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Asset freezes and health care fraud charges: When can prosecutors put a hold on your money?

Can the government freeze assets before trial in health care fraud prosecutions? More specifically, is a freeze allowed when the money is not directly linked to crime and is needed to hire a lawyer to defend against the charges?

The U.S. Supreme Court considered these questions last week in a case called Luis v. United States. In this post, we will discuss what this case says about the legal limits of asset freezes before conviction.

Allegations of kickbacks and overbilling

In the Luis case, prosecutors brought Medicaid fraud charges against a woman who operated a home health care agency. The allegations were the woman paid kickbacks to obtain patient referrals and billed for services that were not performed. According to the allegations, the amount of the fraud was nearly $45 million, undertaken over a six-year period.

After making these charges, prosecutors obtained a court order that put a hold on all of the woman's assets - even those unrelated to the allegations.

The woman contended that this freeze on her assets violated the Sixth Amendment right to counsel. The freeze did this, she argued, by effectively undermining her ability to pay for a defense lawyer of her own choice.

Existing law on freezes of "tainted" assets

Historically, asset forfeiture has been a key tool for government in cases involving organized crime, as well as large-scale drug trafficking. In more recent years, however, government agencies have expanded their forfeiture efforts to many other types of criminal cases.

In the Luis case, the asset freeze was undertaken under a particular federal statute. The statute allows for freezing assets before trial when banking or health care laws have allegedly been violated.

The question, however, is whether such a statute is contrary to the Sixth Amendment's right to counsel. After all, if the government puts a hold on all of your money, that means there isn't any left to hire the defense lawyer you want to contest the actual charges.

Under a 1989 Supreme Court ruling, assets that are "tainted" can be frozen before conviction. This is supposed to protect assets and keep them available for forfeiture - rather than hidden or spent - in the event of conviction.

But that case involved drug money. It is by no means clear that the reasoning of that case can be applied to cases involving health care fraud allegations.

Don't let the government play Mr. Freeze

Mr. Freeze is a villain in the Batman series who deploys a special weapon to freeze his targets solid. Of course, Batman wins in the end, but immobilizing an object with ice can certainly be an effective tactic.

This is certainly true of using your own money to get your own lawyer, rather than one appointed by the government

If you are health care provider who faces a fraud investigation or allegations, you need to move fast to hire a defense lawyer to contest the charges. You don't want to be left high and dry, without access to your own money, while prosecutors try to put a freeze on the very assets you need for your defense.

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