Defendants’ Assets Frozen-Can’t Hire Attorneys

This title is taken from a recent Wall Street Journal article about a hedge-fund mogul who is facing civil charges brought by the SEC for defrauding investors of $300 million. He has been reduced to representing himself because the judge in the case refused to free up money to allow him to hire a lawyer. There is always a conflict between prosecutors seeking to block the use of defendant’s funds which they claim were illegally obtained and the defendant’s use of the funds to hire counsel. However the US Supreme Court has ruled that funds in the possession of a defendant, frozen because they were illegally obtained and as a result defendant is prevented from hiring a lawyer of his choice, does not violate the Sixth Amendment’s right to counsel. What does all of this have to do with asset protection planning? Had the defendant established a domestic asset protection trust in conformance with the law of Delaware, Alaska, Rhode Island or one of the other states that have adopted self-settled trust legislation, funds would be available to pay for lawyers as well as all living expenses. Now this article is not intended to suggest that criminals about to embark upon illegal activity should be afforded the opportunity to use these types of trusts or that lawyers should assist them. Instead I am thinking about persons in high profile positions, CEO’s, bank presidents, and other financial industry higher-ups, many of whom may face claims because of the current lynch mob mentality, but who acted in good faith and without any criminal intent. They too risk their assets being frozen by some zealous prosecutor and an unsympathetic judge. It is this group of people and other industry leaders that should be vigilant in protecting their personal assets and in providing a nest egg free from creditor claims so that if and when the climate changes for them and somehow, unexpectedly, they find themselves the victim they will not be left penniless and without resources to fight.