Lyndon McLellan owns a small business in North Carolina and last October the IRS raided his convenience store and stole $107,000. In government parlance, they “seized” the money from McClellan’s bank account because they suspected his cash deposits had nefarious origins.
McLellan had not been convicted of crime nor had criminal charges been filed against him. If this sounds like a “guilty until you prove your innocent” situation, you would be right.
This is how the pernicious government activity of civil asset forfeiture works.
Federal agents have the authority to seize your bank account if they believe you are suspiciously depositing cash. Federal regulations require that any cash deposit over $10,000 requires certain paperwork be filed by the bank. Deposits under that $10K threshold, which the IRS calls “structuring” appear “suspicious” to the government and that is all they need to take your money.
Business owners have numerous reasons to deposit less than $10k cash into their back accounts. Many business deal in cash, like a convenience owner or a restaurant owner. Some have insurance policies that will not insure more than $10,000 in cash kept on the business premises. Sometimes banks advise their customers to deposit less than $10k because they don’t want to fill out the necessary paper work.
Fortunately, McLellan was represented by the Institute for Justice, an organization which represents many people who have been victimized by the government for “structuring.”
On Wednesday, the Institute for Justice reported that the government has moved to drop their “case” against McLellan.
“There is no crime in this country for doing business in cash,” attorney Robert Everett Johnson said. “But the government treated Lyndon worse than a criminal, by taking his property and forcing him to prove his own innocence to get that property back.”
Once the government seizes your bank account, how do you get the funds to fight them to get it back?
The DOJ has changed its policy on civil asset forfeiture to “reign in their prosecutors” back in March. But still, McLellan had to fight to get his money back.
Fox News writes, “Two months ago, the government offered McLellan 50 percent of his money back and warned him against chasing publicity, even going so far as to suggest it would rile people inside the IRS and could hurt his chances of seeing his cash again, his attorneys said.”
Even though McLellan will get his money back, the government’s “mistake” cost him $3,000 in initial legal fees and $19,000 for an auditor to audit his business. The government will not pay him back for those costs and no one can pay him back the costs to his reputation when folks learned the government has seized his assets.
Civil asset forfeiture is a lucrative business. Between 2005 and 2012 the IRS has seized more than $242M from more than 2,500 cases, according to the Institute for Justice.