In news that reached me after my Baltimore Sun op-ed yesterday was already in print, owners Randy and Karen Sowers of Middletown, Md. have settled the federal charges against their South Mountain Creamery over “structuring” of bank deposits. They “will get back a little more than half of $62,936 seized by the government earlier this year, according to court documents filed late Tuesday. … ‘I didn’t do anything wrong, but we had to settle because we had no other choice,’ Sowers said.” [Courtney Mabeus, Frederick News-Post; earlier here, etc.]
Van Smith with the City Paper in Baltimore (where South Mountain Creamery is a farmer’s-market fixture) reported on Wednesday and again on Friday on the “structuring” charges and forfeiture action against dairy farmers Randy and Karen Sowers (see yesterday’s post). A few highlights:
- On Wednesday, Smith reported that Sowers said in an interview that “he deposited the cash he’d made in the increments in which it had been earned. If the deposited amounts often ended up being a little under $10,001, he explained, that’s just the way it worked out and he [had] no intention of breaking the law.”
On the other hand, according to Smith’s summary of the federal complaint yesterday, Sowers is said to have told federal investigators during a February 29 interview “that ‘during the farmers’ market “season,” his weekly cash receipts were on the order of $12,000 to $14,000,’ yet ‘he kept his cash deposits under $10,000 intentionally so as not to “throw up red flags.”‘ He also told the agents that ‘he was advised by a teller at the bank that the deposit of more than $10,000 in cash would lead to the filing of a form, and that he decided from that point forward not to make deposits in excess of $10,000,’ according to the complaint.”
- “Historically, the anti-structuring statute has been used by prosecutors as an ancillary charge with other accusations of nefarious behavior, such as drug dealing or terrorism. And it still is. But over the last few years, prosecutors have started to use it more regularly as a standalone charge — an observation noted by defense attorneys that Maryland U.S. Attorney Rod Rosenstein confirms. Syracuse University’s Transactional Records Access Clearinghouse, a data center about federal court cases, reports that in fiscal year 2011 Maryland brought 14 of the nation’s 99 structuring cases, making it the top state for such prosecutions. Nationally, the numbers have been rising; the 2011 figures are up 8.8 percent from the year before and up 57.1 percent from five years ago.”
- Targets in Bank Secrecy Act forfeiture cases — which, to repeat, need not be premised on any suspicion of tax evasion or other criminality unrelated to the Act — have included Maryland “gas stations, liquor stores, and used-car dealerships.” “South Mountain is not the first seasonal-produce market to find itself targeted for structuring recently. Taylor’s Produce Stand, on the Eastern Shore, was stung last year after the feds seized about $90,000 from its bank accounts. In December, pursuant to a civil-forfeiture settlement agreement after no criminal charges were filed, the stand’s owners got back about half of the seized money.”
- And this clue as to why the U.S. Attorney’s office in Maryland might be outperforming its colleagues nationwide in pushing BSA forfeitures: the forfeiture complaint against the Sowerses was “signed by assistant U.S. attorney Stefan Cassella – who literally wrote the book on federal forfeiture law.”
- Montgomery County, Maryland officials help plant letters praising speed cameras in local papers [The Newspaper] “Chicago issued $2.4 million in bogus traffic tickets from speed cameras” [David Kravets, ArsTechnica citing David Kidwell and Abraham Epton, Chicago Tribune]
- “DEA Promised TSA Agent a Cut of Passengers’ Seizable Cash” [Jacob Sullum, Reason]
- “Cops Seized Over $107,000 From Couple; Didn’t Charge Them With A Crime” [Rock Island, Ill.; Amy Alkon citing Quad Cities Dispatch-Argus]
- I was among those speaking at an Annapolis event unveiling a new bill to restrain and better control asset forfeiture [Frederick News-Post, WBAL, Scott Shackford/Reason, Grant Zeigenfuse/Maryland Reporter; earlier on South Mountain Creamery case; more on margarita machines as forfeiture perk]
- Texas: “Cops Getting Free License Plate Readers In Exchange For 25% Of The ‘Take’ And All The Driver Data Vigilant” [Tim Cushing, TechDirt]
- Cato podcast on asset forfeiture with Adam Bates. More: What the President should do;
- How does Manhattan District Attorney Cy Vance spend his $800 million slush fund from bank settlements? Any way he pleases? [Scott Greenfield]
- “Rightscorp’s Copyright Trolling Phone Script Tells Innocent People They Need To Give Their Computers To Police” [Mike Masnick, TechDirt]
- “‘Affordable housing’ policies have made housing less affordable” [Matt Welch, L.A. Times]
- South Mountain Creamery case: “Lawmakers Call for Return of Cash Seized From Dairy Farmers” [Tony Corvo/Heartland, quotes me, earlier on this structuring forfeiture case]
- Be prepared to explain your social media trail, like by like: “Supreme Court confirmation hearings in 2035” [Orin Kerr]
- From Eugene Volokh, what looks very much like a case against assisted suicide, embedded in a query about whether state Religious Freedom Restoration Acts (RFRAs) might cut a legal path to it [Volokh Conspiracy]
- “The complaint also indicated that the injuries could affect Reid’s ability to secure employment” after Senate exit [Roll Call on Majority Leader’s suit against exercise equipment firm over eye injury]
- Amazon responds to NYT’s “everyone cries at their desk” hatchet job on its workplace culture [Jay Carney, Medium]
- “American Express Settlement Collapses Amid Charges Of Collusion” [Daniel Fisher]
- Some on Capitol Hill would like U.S. Treasury to return money seized from South Mountain Creamery in now-notorious structuring case [Washington Post, our earlier coverage]
- CEO pay shaming theory has been tried and failed twice, but why not one more try? [Marc Hodak, earlier]
- Another big courtroom reverse for SEC in use of in-house administrative law judges [Reuters]
- Judge Easterbrook on competitive federalism, Delaware, and incorporation [Robert Goddard, Corporate Law and Governance quoting Corre Opportunities Fund, LP v. Emmis Communications Corp.]
- How far will California go to tax one wealthy ex-resident? Consider saga of Gilbert Hyatt vs. Franchise Tax Board [Lloyd Billingsley, Daily Caller]
- Apparently so: “Is Securities Litigation’s Future Secure?” [Nick Goseland, Above the Law]
This is welcome news from the U.S. Department of Justice, and rather than try to rewrite I’ll just quote at length what my Cato colleague Adam Bates wrote:
[On March 31] Attorney General Eric Holder issued new guidelines to federal prosecutors tightening the rules for seizing assets for so-called “structuring” offenses.
Under the Bank Secrecy Act, structuring occurs when someone is suspected of arranging their financial transactions as to avoid triggering a report to the federal government by the financial institution. Some of civil asset forfeiture’s most egregious abuses are the result of federal prosecutors utilizing this nebulous statute to empty the bank accounts of unwitting citizens and small businesses who are never charged with any crime or even aware that their transactions are considered illegal.
The new rules require:
1. That structuring seizures against people for whom there is no criminal charge be based upon probable cause that the funds were either generated by unlawful activity or intended for use in anticipated unlawful activity. Alternatively, prosecutors must procure a warrant from a court and with the approval of either the U.S. Attorney (for Assistant U.S. Attorneys) or the Chief of the Asset Forfeiture and Money Laundering Section (AFMLS) (for Criminal Division trial attorneys).
2. That when the prosecutor determines subsequent to a structuring seizure that the government lacks the necessary evidence to succeed at either a civil or criminal trial, the seizing agency must return the full amount.
3. That when a prosecutor seizes property pursuant to suspicion of structuring, the prosecutor must file either a criminal indictment or a civil complaint, or receive an exception from either a U.S. Attorney or Chief of AFMLS within 150 days or else return the seized assets.
4. That all settlements must be complete and in writing. Informal settlements are expressly prohibited.
I’ve been writing about the outrages of these structuring cases for years, especially the feds’ ambush of Randy and Karen Sowers’s successful Middletown, Md. dairy farm and ice cream maker, South Mountain Creamery. In yesterday’s Washington Post, Rachel Weiner tells how the Sowers’ story “gave civil forfeiture reformers a powerful symbol”, especially after the Institute for Justice got involved. I’m quoted:
“The South Mountain case happened to be one of these that captured the imagination,” said Walter Olson, a blogger for the libertarian Cato Institute who has written about the Sowers case. “Once you’ve bought ice cream for your kids from one of their little trucks, the name sticks in your memory.”
“’How can this happen?’ [Arnolds Park, Iowa restaurant owner Carole] Hinders said in a recent interview. ‘Who takes your money before they prove that you’ve done anything wrong with it?’
The federal government does.”
For years I’ve been writing about the injustice of federal deposit-structuring law, from the South Mountain Creamery case in Maryland on up, and more recently the Institute for Justice has embraced the issue. Now that the New York Times has put a reporter on the case [Shaila Dewan, Oct. 25], the IRS says it will roll back its enforcement of the law to cases where there is other criminality — an excellent first step, although only a first step, since other federal agencies can also generate cases that result in seizures and prosecutions under structuring law.
As always, if you’re a small merchant fearful of this law, don’t go to your bank expecting helpful advice:
In May 2012, the bank branch Ms. Hinders used was acquired by Northwest Banker. JoLynn Van Steenwyk, the fraud and security manager for Northwest, said she could not discuss individual clients, but explained that the bank did not have access to past account histories after it acquired Ms. Hinders’s branch.
Banks are not permitted to advise customers that their deposit habits may be illegal or educate them about structuring unless they ask, in which case they are given a federal pamphlet, Ms. Van Steenwyk said. “We’re not allowed to tell them anything,” she said.
The uproar continues, and quite properly so (earlier here and here), over the threats of Boston Mayor Thomas Menino and Chicago alderman Proco (“Joe”) Moreno to exclude the Chick-Fil-A fast-food chain because they disagree (as do I) with some of the views of its owner. Among the latest commentary, the impeccably liberal Boston Globe has sided with the company in an editorial (“which part of the First Amendment does Menino not understand?…A city in which business owners must pass a political litmus test is the antithesis of what the Freedom Trail represents”), as has my libertarian colleague Tom Palmer at Cato (“Mayor Menino is no friend of human rights.”)
The spectacle of a national business being threatened with denial of local licenses because of its views on a national controversy is bad enough. But “don’t offend well-organized groups” is only Rule #2 for a business that regularly needs licenses, approvals and permissions. Rule #1 is “don’t criticize the officials in charge of granting the permissions.” Can you imagine if Mr. Dan Cathy had been quoted in an interview as saying “Boston has a mediocre if not incompetent Mayor, and the Chicago Board of Aldermen is an ethics scandal in continuous session.” How long do you think it would take for his construction permits to get approved then?
Thus it is that relatively few businesses are willing to criticize the agencies that regulate them in any outspoken way (see, e.g.: FDA and pharmaceutical industry, the), or to side with pro-business groups that seriously antagonize many wielders of political power (see, e.g., the recent exodus of corporate members from the American Legislative Exchange Council).
A few weeks ago I noted the case of Maryland’s South Mountain Creamery, which contends through an attorney (though the U.S. Attorney for Maryland denies it) that it was offered less favorable terms in a plea deal because it had talked to the press in statements that wound up garnering bad publicity for the prosecutors. After that item, reader Robert V. wrote in as follows:
Your recent article about the [U.S. Attorney for Maryland] going after the dairy farmers reminded me a case in New York state where the Health Department closed down a nursing home in Rochester. They claim is was because of poor care, the owner claims it was because he spoke out against the DOH.
The state just lost a lawsuit where the jury found the DOH targeted the nursing home operator because he spoke out against them.
According to Democrat and Chronicle reporters Gary Craig and Steve Orr, the jury found state health officials had engaged in a “vendetta” against the nursing home owner:
Beechwood attorneys maintained that an email and document trail showed that Department of Health officials singled out Chambery for retribution because he had sparred with them in the past over regulatory issues. The lawsuit hinged on a Constitutional argument — namely that the state violated Chambery’s First Amendment rights by targeting him for his challenges to their operation.
The Second Circuit panel opinion in 2006 permitting Chambery/ Beechwood’s retaliation claim to go forward is here. It took an extremely long time for the nursing home operators to get their case to a jury; the state closed them down in 1999 and the facility was sold at public auction in 2002.
Readers will remember from this series of posts in April and May how the U.S. Attorney’s Office for Maryland brought and then settled charges against Randy and Karen Sowers of Middletown, Md., over “structuring” of bank deposits, that is, the conscious holding of transactions under $10,000 to avoid triggering paperwork and federal scrutiny. Now Van Jones of the Baltimore City Paper, who has led the coverage of the story, has some unsettling new allegations:
Randy Sowers is not the only Maryland farmer recently targeted by federal money-laundering investigators for illegally depositing cash his business earns in increments of $10,000 or less, in order to avoid triggering bank-reporting requirements. But Sowers, whose South Mountain Creamery (SMC) dairy farm in Middletown, near Frederick, is a popular fixture at Baltimore-area farmers markets, is the only one to exercise his First Amendment rights and talk to the press about it.
For that, Sowers’ lawyers say, the Maryland U.S. Attorney’s Office (USAO-MD) has made him pay—an assertion that U.S. Attorney Rod Rosenstein denies, despite an e-mail sent to Sowers’ attorney by the chief of Rosenstein’s asset forfeiture and money laundering section, Stefan Cassella, that appears to state exactly that.
David Watt and Paul Kamenar, attorneys for Sowers, say during negotiations over a deal to settle the charges, Watt asked Cassella why the government was insisting on particular concessionary language it had not obtained in the settlement of similar charges against a farmer named Taylor on the Eastern Shore. Cassella sent back a one-line email that read: “Mr. Taylor did not give an interview to the press.” In an e-mail to U.S. Attorney Rod Rosenstein, Cassella has stated that the Sowers settlement was “not a punishment for exercising his First Amendment rights.”
I’m in the paper with an opinion piece on federal prosecutors’ assault on small business for bank deposit “structuring.” My posts on the South Mountain Creamery case, in which federal authorities seized the bank account of a Middletown, Maryland dairy which had allegedly been depositing farmers’ market proceeds in installments of less than $10,000, are here and here. Van Smith of the Baltimore City Paper deserves particular credit for breaking the structuring story with reports here and here. Update: South Mountain case settles.