Farkas v. Warden, FCI Butner II

• Citation: 972 F.3d 548
• Decision Date: 26 August 2020
• Docket Number: No. 19-6347,19-6347
• Parties: Lee Bentley FARKAS, Petitioner – Appellant, v. Warden, FCI BUTNER II, Respondent – Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

972 F.3d 548

Lee Bentley FARKAS, Petitioner – Appellant,

v.Warden, FCI BUTNER II, Respondent – Appellee.

No. 19-6347

United States Court of Appeals, Fourth Circuit.

Submitted: May 22, 2020

Decided: August 26, 2020

Elliot S. Abrams, CHESHIRE PARKER SCHNEIDER, PLLC, Raleigh, North Carolina; Samuel B. Hartzell, WOMBLE BOND DICKINSON (US) LLP, Raleigh, North Carolina, for Appellant. Robert J. Higdon, Jr., United States Attorney, Joshua B. Royster, Assistant United States Attorney, John E. Harris, Assistant United States Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Raleigh, North Carolina, for Appellee.

Before AGEE, KEENAN, and RICHARDSON, Circuit Judges.

Affirmed by published opinion. Judge Richardson wrote the opinion, in which Judge Agee and Judge Keenan joined.

RICHARDSON, Circuit Judge:

Congress requires every federal prisoner who collaterally attacks his conviction to employ the motion mechanism provided in 28 U.S.C. § 2255. There is one exception: If § 2255 appears "inadequate or ineffective," then § 2255(e) provides that a federal prisoner may apply for a writ of habeas corpus under § 2241. In this appeal, we consider whether the petitioner's claims trigger this so-called "savings clause" exception.

In 2010, federal agents arrested Lee Bentley Farkas for fraud. On the government's motion, the district court froze Farkas's assets—at first preventing him from retaining his counsel of choice. Eventually, the court released enough resources for Farkas to hire a team of lawyers and pay his court-appointed attorney. Farkas was convicted, and he lost his direct appeal. In 2014, he filed a § 2255 motion for habeas relief, which the district court denied and Farkas asked us to dismiss on appeal.

Two years later, the Supreme Court determined that the pretrial restraint of a defendant's "untainted" assets, if needed to retain counsel, violates the Sixth Amendment. Luis v. United States , ––– U.S. ––––, 136 S. Ct. 1083, 1087, 194 L.Ed.2d 256 (2016) (plurality). After Luis , we reconsidered our Circuit precedent that permitted the pretrial restraint of a defendant's "substitute" assets without directly connecting those assets to the alleged wrongdoing. See In re Billman , 915 F.2d 916, 917 (4th Cir. 1990), overruled by United States v. Chamberlain , 868 F.3d 290, 295 (4th Cir. 2017) (en banc). And in Chamberlain , we held that the criminal forfeiture statute permits freezing only those assets traceable to the charged offense. 868 F.3d at 297 (construing 21 U.S.C. § 853(e) ). Based on this change in statutory interpretation, Farkas filed the instant § 2241 habeas application. The application attacks Farkas's conviction, asserting that he is entitled to habeas relief based on Chamberlain and the Sixth Amendment.

We disagree. Farkas fails to show that § 2255 would be "inadequate or ineffective to test the legality of his detention"—a jurisdictional prerequisite to his § 2241 application. First, as our existing "savings clause" jurisprudence makes abundantly clear, a § 2255 motion is fully adequate to address alleged Sixth Amendment violations. Second, his statutory claim still fails our "savings clause" tests. For these reasons, the district court properly dismissed Farkas's § 2241 application for lack of jurisdiction.

I. Background

A. Farkas's fraud convictions

Between 2002 and 2009, Farkas and his co-conspirators engaged in a multi-stage fraud scheme centered on a mortgage company in Ocala, Florida. Farkas served as the chairman and principal owner of that company. In brief, Farkas's company papered over a $100-million funding deficit, sold over $500 million in sham mortgage loans, inflated the value of collateral to the tune of some $1.5 billion, and sought to defraud the federal government's 2008-financial-crisis-era Troubled Asset Relief Program of $553 million. See generally United States v. Farkas , 474 F. App'x 349, 351–52 (4th Cir. 2012).

In June 2010, a federal grand jury indicted Farkas on several fraud charges. The next day, the district court entered a restraining order freezing Farkas's assets under 21 U.S.C. § 853(e)(1)(A). At his arraignment, Farkas appeared with two attorneys, Gerald Houlihan and Jeffrey Harris. The district court allowed the lawyers to enter a limited appearance, where they explained that, "but for the restraining order, [they] ... would have been on board" with Farkas's defense. J.A. 9 (internal quotations omitted). Farkas was unable to pay for their representation, and the district court appointed an attorney for Farkas in August 2010. See 18 U.S.C. § 3006(A). In September 2010, the district court granted a consent motion to release one of Farkas's real properties—allowing him to hire a three-lawyer team from out of state and pay his court-appointed attorney.¹

Seven months later, Farkas's trial began. And in 2011, the jury convicted Farkas of six counts of bank fraud, 18 U.S.C. § 1344 ; four counts of wire fraud, § 1343; three counts of securities fraud, § 1348; and conspiracy to commit bank fraud, wire fraud, and securities fraud, § 1349. The district court sentenced Farkas to thirty years’ imprisonment followed by three years’ supervised release. The court also ordered Farkas to forfeit $38,541,209 and held him liable for over $3.5 billion in restitution. We affirmed on direct appeal, rejecting Farkas's argument that the district court violated his Sixth Amendment right to counsel (among other claims). See Farkas , 474 F. App'x at 355–56 ("It is clear on the record before us that Farkas was not denied a fair opportunity to secure counsel.").

Farkas then made his first attempt at habeas relief, filing a § 2255 motion that asserted claims of (1) ineffective assistance of trial counsel, (2) ineffective assistance of appellate counsel, and (3) discovery violations implicating Brady v. Maryland , 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963). See United States v. Farkas , Nos. 1:10cr00200 LMB, 1:13cv01191 LMB, 2014 WL 3615851, at *3 (E.D. Va. July 18, 2014). The district court denied the motion, and we denied a certificate of appealability. United States v. Farkas , 592 F. App'x 211, 212 (4th Cir. 2015).

B. The Sixth Amendment and the changing law of criminal forfeiture

Five years after his conviction, the Supreme Court decided Luis v. United States , which presented the question of "whether the pretrial restraint of a criminal defendant's legitimate, untainted assets ... needed to retain counsel of choice violates the Fifth and Sixth Amendments." ––– U.S. ––––, 136 S. Ct. 1083, 1088, 194 L.Ed.2d 256 (2016) (plurality) (internal quotations and alterations omitted). The Sixth Amendment guarantees, "[i]n all criminal prosecutions, the accused shall enjoy the right ... to have the assistance of counsel for his defense." U.S. CONST. amend. VI. In Luis , four Justices, highlighting the "fundamental character" of the Sixth Amendment, 136 S. Ct. at 1088–89, found a constitutional right for a defendant "to use her own ‘innocent’ property to pay a reasonable fee for the assistance of counsel," id. at 1096. Justice Thomas reached the same result, analyzing the "Sixth Amendment's text and common-law backdrop" in a separate opinion. Id . (Thomas, J., concurring in the judgement); see id. at 1102–03 ("When the potential of a conviction is the only basis for interfering with a defendant's assets before trial, the [Sixth Amendment] requires the Government to respect the longstanding common-law protection for a defendant's untainted property.").²

The Supreme Court's decision in Luis cast doubt on the law of our Circuit, which had permitted the government to freeze, through a pretrial restraining order, a defendant's "substitute" assets in an amount equivalent to that involved in the alleged wrongdoing. See In re Billman , 915 F.2d at 917. So in Chamberlain , 868 F.3d at 291, the en banc court reconsidered our interpretation of 21 U.S.C. § 853(e) —the statute under which the government justified freezing Farkas's assets. And our full court unanimously held, on statutory grounds, that this criminal forfeiture statute does not permit the pretrial restraint of untainted substitute property. Chamberlain , 868 F.3d at 297.

C. The proceedings below

After our decision in Chamberlain , Farkas initiated his third collateral attack on his conviction, filing the habeas application that would lead to this appeal. Farkas did not seek this court's authorization to file a successive § 2255 motion. Instead, Farkas claims that the § 2255 remedy-by-motion is "inadequate or ineffective" to test the legality of his detention and filed the instant application under § 2241. Farkas "bases this [application] on ... Chamberlain and on the violation of his Sixth Amendment right to counsel of choice." J.A. 5.

The district court dismissed Farkas's § 2241 application for lack of jurisdiction. First, the district court reasoned that "because Farkas's petition challenges the constitutionality of the post-indictment restraining order and purported deprivation of his Sixth Amendment right to counsel ... Farkas generally must seek relief under section 2255." J.A. 107. Next, the district court considered whether a § 2255 motion would be "inadequate or ineffective" to address Farkas's statutory argument by applying the "savings clause tests" that our Circuit set out in In re Jones , 226 F.3d 328, 333–34 (4th Cir. 2000) and United States v. Wheeler , 886 F.3d 415, 426-29 (4th Cir. 2018). Finding neither Jones nor Wheeler satisfied, the district court dismissed the petition for lack of subject matter jurisdiction. See Wheeler , 886 F.3d at 426 ("the savings clause requirements are jurisdictional").³ Farkas timely appealed, arguing, as he did below, that § 2255 is inadequate and ineffective to test the legality of his detention, making his § 2241 application proper.

II. Discussion

Farkas bears the burden of establishing the inadequacy of § 2255 so that he may proceed with his § 2241 habeas application. See, e.g. , Charles v. Chandler , 180 F.3d...