Ever since the Supreme Court’s decision in Caplin & Drysdale [v. United States, 491 U.S. 617 (1989)], defense counsel have been on notice that the government may forfeit monies paid to counsel as attorney’s fees if derived from tainted funds, because the Sixth Amendment was held to offer no shield to statutory forfeiture of all criminal proceeds. The result has been to require, in many cases with forfeiture demands present in an indictment or the whiff of forfeiture possibilities in the air, a preliminary conversation with prosecutors before accepting an engagement, in order to gain the confidence of knowing that fees earned will be fees kept. These conversations are necessary but are often awkward, as prosecutors are reluctant to speak with counsel who do not yet actually represent the target or defendant, and counsel are reluctant to say too much about a prospective client’s finances and sources of funds.
No matter the forfeiture conversation, defense counsel at least had the apparent assurance offered by a statutory safe harbor provision that they would not themselves become defendants by accepting arguably tainted funds. At least in the Fourth Circuit, as the result of the decision in United States v. Blair, 2011 WL 4379370 (4th Cir., Sept. 21, 2011) that assurance no longer holds.
Counsel never had to fear facing a charge of concealment money laundering, under 18 U.S.C. § 1956, unless they actively engaged in concealing the nature, source or origin of criminal proceeds, an illegal act not accomplished by transparently accepting payment for legal fees. But simple money laundering under 18 U.S.C. § 1957 was another matter: that statute does not require an intent to conceal the source of monies, or even require knowledge of the monies’ criminal derivation, only an intent to engage in a monetary transaction with qualifying proceeds, as by depositing a fee check. Accordingly, Congress included a section (f) to exclude from the scope of qualifying “monetary transactions” any “transaction necessary to preserve a person’s right to representation as guaranteed by the sixth amendment to the Constitution.”
The Fourth Circuit held in Blair, which involved an attorney-defendant who actively attempted to launder known drug proceeds, that since Caplin & Drysdale employed broad language in stripping away a defendant’s right to use criminal proceeds to hire counsel -- albeit in the forfeiture setting -- the Sixth Amendment as interpreted by the Supreme Court left no defense under Section 1957(f) to an attorney charged with laundering in the form of directing fee payments to himself, as Blair had done to enrich himself from the proceeds in question. That this interpretation rendered Section 1957(f) meaningless was a matter for Congress to evaluate, according to the court of appeals. Perhaps understanding the alarm which its holding would promote, the court emphasized that its ruling did not open the way to criminal sanctions against the two attorneys retained by other defendants, although they were paid from the same tainted source as Blair (“We have never suggested that the attorneys hired for Saunders and Bernard should come in for sanction. The only question facing us today is whether Blair … is liable under § 1957”). But the court laid down no principled basis for distinguishing among the attorneys, once it ruled that the safe harbor provides no harbor for legal fees paid with drug proceeds.
The strong dissent by Chief Judge Traxler argued that Caplin & Drysdale did not control these circumstances, as it established only that Congress could constitutionally pass a law forfeiting drug proceeds needed to retain counsel because the Sixth Amendment did not prohibit such forfeiture. According to the dissent, the Sixth Amendment was not held by the Supreme Court to prohibit Congress from authorizing some use of forfeitable proceeds, and Section 1957(f) was just such a Congressional decision to explicitly provide for an exemption for attorney’s fees to secure necessary legal representation. The dissent cited to United States v. Velez, 586 F.3d 875 (11th Cir. 2009), in which the Eleventh Circuit correctly distinguished the Sixth Amendment-driven holding in Caplin & Drysdale from the different issue presented by the Congressional election in Section 1957(f), and held that the latter did provide a safe harbor to the acceptance of fees from tainted funds.
(Alain Leibman, Esq., the author of this entry and a co-author of this blog, is a partner with Fox Rothschild LLP, based in our Princeton, NJ office. A former decorated federal prosecutor, he practices both criminal defense and commercial litigation in federal and state courts)