Supreme Ct. to consider fight over frozen assets

Published on NewsOK Modified: June 30, 2013 at 11:33 am •  Published: June 30, 2013
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MIAMI (AP) — When Kerri and Brian Kaley came under federal investigation for allegedly stealing medical devices, they took out a $500,000 line of credit on their New York house to hire lawyers. Yet after their indictment in 2007, prosecutors sought to prevent the Kaleys from using the money because the government intended to seize the house.

The Kaleys insisted they were legally reselling the medical items. At the very least, they wanted a hearing to determine whether the government's case was strong enough to justify freezing most of their assets and denying them the right to hire the attorney of their choice.

It's an issue federal courts around the country are deeply divided over. Now, the U.S. Supreme Court has a chance to settle the matter after agreeing earlier this year to hear the Kaleys' appeal.

The case involves both the Fifth Amendment's due process clause and the Sixth Amendment's right to counsel, and could potentially affect thousands of cases each year in which the Justice Department seeks to seize defendants' property. Such cases typically range from alleged drug dealers and Mafia figures to Ponzi schemers and Medicare fraudsters, but also could ensnare people who are wrongly accused.

To property rights advocates, the Kaleys' case is an opportunity for the court to tip the scales of justice slightly more in the favor of defendants who are routinely deprived of their assets without being convicted. The ruling would not directly impact state courts, which operate under their own forfeiture laws, but lawyers could cite the Supreme Court decision to help a client.

"People who are indicted on criminal charges in the United States are presumed innocent," said Larry Salzman, an attorney with the Institute for Justice, an Alexandria, Va.-based nonprofit law firm involved in forfeiture and property seizure cases nationwide. "Seizing their assets on the basis of an indictment alone turns the presumption of innocence on its head. It follows the rule of punishment first, evidence later."

Prosecutors, however, say a grand jury's decision to bring criminal charges shows the case has enough merit to enable them to freeze assets that may have been obtained through illegal activity.

In fiscal 2012, more than $4.2 billion was deposited in the Justice Department's asset forfeiture fund. That compares with about $1.6 billion in each of the two previous years.

Prosecutors say adding a hearing to allow a defendant to attack the validity of the grand jury's indictment would force prosecutors to prematurely lay out their case and might even endanger witnesses.

"No reason exists to think that an extra layer of procedure on that score — one that could be undertaken only at significant cost — would be beneficial, much less that it is constitutionally mandated," the U.S. solicitor general's office wrote in Supreme Court papers.

The office, which represents the administration of President Barack Obama before the Supreme Court, also asked the justices to settle the question nationally so there would be a single standard in federal courts.

The Kaleys, who live in Cold Spring Harbor, N.Y., have been battling the government for more than six years. They declined an interview request through their Miami-based attorneys, Howard Srebnick and Richard Strafer.

It all started when the Food and Drug Administration began an investigation in 2005 into what appeared to be a highly lucrative but unregulated market of resale of various medical devices, from hardware to sutures. The probe led investigators to a Delray Beach middleman in South Florida who was buying the devices from the Kaleys and others and then selling them to other medical providers. He did some $10 million in business in one year.