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Asset Forfeiture Discussion!

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  • rlbaty50
    Interesting exchange between the author of the article and me in the readers comments section following the Forbes article. Enjoy! Primary Link:
    Message 1 of 1 , Feb 19, 2013
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      Interesting exchange between the author of the article and me in the readers' comments section following the Forbes' article.


      Primary Link:


      Alterntate Link:


      Link and quote from author of article:


      > The IRS is entitled to examine a taxpayer's
      > books and records. It is even entitled to
      > tour the taxpayer's business premises, at a
      > reasonable time.
      > But the IRS is not entitled to interview a
      > taxpayer.
      > Taxpayers tend to be chatty in talking with
      > Revenue Agents. They try to talk themselves
      > out of problems, real or imagined, invariably
      > with the opposite result.
      > I never allow a Revenue Agent to interview a
      > client, except in conditions controlled by me,
      > when I know it cannot harm the client.

      Think about that when you consider the following published article and my exchange with the author.


      Nothing Civil About Asset Forfeiture

      By Stephen J. Dunn
      February 18, 2013

      On receiving his monthly bank statements, a small business owner notices that the United States government has seized the balances of his accounts during the month.

      He calls the bank, and is given contact information of a Special Agent of the Internal Revenue Service Criminal Investigation Division.

      The owner's lawyer calls the agent and leaves a voicemail message. An Assistant United States Attorney calls the owner's attorney back saying that the funds were seized because of "structuring."

      The AUSA adds that the government does not intend to seize any more money from the business, or to prosecute the business owner. The owner had no advance notice of the seizure.

      He is supposed to accept this.

      According to the U.S. Department of Justice, civil asset net forfeitures surged to $4.2 billion in the year ended September 30, 2012, from $1.7 billion in the preceding year—a one-year increase of over 150%.

      18 United States Code § 5313, enacted in 1982 as part of the Bank Secrecy Act, requires banks to report to the U.S. Treasury transactions in money in excess of $10,000.

      The purpose of the requirement is to alert Treasury to possible drug trafficking and attendant tax evasion.

      People evade this requirement by arranging their bank transactions in amounts less than $10,000. For example, instead of depositing $90,000, a person may make ten separate deposits of $9,000 each.

      Congress responded by enacting 18 USC §§ 5324 and 5317 in 1986. 18 USC § 5324 makes it a crime for any person to structure or to attempt to structure transactions with one or more financial institutions for the purpose of evading the currency transaction reporting requirements of 18 USC § 5313.

      The cases say that structuring has three elements:


      > arranging one's currency transactions with
      > banks so that they are less than $10,000;


      > doing so with knowledge of the requirement
      > that banks report currency transactions in
      > excess of $10,000; and


      > with intent to evade the bank reporting
      > requirement.

      18 USC § 5317(c)(2) provides in part:

      > "Civil forfeiture. Any property involved in a
      > violation of section 5313 . . . or 5324 of this
      > title, or any conspiracy to commit any such
      > violation, and any property traceable to any
      > such violation or conspiracy, may be seized and
      > forfeited to the United States in accordance
      > with the procedures governing civil forfeitures
      > in money laundering cases pursuant to section
      > 981(a)(1)(A) of title 18, United States Code."

      From the earliest days of the republic, the government has seized property used to perpetrate a crime, or produced by crime. But first the government must convict the property's owner of a crime. This requires the government to carry the heavy burden of persuading the trier of fact that beyond a reasonable doubt that the elements of the crime are proved.

      18 USC § 5317(c)(2) broadens forfeiture beyond its traditional criminal realm, into civil cases.

      To prevail in a civil case, the plaintiff need only persuade the trier of fact by a mere preponderance of evidence that the elements of the cause of action have been proved.

      Broadly interpreting 18 USC § 5317(c)(2), the IRS Criminal Investigation Division liberally seized bank balances.

      CID did so based upon its subjective interpretation that structuring had occurred, without any judicial intervention.

      It was a due process nightmare.

      Congress responded by enacting the Civil Asset Forfeiture Reform Act of 2000 ("CAFRA"). This requires the government to procure an ex parte warrant from a U.S. District Court upon probable cause before seizing property. Within 60 days after the government seizes property, it must send written notice of the seizure to parties interested in the property (i.e., the owner).

      The interested parties then have 35 days to file a claim for the property. If a timely claim is filed, government has 90 days to either indict the claimant or bring a lawsuit in federal court seeking a judgment of civil forfeiture of the property.

      If the government does neither, it must return the seized property forthwith.

      Congress struggled with the fungible nature of cash. For example, where there are many deposits to a bank account, some of which are allegedly structured and some of which are not, and there are many withdrawals from the bank account, so that the account balance turns over frequently, it is impossible to trace the balance in the account at any given time to one or more specific, allegedly structured, deposits.

      Congress resolved this by doing away with the tracing requirement for fungible property, but imposing a short statute of limitations—the government must bring a civil forfeiture lawsuit within one year after the allegedly structured transaction.

      The short statute of limitations works to the depositor's advantage.

      If the government does file a civil forfeiture action, the depositor's accountant should be alerted to reconcile deposits into the depositor's bank accounts to receipts reported on the depositor's tax return for the subject year.

      In a civil forfeiture lawsuit, the government prevails by proving the alleged structuring by a preponderance of evidence.

      The claimant can demand a jury trial.

      If, during the pendency of the suit, the claimant persuades the court that it needs a distribution of the seized funds to pay its expenses of suit, the court can order such a distribution to the claimant.

      If the claimant substantially prevails in the suit, the judge may in her discretion award the claimant legal costs against the government.

      It is clear from the legislative history of CAFRA that Congress intended to limit civil forfeitures to alleged structuring connected with an underlying offense of drug trafficking or money laundering.

      Money laundering arises out of drug trafficking - that will be the subject of a separate post.

      The business owner can also argue that the amount of money seized from his bank accounts violates the Excessive Fines Clause of the Eighth Amendment to the U.S. Constitution.

      A person can gain exemption from the currency reporting requirements by having its bank complete FinCEN Form 110, Designation of Exempt Person, as to it and file the form with the IRS. Banks are reluctant file Forms FinCEN 110 for small businesses, as filing of the form draws greater IRS scrutiny upon the bank. But our owner should ask his bank to file a FinCEN Form 110 for it with the IRS, for several reasons. If the bank files the form, it will demonstrate to the jury the fortuitous nature of the government's conduct. It will also benefit the business going forward. If the bank refuses to file the form, it will demonstrate to the jury the unfairness of the system.

      Civil forfeiture remains a travesty of due process.

      The property owner receives no advance notice; he is not afforded an opportunity to participate in the District Court warrant hearing.

      Once the property is seized, the owner may file a claim, at peril of being indicted, or of incurring heavy civil litigation costs.

      The spectre of these unappealing potential consequences undoubtedly persuades many victims of civil forfeiture to do what the AUSA suggested here-go away without filing a claim.

      Not our business owner.

      He finds bank deposits inconvenient, and does not make them every day.

      Some of his deposits exceed $10,000.

      He was unaware of the bank's currency transaction reporting requirements.

      He was under the mistaken impression that if he made bank deposits in excess of $10,000, he would have a reporting requirement.

      As the owner thus did not arrange his deposits to evade the bank's currency transaction reporting requirements, he did not structure.

      There is no underlying offense of drug trafficking or money laundering. The owner asserted a claim for the seized funds.

      He intends to prevail, and to recover his legal costs in the matter.

      Readers' Comments:


      From: Robert Baty
      Date: Monday, February 18, 2013


      If the case is as simple as you lay it out, it should
      be an easy fee for you to get out of the feds.

      It reminds me of a somewhat recent case I ran across
      that a poster here handled in his practice. The lawyer
      was representing a drug dealer of sorts who had some
      money forfeited and she was suing to get it back. I
      don't recall all of the details, but as it turns out,
      as I recall, the feds got the lawyer to concede the
      forfeiture case and paid him 10% of the forfeiture
      for his troubles.

      Then there is the Hovind case that has been the subject
      of several recent Forbes columns recently. In Hovind's
      case, the feds prosecuted and the forfeiture was part
      of the criminal trial results. The "structuring" that
      was the subject of the forfeiture in that case involved
      45 less than $10,000 withdrawals over the course of
      about 13 months. Hovind was a preacher of sorts.

      I just present those two examples I had a little
      experience with in order to note that such cases
      are very, very, very fact sensitive.

      Stephen, you present all the alleged facts in favor
      of your client; so there is not much to argue with.
      Without more, it's hard to use your case analysis
      for purposes of criticizing the forfeiture rules or
      justifying them.

      Maybe if your case proceeds into the public square,
      you can give us a citation and we can follow the

      If you don't quickly succeed in getting the money
      back, with your fee, I would like to see the Government's
      defense of its action and so try to make a better,
      informed decision as to how your case goes to evaluating
      the present state of affairs regarding civil forfeitures.


      From: Stephen J. Dunn
      Date: Monday, February 18, 2013

      Thanks for your comment.

      The facts related are accurate.

      The government has not yet responded to our claim.

      We have no intention of rolling over.

      I will update the post when there is anything to
      add to it.


      From: Robert Baty
      Date: Monday, February 18, 2013

      I will look forward to the additional information
      in any case.

      For us spectators, it might be better if the
      Government doesn't roll over either and there
      is a knock-down, drag-out regarding the facts,
      law and circumstances.


      From: Stephen J. Dunn
      Date: Monday, February 18, 2013

      I'll keep you posted.
      Thanks for your interest.


      From: Robert Baty
      Date: Monday, February 18, 2013


      If you care to patronize my interest a bit further,
      I would like to consider the following from your

      > Some of his deposits exceed $10,000.
      > He was unaware of the bank's currency transaction
      > reporting requirements.
      > He was under the mistaken impression that if he
      > made bank deposits in excess of $10,000, HE would
      > have a reporting requirement.

      That seems to admit that your client was aware of
      the $10,000 CTR rule; just allegedly thinking HE
      was the one required to file the report instead of
      the bank.

      I'm not a lawyer or the son of a lawyer, or even a
      CPA, so I am left wondering whether, for purposes
      of establishing a "structuring" violation, it is
      necessary that the person know who is responsible
      for filing the form or just necessary that he know
      there was a requirement that a report be made.

      I am wondering what happened when your client made
      those $10,000+ deposits.

      Did he try to file the reports himself?
      If not, why not?

      I can see the prospect that the argument could be
      made that your client had the requisite "knowledge"
      of the reporting requirement which may stand independent
      of the technical details as to who is to file what
      report on the matter.

      Maybe there is a precedent on that.
      Maybe you client will set the precedent.

      If he didn't want to file the reports, he may be
      considered to have "structured" his deposits with
      the intent to evade the reporting requirements;
      perhaps mistakenly thinking he was evading HIS
      responsibilities instead of the evading the bank's


      From: Stephen J. Dunn
      Date: Monday, February 18, 2013

      Structuring requires arranging one's banking
      transactions with intent to evade the bank's
      reporting requirements.

      This requires knowledge of the bank's reporting

      In the facts related, there was no structuring.


      From: Robert Baty
      Date: Monday, February 18, 2013

      Stephen, you wrote:

      > Structuring requires arranging one's
      > banking transactions with intent to
      > evade the bank's reporting requirements.
      > This requires knowledge of the bank's
      > reporting requirements. In the facts
      > related, there was no structuring.

      As I indicated in my earlier comment, that may or
      may not be the case (i.e., knowing it's the bank's
      responsibility as opposed to just knowing that there
      was a responsibility on someone). In other words,
      the effect is to evade the bank's reporting whether
      or not you knew it was the bank who had the
      responsibility to report the transaction.

      I don't know, but your case appears to present that

      Maybe your case will provide a precedent for resolving
      that issue if it has not been previously resolved.

      Restated, the issue I raised questioned whether or not
      its relevant that the person know who is responsible
      for filing the report if he knows there is a report to
      be filed and, for example, deposits $9,500 instead of

      If that issue has not been previously raised and
      resolved, with specificity, then maybe it needs to
      be resolved and maybe, based on the facts alleged
      above, your case could be the means for resolving
      that fine point.

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