In the latest salvo against civil forfeiture, 21 Republican Members of Congress sent a letter to Attorney General Jeff Sessions on Thursday that demanded the Justice Department “immediately return” up to $22 million that was “seized unfairly by the government.” Using civil forfeiture, the Internal Revenue Service raided bank accounts from hundreds of owners for alleged “structuring” offenses, which involves making a series of cash transactions under $10,000 to skirt federal reporting requirements.
“What was done was not fair, just or right in most cases,” the letter declared, which was co-signed by House Ways and Means Chair Kevin Brady (R-TX), Oversight Subcommittee Chair Lynn Jenkins (R-KS), and former Oversight Subcommittee Chair Peter Roskam (R-IL). “The IRS’s actions led to the destruction of many lives and small businesses, some of which will never fully recover.”
In response to a public backlash, the IRS announced two years ago that it would notify owners who had their property forfeited under structuring laws that they could file petitions to recover what was taken. Appearing before a House Ways and Means Oversight Subcommittee hearing last month, representatives from both the IRS and Justice Department provided an update on the structuring petitions they had received. The contrast between the two agencies was stark.
After mailing over 1,800 letters to property owners, the IRS received 464 petitions. Upon further review, only 208 petitions were within its jurisdiction. Among those petitions, the IRS decided to grant 174 (or roughly 84 percent), and returned over $9.9 million to property owners.
For the remaining 256 petitions, the IRS sent those to the U.S. Department of Justice, and recommended that DOJ grant 194 of those petitions. Yet the Department only accepted 41 petitions—less than 1 in 6 petitions—and refused to return more than $22.2 million.
Slamming DOJ’s position as “wholly indefensible,” the Members of Congress wrotethat they were “profoundly troubled by the significant discrepancy between the IRS’s recommended outcome and DOJ’s final decisions.” “By DOJ’s own testimony, the mitigation process acts as a pardon request, permitting a plea for leniency,” noted the letter. “It provides DOJ with a safety valve that allows for the correction of actions taken by the Government, which in hindsight, we may realize were in error. This is one of those instances.”
Although structuring was promoted as a way to combat money laundering, drug trafficking, and other criminal enterprises, the IRS regularly seized money that had been legally earned by small business owners. In fact, a report by the Treasury Inspector General for Tax Administration found that out of a sampled 278 structuring cases, 91 percent were “legal source cases,” i.e. they were not derived from illegal activity.
But in October 2014, the IRS announced that it would no longer confiscate cash from legal source structuring cases, after The New York Times ran a front-page story on new lawsuits filed by the Institute for Justice that challenged structuring. As for illegal source cases, the IRS has only conducted 32 seizures since the new policy was implemented.
The shift in policy was an important win for private property rights and due process. But it did not apply to owners who had their cash confiscated before the policy change. In order to help prior victims of structuring get back their money, the Institute for Justice filed “petitions for remission or mitigation” in 2015, paving the way for others to follow. In less than a year, IJ successfully secured the return of $29,500 taken from Randy Sowers, a Maryland dairy farmer, and more than $150,000 that was forfeited from Ken Quran, who runs a convenience store in rural North Carolina. Neither man was ever charged with a crime.
Now the fate of the 194 owners denied their property’s return by DOJ may ultimately lie with Jeff Sessions, one of the nation’s top cheerleaders for civil forfeiture. Last summer, the Attorney General reversed restrictions placed on “adoptive” forfeitures, making it easier for local and state agencies to circumvent state laws that protect innocent owners. He later defended that decision by declaring, “I love that program. We had so much fun doing that, taking drug dealers’ money and passing it out to people trying to put drug dealers in jail. What’s wrong with that?”
Yet even Sessions has voiced qualms about structuring. During a 2015 Senate Judiciary Committee hearing on civil forfeiture, then Sen. Sessions said he believed that that “structuring can be abused,” and “people have made some valid points about it.”