Efforts to punish Russia for invading Ukraine rely not just on funneling weapons to the beleaguered defenders but also on economic sanctions to deny Vladimir Putin's regime resources and to inflict pain until the aggression stops. Among the targets are "Russian elites and their families," in President Joe Biden's words, whose assets are being seized to pressure the regime. But calling somebody an "oligarch" is no substitute for legal proceedings, and the U.S. government is stretching already sketchy asset forfeiture powers in ways that will, no doubt, create precedents for the future.
"Did you see these yachts we're—that are being picked up?" President Biden boasted this week. "Think about the—the incredible amounts of money these oligarchs have stolen. These yachts are a hundred—millions and millions of dollars."
The president riffed off a Justice Department announcement of the seizure of "a $90 million yacht— named the Tango — belonging to sanctioned Russian oligarch Viktor Vekselberg." Spanish authorities took the yacht using a U.S. warrant issued as part of Task Force KleptoCapture, launched after the invasion "to hold accountable corrupt Russian oligarchs." KleptoCapture is a catchy name, but it glosses over the fact that, while many wealthy Russians are close to Putin's regime, calling them "oligarchs" isn't the same as demonstrating that they share responsibility for the war.
"The western media employ the term 'oligarch' to describe super-wealthy Russians in general, including those now wholly or largely resident in the west," Anatol Lieven of the Quincy Institute for Responsible Statecraft wrote last month in the Financial Times. "The term gained traction in the 1990s, and has long been seriously misused. In the time of President Boris Yeltsin, a small group of wealthy businessmen did indeed dominate the state, which they plundered in collaboration with senior officials. This group was, however, broken by Putin during his first years in power."
Putin still has an inner circle of cronies who wield power and bear responsibility for invading Ukraine, but being Russian, rich, and labeled "oligarch" isn't proof of being one of them. That's important, because the West, in general, and the United States, in particular, is supposed to prove that private individuals engaged in crimes before imposing punishment.
"Serious legal questions surround the seizures of boats, planes and other property owned by oligarchs," warns George Washington University Law School's Jonathan Turley. "In these largely uncharted waters, many of the owners are likely to get back their yachts and other property after the headlines have receded. The United States and Western countries have considerable authority to seize property, but less authority to keep it. The reason is that, unlike Russia, these countries are bound by property rights and rules of due process."
True, few people harbor much sympathy for Russians of any sort these days; Rep. Eric Swalwell (D–Calif.) infamously called for expelling Russian students from the country. And owning a yacht that can be seized, let alone one worth $90 million, doesn't guarantee much sympathy from the public. But being rich doesn't erase your rights, and it means that you have the resources to defend yourself in ways not always available to regular people subject to official attention.
"While freezing an asset is a relatively simple task, seizing and taking over properties is more involved. It requires a lengthy legal process that takes years in many cases, according to several experts on the subject," Janaki Chadha observed in Politico. "Seizures can be further complicated by the fact that ownership of most if not all of the Russian oligarchs' properties is shielded by shell companies."
Contrast that with the experience of Terry Abbott from whom Indiana police seized $10,000 in 2015. "Cops used a process known as civil forfeiture, allowing them to proceed with pocketing those funds prior to securing a criminal conviction," Billy Binion reported for Reason. "Naturally, Abbott attempted to challenge that action in court. But he lost his attorney—as the money he would use to pay for that counsel had been taken by the state."
Civil asset forfeiture is frequently and accurately criticized as a "license to steal." Widely publicized abuses like the treatment of Abbott sparked an intermittently successful reform movement.
"While I support further reforms to expand the role of a criminal conviction in asset forfeiture, this bill is a step forward to create higher burdens of proof imposed on the seizure of private property by the government," Pennsylvania Gov. Tom Wolf (D) said upon signing a reform measure in 2017.
But unpopular targets can breathe new life into abusive practices, and Vekselberg's property was seized under the same authority as was wielded against Abbott. The federal government sued and seized the yacht itself without proving its owner engaged in wrongdoing. Of course, Vekselberg has the resources to battle the U.S. government through the courts. In the meantime, the property must be kept up.
"A vessel is treated very much like a person or corporation," Michael Karcher, a maritime lawyer told Robb Report, which focuses on luxury lifestyles. "The boat can run up its own bills. Then, if the yacht is in someone's boatyard, there's the question of 'Can we do any business with them?'" The publication also predicts "prolonged legal battles and hefty costs to maintain these gigayachts."
Ultimately, the United States government may lose, adds Turley, because "prosecutors would have to show that large corporations that have operated for decades in international markets are now deemed criminal enterprises for the purposes of these properties. It is not clear that governments now seizing the property will be able to establish the nexus between an alleged crime and these proceeds or property for some, if not most, of the oligarchs."
A proposed bill might provide a firmer legal basis for seizures. "The legislation encourages the administration to confiscate any property – including luxury villas, yachts, and airplanes – valued over $5 million from Russian oligarchs previously sanctioned by the U.S. government for their involvement in the Kremlin's invasion and human rights violations in Ukraine," according to Rep. Tom Malinowski (D–N.J.) who is co-sponsoring the bill with Rep. Joe Wilson (R–S.C.). But rather than address due process concerns, the bill makes private property forfeit based on little more than officials' claims that its owners are linked to Putin. Lowering the bar to forfeiture reverses reform efforts and may come back to haunt us.
Russian billionaires will probably survive economic sanctions in relative comfort. But the precedent set by labeling people as untouchables and then imposing penalties without proof of a crime will set the tone for future abuses. Powers used against wealthy Russians now will be deployed in the years to come against people who cross the authorities and have fewer resources for defending themselves.
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