JUSTICE MANUAL 9-120.000 – Attorney Fee Forfeiture Guidelines

9-120.100 – Policy Limitations on Application of Forfeiture Provisions to Attorney Fees
While there are no constitutional or statutory prohibitions to application of the third party forfeiture provisions to attorney fees, the Department recognizes that attorneys, who among all third parties uniquely may be aware of the possibility of forfeiture, may not be able to meet the statutory requirements for relief for third party transferees without hampering their ability to represent their clients. In particular, requiring an attorney to bear the burden of proving lack of reasonable cause to believe that an asset was subject to forfeiture may prevent the free and open exchange of information between an attorney and a client. The Department recognizes that the proper exercise of prosecutorial discretion dictates that this be taken into consideration in applying the third party forfeiture provisions to attorney fees. Accordingly, it is the policy of the Department that application of the forfeiture provisions to attorney fees be carefully reviewed and that they be uniformly and fairly applied.

9-120.101 – Attorney Fee Forfeiture Guidelines
The purpose of these guidelines is twofold. First, it is to insure that any forfeiture of assets transferred to attorneys as fees for legal services has been reviewed carefully. Second, it is to insure that the public’s interest that those convicted of certain offenses do not realize any economic benefit from their illegal activity is pursued fairly and with due consideration for the individual’s right to counsel in a criminal matter.

These guidelines are set forth solely for the purpose of internal Department of Justice guidance. They are not intended to, do not, and may not be relied upon to create any rights, substantive or procedural, enforceable at law by any party in any matter civil or criminal, nor do they place any limitations on otherwise lawful litigative prerogatives of the Department of Justice.

9-120.102 – Forfeiture of Assets Transferred to an Attorney in a Fraudulent or Sham Transaction
Forfeiture of an asset transferred to an attorney as fees for legal services may be pursued where there are reasonable grounds to believe the transfer was a fraudulent or sham transaction designed to shield from forfeiture assets which otherwise are forfeitable.

The mere fact that an attorney has received a forfeitable asset as payment for legal fees by itself does not provide reasonable grounds to believe the transfer was a fraudulent or sham transaction. There must be reasonable cause to believe the asset was transferred for the purpose of impeding or defeating the government’s ability to forfeit it. Generally, there should be some proof that a scheme existed to maintain the client’s interest in the asset or ability to use it to his/her benefit. This may be shown, for example, by proof that the value of services actually rendered was disproportionately low compared to the value of the asset transferred and that there was agreement by the attorney to transfer the asset or some portion of it back to the client. In other situations there may be evidence that the attorney agreed to transfer the asset to another third party for the benefit of the client or to an account or corporation that is controlled by the client. The evidence, however, need not establish that the attorney was a participant in the criminal activity giving rise to the forfeiture or that he/she otherwise violated any law.

9-120.103 – Forfeiture of Assets Transferred to an Attorney for Representation in a Civil Matter
Forfeiture of an asset transferred to an attorney as payment for legal fees for representation in a civil matter may be pursued, notwithstanding the fact that the asset may have been transferred for legitimate services actually rendered, when there are reasonable grounds to believe that the attorney had reasonable cause to know that the asset was subject to forfeiture at the time of the transfer.

9-120.104 – Forfeiture of Assets Transferred to an Attorney for Representation in a Criminal Matter
Forfeiture of an asset transferred to an attorney as payment for legal fees for representation in a criminal matter may be pursued, notwithstanding the fact that the asset may have been transferred for legitimate services actually rendered, where there are reasonable grounds to believe that the attorney had actual knowledge that the asset was subject to forfeiture at the time of the transfer. However, such reasonable grounds must be based on facts and information other than compelled disclosures of confidential communications made during the course of the representation.

9-120.105 – Discussion of Actual Knowledge and/or Reasonable Cause to Know
The principal issue to be addressed in the application of these guidelines is what constitutes “actual knowledge” or “reasonable cause to know” that an asset is subject to forfeiture “at the time of the transfer.” This issue must be resolved on a case-by-case basis. However, the following principles shall be applied in determining whether the prerequisite of actual knowledge or reasonable cause to know exists in a particular case.

9-120.106 – At the Time of the Transfer
For purposes of these guidelines, a transfer occurs at the time an attorney becomes entitled to the asset free from any claim by the defendant or others. For example, if an asset is transferred to an attorney to be held in trust for the defendant, with the understanding that the attorney shall be entitled to a portion of the asset for legal services rendered, the time of the transfer will be the time at which the attorney renders the services and becomes entitled to the asset. If he/she has the requisite knowledge at that time, the asset may be subject to forfeiture.

9-120.107 – Actual Knowledge of Forfeitability
For purposes of these guidelines, actual knowledge refers not simply to knowledge that some of a client’s assets are either subject to forfeiture or from criminal misconduct. Rather, an attorney must have actual knowledge that the particular asset he/she received was subject to forfeiture. The guidelines require that there be reasonable grounds to believe that actual knowledge exists.

Reasonable grounds exist for believing that an attorney has actual knowledge that an asset is subject to forfeiture when there is evidence that it was known to the attorney at the time of the transfer either: (a) that the government had asserted that the particular asset is subject to forfeiture or (b) that the particular asset in fact is from criminal misconduct.

9-120.108 – Knowledge that the Government has Asserted that a Particular Asset is Subject to Forfeiture
Generally an attorney will have actual knowledge that the government has asserted a claim that an asset is subject to forfeiture based upon some proceedings instituted by the government. Normally the government will do this by initiating civil forfeiture proceedings against the asset, filing a lis pendens against real property, applying for pre-indictment or pre-conviction restraining orders under a criminal forfeiture statute, or obtaining an indictment containing a forfeiture count.

A civil forfeiture proceeding, if known to an attorney, will establish actual knowledge of the forfeitability of any assets which are the subject of the proceeding since such assets must be specifically identified in the complaint. This is because in a civil forfeiture proceeding the res is the defendant and it must be sufficiently identified to allow seizure. A defendant, in most cases, will not be able to transfer an asset which is the subject of a civil forfeiture action to an attorney because the asset is actually seized as soon as the proceeding is instituted. However, in the rare case where a transfer takes place after the suit is initiated but before the seizure occurs, an attorney who has knowledge of the civil forfeiture action has actual knowledge that the particular asset is subject to forfeiture.

For the same reason an attorney has actual knowledge of the forfeitability of any asset which he/she knows is subject to a restraining order based upon a forfeiture allegation in a criminal proceeding. However, when the government asserts a claim only by including a forfeiture count in an indictment and no assets have been restrained, the return of the indictment by itself will not necessarily establish actual knowledge that a particular asset is forfeitable. It will depend upon how specifically the asset is described in the forfeiture allegation. There are essentially three means by which an indictment can describe property that is alleged to be subject to forfeiture. It may specifically describe the property, such as “ten shares of stock in XYZ Corp. certificate nos. 1-10, purchased on January 1, 1985” or “account 12345 at First National Bank, Downtown Branch in the name of the defendant.” It can set forth a generic description of certain property by amount and/or type, such as “ten shares of stock in XYZ Corp.” or simply “$200,000.” Finally, it can allege a broad all-inclusive description of property subject to forfeiture by incorporating statutory language, such as “any and all proceeds or profits of the criminal enterprise.”

If property is specifically described, an attorney undoubtedly has actual knowledge of its forfeitability if he/she is aware of the contents of the indictment. However, if property is included in the forfeiture count only under a generic description or by the inclusion of the all-inclusive statutory language, an attorney does not have actual knowledge based on that fact alone that any particular a…

JUSTICE MANUAL 9-120.000 – Attorney Fee Forfeiture Guidelines

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