Government Expands Forfeiture Program

In 1984, George Orwell’s novel about a dystopian near-future society, Oceania was constantly at war with one of its geopolitical rivals. The grandfatherly yet sinister O’Brien later admitted that victory over Eurasia or Eastasia was not the war’s objective – the ongoing conflict was simply an excuse for the totalitarian government to intervene in peoples’ affairs.

The United States is in the midst of several wars, many of which are against rather amorphous opponents. Case in point: the war on drugs. It’s not exactly like Oceania’s war against Eurasia/Eastasia, but there are some common elements. Both conflicts are seemingly endless, and both have political overtones. Perhaps most significantly, in both conflicts, bystanders are caught in the crossfire.

Asset forfeiture has been one of the most controversial weapons in the government’s war on drugs. Recently, the IRS significantly expanded its asset seizure policy, then somewhat retreated when examples of grossly unfair treatment came to light.

Reporting and Structuring

Most businesses that make large cash deposits are familiar with the infamous Form 8300. If any entity makes a cash deposit of over $10,000, it’s required to self-report the transaction to the IRS. Form 8300 is essentially a red flag for law enforcement that criminal activity, such as money laundering, may be crouching at the door.

Under federal law, it’s illegal to make a $10,000 cash deposit and not report it. It’s also illegal to make a deposit of less than this amount with the intent to evade the reporting requirement. That’s when conduct known as “structuring” enters our story.

Banks and other financial institutions are required to file Suspicious Activity Reports if they believe that there is, well, suspicious activity. On one end, Guido makes a $9,999 deposit. On the other end, Grandma Jones makes a $20 deposit. Guido’s visit to the bank should do more than raise a few eyebrows, since it seems fairly clear that he is a bit hesitant to draw attention to himself by filing Form 8300, while Grandma Jones’ transaction could hardly be considered suspicious.

This analysis leaves a large number of transactions in a grey area. What about the grocer who deposits about $4,000 in regular intervals every other week? According to law enforcement, the grocer could be structuring his transactions to avoid detection. At the same time, banks tend to err on the side of caution by filing lots of SARs, so there are plenty of bank statements for federal investigators to review.

According to one advocacy group, this convergence is one reason that asset forfeitures mushroomed by 500 percent in the last ten years. Multiple media reports indicate that dairy farmers, restaurant owners and other who have no plausible connection to illegal activity have had substantial cash assets seized under the new aggressive policy. It is worth mentioning that the law enforcement agency gets to keep a portion of the seized assets.

As mentioned earlier, the IRS has promised to be more judicious in its use of asset forfeiture laws in New Jersey. A statement released by the agency stated that it would concentrate on violations that “closely align with C.I.’s mission and key priorities.” The government did not say it would change the law: the rather weak promise is to lay off enforcement until public scrutiny is directed elsewhere.

Defenses in a Forfeiture Action

When the government suspects that any property was used in furtherance of a crime or is the proceeds of criminal activity, such property is subject to forfeiture. Typical examples include cash, real property and automobiles. Asset forfeiture cases are difficult to defend, since the government doesn’t have to prove that the defendant was actually involved in criminal activity. But a landmark case a few years ago made it easier for criminal defense attorneys in Bloomfield to protect your money.

Citing “purposeful and flagrant Constitutional violations,” a California judge overturned a seizure of $28,000 in cash and also awarded some attorneys’ fees. The case is not binding anywhere except parts of southern California, but it helps an attorney construct persuasive arguments to get your money back.

If the government has sized funds from you under the forfeiture statute, connect with me on TaxConnections.

Original Post By:  Michael DeBlis

As a former public defender, Michael has defended the poor, the forgotten, and the damned against a gov. that has seemingly unlimited resources to investigate and prosecute crimes. He has spent the last six years cutting his teeth on some of the most serious felony cases, obtaining favorable results for his clients. He knows what it’s like to go toe to toe with the government. In an adversarial environment that is akin to trench warfare, Michael has developed a reputation as a fearless litigator.

Michael graduated from the Thomas M. Cooley Law School. He then earned his LLM in International Tax. Michael’s unique background in tax law puts him into an elite category of criminal defense attorneys who specialize in criminal tax defense. His extensive trial experience and solid grounding in all major areas of taxation make him uniquely qualified to handle any white-collar case.


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