Subpoenaed on Fees : Has U.S. Put Lawyers on Defensive?

Even the opposing lawyer would later say he understood well the motives of assistant U.S. Atty. Richard Martin. It was the type of frustrating situation that might drive any dedicated young prosecutor to unusual lengths.

The federal government had spent years investigating what it suspected was a massive heroin distribution and money laundering enterprise. The indictment returned here in April, 1984, identified Salvatore Catalano as a top boss of the enterprise and claimed that his organization in one six-month period had transferred nearly $20 million in cash to accounts in Switzerland and other countries.

But the government could locate few of Catalano’s assets, and court papers filed by Catalano’s attorney claimed his client lived in a modest $300-a-month apartment and earned only $700 a week from a Queens bakery and pizza business.

Fee Believed to Be $500,000

If that were so, Martin wondered, how could Catalano afford to hire the noted criminal defense attorney Ivan S. Fisher, a large, blunt man who works out of a tony Upper East Side town house, maintains a country home in Southampton, and travels about the city in a chauffeured limousine. Based on conversations with other lawyers, the prosecutor figured Fisher’s fee must be in the range of $500,000.

Last Feb. 12, Martin issued a subpoena calling for the defense attorney to produce all documents and information related to the size, nature and source of the fee he was getting. The prosecutor also would not rule out the possibility that the government later might try to seize Fisher’s fee as part of the profits of an illegal drug syndicate.

If courts reject the defense attorney’s motion to quash the subpoena, which is pending, he might be forced to withdraw from the case because of conflict of interest. The prosecutor is, in a sense, asking Fisher to provide incriminating information and even become a witness against his own client.

Martin’s action was unusual, but not unique. A number of federal prosecutors throughout the country in recent months have started doing much the same.

Aggressive New Strategy

Their actions are part of an aggressive new strategy, monitored by the Justice Department, that has kicked up a fierce controversy within the legal community and raised a host of perplexing and far-reaching questions.

At its heart, the debate is the unending one that the U.S. Constitution often fosters between conflicting values.

“There is a legitimate and worthwhile goal of effective, strong and aggressive law enforcement which we all recognize must be adhered to,” said Elkan Abramowitz, a former chief of the criminal division in the U.S. attorney’s office for the Southern District of New York. “And there is equally a legitimate, worthwhile goal of faithful adherence to the Bill of Rights and, particularly with respect to this issue, the right to counsel and to the adversary system, in general.”

Miami defense attorney Albert Krieger put it more simply: “There is no clear answer. You give up something for another goal. I can understand the prosecutor’s position, but if you do this, you throw out the baby with the bathwater. There is no way it’s going to be resolved in a way that leaves everyone happy.”

Which value will prevail depends, as it usually does, on where various people sit.

A wide array of attorneys and bar associations says the government, frustrated in its efforts to fight crime, has taken dead aim at the retained defense lawyers, trying to drive them away from certain types of cases and force reliance on the more limited resources of court-appointed attorneys.

Rights Violations Charged

Along the way, they say, the government is trampling on the Sixth Amendment right to effective counsel of choice, the presumption of innocence and the attorney-client privilege. The remedy the government proposes is worse than the disease. “You can’t really understand this unless you have been at the mercy of someone with government power,” Fisher said.

Prosecutors, defense attorneys say, can prevent defendants from hiring top-flight legal help even though they have not been found guilty. Prosecutors can also, in effect, pick their adversary by using subpoenas to force attorney after attorney off a case. They seem to be targeting the cream of the defense bar, it is argued.

Just the threat of using the weapon, defense attorneys say, can affect how they act with their clients and with the prosecutor. They unavoidably would feel encouraged to plea bargain in order to get their fees, and to assume conciliatory stances so as not to rile the U.S. attorney.

Ephraim Margolin, formerly general counsel, now advisory counsel to the American Civil Liberties Union in Northern California, is representing several lawyers in their effort to fight such subpoenas.

‘Being Driven Away’

“I’ve had 40 phone calls from lawyers this past month. There is a groundswell of fear,” he said. “They worry whether they should take cases. They are being driven away. The implications are mind-boggling. In the process of finding a way to put people away, lawyers and the legal process become irrelevant.”

The defense lawyers’ rhetoric may seem overheated at times, but they are clearly alarmed about a shift in the crucial balance of power in the courtroom. Hanging in the balance, said prominent Miami attorney Neal Sonnett, a former prosecutor and president of the Dade County Bar Assn., who has received a subpoena about his fee in a Fresno drug case, is nothing less than “the future of the retained criminal bar and the entire adversary system of justice.”

The government, on the other hand, sees the matter in less complex or apocalyptic terms. It is as if the two sides were contemplating completely different issues.

Prosecutors argue that they are simply making use of a new law passed last October that enables them to go after drug dealers and organized crime in the most effective manner by seizing their assets. Only by cutting off their financial empires can the enterprises be stopped. That lawyers are being affected, they say, is merely an incidental footnote.

“Congress has said you have no right to use unlawful drug profits,” said Stephen S. Trott, assistant attorney general in charge of the criminal division. “You can’t buy a car with it, or a pair of shoes, or send the kid to Yale, or hire a lawyer. You’re not entitled. You don’t have the right to counsel of your choice unless you have the money to pay him. You can get an appointed attorney, like most do. Wham. It’s that simple.”

Long-Simmering Tension

As the discussion takes shape in this fashion, some have suggested that beyond the philosophical and legal debate, the current controversy is also powered by a long-simmering, more visceral tension between modestly paid prosecutors and an elite circle of well-known, often-quoted and highly rewarded defense attorneys.

“I can understand the prosecutor’s viewpoint,” Fisher said. “Here is a highly paid defense attorney getting rewarded for his willingness to use all these mechanisms to block the effective reach of justice. Their statement that seizing my fee is just a regular part of forfeiture is not the reality. The real point they’re saying is: ‘You guys bug us. We work harder than you. We don’t have enough money to vacation or leisure like you. We are more honorable. But you are reaping society’s benefits.’ I appreciate that viscera. Martin feels he’s going the legal 55 m.p.h. on the Long Island Expressway and I’m passing him by.”

These feelings surface only occasionally amid the more formal legal arguments, but they are palpable.

Brian Leighton, the assistant U.S. attorney in Fresno, sits in a cramped courthouse office and hurriedly, during a brief lull in a frantic stream of conferences and court appearances, talks of living in the San Joaquin Valley all his life and working his way through an unaccredited night law school in order to pass the bar.

He expresses harsh feelings against drug dealers. He points out that in the current case he is prosecuting, the two defendants’ assets included $825,000 in cash in a shopping bag, along with assorted Jaguars, Cadillacs, boats and airplanes, although each claims a gross annual income of just $60,000. Then he mentions that one of the lawyers he has subpoenaed for fee information in the case (Neal Sonnett) drives a Rolls-Royce.

“It’s always frosted me how much money defense attorneys get in cases where there’s dope money,” he said. “I can’t say I was looking for a case, but. . . . “ He shrugged.

Legally Will Be Paupers

Leighton has a ready solution to the claim he is violating the Sixth Amendment right to counsel. After seizing the defendants’ assets, he points out, they legally will be paupers and entitled to court-appointed attorneys. Leighton said he would be perfectly willing to appoint Sonnett to the case--at the standard rate of $30 an hour for out-of-court work, $40 at trial.

Then there is Rudolph W. Giuliani, U.S. attorney for the Southern District of New York, where the most subpoenas and forfeiture efforts have appeared, offering an even better deal. When he seeks forfeitures, he proposes, why not set aside out of the assets a “reasonable” fee approved by the court?

“The amount can’t be what I regard as scandalous, but it wouldn’t be court-appointed rates either. It just wouldn’t be what they are used to getting. There is an absolutely unregulated flow of money at high levels from organized criminals to defense attorneys. This current enforcement plan does not take direct aim at that, but it has disrupted that way of life. What we are talking about is not a constitutional issue, but whether some lawyers get a third summer house, or have two chauffeurs or one, or take three or four European vacations a year.”

The response from many defense lawyers is animated.

“The racketeering and drug laws are supposed to be aimed at the defendants, not the lawyers,” Sonnett said. “If the lawyer is serving as a conduit or helping a sham transfer, then the government has an argument. But that’s not what the prosecutors want. What they want is to decide how much we should be paid. It undermines the entire idea of private practice. I’m not sure Rudy Giuliani should be the one to decide what is a scandalous fee.”

Hours of Preparation Cited

The defense lawyers also say that highly complex racketeering cases require thousands of hours to prepare adequately, in the face of the federal government’s vast resources, and so impose an impossible burden on appointed counsel and those who get limited fees.

“Private lawyers cannot afford to take court-appointed fees for major cases that require six months to a year of non-stop work,” Sonnett said. “I know lawyers who have gone bankrupt after taking appointed cases.”

Sonnett offers no apologies for making a good living. “If I render top service, I am entitled to charge a reasonable fee,” he said. “What is reasonable? No one complains when a corporate attorney charges $250 or $300 an hour. What the government really is saying is it doesn’t want these people to have good counsel. Fees are commensurate of talent. The better get paid more. What they are saying is, let’s get rid of the top-notch advocate.”

The seeds of the current controversy were planted last Aug. 13, when the 2nd Circuit Court of Appeals issued an opinion in a case involving New York attorney Gerald L. Shargel.

Shargel is a mild-mannered, soft-spoken attorney who keeps a framed photo of his daughters on his office desk. Behind that desk is a stunning picture window offering a panoramic view of Manhattan and Central Park. Thirty-three stories below, in the building’s garage, sits Shargel’s resplendent Jaguar.

Called Crime Group Counsel

In court papers, the U.S. attorney’s office for the Southern District of New York has called Shargel “house counsel” to an organized crime group. The prosecutor claims that Shargel was paid $100,000 in cash, delivered in a brown paper bag on a Manhattan street corner, for representing part of a group of 10 charged with racketeering and for lining up additional lawyers for the others,

Shargel insists it was only $2,000.

He has no apologies about the manner of delivery. “I see nothing wrong with taking cash fees in paper bags or any other container that will get them into my office. Why not? I am not an agent of the government.”

On March 5, 1984, a federal grand jury here issued a subpoena requiring Shargel to produce records of any fees or property transferred to him by the 10 individuals. Shargel moved to quash the subpoena, first in district court, where he lost, and then to the 2nd Circuit Court of Appeals.

The decision of the appeals court last August to uphold the subpoena was not by itself noteworthy, for courts frequently have held that client identity and fee information alone, absent special circumstances and before indictment, are not privileged before a grand jury. What drew the attention of prosecutors and defense attorneys was the tone of the opinion.

The appellate judges suggested that to protect lawyers from subpoenas “might easily become an immunity for corrupt or criminal acts. . . . The bar and the system of justice will suffer little if all involved are aware that assured safety from disclosure does not exist.”

‘You Can Go Get Them’

Gerald Lefcourt, head of the New York bar association’s criminal advocacy committee, said: “The Shargel decision said defense attorneys are not protected. You can go get them. It was taken as a signal.”

If so, the signal gained a full head of steam when the Comprehensive Crime Control Act of 1984 went into effect last October.

This was legislation that the Justice Department had been lobbying for since 1980. The new bill in part strengthened the already powerful Racketeer Influenced and Corrupt Organizations Act (RICO), which provides that a person convicted of a pattern of racketeering is subject to forfeiture of all assets gained through the racketeering activity, as well as other tainted money.

The new law broadened the reach of forfeiture to include any felony drug charge. Then it eliminated the need under RICO for a formal hearing in order to freeze assets before trial. Instead, a restraining order now goes into effect automatically, once an indictment is issued, and it is up to the defendant to challenge that order in court.

Finally, the new law provides that forfeiture covers all assets held at the time of the commission of the racketeering act, instead of at the time of conviction, as under RICO. That means assets transferred to third parties prior to conviction are subject to forfeiture, unless the third parties can establish in court that they were “without reason to believe” the asset was tainted.

Fees Subject to Forfeiture

It is this final provision that has most directly pitted prosecutors against defense lawyers. The Justice Department has interpreted the language of that section to mean that lawyers’ fees are nothing more than an asset transferred to a third party, and so are just as subject to forfeiture as a car would be.

“These lawyers say there is no way to know where their client got the money to pay them,” Trott said. “Oh, come on, let’s be serious. Just ask the client where he got the money. It’s that damn simple. Tell him that you can’t be paid in drug money. Ask him where he got this money.”

Five days after the new law went into effect, New York attorney Robert M. Simels was served with a trial subpoena in open court on Oct. 17, calling for him to produce documentary evidence relating to his fee arrangements with a client named Donald Payden, charged with selling heroin. The Payden case has become one of the early guideposts in the prosecutors’ efforts to get the courts to apply the new law according to their interpretation.

Simels was a target quite unlike Shargel. A former assistant in the district attorney’s office and a former member of a New York state special strike force, he works out of a modest mid-town office and, in the past, was known more for pugnacious prosecuting than for the drug or mob clients included in his current practice.

He quickly turned to the legal community for help, realizing that the government was moving to establish a new body of law. Even the corporate attorneys who do not usually rub elbows with criminal defense lawyers sprang into action, realizing that the same techniques the prosecutor was trying to employ in drug cases could be applied to virtually all white-collar crimes.

Bar President Tells Concern

In December, a distinguished team from the bar association visited privately with the U.S. attorney, and the president of the association, Robert McKay, wrote a letter expressing his great concern.

But they accomplished little. Prosecutor Giuliani, after all, had helped shape the new crime bill when he was serving as associate attorney general, the No. 3 job in the Justice Department, between 1981 and 1983. His response was to withdraw the trial subpoena--and replace it with a post-indictment grand jury subpoena that called for the same information.

To Simels, it seemed that the prosecutor was unfairly using the subpoena as a discovery tool to prepare for trial. As the days wore on, he often found himself required to explain to colleagues that he was not himself under investigation. He allowed that he felt “shellshocked” in his dealings with the U.S. attorney.

The government had chosen its test case wisely, for the jurist who was presiding in the Payden trial and who would hear Simels’ motion to quash the subpoena was U.S. District Judge David Edelstein, well known for his tough, conservative attitudes in criminal matters.

Edelstein on March 11 denied Simels’ motion. Even though the question of forfeiture was not before him, Edelstein also made a point of writing in a lengthy opinion that he felt the government had a right to seize attorneys’ fees.

Use Payden Decision

Edelstein’s ruling is now under appeal to the 2nd Circuit Court of Appeals. Meanwhile, prosecutors have taken to citing the Payden decision in support of other subpoena and forfeiture motions.

Not all judges have agreed with the government so completely.

Federal judges sitting in Colorado and New Hampshire have quashed subpoenas in strongly worded opinions. U.S. District Judge Martin F. Loughlin found “the actions of the U.S. attorney are without doubt harassing (and) show minuscule perception of the untoward results.”

Because of the mixed and uncertain decisions, the Justice Department is moving cautiously, choosing cases carefully as it monitors situations across the country and works to develop central guidelines.

The department, aware that the matter finally will be decided by the U.S. Supreme Court, wants the issues framed and presented on its terms. Prosecutors emphasize that they only intend to go after the relatively few cases where all the assets are tainted and there is no visible source of legitimate funds. U.S. attorneys have been told that they need Assistant Atty. Gen. Trott’s approval before seeking forfeiture.

Tactics Modified

Where the government fears that it may lose, and thus create bad case law, it has modified tactics.

For example, in Fresno last month, prosecutor Leighton, after extended consultation with the Justice Department, withdrew the subpoenas and the forfeiture clauses aimed at Sonnett and Krieger. Instead, Leighton said he would seek forfeiture of the lawyers’ fees after winning convictions at the trial, by means of a hearing in which he could compel the lawyers to testify about their fees.

Sonnett proclaimed this a victory and, in Washington, Trott offered the move as an example of the Justice Department’s intent to use moderation in applying the new law. Both may be right. However, the turn of events also represents part of the current legal maneuvering. The prosecution simply feared that the relatively liberal 9th Circuit Court of Appeals might not allow the subpoenas, and so decided to limit the higher court rulings in California to the forfeiture issue.

As the confrontation unfolds in this manner, there are those on both sides who point out that however the current conflict is resolved, in the end it has spotlighted an issue of even more troubling import lurking in the fabric of the legal system.

What are the implications for our system, they ask, if being forced to use a legal aid or court-appointed attorney in complex cases means a defendant will get something less than full justice?

Not Offended by Forfeiture

Speaking at a hearing on lawyer subpoenas and forfeiture staged in late March by the Assn. of the Bar of the City of New York, Monroe Freedman, professor and former dean at the Hofstra University law school, surprised some when he said he worried greatly about subpoenas but was not offended by forfeiture of fees.

“If we view (forfeiture) as tantamount to a deprivation of Sixth Amendment rights, it seems to me that our concern should be reform of the legal aid system and of the system and form of payment of court-appointed lawyers, rather than maintaining the distinction we now have between rich and poor criminal defendants. . . . The right to select your own lawyer is something we afford only to people who can afford it. . . .

“If we are troubled by (that), there is a major issue that goes far beyond the very limited concern with successful criminals and lawyers who represent them.”

In Fresno, prosecutor Leighton put it more heatedly: “Why should drug dealers get the Sonnetts of the world?”

Such words give particular pause to ACLU lawyer Margolin, who regularly devotes one-third of his time to pro bono service and also, as it happens, represents Fisher in New York and Sonnett and Krieger in Fresno in their fights against subpoenas.

Provided Services Free

Margolin knows well that Krieger spent half a year providing free legal aid to Indians in Wounded Knee, S.D., and Sonnett was nominated for the American Bar Assn.’s Pro Bono Publico award for his extensive efforts to provide legal aid to Haitian refugees in Florida. He also knows that big fees help pay for other, uncompensated work.

But he appeared troubled as he talked of the matter recently in his San Francisco office.

“The horror is, when you think of it, Leighton may have a point,” Margolin said. “It’s very excruciating. I’ve spent most of my life representing indigents. The lawyers representing (Atty. Gen. Edwin) Meese get $250 an hour, and the indigent $40. Everyone knows this is wrong. The truth is, we screw a lot of defendants, we treat a lot of them shabbily because of unequal resources. . . . It should not be up to Leighton to decide who can go to the best lawyer. But in asking the question, Leighton becomes a true adversary.”