The federal government can just take it all at will
On occasion, the government does things for no better reason than because it can. Iowan Carole Hinders, owner of a Mexican restaurant named Mrs. Lady’s, discovered that nasty phenomenon last year when the IRS seized $33,000 from her bank account. Her crime? Mrs. Lady’s is a cash-only business that does not accept credit cards.
For decades, Hinders deposited restaurant income in her bank account. As the New York Times reported, federal agents “detected a pattern of deposits under $10,000. Under a law designed to catch terrorists, money launderers and drug lords, depositing less than $10,000 is illegal if it is done to evade a federal bank reporting requirement, but Ms. Hinders, 67, said she never knew about the requirement.”
Civil libertarians have had big issues with a practice known as civil asset forfeiture. Prosecutors can seize the ill-gotten gains of the drug trade without charging a suspected kingpin. As an individual, you may be presumed innocent unless or until you are proven guilty, but your money and possessions have no such protections. To get your money back, you have to go to court essentially to prove that you and your assets are not guilty.
Federal agents have used this power to seize medical marijuana dispensaries in states that have legalized medical marijuana. This practice allows law enforcement to shut down what are legal businesses under California law without having to establish beyond a reasonable doubt that the owners violated federal drug laws. To our thinking, these cases show prosecutorial overreach, but at least there is a nexus between a crime and the punishment. In Hinders’ case, the IRS had not even argued that Hinders was running an illegal eatery. Fortunately, the Institute of Justice, a nonprofit property-rights group based in Washington, stepped in to protect Hinders’ from her own government.
Institute attorney Larry Salzman told the New York Times, “After her deposition, at which it became overwhelmingly clear that Carole was an innocent and hardworking restaurateur, the assistant United States attorney on the case told us that he informed the IRS that they should not go forward with the case.” It should not have taken more than a year for the IRS to see the light on this case.
Loretta Lynch, the U.S. Attorney for the Eastern District of New York and President Obama’s nominee to succeed Eric Holder as Attorney General, has been an aggressive practitioner of asset seizures. The Wall Street Journal has editorialized that Lynch’s office has served as “a major forfeiture operation, bringing in more than $113 million in civil actions from 123 cases between 2011 and 2013.” Lynch’s Mrs. Lady’s case involves Bi-Country Distributors, a Long Island family business that stocks convenience stores. In May 2012, federal agents seized more than $400,000 from the business bank account. Brothers Jeffrey, Richard and Mitch Hirsch who run the business, also made frequent deposits under $10,000. Again, federal prosecutors grabbed the money, but didn’t charge the Hirsches with a crime. Again the Institute of Justice has stepped in. That’s great news for the Hirsch brothers, but really, federal agents and prosecutors should know better.