the government is making strong efforts to deny to defendants counsel of their choice. See, United States v. Sheehan, et al., No. CR F 84198 (REC) (E.D. Cal. 1985); United States v. Rodgers, No. 84-CR337 (D.C. Colo. 1985). See also, Buffone, Forfeiture of Attorney Fees and the Effect of the Crime Control Act of 1984, Drug Law Report, Vol. I, No. 13, Jan.-Feb. 1985. Passage of the proposed forfeiture legislation will only exacerbate an already severe problem. I recommend this Subcommittee reexamine this problem in light of existing case histories.

I want to specifically point out the statutory ambiguities contained in H. R. 2785 and H. R. 2786. This bill contains a new definition of forfeitable property geared toward the new substantive offense of money laundering in that bill. The general description of forfeitable property as "any money or other property involved in such an offense" fails to identify the required nexus between the defendant, the offense, and the property. For example, does "property involved in an offense" include only property actually used to violate these offenses? A broad interpretation of the flexible phrase "involved in" might lead a court to conclude that a defendant's entire bank account, mortgage, stock, or equitable interest in an asset would be subject to forfeiture regardless of the nexus between the property and the defendant's criminal conduct. Under this interpretation, a $10 deposit, for example, would render an entire bank account forfeitable. Such a result is unjust and inequitable.

Application of the flexible phrase "involved in" to the classic money laundering scheme also highlights the imprecise fit between the term and the targeted offense. If a bank teller accepts a deposit

of illicit funds, these funds are "involved in" a substantive offense but they are also not the teller's funds to forfeit. If deposits are the targeted evil, then the threat of a prison term is the only sanction available against the teller. Of course, current forfeiture law would apply with full vigor to the depositors' illicit monies.

In a similar manner, the additional description of forfeitable property as that "which represents the proceeds of ΟΙ which is traceable to such money or property" is equally ill-phrased. If Congress wants to reach the "proceeds" of illicit activity, it can do so by using the word "proceeds." See, e.g., 18 U.S.C Sec. Adding the prefatory words

1963 (a) (3); 21 U.S.C. Sec. 853 (a) (1). "which represents the" can only lead to ambiguity as to what Congress has attempted to describe. Additionally, the proposed statute's listing of property "which represents the proceeds" as an alternative to property "traceable to such money" raises a fundamental question as to the meaning of "proceeds" in the first place.

The relation back provision of H. R. 2785 and H. R. 2686 also creates new ambiguities. The relation back doctrine, which establishes the legally operative point of title transfer from the defendant to the government, is triggered by the "commission of the act giving rise to forfeiture." 21 U.S.C. Sec. 853 (c). The proposed money laundering offense, however, is predicated on the use ΟΙ attempted use of a financial institution as a conduit for funds emanating from "unlawful activity." If the unlawful activity is considered the "act giving rise to forfeiture" then title vests in the federal government from the operative date of every state and federal felony offense. Conversely, if the use of the "financial

(i.e.,

institution" constitutes the "act giving rise to the forfeiture," then some clarification of the triggering financial event deposit, withdrawal, extension of credit, etc.) would appear necessary. Again, the ambiguity is created not by the doctrine itself but rather by its wooden application to a broadened class of criminal conduct without reference to the enforcement needs that inspired the criminal offense in the first place. All of these ambiguities are not contained in the current criminal forfeiture laws.

The "substitute asset" provisions of the proposed legislation are also extremely troublesome. These provisions are even more ambiguous that those regarding property forfeitable as a direct result of the defendant's criminal conduct. There are serious constitutional problems with this portion of the proposed legislation. A similar (although not as broad) substitute asset provision was deleted by the Conferees for the Comprehensive Forfeiture Act of 1984. See Conference Report, No. 1159, 98th Cong. 2d Sess. 419 (1984). The House Report rejecting the concept of substitute assets forfeiture and noted the similarity of the concept to the constitutional prohibition against forfeiture of estate. The Report

stated:

At the present time the proposed 'substitute asset' provision appears to be ill-advised, unworkable and the need for it has not been substantiated. Any attempt to forfeit 'substitute assets' which has no nexus to the criime 'in personam' forfeiture is a giant step in the direction of 'forfeiture of estate' and would needlessly raise constitutional questions which could jeopardize successful prosecutions under this bill for years to come.

H. Rep. No. 845, Part I, 98th Cong. 2d Sess. 12 (1984). The House and Senate Conferees on the Comprehensive Crime Control Act of 1984 apparently agreed with this assessment; the "substitute assets"

provision in the Comprehensive Forfeiture Act was deleted. Wholly apart from whether the imposition of "substitute" forfeiture penalty constitutes a prohibited forfeiture of estate, the imposition of criminal forfeiture in a criminal prosecution on assets unrelated to the defendant's criminal conduct raises substantial questions of due process.

The proposed "substitute assets" provision set forth in H.R. 2785 and H. R. 2786 goes even further than the prior substitute assets language previously rejected by the 98th Congress. Under the proposed "substitute assets" language, mandatory forfeiture is imposed not only for the affirmative acts of a defendant which diminish the assets available for forfeiture, but under the proposed legislation, substitute assets can be forfeit as a result of the defendant's failure to act in a way which maximizes the assets available for ultimate forfeiture. Thus, the defendant will be placed in the incongruous position of being a trustee or fiduciary to the government's unsecured claim of title from the moment of the operative criminal act. Enactment of this proposed legislation will require the federal judiciary to engage in a historical analysis of the relative success of the defendant's investment strategy for purposes of determining the defendant's current forfeiture liability.

For the preceding reasons, the proposed expanded forfeiture sanctions should not be enacted.

Mr. HUGHES. Thank you very much, Mr. Bailor, for a very fine statement. You really gave us a great deal of insight into money laundering, and your recommendations are well taken.

I just want to say, in reference to your last comment, I share your concern about the Justice Department's interpretation of the forfeiture law. You know, the forfeiture law came out of this subcommittee, and we worked on it for about 4 years. It was never our intent, in fact, to trample upon sixth amendment rights, and I share your concern. We'll take a look at that, because it appears that the Justice Department, in fact, is interpreting it and implementing the forfeiture statute contrary to the intent of the subcommittee.

I just have a couple of questions.

First of all, with regard to your recommendation about the $2,000 threshold for Treasury checks, cashier's checks, and so forth, one of the difficulties I see and that occurred to me as you were testifying, is that with the new money market accounts, for instance, you're only permitted three transactions and given three checks.

Mr. BAILOR. That is correct, three is the maximum.

Mr. HUGHES. So, what many folks are doing is, they're getting travelers' checks or cashier's checks and having them written specifically to individuals. So that would present somewhat of a practical problem.

Mr. BAILOR. Well, Mr. Chairman, my recommendation was that for non-account holders, that this $2,000 limit be applied. And I don't think that would apply to a person who had a money market

Mr. HUGHES. So, you're talking about specifically account hold

ers.

Mr. BAILOR. Well, specifically that the limit be applied on people who walk in off the street, for example.

Mr. HUGHES. The other problem I see is a practical one. In Mario's case, for instance, most of his transactions were in the $500-to-$2,000 range, and what you would do would be, if you put a $3,000 threshhold, you'd just merely force them to get checks up to $2,000. Even though it would inconvenience them somewhat, I'm not sure we would really address the problem.

Mr. BAILOR. Mr. Chairman, the whole thrust of my making that recommendation is to create a situation that makes it easier for law enforcement to identify. It will stop a lot of the "smurf”' transactions, but the major thrust is money laundering probably will not be stopped by legislation, it's going to be stopped by the cop on the street.

Mr. HUGHES. I couldn't agree with you more. I think that the focus of your testimony in describing the need for additional manpower, in particular, commitment to investigate financial transactions, some of the administrative changes that have been recommended, are all well taken. But I think you would agree that what we've got to do is try to approach it in a balanced fashion, and we've got to make sure that, first of all, the changes would really make a difference and not inconvenience the folks that are legitimately conducting business in banks.

Mr. BAILOR. I couldn't agree more, Mr. Chairman.