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Expect the Unexpected Fallout from Supreme Court Asset Forfeiture Decision

A U.S. Supreme Court decision flew under the radar in the flurry of decisions at the end of the most recent term. The decision highlights an issue often not considered early in criminal cases and an issue that may have serious consequences for third party “innocent” purchasers of goods not yet included in a government forfeiture notice.

Supreme Court Decision

Along with other decisions, the Court handed down McIntosh v. United States, No. 22-7386, issued April 17, 2024. The upshot is that if a prosecutor in seeking a federal indictment neglects to include a provision giving notice that the government seeks forfeiture of assets used in furtherance of the alleged crime or purchased with proceeds of criminal conduct, he or she may be spared embarrassment and allowed to fix the problem. But the Court did not address the collateral damage of such a blunder, including the impact on third party “innocent” purchasers for value. That means someone who purchases the assets unknowingly from the defendant between the time of indictment and the time the case is resolved. If there is no lien of record and the case receives little press, the third party in most instances will have no reason to know what’s coming.

Unexpected Fallout from Late Filing

Asset forfeiture claims, which accompany practically all but routine federal criminal charges, require the defendant to forfeit to the government all assets and real or personal property used to perpetrate the crime or that are purchased with illegal proceeds. That would include for example otherwise non-descript houses, acreage, strip malls, vehicles, and investment accounts.

If the prosecutor neglects to include a forfeiture notice and get a lien notice filed in a timely fashion but waits until the case is over, the “innocent” third party may not get notice before making a large investment – or before in turn selling the asset to another party. Property interests may have changed hands multiple times and commercial leases may have been executed. There is often a lot to unwind if it can be unwound at all and at significant expense. The only other option is to sue the fraudster who by that time likely has run out of liquid funds.

McIntosh v. United States, No. 22-7386

In McIntosh, the federal prosecutor neglected to obtain from the court a preliminary order of forfeiture prior to sentencing of a defendant indicted and convicted for robbery and firearms offenses. The defendant had purchased a BMW with proceeds of one of the robberies just five days after the robbery and had at least $75,000.00 cash proceeds stored away. Despite the error, the Court allowed the government to seize the BMW as “fruits of the crime”. In this case, the BMW had not been sold in the interim to an innocent third party – but that is not always the case. The decision will only make it more difficult to sort out whether the government or a third-party purchaser after the fact has a priority claim. It matters but is often not considered in the heat of the battle – when guilt or innocence is the driving concern.

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