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Eleventh Circuit Excludes Attorney Fees from Money Laundering Statute

By Sherry L. Talton, Litigation News Associate Editor – January 12, 2010

Defense attorneys across the nation likely breathed a sigh of relief after the Eleventh Circuit’s recent decision in U.S. v. Velez, et al. [PDF], shielding attorneys from criminal prosecution under a 1988 money laundering law with a congressional exemption created to protect a defendant’s constitutional right to counsel.

In Velez, the Eleventh Circuit held that “transactions involving criminally derived proceeds are exempt from the prohibitions of § 1957(a) when they are for the purpose of securing legal representation to which an accused is entitled under the Sixth Amendment.” 18 U.S.C. § 1957(a) [PDF] prohibits engaging “in a monetary transaction in criminally deprived property that is of a value greater than $10,000 and is derived from specified unlawful activity.”

Background of the Case
Roy Black, a Florida defense attorney, asked Ben Kuehne, who previously represented Al Gore in the litigation over the 2000 presidential election, to investigate whether alleged Columbian drug lord Fabio Ochoa had enough money from legitimate sources to pay Black’s legal fees of approximately $5.2 million. Kuehne determined that Ochoa had enough money from the sale of property obtained before Ochoa engaged in any drug trafficking and authored opinion letters regarding the legality of the funds.

In March 2003, after Ochoa’s conviction, the government began an investigation into Kuehne’s acceptance of legal fees for his opinion letter to Black. The government charged Kuehne in 2007, alleging that Kuehne knew the funds Ochoa used for legal fees came from criminal activities.

In December 2008, U.S. District Court Judge Marcia Cooke dismissed the money laundering count of the indictment because 18 U.S.C. § 1957(f)(1) excludes from section 1957(a) “any transaction necessary to preserve a person’s right to representation as guaranteed by the sixth amendment to the Constitution.”

Shortly after the Eleventh Circuit affirmed Judge Cooke’s decision as “eminently correct,” the Department of Justice moved to dismiss all remaining charges in “the interests of justice.”

National Ramifications of the Indictment and Dismissal
Bennett L. Gershman, Professor at Pace Law School, White Plains, NY, and member of the Ethics subcommittee of the ABA Section of Litigation’s Criminal Litigation Committee, finds that this case has “broad national implications” because “it is the first and only decision that I know of construing the money laundering statute as it applies to attorneys.”

Stacey F. Gottlieb, Phoenix, AZ, cochair of the Section’s Criminal Litigation Committee, agrees.

“The [g]overnment’s indictment . . . made an effort to invade . . . the most sacred right of criminal defendants; that is, the right to counsel. The courts’ rulings and the subsequent dismissal by the [g]overnment marks an important victory for the Sixth Amendment and for all citizens who value fundamental fairness as the mainstay of our judicial system,” Gottlieb says.

Should Criminal Defense Attorneys Rest Easy Now?
Despite the dismissal of the Velez case, many Section leaders and others warn that counsel should continue to exercise extreme diligence in accepting legal fees from defendants.

Rachel May Zysk, Tampa, FL, a member of the Section’s Criminal Litigation Committee and newsletter editorial board, warns that prosecutors could always use other statutes besides the money laundering law against attorneys.

“[C]riminal practitioners are still best served by engaging in due diligence to ensure funds are not tainted by criminal conduct,” Zysk advises.

“The Eleventh Circuit decision addresses only 18 U.S.C. s. 1957. No criminal defense attorney wants to be the government’s ‘test case’ for a different provision. The end result may not be the same,” she says.

The Velez case illustrates the hardship that any criminal investigation imposes on defendants, opines Zysk.

“The proceedings against Mr. Kuehne lasted for nearly two years, undoubtedly disrupting his life and career,” she notes.

“While the end result was a good one, no one knows more than criminal defense attorneys the immense harm that can be caused by the government’s power to indict, even if the ultimate outcome is a dismissal or acquittal,” Zysk says.

Michael L. Seigel, professor at the University of Florida Levin College of Law and ABA member, explains that “it’s safe to say that criminal defense attorneys can—to some extent—rest easy.”

“But they can only rest easy with respect to the very narrow issue of whether they can face money laundering charges under section 1956 and section 1957 for accepting a tainted fee. There are many additional pitfalls for defense attorneys in these situations,” Seigel says.

Gershman agrees that the decision in Velez “might give [practitioners] a sense of relief that the government cannot use this criminal weapon [section 1957(a)] to go after lawyers . . . but the government can still use its civil weapon—forfeiture of funds.”

“Tainted moneys paid for legal fees are subject to forefeiture . . . [s]o although the Kuehne case means that a criminal defense attorney will not go to jail for accepting tainted money, it doesn’t lower the risk that the attorney will do a lot of work in the case and end up not getting paid,” Seigel explains.

Keywords: Litigation, attorney fees, criminal litigation, Eleventh Circuit, Sixth Amendment


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