Criminal Law & Process, Forfeiture, White Collar Crimes

Forfeiture and Restitution in Federal Criminal Cases

Forfeiture and Restitution are Mandatory Penalties in Many Federal Criminal Cases

Along with facing fines and incarceration, individuals targeted for prosecution can also face forfeiture and restitution. Criminal forfeiture involves the government seizing or restraining assets as a form of punishment, while restitution compensates crime victims for their losses.

With that said, forfeiture and restitution often go hand-in-hand. As one U.S. Attorney’s Office explains:

“[A]sset forfeiture . . . is increasingly being used to compensate victims for losses suffered as a result of criminal activity. Forfeiture is a critical tool in assisting victims because it allows the government to seize or restrain tainted assets prior to trial.”

In many cases, federal prosecutors will seek forfeiture and restitution in identical amounts. When forfeited assets are not used as a source of restitution, this can create a perception that defendants are being penalized twice for the same offense. This, in turn, can provide an opportunity for defense counsel to negotiate during the plea bargaining or settlement process—even when the applicable federal statutes mandate both.

Forfeiture and Restitution: The Basics and Strategic Considerations for Federal White-Collar Criminal Defendants

Beyond negotiating asset forfeitures and restitution obligations, defendants may have a variety of other options for protecting their assets during federal criminal cases as well. These include contesting restitution amounts, seeking restoration, and seeking innocent spouse protection. Of course, defendants may have grounds to challenge the underlying basis for their prosecution as well; and, if it is possible to avoid prosecution or obtain a dismissal either before or during trial, this will obviate the need to pursue alternate financial risk mitigation strategies.

When Prosecutors Can (and Must) Seek Forfeiture and Restitution

Prosecutors at the U.S. Department of Justice (DOJ) can seek forfeiture and restitution in a wide range of white-collar criminal cases. They also must seek forfeiture and restitution in many of these cases, as these penalties are often mandated by law.

Forfeiture, at least initially, is a pre-trial matter. Various federal laws allow the DOJ to forfeit and seize defendants’ assets prior to trial as a means of ensuring that these assets will remain available to satisfy defendants’ liability in the event of a guilty verdict. Restitution, in contrast, cannot be imposed until sentencing—which is why the DOJ has turned to using forfeiture as a tool for enforcing defendants’ restitution liability in recent years. While the DOJ has various mechanisms it can use to enforce restitution liability once it has been imposed, at this point defendants’ assets may no longer be available without pre-trial forfeiture.

Strategies for Handling Forfeiture and Restitution in Federal White-Collar Criminal Cases

While forfeiture and restitution can present significant financial risks for white-collar criminal defendants, there are various potential options for mitigating (if not eliminating) this risk during a federal criminal case. Here are some examples:

Negotiating Forfeiture and Restitution

As is the case with all potential penalties in federal criminal cases, forfeiture and restitution are subject to negotiation. If seeking to avoid forfeiture or restitution (or both) is not a viable strategy under the circumstances at hand, then negotiating to minimize a defendant’s liability may be the next-best option. For example, in some cases, federal prosecutors will be willing to waive restitution in exchange for full forfeiture—and then the forfeited assets can be used to avoid double-penalization through the restoration process.

Seeking Restoration

The DOJ’s restoration policy allows forfeited assets to be applied toward restitution. Federal courts do not have the authority to redirect forfeited assets to restitution—only the DOJ can approve restoration through its Money Laundering and Asset Recovery Section (MLARS). When negotiating a plea deal or settlement that consents to forfeiture, it will often be advisable to include terms that specifically provide for the forfeited assets to be used for restoration.

Seeking Innocent Spouse Protection

The federal innocent spouse protection policy provides a way for married defendants to protect certain assets against forfeiture. Under this policy, spouses can claim an innocent ownership interest in property that would otherwise be subject to forfeiture if they can show that their interest either: (i) predated the alleged crime in question; or, (ii) was acquired without knowledge of the alleged illegal activity. While asserting innocent spouse claims in federal court is an option, here too, negotiation will often prove to be a more tactful approach than litigation.

Contesting Restitution Amounts

Another option in appropriate cases is to contest the amount of restitution at issue. To seek restitution, the DOJ must be able to prove actual loss. If a defendant has grounds to question either the existence or the amount of an alleged victim’s actual losses, this can provide leverage in negotiations with the DOJ—or, if necessary, it can provide a defense to restitution liability at sentencing.

Defending Against the Charges At Issue

Of course, federal white-collar defendants should only focus on mitigating their forfeiture and restitution liability if they do not have any viable options for seeking to avoid liability entirely. There are numerous ways to defend against all types of federal white-collar criminal charges—including strategies that can be implemented both before and during trial. While it is important to keep the options discussed above on the table if necessary, it is even more important not to assume that focusing on liability mitigation (as opposed to liability avoidance) is the best approach.

Dr. Nick Oberheiden

Founder

Attorney-at-Law

Lynette S. Byrd

Former DOJ Trial Attorney

Partner

Brian J. Kuester

Former U.S. Attorney

Hon. Kevin McCarthy

55th Speaker, U.S. House of Representatives (ret.)

Government Consultant

Mike Pompeo

Of Counsel

Former U.S. Secretary of State

John W. Sellers

Former Senior DOJ Trial Attorney

Linda Julin McNamara

Federal Appeals Attorney

Nicholas B. Johnson

Former Prosecutor

Roger Bach

Former Special Agent (DOJ)

Chris J. Quick

Former Special Agent (FBI & IRS-CI)

Michael S. Koslow

Former Supervisory Special Agent (DOD-OIG)

Ray Yuen

Former Supervisory Special Agent (FBI)

5 Key Insights for Federal Defendants Facing Asset Forfeiture and Restitution

With this information in mind, what do white-collar criminal defendants need to know if they are facing asset forfeiture and restitution? Here are five key insights:

Forfeiture and restitution are often ripe for negotiation in federal white-collar cases. In many cases, defendants can also use the restoration process to avoid duplicate penalties.
There are a variety of other options for negotiating with the DOJ regarding forfeiture as well. For example, if the DOJ is seeking to seize a defendant’s home, it may be possible to negotiate a life estate that allows the defendant to continue residing in the home until his or her death, at which time ownership will transfer to the United States.
Engaging with DOJ prosecutors early can often help facilitate a favorable result. If it is not possible to avoid liability entirely, this may involve working with the DOJ’s Financial Litigation Unit (FLU) to avoid uncertainty at (or after) sentencing or to structure a payment plan.
Prioritizing forfeiture compliance can often help mitigate the risk of facing separate restitution liability. Even without restoration approval from the DOJ, this may help convince the judge to waive restitution at sentencing.
Due to the amount of flexibility that is available and the inherent uncertainty of success at trial, even relatively low-probability claims can often yield significant benefits in pre-trial forfeiture proceedings.

FAQs: Forfeiture and Restitution in Federal Criminal Cases

What is Forfeiture in a Federal Criminal Case?

In federal criminal cases, forfeiture is a tool that the DOJ uses to ensure that defendants’ assets will remain available to satisfy their liability in the event of a criminal conviction. The DOJ also uses forfeiture to deprive criminal organizations of the assets they need to continue operating. In the words of the DOJ, “[a]sset forfeiture is designed to deprive criminals of the proceeds of their crimes, to break the financial backbone of organized criminal syndicates and drug cartels, and to recover property that may be used to compensate victims and deter crime.”

What is Restitution in a Federal Criminal Case?

Restitution is a financial obligation to compensate the victim (or victims) of a federal criminal offense. Depending on the nature of the offense, this could include compensating individuals (i.e., investors in securities fraud cases), the U.S. government (i.e., in Medicare fraud cases), or other entities or institutions (i.e., financial institutions in cases of bank fraud and mortgage fraud).

Will the U.S. Government Use Forfeited Assets to Pay Restitution to Victims?

The U.S. government will use forfeited assets to pay restitution to crime victims in some (but not all) cases. Forfeiture and restitution are separate penalties; and, while the government can use forfeited assets to satisfy restitution obligations (through the process known as restoration), it is not required to do so.

How Can Federal Defendants Avoid Forfeiture of Their Assets?

Federal defendants can seek to avoid forfeiture of their assets by negotiating with the DOJ or fighting prosecutors’ allegations in court. In appropriate cases, defendants can rely on the federal government’s innocent spouse protection policy to shield certain assets as well.

Can the U.S. Government Seek Forfeiture of Assets Not Obtained Through Illicit Means?

Yes. While the U.S. government will often seek to forfeit and seize assets obtained through illicit means, it also has the ability to pursue forfeiture of “substitute assets” in appropriate cases. This is a critical factor to consider when facing forfeiture—and it is one of many factors that federal defendants should discuss with experienced defense counsel as soon as possible.

Schedule a Free and Confidential Consultation with a Federal Defense Lawyer at Oberheiden P.C.

If you are facing forfeiture and restitution in a federal white-collar criminal prosecution, we encourage you to contact us promptly for more information. Call 888-680-1745 or contact us online to speak with a senior federal defense attorney at Oberheiden P.C. in confidence as soon as possible.

Nick Oberheiden

Dr. Nick Oberheiden, founder of Oberheiden P.C., focuses his litigation practice on white-collar criminal defense, government investigations, SEC & FCPA enforcement, and commercial litigation.