The Department of Justice and its underlings (the FBI and nearyl every law enforcement agency in the nation) have turned the ideal of asset forfeiture (defund drug dealers; return money to the defrauded, etc.) into a free-roaming, many-tentacled opportunistic beast, one that "liberates" any amount of "suspicious" cash from tourists, legitimate business owners or anyone else who just happens to have "too much" cash in their possession.
The IRS is in on this as well. The agency doesn't need to prove anyone is guilty of anything before seizing assets. It just needs to feel that things aren't quite right.
For almost 40 years, Carole Hinders has dished out Mexican specialties at her modest cash-only restaurant. For just as long, she deposited the earnings at a small bank branch a block away — until last year, when two tax agents knocked on her door and informed her that they had seized her checking account, almost $33,000.
The Internal Revenue Service agents did not accuse Ms. Hinders of money laundering or cheating on her taxes — in fact, she has not been charged with any crime. Instead, the money was seized solely because she had deposited less than $10,000 at a time, which they viewed as an attempt to avoid triggering a required government report.
The person whose money has been seized isn't necessarily guilty of anything. Hinders hasn't been arrested, nor does there appear to be any sort of ongoing investigation. The IRS hasn't hit Hinders with tax liens for unpaid taxes or subjected her to an audit. All it did was look at records for her deposits and decide that because none of them surpassed the $10,000 mark (which triggers automatic reporting), everything in the account must be somehow illegal.
Here's the brain-bleeding explanation of IRS's civil forfeiture program
Civil forfeiture is an in rem proceeding against the property itself, not the owner of property. Civil forfeiture is a process that is separated from, and not dependent on, a criminal prosecution. Civil forfeiture can proceed administratively or judicially.
Hinders never needs to be charged. In fact, she never needs to be heard from again. The IRS can seize and hold this money indefinitely and decide whether or not the $33,000 is "guilty" without any
input from Hinders. To opportunistic agents, any sub-$10,000 deposit is "evidence" that the depositer is deliberately avoiding reporting requirements, rather doing so for any number of more mundane, less criminal reasons.
Take this IRS seizure from last year
, for example.
Since he bought it in 1978, Terry Dehko has owned Schott’s Supermarket in Fraser, Michigan. His daughter, Sandy, began working at the store when she was 12 and now helps her father run it. The IRS has not argued before a court of law that Terry and Sandy have committed a crime, but that has not stopped it from seizing their entire bank account, worth over $35,000. The IRS claims that Terry and Sandy violated federal anti-money laundering laws by making regular deposits of cash in amounts less than $10,000.
But the IRS has offered no evidence that money laundering has occurred. In fact, it has done nothing more than seize Dehko's money. The explanation for Dehko's deposit patterns make perfect sense, but perfect sense won't fund further IRS activity.
Their insurance policy, aimed at small businesses like their grocery store, protects them from theft, but only up to $10,000. Since any dollar over 10,000 left in the store is liable to uninsurable theft, Terry and Sandy make sure their revenues are deposited in their bank account before accumulating above $10,000.
Anyone nailed by an IRS seizure can fight for the return of their money, but there's nothing resembling due process here. Those choosing to do so would have to file a lawsuit intervening
in the IRS's forfeiture case. In other words, the situation must be forced. Simply showing up and defending money from accusations of wrongdoing isn't enough. In fact, it isn't even a possibility, at least not in this case. Prosecutors for the Dehko case offered the them a "deal:" an implicit admission of guilt via a plea bargain (presumably on behalf of the guilty money) and the return of 20% of the seized funds.
There are more stories like this. A dairy had $70,000 seized by the IRS after a string of deposits
following the sale of farm equipment raised bank eyebrows. Again, prosecutors offered a pennies-on-the-dollar settlement to the couple whose assets were taken. A 27-year-old vending business, heavily reliant on cash flow, had nearly $450,000 seized
. Again, "structuring" of deposits was the excuse used to justify the government's theft of earned income. The IRS civil forfeiture system is every bit as crooked as the one being abused by law enforcement agencies. Perverted incentives have demolished restraint and fairness and turned it into an extremely efficient way to stockpile cash.
According to the Institute for Justice, the Department of Justice’s Asset Forfeiture Fund held $93.7 million of seized assets in 1986. In 2008, that fund was greater than $1 billion…
Fortunately for the Dehkos, they won their battle against the government and had the seized funds returned. The IRS was ordered to produce proof of wrongdoing or release the funds. It chose the latter and was additionally held responsible for $71,500 in attorneys' fees. Dropping the case also allowed the IRS to walk away from the debacle without further legal examination of its civil asset seizure policies. So, while the Dehkos obtained a win, the IRS ultimately learned nothing from the experience. The fact that the average forfeiture battle racks up over $20,000 in legal fees means that more often than not, the IRS will get to keep nearly everything it seizes.