we are doing a good job and to get a good
evaluation and I am struggling to collect from my big fish
defendants, what do I do? I go out and bring more expansive
restitution claims against other defendants. Is there anything
to that theory, Mr. Smith?
Mr. Smith. Absolutely. As a matter of fact, Congressman, I
think everything you have said is right on point. And it
takes----
Mr. Davis. I am going to quit while I am ahead.
Mr. Smith. And thank God you are a former AUSA because you
know exactly what goes on. And everything you have said strikes
me as totally realistic. That will happen. And I don't think
you have heard any good answers to your questions.
Mr. Davis. Mr. Chairman, I shall quit while I am ahead.
Mr. Scott. Thank you. The gentleman from Texas.
Mr. Gohmert. Mr. Chairman, I would just like to ask
unanimous consent to make this written submission by the U.S.
Department of Justice before our Committee on this bill part of
the record.
Mr. Scott. Without objection. The gentleman from
California.
Mr. Lungren. Thank you very much, Mr. Chairman. This has
been a most interesting hearing. Mr. Smith, you have
enlightened me that--this is the first time I have heard on
this panel that the U.S. Justice Department or downtown Justice
Department doesn't have any control over its U.S. attorneys. I
mean, I heard just the opposite. That is the complaint we got,
that they have got too much control of the U.S. attorneys but
you have enlightened me that in fact they used a laissezfaire
approach. You have also told me that you don't trust Federal
judges to get it right, except when you do trust Federal judges
to get it right.
Mr. Smith. When they know the facts.
Mr. Lungren. And you have also told me that this bill by
itself is going to undermine our whole system of justice. So
this must be a pretty big bill. Let met ask any of you out
there. In 1996, when I was attorney general of California, we
worked with the California legislature to pass a preconviction
asset-freezing law dealing with white-collar crime. It was
limited, as I recall it, to white-collar crimes and it had to
be involving two felonies and it had to be over a certain
amount and so forth. I was just wondering--and that was on an
ex parte order based on a showing of probable cause. And it
resulted in the freezing of defendant's assets. And I have been
gone for quite a while there so I have not followed it. But
since you are giving us an opinion with respect to this bill
that, in some ways, seems to be similar what happened in
California, have any of you seen whether the concerns you have
expressed here have actually seen fulfillment in the
enforcement of the California act?
Mr. Cassell. If I could just comment on that, Congressman.
The bill that you put into was put into effect more than 10
years ago has been on the books in California. There have been
some defense challenges and those defense challenges have been
rejected. California courts have found that that law is
constitutional and it has been used effectively, as I
understand it, by prosecutors all over the State there to
restrain assets. And then if a defendant is convicted, to
provide restitution to crime victims. So I think the burden
should be on those who are in this room that suggest that this
kind of legislation is unconstitutional to prove why laws in
California, Minnesota, my home State of Utah and Pennsylvania
that do essentially the same thing have all been on the books
and have all survived constitutional challenges.
Mr. Lungren. Maybe I would ask the question this way. The
allegation has been put forward that if this bill goes forward,
it would result in virtually all of these defendants being
placed in a position of indigency such that they would not be
able to afford their lawyers. Does anybody know what has
happened in those States such as my home State or Utah or the
others that have this, where it has been put into place, do we
have the reality that that has rendered these defendants
incapable of hiring their own counsel and therefore essentially
getting indigent lawyers?
Mr. Cassell. That has not happened in Utah, Congressman.
Mr. Lungren. Okay. Any of the other three, could you give
me some advice on that?
Mr. Weissmann. I can address that on the Federal level
because right now there is the ability to obtain an ex parte
order with respect to forfeiture. The difference in this bill
is that post indictment with respect to restitution, the
procedural protections that are in place currently with respect
to pretrial, preconviction, pre-indictment restraints of
forfeiture do not exist with respect to what would be put in
place----
Mr. Lungren. I understand that. But I am saying we have at
least four States as I understand it that have this with
respect to--not all crimes. I understand this is broader. But
with respect to certain categories of white-collar crimes. So--
and it is pre-indictment as I understand it. And it follows
many of the parameters of this bill. Look, I don't want to see
abuses by prosecutors. But I am trying to find out if the
criticisms that you have registered have proven out in the
experiences of the States that have similar statutes or you can
argue to me if you will that these are different types of
statutes than what we are talking about here. I am just trying
to figure out----
Mr. Weissmann. I don't know the answer with respect to the
specific States, but I would tell you that the things to look
at to see whether there are sufficient procedural protections
are is there a limited period of time after an ex parte order
is entered after which it sunsets and that the defendant has a
real opportunity to have a hearing. Neither of those are true
with respect to the provision that is proposed here.
Mr. Lungren. Well, let me ask you that. This bill--at least
H.R. 845, at least on page 21 has the defendant's right to a
hearing. And it says in the case of a pre-indictment protective
order entered under subsection such and such, the defendant's
right to a post restraint hearing shall be governed by
paragraphs 1(b)b and 2 of section 413(e) of the Controlled
Substance Act. And I looked at the Controlled Substance Act and
it says that you have a right to a hearing and I believe it is
within 10 or 15 days.
Mr. Weissmann. Yes, it is within 10 days. And there is a
10-day and a 90-day provision. One of the anomalies with the
current bill is that for somebody where it is pre-indictment,
it just tracks the current forfeiture provisions for an ex
parte restraint. If it is post indictment, almost all of the
protections that currently exist are wiped out. So it is not a
limited opportunity--a limited period where the order is in
place. The opportunity for the defense to challenge it is
virtually nil. There is no requirement to show that the assets
would be dissipated. That is not even something that the
prosecutor has to even show a judge is possible, which is, of
course, something that is required in the civil context. So
that many of the procedural requirements that currently exist
in the--that are tracked here with respect to forfeiture pre-
indictment do not exist post indictment in this bill.
Mr. Scott. Will the gentleman yield?
Mr. Lungren. Well, I am confused because what I read was
specifically that it said post restraint hearing, the right to
a post restraint hearing, which is still pre-indictment but it
is after the freezing. They refer to it as a restraint occurs.
Then as I understand it, you have governed by this section of
the Code which says a hearing requested concerning an order
entered into this paragraph shall be heard at the earliest
possible time. And so that is what I am----
Mr. Scott. Will the gentleman yield?
Mr. Lungren. Yes. I would be happy to.
Mr. Scott. You get the hearing. The next step is what
happens at the hearing.
Mr. Lungren. I understand that. But I am just saying as I
understand it----
Mr. Scott. And I think one of the complaints is that at the
hearing the prosecutor says we have probable cause and that is
the beginning and the end of the hearing.
Mr. Turley. To answer both of the questions--I am sure
everyone's answer as well--first of all, your first question, I
know of no law in any of the States that you mentioned as broad
as this law and I know of no law that deals with restitution.
Mr. Lungren. I understand about broad. And I said that as
part of my question. But I said the way it actually has worked
in that universe of offenses to which it applies has what you
have suggested would result if this went into effect taken
place with that universe of defendants.
Mr. Turley. Yeah. If you shrink the universe--actually,
there is a smaller universe in Federal law. There are some
provisions involving asset hearings in Federal law as well. But
I think the point that is made by the Chairman is really the
correct one, that the reference that you are making, the pour-
over clause to controlled substances defines essentially the
framework of the hearing and once you get the hearing. Once you
get there, the standard is basically answered by the subject of
the hearing that--because all you have to do is show that you
have probable cause that if convicted you would be subject to
restitution under these offenses.
Well, particularly if you make restitution applicable, the
probable cause standard--you have to show that there is a
probable cause standard error, that there was an error that you
would not be subject to restitution. Otherwise I don't know
what the purpose of the hearing is because it is not a mini
trial.
Mr. Lungren. What I am saying, though, is I understand that
that is the same standard used in the California law. It is
upon the showing of probable cause. It is nothing more than
that. So my point is, if that is such an insurmountable
impediment for the defendant, that it is almost inevitable that
he or she will always lose and will have these consequences
that you have talked about--and I am trying to think of that as
legitimate potential consequences. If that has not occurred in
the application of the law, maybe it is not as inevitable as
you suggest.
And again I am trying to figure out a way--I mean, when I
came to Congress in 1979, I worked with Ab Mikva to try to make
restitution a significant working part of the Federal criminal
justice system. I have, with real enthusiasm, hoped that that
would be a part of our system. And when I see a GAO report that
shows that it is not working well, I am willing to look at
different mechanisms to make it work. And it would be helpful
if in addition to opposing this--I realize you have just been
asked to testify about this--in addition to opposing this, you
might give us some recommendations as to how it might actually
work such that the guys that--we all agree, you know, at the
time that they are convicted and, man, their assets are gone,
they have been secreted somewhere, they can't get them. That is
not only unfair to the overall justice system, it is unfair to
the victims.
And how do we deal with it in a way that is also fair to
people that have the presumption of innocence before trial and
is there not a--both a practical and legal difference between
forfeiting that asset and freezing that asset or at least as I
take it from three of you on the panel, there is no real
practical difference, you are denying that person that
property. One of the arguments of the proponents is there is a
significant difference between the two. And I guess you were
arguing that there really is not a difference between
forfeiting it and freezing it as far as the ability to defend--
--
Mr. Turley. I think that there is no practical difference
when you freeze assets in a proceeding like this. I think what
it does--I think it will be a nightmare for judges, because
what it does is once the assets are frozen--I have got to tell
you, I could not imagine a prosecutor worth any, you know,
worth not being able to freeze all of the assets under some of
these theories of a normal case. But once those assets are
frozen, you can come back and say, look, I need some of that
money for attorneys. And the judge is in the position to say,
well, how much do you need? How much do you have? And the judge
is going to be essentially treating your assets like you were
an indigent defendant. They will be treating your assets
because the judge is allowed under these rules to release funds
if it considers that you are showing that indeed you need the
money for counsel.
Mr. Scott. Will the gentleman yield?
Mr. Lungren. Sure.
Mr. Scott. One of the bills--you get the hearing if you
need the money for the attorneys, but I don't see where you
can----
Mr. Smith. You are right, Mr. Chairman, there is no
provision. Mr. Turley is wrong about this one. There is no
provision in here which allows the judge to release assets to
pay attorneys or for necessary living expenses. And that is one
of the major--one of the most obvious reasons why this
provision is dreadful.
Mr. Lungren. Mr. Cassell, would you object to that?
Mr. Cassell. I am looking right at here. It says that if
there are assets available to the defendant to retain counsel
in a criminal case or to provide for reasonable living
allowances----
Mr. Scott. That gets you the hearing. Then where further
down do you get to use--once you are--that gets you to the
hearing.
Mr. Smith. That gets you to the hearing. Exactly.
Mr. Scott. Now, once you are in the hearing, the judge
doesn't have any authority to actually release the money.
Mr. Cassell. That is not my reading of the bill. And if
that is what the law says, that is a drafting issue.
Mr. Lungren. Professor Cassell, would you object to that?
Mr. Cassell. No, of course not. I mean, it has been the law
in California--I guess . . . maybe what we should do is take
the California law you wrote or helped to write 10 years ago,
Xerox that and put that into the Federal statutes, because that
seems to have worked well for 10 or 11 years out in California
to allow prosecutors to seize assets without creating this
parade of horribles that we hear from the----
Mr. Lungren. This is another example, Professor Cassell,
why I am so opposite that I can't refer to you as Judge Cassell
anymore. I yield back.
Mr. Scott. The gentleman's time has expired. We will have
another round of questions. One of the problems, Professor
Cassell, is with tweaking is the entire basis of the bill is an
ex parte pre-indictment, no notice freezing of assets without
discretion on the judge to release the assets so long as there
is a facial showing of probable cause. You could have the
situation in a criminal case where the defendant can show by
the preponderance of the evidence that he is innocent. But if
there is still probable cause, his assets are frozen until he
can get to court. This is pre-indictment. So it is kind of hard
to tweak when that is the basis of the bill. Mr. Smith, are you
familiar with the Virginia victims compensation law?
Mr. Smith. No, I am not, your honor. I mean Mr. Chairman. I
am not.
Mr. Scott. What would happen in partnership assets if one
of the--if the partnership is being charged with a crime, do
all the partners and all of their personal assets get caught up
in this?
Mr. Smith. If a partnership is charged with a crime, yeah,
sure, all of their assets could be frozen under this provision.
You see, this asset freeze provision is modeled after the
Federal forfeiture laws. And to me it is also a shame that the
Federal forfeiture laws do not have any provision to allow to
give a judge discretion to release funds needed to support
one's family or to pay counsel. In other words, if the
government makes that probable cause showing that these assets
are subject to forfeiture, that is the end of the matter.
Mr. Scott. In these bills?
Mr. Smith. No. Not just under this bill, but under current
forfeiture law, that is also the law.
Mr. Scott. But that is after conviction?
Mr. Smith. No, that is before conviction.
Mr. Scott. But that is with fruits of the crime?
Mr. Smith. By probable cause.
Mr. Scott. Fruits of the crime, not----
Mr. Smith. An ex parte showing a probable cause is enough
to freeze the assets in the Federal forfeiture case. And then
even if the defendant, let's say, needs the money to pay for
his wife's cancer operation, the judge has absolutely no
authority to order that money to be released for that purpose
because it is subject to forfeiture.
Mr. Scott. But that is only fruits of the crime assets.
Mr. Smith. Excuse me?
Mr. Scott. Is that just fruits of the crime assets?
Mr. Smith. Yes. In other words, it has to be tainted money.
And this provision goes, you know, enormously further because
it allows the government to freeze all of the defendant's
assets, clean money, dirty money and anything in between.
Mr. Scott. Now, if you are on appeal--you have been
convicted and on appeal, what is the present law on liquidating
your assets and what would these bills do to that law in
liquidating your assets unrelated to the crime?
Mr. Smith. On appeal under this statute?
Mr. Scott. Right.
Mr. Smith. Well, again, one of the provisions in these
bills takes away a Federal judge's power to allow the defendant
to not pay restitution during--while his case is on appeal. He
can be compelled to pay the restitution. And so that even if he
wins his appeal, he doesn't get his money back because he can't
compel the victims to whom the money has been paid, the
supposed victims, to give it back. And I think that is a very
ill-conceived provision as well. It is unfair because there is
no way to undo the damage if the defendant wins his appeal and
is exonerated.
Mr. Scott. How are innocent third parties protected if you
have a construction firm, somebody has prepaid for the building
of the house, how are they protected under this freezing of
assets? Because if you have been prepaid for the house, the
contractor can't build the house if his checking account is
frozen, he can't pay the workers. What happens--do innocent
third parties get to come in----
Mr. Smith. They are out of luck because as--there are no
special provisions in these bills for innocent third parties.
In fact, they have even fewer rights than the pathetically
limited rights they have under the Federal forfeiture statutes.
Here----
Mr. Cassell. That is just not right. The provision I am
looking at it says third party's right to post restraint
hearing. There it is right there.
Mr. Scott. Read that section so we know what a third
party--innocent third party would have to prove to get their
money kind of unfrozen.
Mr. Cassell. A person other than a defendant who has a
legal interest in a property affected by a protective order
issued under this law may move to modify the order on the
grounds that the order causes an immediate and irreparable
hardship to the moving party and less intrusive means exist to
preserve the property for restitution. If after considering the
evidence, the judge is entitled to modify the order.
Mr. Scott. So the third party would have to come in and
argue the case?
Mr. Cassell. Right. But remember, though, what the other
interests are.
There are crime victims that are involved here who are
entitled to recover restitution, and the money is being spent
on trips to Europe or things like that. This says a third party
can come in and say, wait a minute, I have a stronger claim
than the crime victim does and then it lets the judge sort out
all----
Mr. Scott. The problem with this is this is all pre-
indictment.
Mr. Weissmann.
Mr. Weissmann. There is one provision that my colleague
just didn't mention. Once that third party comes in and makes
that showing, what the court is allowed to do, if a third party
comes in and makes those two showings, basically the court has
this discretion. The court shall modify the order to mitigate
the hardship to the extent that it is possible to do so while
preserving the asset for restitution.
With that language, what exactly can a court do? The asset
needs to be restrained for restitution. So I don't know how the
court satisfies that prong and grant relief.
Mr. Smith. That is the point I wanted to make. That
provision is not in Federal forfeiture statutes.
In other words, a third party can come in a forfeiture case
and say, judge, you've restrained my assets, and I am innocent.
It is a mistake. I actually own this property, not the
defendant. The judge has the power to lift the restraining
order and return those assets to the third party.
But as you just heard from Mr. Weissmann, under these
provisions in the bills in front of you, the judge does not
have that authority. He can't return the asset to the third
party because that would make the property unavailable to pay a
future restitution order.
Mr. Scott. Mr. Turley.
Mr. Turley. Actually, this hits on one of the main problems
in this design; and it is that you expand the pool of people
that can make claims upon the assets by expanding the victims.
You actually make the defendant pay for attorneys fees for
other attorneys. So if you challenge that, you are running up
fees you may ultimately have to pay.
But, in the end, the court is in a weird position. He is
sort of like a special master. He has to sit there and decide
who gets what out of the asset pool. And there is not many
guidelines here.
And I also want to note, if I would, about the disagreement
earlier. Part of this all folds into the same problem with
regard to the power of the court to release money for
attorneys. And that is, if you take a look at the post-
indictment provision, the very purpose of the hearing is that
you have established by a preponderance of the evidence that
indeed you need this money for counsel.
So the point--you are having a hearing on that subject, but
when you get to the hearing it doesn't say anything about that
as the basis for releasing assets, and so you have two
provisions that are in conflict.
My guess is that a court would probably resolve it to mean
that, actually, they have a fair amount of authority to
determine that not all these assets are needed to protect
victims, and they would probably resolve it. Because that is
the subject of the hearing, is your right to get attorneys
fees.
But all of these show what madness may lie at the end of
this road. Because you are going to have a lot of people making
claims on limited assets, a judge who is going to have to try
to manage that as well as requests for attorneys fees and
determine what her authority is to grant them, and at the end
of that road that court is going to have to sit there and
divide up this pie. And I have to tell you I would not want to
be there for that event.
Mr. Cassell. I don't think it would be that difficult to
sort some of these things out. What is madness here is we let
criminals go off to Europe, squander assets, and at the end of
the day say to crime victims, I am sorry, we've let the
criminals spend all the money. There is nothing left for you.
That is what is madness here, and that is what the Subcommittee
should change.
Mr. Scott. That is one of my original points. You have the
same provision for the guilty as well as the innocent. Someone
who is subsequently found to be not guilty cannot spend his own
money.
Mr. Cassell. For the limited period of time, 69 days under
the Speedy Trial Act while they are awaiting trial.
Mr. Scott. Wait a minute. That is after indictment. How
long--let me ask somebody. Mr. Weissmann, how long can they go
with one of these things? After they have frozen your assets,
when do they have to indict you?
Mr. Weissmann. They don't. But the other is post-indictment
to say that you go to trial in 70 days because of the Speedy
Trial Act is--in my experience in 15 years I never saw a case
go to trial in 70 days. That just doesn't happen. The Speedy
Trial Act has so many exclusions, so you could have this kind
of pretrial restraint for years. Enron is a good example of
that.
Mr. Scott. And then once the trial starts, how long does a
trial take?
Mr. Weissmann. It could take a week. It could take 6
months.
Mr. Scott. During which time your assets are frozen?
Mr. Weissmann. Yes, and it could be assets you want to use
for counsel.
Mr. Scott. And if you are trying to run a business, the
corporate checking account or the business checking account is
frozen. It is in your name.
Mr. Weissmann. Yes. Right. And that is where the difference
between seizure and freezing is really illusory when you need
the money.
Mr. Turley. The great moment, actually, in sports for this
statute actually comes when you have a transfer of property,
when you have a defendant who is deceased. So under one of the
sort of accidents waiting to happen is that if you have a
defendant who dies and so property transfers, let's say, to his
family, under these provisions it would seem to read that the
government can go after that family and say, we know you have
this house in fee simple transfer, but we have determined that
this was a really bad guy, and so we are going to come after
you. And that would--you are talking about all this end pipe
problems. That really would be an extraordinary act.
Mr. Scott. Let me ask one other question. Do you have--I
will yield to the gentleman from Georgia for 5 minutes.
Mr. Johnson. Yes, thank you, Mr. Chairman.
I want to make sure I have this correct. A pre-indictment
asset, or the pre-indictment asset restraint provision kicks in
upon an ex parte showing of probable cause that the indictment
will allege an offense which requires restitution to be paid.
Is that correct?
Mr. Cassell. That's correct; and then there is, of course,
the right to a hearing very rapidly.
Mr. Johnson. And the defendant then can request a hearing.
And the government would simply show--they would simply show by
probable cause that the indictment that will come will allege a
crime for which restitution must be ordered.
Mr. Cassell. And that the amount of restitution in question
is necessary----
Mr. Johnson. No, no, no, I don't want to go that far. I
just want to say that the only thing that the government has to
prove by probable cause is that they will charge, in an
indictment, that the defendant has committed a crime which
requires that restitution be ordered.
Mr. Turley. And if 845 is enacted, all crimes will be
subject to restitution.
Mr. Johnson. So it doesn't matter how much restitution. It
is just a fact that restitution can be ordered or must be
ordered as a result of an indictment to come.
Mr. Turley. It would be the world's shortest probable cause
hearing. The prosecutor will walk in and----
Mr. Johnson. And it won't be probable cause that the
defendant committed the offense to be alleged against him.
Mr. Turley. Right. It can't be.
Mr. Johnson. It is simply that the species of the
allegation to be leveled in the future is one that would
require restitution to be ordered.
Mr. Turley. That's right. The language of the statute would
answer the question of the hearing. And as Judge Cassell was
going to point out about the size of the award, you have to
remember at this stage you're pre-indictment. But even if you
are post-indictment pretrial, that indictment is very likely in
many cases subject to a superseding indictment. Counsel will be
dropped.
You are talking about the earliest possible stage. So you
have the maximum number of counts, and all the prosecutor has
to show the judge is this huge universe of potential victims
under this act and say all of these people can ask for these
assets. That's a fluid standard that you can easily stretch the
limits of anyone's asset.
Mr. Cassell. I guess I would say why hasn't this happened
in California in the last 12 years? At Page 29 in my testimony,
I recount the California law that Congressman Lungren helped
draft. It has the same language, including pre-indictment
language, as I understand it, and this parade of horribles that
we keep hearing is going to happen--it is going to threaten the
sixth amendment; it is going to lead to persons kicked out on
the street without a roof over their heads--none of this has
happened in California.
What has happened in California is that crime victims have
been able to get money back to them that criminals have taken
from them. That's the fundamental issue here.
And there are certainly some drafting issues that can be
looked at, and you may have put your finger on some words that
need to be tightened up. But the goal here should be to ensure
that crime victims get compensation in a fair way, not to
simply say, well, there are drafting problems here, and we will
throw the whole thing out.
Mr. Scott. In your testimony, you cite at the hearing the
court is directed to consider relevant factors as follows:
Shall weigh the relevant degree of certainty of outcome on the
merits, the consequences to each of the parties of granting
interim relief. If the prosecution is likely to prevail on the
merits and the risk of dissipation outweighs potential harm to
the defendants and interested parties, the court shall grant
relief, shall give significant weight to the following factors
and so on and so forth.
This says once probable cause attaches, you don't consider
anything. There is no weighing. It's a done deal.
In fact, on the initial thing, all the defendant knows is
his check has bounced. The U.S. Attorney says, I have an ex
parte. You go in. You don't even know what you're defending.
How do you prepare for a hearing?
I mean, I guess you got to get a continuance after you get
a little bit of what the allegations are, and you still can't
write a check. There is no weighing. There is no public
interest in preserving the property. There is no public
interest measure.
Mr. Johnson. In reclaiming my time, the universe of the
charges that are possible is infinite.
Mr. Cassell. I guess my point would be this. If you think
the California language is better--and there are certainly some
things in the California statute that aren't in this statute,
there are things in this statute that aren't in the California
statute--but if you like the California statute better, you
couild just copy that and put that into the Federal Code.
Because that will at least give prosecutors a tool that they
could use to freeze assets when it was necessary. Right now,
they don't have that tool at all.
Mr. Smith. I would like the raise a point about this
reliance on State law. I am not familiar with this California
statute that Professor Cassell is talking about. But in my
experience with State forfeiture laws, which is very extensive,
I have found that generally the States are very, very
unaggressive in white-collar cases, assuming they do them at
all. And that is what we are talking about here. There is no
restitution money to be raised in anything but white-collar
cases.
I would like to know--I would like to see statistics on how
much money California has actually recovered for victims
through this statute and how much increase there was once the
statute was enacted. And I will bet you it is very small.
Because they just don't have the resources to do these big
white-collar cases that the Feds do, and so I really doubt that
one can learn very much from whatever State experience is out
there.
Mr. Scott. Well, one of the cases that I think would--one
of the first things you would see in a controversy, you have
some businessman, a contractor or something, charged with a
drug crime, charged with some theft or some conspiracy or
something; and the first thing they go in and freeze the
business assets.
Let me ask one final question. Mr. Smith, can you talk
about the effect of all of this on your right to choose counsel
and the constitutional implications of freezing your assets and
your right to choose a counsel?
Mr. Smith. Can I speak to that? Absolutely.
I think it will have a devastating effect on your ability
to choose counsel or to obtain any private counsel. And one of
the questions that we pose, which nobody really answered, was
how in the world do you get the necessary money to even
challenge one of these restraint orders if all your assets are
frozen? I mean, it is like a chicken-egg problem. How do you
get the money to--and believe me, I know from experience it
takes a lot of money to challenge one of these orders. Because
you have got to learn the case. And how are you going to learn
the case? It is basically all secret at this point.
Mr. Scott. Because all you know is your checks bounced.
Mr. Smith. Exactly. You know your checks bounced, and they
have your money. But you don't know what their theory is or
what their evidence is, and you're not going to. And it is
going to be difficult to find out. So how do you get a lawyer
to take your case to challenge the restraint order when you
don't have any money to do so? Nobody answers that question.
One of the points I make in my statement, which we didn't
really mention here, is that Congress has several times
rejected the Department of Justice's proposals to extend
pretrial asset restraint to what are called substitute assets,
meaning clean or legitimate assets that are subject to
forfeiture under our forfeiture statutes. But Congress is quite
smart, wisely refused to allow the government to freeze those
assets prior to trial. And why is that?
Every time the government has proposed that, even in the
Patriot Act of 2001, which just sailed through under the
pressure of 9/11, that provision, when they stuck it into the
Patriot Act, because they figured, well, everything in this act
is going to pass, but, guess what, Senator Leahy took it out.
It is not in there because he knew exactly what would happen if
you give the government this tremendous authority to freeze
clean assets prior to trial. It would basically mean the end of
our adversary system of justice or at least the replacement of
the private bar with public defenders in pretty much every case
unless for whatever reason the prosecutor was nice enough to
just ignore his powers under this statute. And if you want to
do that, then just go ahead and do it. Abolish the defense bar.
Make everybody a public defender.
But is it really worth it? How much money has been--is
going to be obtained for victims that way, by abolishing the
private practice of criminal defense work? Not very much.
And, to me, it is just--the two things are so out of
proportion that that is why I say, you know--at least I am not
talking about the rest of the bill. Obviously, reasonable
people can differ about a lot of the provisions in this bill. I
am talking about this provision, the pretrial asset restraint
provision.
I don't really see what reasonable argument can be made
that this is so necessary to raise money for victims that we
need to jeopardize the existence of a private defense bar and
basically put everybody--every criminal defendant at the mercy
of every prosecutor. And that is why Congress has repeatedly
rejected this idea. In the forfeiture context, why in the
world--where, by definition, assets are supposed to be subject
to forfeiture, why in the world would we allow this in the
restitution context where, you know, all that is at stake is
money, basically. We are not talking about the--you are
sacrificing the sixth amendment right to counsel to a victim's
desire to be compensated.
There are much better ways, and I think the Chair has
suggested some better ways to compensate the victims. Let's let
the Treasury compensate them, if necessary. But don't allow the
government to pauperize every defendant in order to pursue this
will of the wisp.
Mr. Cassell. Can I correct Mr. Smith on one point?
Mr. Scott. Just a minute. Mr. Turley.
Mr. Turley. Thank you, Mr. Chairman.
Just to respond to the question you asked about the sixth
amendment, there is a misunderstanding I think with some
supporters of the bill that Caplin Drysdale would support this
bill. Because in Caplin Drysdale was where the Court--the
Supreme Court and in Monsanto said that you can, in fact, have
forfeiture of assets that are claimed for attorneys fees and
that it is not a violation of the sixth amendment. But that is
indeed the difference between forfeiture and a restitution. The
reason you can freeze that money is because the money is not
yours because they are showing that it is tainted money.
And the only other point I would raise is everyone is
talking about dividing this up for victims. In my view, this is
not going to get more money to victims, but it may very well
get some money to attorneys. Because if you're talking about
the 15 percent that actually has assets, they are going to have
their assets thrown into these pots, the defendant has to pay
for the attorneys who are going after the assets. Those
attorneys will have agreements, I assure you, from their
clients that they will get paid. They will get a priority
interest in those assets or they will be paid directly.
I think the most likely result is that these victims funds
are going to go largely to lawyers.
Mr. Scott. Final comment, Professor.
Mr. Cassell. Yes, thank you, Mr. Chairman. I appreciate
that.
It is simply not true to say Congress has repeatedly
rejected this. This bill comes before this Committee having
passed the Senate already.
And with regard to how much money is at stake here, Senator
Dorgan's example has gone unchallenged today. More than $10
million was transferred by the defendants in those cases,
transferred away from victims that could have desperately used
that money for their legitimate losses. And so I would urge
this Subcommittee to move forward with the bill.
Mr. Scott. Thank you.
A letter from Thomas Hillier from the Federal Public
Defender be entered into the record. Without objection.
I want to thank all of our witnesses, and I would like to
thank you for your testimony today.
Members may have additional questions which we will forward
to you and ask that you answer as promptly as you can so they
be made part of the record.
Without objection, the hearing record will remain open for
1 week for the submission of additional materials.
Without objection, the Subcommittee stands adjourned. Thank
you very much.
[Whereupon, at 4:30 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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Material Submitted for the Hearing Record
Prepared Statement of the Honorable John Conyers, Jr., a Representative
in Congress from the State of Michigan, and Chairman, Committee on the
Judiciary
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Prepared Statement of the Honorable Sheila Jackson Lee, a
Representative in Congress from the State of Texas, and Member,
Subcommittee on Crime, Terrorism, and Homeland Security
Mr. Chairman, thank you for your leadership in convening today's
very important hearing legislative proposals before the 110th Congress
to amend federal restitution laws. I would also like to thank the
ranking member, the Honorable Louie Gohmert. Welcome to our
distinguished panelists.
Since 1925, with the enactment of the Federal Probation Act,
restitution has been an accepted form of punishment with the federal
criminal justice system. Simply put restitution is the money a judge
orders an offender to pay to the victim(s) to compensate for damages
related to the crime.
Restitution is part of the offender's sentence and can be ordered
in both adult and juvenile cases following a conviction or a plea of
guilty. The amount of restitution ordered by the judge is contingent
upon the victim's expenses related to the crime and the offender's
ability to pay.
Presently, restitution can only be requested for out-of-pocket
expenses incurred by the victim as the result of a crime. If the entire
amount of the victim's loss is unknown at the time of sentencing, the
amount of restitution ordered may be determined at a later date.
All requested restitution costs must be directly related to the
criminal act perpetrated by the charged defendant(s). Expenses incurred
by another critical incident will not be considered for payment. Some
judges will only order restitution for expenses not covered by
insurance.
Payment for physical pain and/or emotional trauma can not be
ordered by the criminal court. Victims who seek additional financial
compensation for this type of loss must retain a civil attorney for
representation. The offender's financial resources and ability to pay
should be considered when assessing this recovery option.
Restitution can be mandatory or discretionary. Once the court
determines the restitution amount, the resulting amount is the
restitution that the court must impose in mandatory restitution cases.
Offenses which mandate the imposition of the full restitution amount
are those listed in 18 U.S.C. sections 3663A, 2248, 2259, 2264, and
2327. Discretionary restitution is authorized as a separate order for
any offense listed in section 3663.
In discretionary restitution cases, the restitution amount imposed
is the result of balancing the harm with a consideration of the
defendant's ability to pay restitution for that harm. In deciding
whether to impose discretionary restitution, the court must consider
the statutory ``factors'' provided in section 3663(a)(1)(B)(i), which
are: ``The court, in determining whether to order restitution under
this section, shall consider--(I) the amount of the loss sustained by
each victim as a result of the offense; and (II) the financial
resources of the defendant, financial needs and earning ability of the
defendant and the defendant's dependents, and such other factors as the
court deems appropriate.'' Determining the defendant's ability to pay
is also relevant in determining the amount of a fine to impose, and it
is relevant to determining the manner of payment of any restitution
order, pursuant to 18 U.S.C. section 3663(f)(2).
The Subcommittee will examine proposed legislation that would make
substantial changes in federal restitution law. Three legislative
proposals, two before the House and one before the Senate, have the
potential of imposing sweeping changes to restitution requirements on
defendants, altering the discretion of judges, and freezing the assets
of citizens even before they are charged with a crime. The Subcommittee
will examine the proposals and hear arguments concerning them.
Mr. Chairman, the Subcommittee will hear testimony about S.973,
H.R. 845, the ``Criminal Restitution Improvement Act,'' sponsored by
Honorable Steve Chabot (OH) and H.R. 4110, the ``Restitution for
Victims of Crime Act of 2007'', sponsored by the Honorable Carol Shea-
Porter (NH). These proposals call for the expansion of prosecutorial
authority to freeze a defendant's assets in anticipation that the
defendant will have to pay restitution to a crime victim.
Reform is needed because uncollected federal restitution and fine
payments totaled nearly $46 billion at the end of fiscal year 2006, the
latest total available from the Justice Department, an increase of $5
billion over the year before. While reform is needed, these legislative
proposals are not the answer. Instead, their enactment will lead to
increased claims of restitution and more uncollected funds.
The legislative proposals that we are examining today call for
three kinds of adjustments to ensure control over a defendant's assets:
expanding the universe of crime victims entitled to restitution,
expanding the government's ability to control a defendant's assets
procedurally, and creating a new avenue of controlling a defendant's
assets by authorizing pre-conviction asset freezing.
These proposals expand the universe of potential victims by
expanding the number of offenses for which restitution would be
ordered. S. 973 and H.R. 4100 would add six statutes to those already
authorizing the court to order restitution at its discretion.
H.R. 845 is more far-reaching because it would mandate restitution
for all federal offenses. This would lead to a large volume of crime
victims who would qualify for restitution.
These proposals also expand the universe of potential crime victims
by expanding the definition of a crime victim. Currently, the law
defines victims for mandatory restitution as (1) those designated in a
plea bargain, (2) the estate of a victim, (3) those harmed directly and
proximately by the offense, (4) those harmed by the scheme or pattern
of the offense when the offense has a scheme or pattern as one of its
elements, and (5) guardians when the victim is a minor or disabled. 18
USC section 3663A(a)(1)(2006). H.R. 845 would provide for broader
categories of victims and includes successors.
H.R. 845 would amend the law to require restitution payments to be
made immediately. Specifically, H.R. 845 states that ``upon
determination of the amount of restitution owed to each victim, the
court shall order that the full amount of restitution is due and
payable immediately'' H.R. 845 sec. 3664(j)(1).
All of the proposals provide that the court retains its authority
to provide for payments based upon installments according to a
schedule. The proposals also add that the Attorney General may collect
and apply unreported or otherwise newly available assets to the payment
due the victim without regard to the court's installment payment
provision. This could have serious effects if the defendant does not
have the money.
S. 973 and H.R. 4110 add increased provisions for enforcement.
Under these proposals, the defendant would be required to pay a minimum
of $100 per year in restitution. Because prisoners get paid so little
in prison and because prisoners are required to pay for their own
personal hygiene products, it is unlikely that many inmates would be
able to meet the $100 minimum payment for restitution.
The Senate proposal amends current law by requiring defendants to
pay restitution during an appeal, absent good cause. If the case is
vacated or overturned on appeal, the government cannot compel the
victim to return the restitution he or she was paid by the defendant.
Rather, the defendant has the burden of recovering these funds from the
victim.
These proposals would also allow for pre-indictment freezing of a
defendant's assets to ensure their availability should a defendant be
convicted and ordered to pay restitution. This might be considered a
seizure, which is abhorred by the law and is arguably unconstitutional.
The proposals before us today do little in the way of ensuring that
the $46 billion in uncollected federal restitution and fine payments
will ever be collected. Instead, these proposals add further strain to
a weak system, make uncollected federal restitution grow to even more
staggering heights, and severely curtail the constitutional rights of
defendants. These proposals expand the number of offenses for which
restitution would be ordered and it expands the number of crime victims
who would qualify for restitution. Additionally, these proposals make
the full amount of restitution due and payable immediately. They
require a defendant to pay restitution while appeals are ongoing. They
also allow pre-indictment freezing of a defendant's assets to ensure
their availability should a defendant be convicted and ordered to pay
restitution. These expanded restitution proposals amount to debtors
prison and will have the effect of either keeping defendants in prison
because they are unable to meet their restitution obligations or
because they must resort to a criminal activity to pay for the
restitution owed to victims.
I welcome today's hearing and I look forward to hearing from
today's panelists. This problem of uncollected restitution is a big one
and Congress must address it. However, these proposals are not the
vehicle for addressing the problem.
Thank you. Mr. Chairman, I yield the remainder of my time.
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