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Law Lets I.R.S. Seize Accounts on Suspicion, No Crime Required

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  • Law Lets I.R.S. Seize Accounts on Suspicion, No Crime Required

    http://www.nytimes.com/2014/10/26/us...pgtype=article

    ARNOLDS PARK, Iowa — 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.

    “How can this happen?” Ms. Hinders said in a recent interview. “Who takes your money before they prove that you’ve done anything wrong with it?”

    The federal government does.

    Using a law designed to catch drug traffickers, racketeers and terrorists by tracking their cash, the government has gone after run-of-the-mill business owners and wage earners without so much as an allegation that they have committed serious crimes. The government can take the money without ever filing a criminal complaint, and the owners are left to prove they are innocent. Many give up.
    Photo

    The I.R.S. seized almost $33,000 from Ms. Hinders. Credit Angela Jimenez for The New York Times
    “They’re going after people who are really not criminals,” said David Smith, a former federal prosecutor who is now a forfeiture expert and lawyer in Virginia. “They’re middle-class citizens who have never had any trouble with the law.”

    On Thursday, in response to questions from The New York Times, the I.R.S. announced that it would curtail the practice, focusing instead on cases where the money is believed to have been acquired illegally or seizure is deemed justified by “exceptional circumstances.”

    Richard Weber, the chief of Criminal Investigation at the I.R.S., said in a written statement, “This policy update will ensure that C.I. continues to focus our limited investigative resources on identifying and investigating violations within our jurisdiction that closely align with C.I.’s mission and key priorities.” He added that making deposits under $10,000 to evade reporting requirements, called structuring, is still a crime whether the money is from legal or illegal sources. The new policy will not apply to past seizures.


    The I.R.S. is one of several federal agencies that pursue such cases and then refer them to the Justice Department. The Justice Department does not track the total number of cases pursued, the amount of money seized or how many of the cases were related to other crimes, said Peter Carr, a spokesman.

    But the Institute for Justice, a Washington-based public interest law firm that is seeking to reform civil forfeiture practices, analyzed structuring data from the I.R.S., which made 639 seizures in 2012, up from 114 in 2005. Only one in five was prosecuted as a criminal structuring case.

    The practice has swept up dairy farmers in Maryland, an Army sergeant in Virginia saving for his children’s college education and Ms. Hinders, 67, who has borrowed money, strained her credit cards and taken out a second mortgage to keep her restaurant going.

    Their money was seized under an increasingly controversial area of law known as civil asset forfeiture, which allows law enforcement agents to take property they suspect of being tied to crime even if no criminal charges are filed. Law enforcement agencies get to keep a share of whatever is forfeited.

    Critics say this incentive has led to the creation of a law enforcement dragnet, with more than 100 multiagency task forces combing through bank reports, looking for accounts to seize. Under the Bank Secrecy Act, banks and other financial institutions must report cash deposits greater than $10,000. But since many criminals are aware of that requirement, banks also are supposed to report any suspicious transactions, including deposit patterns below $10,000. Last year, banks filed more than 700,000 suspicious activity reports. Owners who are caught up in structuring cases often cannot afford to fight. The median amount seized by the I.R.S. was $34,000, according to the Institute for Justice analysis, while legal costs can easily mount to $20,000 or more.

    There is nothing illegal about depositing less than $10,000cash unless it is done specifically to evade the reporting requirement. But often a mere bank statement is enough for investigators to obtain a seizure warrant. In one Long Island case, the police submitted almost a year’s worth of daily deposits by a business, ranging from $5,550 to $9,910. The officer wrote in his warrant affidavit that based on his training and experience, the pattern “is consistent with structuring.” The government seized $447,000 from the business, a cash-intensive candy and cigarette distributor that has been run by one family for 27 years.

    There are often legitimate business reasons for keeping deposits below $10,000, said Larry Salzman, a lawyer with the Institute for Justice who is representing Ms. Hinders and the Long Island family pro bono. For example, he said, a grocery store owner in Fraser, Mich., had an insurance policy that covered only up to $10,000 cash. When he neared the limit, he would make a deposit.

    Ms. Hinders said that she did not know about the reporting requirement and that for decades, she thought she had been doing everyone a favor.
    Photo


    Jeff Hirsch, an owner of Bi-County Distributors on Long Island. The government seized $447,000 from the business, a candy and cigarette distributor run by one family for 27 years. Credit Bryan Thomas for The New York Times
    “My mom had told me if you keep your deposits under $10,000, the bank avoids paperwork,” she said. “I didn’t actually think it had anything to do with the I.R.S.”

    In May 2012, the bank branch Ms. Hinders used was acquired by Northwest Banker. JoLynn Van Steenwyk, the fraud and security manager for Northwest, said she could not discuss individual clients, but explained that the bank did not have access to past account histories after it acquired Ms. Hinders’s branch.

    Banks are not permitted to advise customers that their deposit habits may be illegal or educate them about structuring unless they ask, in which case they are given a federal pamphlet, Ms. Van Steenwyk said. “We’re not allowed to tell them anything,” she said.

    Still lawyers say it is not unusual for depositors to be advised by financial professionals, or even bank tellers, to keep their deposits below the reporting threshold. In the Long Island case, the company, Bi-County Distributors, had three bank accounts closed because of the paperwork burden of its frequent cash deposits, said Jeff Hirsch, the eldest of three brothers who own the company. Their accountant then recommended staying below the limit, so for more than a decade the company had been using its excess cash to pay vendors.


    More than two years ago, the government seized $447,000, and the brothers have been unable to retrieve it. Mr. Salzman, who has taken over legal representation of the brothers, has argued that prosecutors violated a strict timeline laid out in the Civil Asset Forfeiture Reform Act, passed in 2000 to curb abuses. The office of the federal attorney for the Eastern District of New York said the law’s timeline did not apply in this case. Still, prosecutors asked the Hirsch’s first lawyer, Joseph Potashnik, to waive the CARFA timeline. The waiver he signed expired almost two years ago.

    The federal attorney’s office said that parties often voluntarily negotiated to avoid going to court, and that Mr. Potashnik had been engaged in talks until just a few months ago. But Mr. Potashnik said he had spent that time trying, to no avail, to show that the brothers were innocent. They even paid a forensic accounting firm $25,000 to check the books.

    “I don’t think they’re really interested in anything,” Mr. Potashnik said of the prosecutors. “They just want the money.”

    Bi-County has survived only because longtime vendors have extended credit — one is owed almost $300,000, Mr. Hirsch said. Twice, the government has made settlement offers that would require the brothers to give up an “excessive” portion of the money, according to a new court filing.

    “We’re just hanging on as a family here,” Mr. Hirsch said. “We weren’t going to take a settlement, because I was not guilty.”

    Army Sgt. Jeff Cort***o of Arlington, Va., began saving for his daughters’ college costs during the financial crisis, when many banks were failing. He stored cash first in his basement and then in a safe-deposit box. All of the money came from paychecks, he said, but he worried that when he deposited it in a bank, he would be forced to pay taxes on the money again. So he asked the bank teller what to do.

    “She said: ‘Oh, that’s easy. You just have to deposit less than $10,000.’”

    The government seized $66,000; settling cost Sergeant Cort***o $21,000. As a result, the eldest of his three daughters had to delay college by a year.

    “Why didn’t the teller tell me that was illegal?” he said. “I would have just plopped the whole thing in the account and been done with it.”
    That's pretty messed up.

    Thoughts?
    Originally posted by RSGSRT
    We've reached a point where natural selection doesn't have a chance in hell of keeping up with the procreation of imbeciles.
    Why is it acceptable for you to be an idiot, but not acceptable for me to point it out?

  • #2
    My thoughts are that just like most media accounts of a criminal investigation, you have a lot of statements from the suspects but little to no detail about what facts the criminal investigation revealed. The facts that investigators discovered and relied upon can be found in the warrants that were written to seize the money. Few of those facts are presented here.

    In my experience, the media tends to leave out a lot of facts which would give a more objective view of the situation, instead choosing to selectively present information in order to create the desired emotional response from their readers ("That's pretty messed up," for example). There are two sides to every story and in this Times article I'm only seeing one.
    "Screw that. We can make bullets faster than they can make terrorists. Kill them all. Every last one." -Interceptor

    Comment


    • #3
      I have eaten at that restaurant
      Since some people need to be told by notes in crayon .......Don't PM me with without prior permission. If you can't discuss the situation in the open forum ----it must not be that important

      My new word for the day is FOCUS, when someone irritates you tell them to FOCUS

      Comment


      • #4
        Originally posted by LPSS View Post
        My thoughts are that just like most media accounts of a criminal investigation, you have a lot of statements from the suspects but little to no detail about what facts the criminal investigation revealed. The facts that investigators discovered and relied upon can be found in the warrants that were written to seize the money. Few of those facts are presented here.

        In my experience, the media tends to leave out a lot of facts which would give a more objective view of the situation, instead choosing to selectively present information in order to create the desired emotional response from their readers ("That's pretty messed up," for example). There are two sides to every story and in this Times article I'm only seeing one.
        I would trust the news media before I would trust the IRS.
        Retired

        Comment


        • #5
          Originally posted by retired View Post
          I would trust the news media before I would trust the IRS.
          I would say a toss up.................
          Since some people need to be told by notes in crayon .......Don't PM me with without prior permission. If you can't discuss the situation in the open forum ----it must not be that important

          My new word for the day is FOCUS, when someone irritates you tell them to FOCUS

          Comment


          • #6
            Originally posted by Iowa #1603 View Post
            I would say a toss up.................
            I agree on that, and I don't care whether it's a donkey or an elephant in the white house in that agreement either before folks start getting up in arms about it!

            Comment


            • #7
              It's a very interesting article, though. If all they based their seizures on were the amounts, that's pretty messed up. And, unfortunately, true or not, that's the only part MOST people will care about.
              Originally posted by RSGSRT
              We've reached a point where natural selection doesn't have a chance in hell of keeping up with the procreation of imbeciles.
              Why is it acceptable for you to be an idiot, but not acceptable for me to point it out?

              Comment


              • #8
                Originally posted by Aerohead View Post
                It's a very interesting article, though. If all they based their seizures on were the amounts, that's pretty messed up. And, unfortunately, true or not, that's the only part MOST people will care about.
                This story has gotten absolutely NO PLAY in Iowa--------------I think something smells
                Since some people need to be told by notes in crayon .......Don't PM me with without prior permission. If you can't discuss the situation in the open forum ----it must not be that important

                My new word for the day is FOCUS, when someone irritates you tell them to FOCUS

                Comment


                • #9
                  Abolish the IRS.
                  September 11, 2001 - All gave some, some gave all. Never forget -- Never forgive.......... RIP Brothers and Sisters.

                  Comment


                  • #10
                    Originally posted by Iowa #1603 View Post
                    This story has gotten absolutely NO PLAY in Iowa--------------I think something smells
                    Oh trust me, I wouldn't put it past the media to just start outright lying about stuff to make a story.
                    Originally posted by RSGSRT
                    We've reached a point where natural selection doesn't have a chance in hell of keeping up with the procreation of imbeciles.
                    Why is it acceptable for you to be an idiot, but not acceptable for me to point it out?

                    Comment


                    • #11
                      Originally posted by retired View Post
                      I would trust the news media before I would trust the IRS.
                      The comedy duo Abbott and Costello were audited by the IRS and in the end they owed a large sum of money with interest and penalties they couldn't pay, so pretty much everything they owned was taken and sold at auction, they even demanded and took Costellos' wedding ring off his hand.

                      Comment


                      • #12
                        Originally posted by Aerohead View Post
                        It's a very interesting article, though. If all they based their seizures on were the amounts, that's pretty messed up. And, unfortunately, true or not, that's the only part MOST people will care about.
                        Like I said, the Times neglected to provide any of the real details that investigators outlined in their seizure warrants while implying that the seizures were solely based on deposit amounts. For example, if the IRS audited the Mexican restaurant's books and found that they netted $12,500 in cash profit every week yet deposited only $9,500 weekly in order to avoid the legal reporting requirements and held the remaining $3,000 for the next deposit, then they were deliberately breaking the law. I'm not an IRS investigator nor do I specialize in financial crimes but I imagine that this is the type of stuff they'd be looking for.
                        "Screw that. We can make bullets faster than they can make terrorists. Kill them all. Every last one." -Interceptor

                        Comment


                        • #13
                          Originally posted by Steve856
                          And how do you suggest that government fund itself?
                          Really?
                          September 11, 2001 - All gave some, some gave all. Never forget -- Never forgive.......... RIP Brothers and Sisters.

                          Comment


                          • #14
                            Originally posted by Steve856
                            And how do you suggest that government fund itself?
                            The way they did before there was an IRS? Not sure how that worked, but, there was something, some kind of tax, maybe not a federal income tax.
                            https://www.thereligionofpeace.com/TROP.jpg

                            List of Islamic terror attacks in the last 30 days

                            Comment


                            • #15
                              Originally posted by Max K View Post
                              The way they did before there was an IRS? Not sure how that worked, but, there was something, some kind of tax, maybe not a federal income tax.
                              Flat tax...Steve 856 knows exactly what that is. It makes the criminals, politicians, and honest people pay the same. That is why the criminals and politicians are against it. I wonder why criminals and politicians agree? NO MORE LOOPHOLES.
                              September 11, 2001 - All gave some, some gave all. Never forget -- Never forgive.......... RIP Brothers and Sisters.

                              Comment

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