JOHN M. WALKER, JR., Circuit Judge:
William R. Cosme challenges the government's restraint of his property during his prosecution on charges of wire fraud. Upon arresting Cosme in 2012, the government seized several of his assets, including his cars and two bank accounts. In August 2013, the district court issued an order allowing the government to hold the seized property until the conclusion of its criminal case. Cosme then unsuccessfully moved to vacate the order on the basis that it violated his Fourth Amendment rights because the government seized his assets without seeking a warrant. In addition, Cosme argues on appeal that there has been no judicial finding as to whether probable cause supports the forfeitability of the seized assets. We find merit in both arguments and hereby hold that exigent circumstances do not support the government's indefinite seizure in the absence of a warrant. We remand for the district court to determine whether probable cause supports the forfeitability of Cosme's assets. Accordingly, we
Cosme was arrested on December 19, 2012 on charges of wire fraud. According to the criminal complaint supporting the arrest, Cosme defrauded an international school in Korea of approximately $5.5 million. The complaint alleges that Cosme represented that he would invest the school's money but instead used the money to enrich himself.
On the day of Cosme's arrest, the government seized several of his assets, including a Cadillac that was parked in plain view in his driveway, and a Lamborghini and a Ferrari in his garage that were discovered during a protective sweep. During an inventory search of the cars, officers found and seized a bag containing $634,894 in currency.
That same day, the government delivered letters to Scottrade and Sterling National Bank requesting that they freeze Cosme's accounts (the "bank accounts"), believed to contain proceeds of unlawful activity, pursuant to civil forfeiture provisions 18 U.S.C. §§ 981(a)(1)(A), 981(a)(1)(C), and 981(b)(2)(B)(ii). In its letters to the financial institutions, the government stated that it had "probable cause to believe that the ... property is subject to seizure and forfeiture." App'x 161. The letters also stated that the government was "in the process of obtaining a seizure warrant" from the court for the accounts but that "exigent circumstances require that the Subject Property be frozen immediately to prevent it from being dissipated." App'x 161. The government cited United States v. Daccarett, 6 F.3d 37 (2d Cir.1993), and 18 U.S.C. § 981(b)(2)(B)(ii) in support of this last statement and noted that, upon the warrant's issuance, a copy of the warrant would be provided to the letters' recipients.
On January 17, 2013, Cosme was indicted in the District Court for the Southern District of New York. The indictment alleged that the international school had transferred $5.5 million to Cosme upon his promise to invest it. Instead, the indictment alleged, Cosme spent the money on himself and otherwise misappropriated it. The indictment listed a series of purchases made by Cosme using the money, including a Cadillac Escalade, a Lamborghini Gallardo, a Nissan Juke, and a Ferrari 458. In a section entitled "Forfeiture Allegation," the indictment stated that Cosme "shall forfeit" the listed property, which included, in addition to the four automobiles, funds held by Scottrade, Inc., Sterling National Bank, Chase Investment Services, and JP Morgan Chase banks, as well as the seized $634,894 in currency. App'x 34-35. In its brief on appeal, the government acknowledges for the first time that the indictment's forfeiture allegations were "merely notice provisions that were not subject to a grand jury vote." Appellee Br. 39. On July 5, 2013, the government filed a Bill of Particulars that listed the same property as subject to forfeiture.
In July 2013, the government moved ex parte for a pretrial restraining order applicable to the seized assets. At a conference on August 6, 2013 before the district court (Harold Baer, Jr., Judge), the parties discussed the proposed order, which Cosme and his attorney had not seen prior to the conference. The district court reviewed the property seized and attempted to determine its value. After describing it on the record, the district court signed the pretrial restraining order and provided a copy to Cosme, who offered no objections to its entry. By its terms, the August 6, 2013 restraining order permitted the government to "maintain custody" of the seized assets "through the conclusion of the pending criminal case." App'x 165-66. As the government was by then seeking only criminal forfeiture, the order relied on 21 U.S.C. § 853, a criminal forfeiture statute, for its authority and stated that the property was "already in the lawful custody of the Government." App'x 72. The order also cited 18 U.S.C. § 983(a)(3)(B)(ii)(II) to preserve the government's ability to later pursue civil forfeiture.
At the same conference, Cosme's attorney asked to be relieved because of the conflict between his position as a court-appointed lawyer and Cosme's potential Monsanto hearing, the purpose of which would be to obtain the release of seized funds in order to hire a replacement lawyer.
On September 18, 2013, the parties appeared again before the district court to discuss a stipulation (the "First Stipulation"), in which the government agreed to release the seized currency in the amount of $634,894 to enable Cosme to fund his defense. In exchange, Cosme promised that "he [would] have access to sufficient unrestrained assets to fund his defense throughout the course of the [criminal] case, and that, as a result, he [would] not seek a Monsanto hearing in this case with respect to any restrained accounts, currency, or property, including but not limited to the Accounts, Currency, and Property listed in the Bill of Particulars." App'x 92. He further agreed "not to raise on appeal any denial by the Court of a Monsanto hearing." Id. At the conference, the district judge confirmed that Cosme understood the terms of the stipulation. He told Cosme that he was waiving the right to "come back and ask for more money," App'x 79, and Cosme acknowledged that "the stipulation does waive some due process"
On January 8, 2014, Cosme entered into another stipulation (the "Second Stipulation"), in which the government agreed that $407,000 held in an escrow account by attorney Sercarz could be released to a new attorney, David Touger, who, with the court's approval, relieved attorney Sercarz. Cosme confirmed with reference to these funds that he had "access to sufficient unrestrained assets to fund his defense," and he again agreed "not to raise on appeal any denial by the Court of a Monsanto hearing in this case." App'x 97.
A few weeks later, on January 23, 2014, attorney Steven Kessler (Cosme's eighth lawyer) filed a notice of appearance.
On February 14, 2014, Cosme moved to vacate or modify the district court's August 6, 2013 order. Cosme argued, inter alia: (1) that the seizure of his assets was unlawful pursuant to the Fourth Amendment because the government had not obtained a warrant and exigent circumstances did not justify the seizure; (2) that the order violated his Fifth Amendment rights to due process because the government's application was ex parte; and (3) that the order violated his Sixth Amendment rights because he did not have enough money to retain his counsel of choice.
On March 27, 2014, the district judge informed the parties at a conference that he intended to deny Cosme's motion but that he would "permit a Monsanto hearing" in the "interest of justice" if Cosme requested one. App'x 213. The next day, the district court denied Cosme's motion to vacate the order with respect to all of the seized assets except the bank accounts, which might be subject to a Monsanto hearing. On March 31, 2014, Cosme informed the district court that he "intends to seek a Monsanto hearing." App'x 242.
On April 21, 2014, the district court issued an opinion denying without a hearing Cosme's motion to vacate the August 6, 2013 order of seizure. The district court stated that "[t]he Government made a sufficient showing of probable cause by virtue of the Indictment, which included the forfeiture allegation," citing Kaley v. United States, ___ U.S. ___, 134 S.Ct. 1090, 1098, 188 L.Ed.2d 46 (2014), in support. App'x 250. The district court's opinion also denied Cosme's request for a Monsanto hearing on the basis that Cosme waived that right "both in writing and orally," App'x 253, and that Cosme failed to show that he did not have sufficient alternative assets to fund his defense as required by United States v. Bonventre, 720 F.3d 126, 131 (2d Cir.2013).
Cosme filed a timely notice of appeal.
As a threshold matter, the government argues that Cosme waived his right to appeal the restraints on his property by failing to object during the August 6, 2013 conference and by entering into the two stipulations.
A waiver requires the "intentional relinquishment or abandonment of a known right." United States v. Olano, 507 U.S. 725, 733, 113 S.Ct. 1770, 123 L.Ed.2d 508 (1993) (quoting Johnson v. Zerbst, 304 U.S. 458, 464, 58 S.Ct. 1019, 82 L.Ed. 1461 (1938)). As a corollary, if a "party consciously refrains from objecting as a tactical matter, then that action constitutes a true `waiver,' which will negate even plain
Cosme's conduct at the August 6, 2013 conference does not reveal intentional waiver of all rights to appeal the pretrial restraining order. In that conference, Cosme challenged the restraints on his property by raising objections to the seizures. He protested, for example, that the seized assets "far exceed" the theft amount alleged, App'x 56, and argued that the "[t]he burden is on [the Government], right, of proving the money is tainted," App'x 62. He also timely sought to vacate the order before the district court. Cf. Olano, 507 U.S. at 731, 113 S.Ct. 1770 (noting that a right is forfeited through the failure to timely object in the district court).
The stipulations present a closer question. However, we do not read them as waiving the Fourth and Fifth Amendment claims that Cosme brings here. In the First Stipulation, Cosme agreed that "he will not seek a Monsanto hearing in this case with respect to any restrained accounts, currency, or property, including but not limited to the Accounts, Currency, and Property listed in the Bill of Particulars." App'x 92. He also agreed "not to raise on appeal any denial by the Court of a Monsanto hearing in this case." Id. The relevant language of the Second Stipulation exactly mirrored that of the First. App'x 97.
Both stipulations were narrowly phrased and specifically addressed only Cosme's right to a Monsanto hearing. Both stipulations were intended, by their terms, to cover only Cosme's Sixth Amendment-protected "access to sufficient unrestrained assets to fund his defense." App'x 92, 97. Neither stipulation referenced Cosme's Fourth or Fifth Amendment rights. Thus we conclude that these stipulations did not effect a waiver of the Fourth and Fifth Amendment claims that Cosme now asserts.
A Monsanto hearing vindicates a defendant's Sixth Amendment right to counsel by testing in an adversary hearing whether seized assets are properly forfeitable in circumstances where the defendant has insufficient assets from which to fund his defense. United States v. Monsanto, 924 F.2d 1186, 1203 (2d Cir.1991) (en banc) (defining the required process as "an adversary, post-restraint, pretrial hearing as to probable cause that ... the properties specified as forfeitable in the indictment are properly forfeitable, to continue a restraint of assets"), abrogated in part on other grounds by Kaley v. United States, ___ U.S. ___, 134 S.Ct. 1090, 188 L.Ed.2d 46 (2014). Monsanto, however, dealt specifically with the Sixth Amendment and, as incident to that, the defendant's Fifth Amendment right to a hearing on that question. Id. at 1191 (holding that "a pre-trial adversary hearing is required where the question of attorney's fees is implicated" (internal quotation marks omitted)). Monsanto did not mention, let alone discuss, a defendant's rights under the Fourth Amendment and it referenced the Fifth Amendment only as "taken in combination" with the Sixth Amendment. Id. at 1192.
Because Cosme's stipulations waived only his right to a Monsanto hearing, they do not reach his Fourth Amendment claim or his Fifth Amendment due process claim relating to the government's ex parte application for the order that was entered on August 6, 2013. The government could have sought a broader waiver but did not do so. Consequently, although Cosme waived the ability to contest the seizure of his property based on the Sixth Amendment, he did not waive his right to contest it under the Fourth and Fifth Amendments.
Cosme's Fifth Amendment claim, moreover, is easily rejected and need not concern us further.
Cosme argues that the restraining order issued on August 6, 2013 violates the Fourth Amendment because there was never a judicial finding of probable cause. We review this question of law de novo. See Bonventre, 720 F.3d at 128. After examining the record, we agree that no proper finding of probable cause has occurred in this case and, thus, we must remand the case to the district court to determine whether probable cause supports the forfeitability of the restrained property.
Government seizures of property in criminal cases must comply with the Fourth Amendment. While "the government need not obtain a judicial determination of probable cause prior to seizure," it must establish probable cause if a defendant protests restraints on his property. Daccarett, 6 F.3d at 50 (stating that
The government's switch from civil forfeiture to criminal forfeiture in this case does not immunize it from having to demonstrate probable cause. When it first seized Cosme's property in 2012, the government cited civil forfeiture provision 18 U.S.C. § 981(b)(2)(B)(ii).
The government argues that this error is harmless, but we disagree. Although the substantive allegations in the indictment mention the assets in connection with the criminal conduct, at no point in this case has the government had to demonstrate that it had probable cause to restrain Cosme's assets as required by the Fourth Amendment.
Cosme also argues that the government's seizure and continued possession of his bank accounts violates the Fourth Amendment. We agree.
18 U.S.C. § 981(b)(2)(B)(ii) allows the government to seize property without a warrant where an "exception to the Fourth Amendment warrant requirement would apply." We have held that the forfeiture statute does not "create a new exception to the fourth amendment's warrant requirement." United States v. Lasanta, 978 F.2d 1300, 1304 (2d Cir.1992), abrogated on other grounds by Florida v. White, 526 U.S. 559, 563, 119 S.Ct. 1555, 143 L.Ed.2d 748 (1999). "To be valid, therefore, this warrantless seizure must meet one of the recognized exceptions to the fourth amendment's warrant requirement." Id. at 1305.
The government defends the warrantless seizure of Cosme's bank accounts by arguing that it was justified by the exigent circumstances exception to the warrant requirement under Daccarett. In Daccarett, we held that exigent circumstances existed where the government sought to freeze bank accounts used to move drug trafficking funds. 6 F.3d at 49. We stated that "[b]ecause the property at issue was fungible and capable of rapid motion due to modern technology, we are satisfied that exigent circumstances were present [in that case]." Id.
Daccarett permitted the initial freezing of electronic accounts because of their virtually instantaneous transfer capabilities — akin to the police securing or restricting access to premises while a warrant is obtained — but we do not read it to allow the perpetual restraint of a defendant's property without a warrant. Rather, the exigent circumstances exception only permits a seizure to continue for as long as reasonably necessary to secure a warrant, as the government promised but then failed to do here. We are troubled that, in the absence of a warrant, the government has retained custody of Cosme's bank accounts for over two years. See Lasanta, 978 F.2d at 1305 (noting that a warrant was necessary where it was not "impractical" for agents to obtain one); cf. Mincey v. Arizona, 437 U.S. 385, 393, 98 S.Ct. 2408, 57 L.Ed.2d 290 (1978) ("[A] warrantless search must be strictly circumscribed by the exigencies which justify its initiation." (internal quotation marks omitted)).
Accordingly, the exigent circumstances exception does not immunize the lengthy, warrantless seizure here. Because the government has never set forth,
However, for the reasons described above in Section II, Cosme is entitled to a judicial determination of probable cause. If the district court determines that probable cause existed at the time of seizure to support forfeitability, Cosme's request for the return of his property must be denied even though the continuing seizure was illegal, because "the illegal seizure of property... will not immunize that property from forfeiture."
For the reasons stated above, we
