ABA Fights Law Requiring Assets Involved in Crimes to Be Forfeited

WASHINGTON - Advocating greater protections for lenders, a banking trade group has asked the Supreme Court to declare an asset forfeiture law unconstitutional.

The American Bankers Association said in a brief filed last Friday that bankers and other third parties shouldn't lose their interest in an asset simply because it was used in a crime.

"This is not what lawmakers intended," ABA senior counsel John Byrne said. "They wanted to punish the criminal act. They never considered outside parties who have a stake here."

Lawmakers, who are trying to fight drug dealing and prostitution, have permitted prosecutors to seize houses, cars, and other assets involved in crimes. Most laws allow third parties to assert their right to the property before the government sells it. State prosecutors, however, are circumventing that time-consuming requirement by seizing property under novel legal theories.

The ABA wants the justices to stop this new approach, asking them to void a Michigan law that allows the state to seize assets under the nuisance abatement rules. Those rules don't provide third parties with any rights.

"Financial institutions will be prevented from having their day in court to protect their property prior to sale if this decision is not reversed," the ABA wrote.

The ABA appears to have a strong chance of prevailing; the Supreme Court has issued several recent decisions restricting asset forfeiture laws.

The Michigan decision would have several unintended consequences, the ABA wrote. It would stifle lending as banks, fearing the loss of their collateral, would more frequently refuse borrowers. Also, consumers would pay higher fees to cover the intensive background investigations lenders would conduct.

The case began in 1988 when police caught John Bennis having sex in his car with a prostitute. Mr. Bennis was convicted of gross indecency, and his 1977 Pontiac was seized.

Tina B. Bennis, his wife, fought to recover her interest in the car. She asserted that she was an innocent party, with no knowledge of her husband's illegal actions.

The Michigan courts vacillated over her claim. The trial judge rejected her argument, but the appellate court overturned and ruled that the state couldn't seize the car.

Then, in 1994, a divided Michigan Supreme Court restored the trial court's decision, ruling that third parties sacrifice their protections whenever they allow someone to use their property.

The Supreme Court is expected to hear arguments late this fall. A decision could be made this winter.

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