This simple solution is as good or as bad as the current one where the government seems to be incapable of following 18 U.S.C. § 983(a)(1) under CAFRA…60 day window or process 18 U.S.C. 983(a)(2)(A) – the right to file a claim for the return of their property where the IRS would have 90 days to either file a forfeiture action against the property—or return it.
I do not call in question the original purpose for the “Anti-Structuring Laws” against money laundering etc. but I do have to criticize the application of those laws to real people in 2014. It makes totally sense to uphold and enforce that the banks file one or more “Suspicious Activity Reports” that detail “suspicious deposit practices” but what makes no sense for the IRS is to shoot first and ask questions later – that is or was the Wild West.
How odd it is that financial “structuring” can be considered a serious crime by the IRS when practiced by ordinary little people who gain no benefit from it, yet perfectly OK when practiced by a corporation’s tax department that employs a myriad of structuring strategies to avoid paying millions or billions of dollars in taxes.
But it makes perfect sense, that rather than trying to rein-in loophole exploiting corporations who are sure to put up a massive, expensive and lengthy court fight, the IRS knows that picking the pockets of people who can’t afford to fight them in court — or know it would be more expensive to fight than to simply walk away and swallow the loss — makes much better business sense.
And it’s only natural that IRS agents would rather take the easy route and add a few more small notches on their belt, than spend all their time and energy “fighting the good fight” and probably losing in the end. Congress created asset forfeiture law, and Congress has proceeded to make it worse time after time. Members of Congress need to be held responsible - individually, and by name.
The IRS lost a forfeiture case at the Supreme Court in 1994 (Ratzlaf v. US) when a defendant was able to successfully make the case that he hadn't known he was "structuring" deposits in a way that could be considered illegal. The execrable federal prosecutors then complained to Congress who shamefully obliged them and changed to law to remove the requirement that the offence be "willful".
I haven't done the research to see exactly which members of Congress sponsored that legislation, but this information should be sought, and they should be exposed as being responsible for this nonsense. Any time legislators seek to remove Mens Rea (intent) from the law, they are weakening respect for the law, because eventually such a law will be unjustly abused by regulators, law enforcement and prosecutors.
See the discussion of the IRS and Ratzlaf v. US
2013 banks filed 700,000 SARs. The median amount seized by the IRS. was $34,000….while legal costs can easily mount to $20,000+ meaning most account owners can’t afford to fight the government for their money. I think it is fair to say that the practice “amounts to nothing short of grand larceny on the part of the Internal Revenue Service” . Many parties often voluntarily negotiate or plea “bargain” to avoid going to court which brings me to Jacks blog post :
http://www.federaltaxcrimes.blogspot.ch/2014/11/the-honorable-jed-rakoff-on-why.html
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…for 2014 this number is estimated to be close to $2billion !
To put a different spin on it : why set a $10K limit at all if you are going to arbitrarily go after anyone who follows the rules? It’s like pulling over someone for going 55 MPH in a 60 MPH zone.
“Oh you got really close to the speed limit but didn’t go over, so we are going to assume you stayed below the limit to avoid suspicion, which is suspicious.”
How much do you want to bet that there is a (formal or informal) quota system, that IRS agents expected to make a certain number or amount of seizures every quarter?
But what is good for the goose is certainly good for the gander …the IRS civil forfeiture system is every bit as crooked as the one being abused by law enforcement agencies : The Justice Department’s Equitable Sharing Program was an initiative that allows local and state police to keep up to 80% of the assets they seize. Police have seized $2.5 billion since 2001 from people who were not charged with a crime and without a warrant being issued. Police reasoned that the money was crime-related. About $1.7 billion was sent back to law enforcement agencies for their use.
With regards to 18 U.S.C. 983(a)(2)(A)……Yes it is correct anyone nailed by an IRS seizure can fight for the return of their money/property, 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 the Dehko case. Take this IRS seizure from last year : Prosecutors for the Dehko case offered to 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.
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.
In the case of the Hirsch brothers the IRS blew far past these deadlines. Instead of commencing forfeiture proceedings in a matter of days after the seizure, the IRS has waited years.
As I read the law, the IRS is not required to file a judicial proceeding within days after the seizure. Indeed, it is not required to file such a proceeding at all unless the putative owner files a timely administrative claim with IRS CI SAC. The timely administrative claim require the IRS to either file the judicial proceeding within 90 days or return the property. I am confident that a court would enforce that requirement. Did the Hirsch brothers filed the timely claim? If so, did they ask a court to force return of the money because no judicial proceeding was timely filed by the IRS?
Here is a brief summary of the forfeiture rules :
Administrative forfeiture is available for personal property (including bank accounts) not in excess of $500,000 and for monetary instruments (not including bank accounts) “within the meaning of 31 USC §5312(a)(3), regardless of their value .” Within 60 days of the seizure, the seizing agency (here the IRS) must send notice to all known claimants to the property of the seizure will advise those persons that they have either a judicial remedy or an administrative remedy. In addition, the IRS must publish notice of the seizure “once a week for three consecutive weeks in a newspaper of general circulation in the judicial district where the property was seized.” The judicial remedy is obtained by filing a claim of ownership. The administrative claim of ownership is a timely claim made no later than 35 days after the notice letter or, if no such letter received, within 30 days after final publication “to refer the matter to a US district court for a judicial judgment” made to the SAC of the IRS field office responsible for the forfeiture. There is no requirement to post bond. If the administrative claim is filed, the IRS must file a civil judicial forfeiture proceeding within 90 days or return the property seized. The process to insure prompt judicial review is a requirement of due process.