On June 13 “the U.S. Senate unanimously approved legislation that stops the Internal Revenue Service from raiding the bank accounts of small-business owners. The Clyde-Hirsch-Sowers RESPECT Act, passed as part of the Taxpayer First Act (H.R. 3151), is named after Institute for Justice clients Jeff Hirsch and Randy Sowers, two victims of the IRS’s aggressive seizures for so-called ‘structuring.’ Through structuring laws, the IRS has routinely confiscated cash from ordinary Americans simply because they frequently deposited or withdrew cash in amounts under $10,000. And by using civil forfeiture, the IRS can keep that money without ever filing criminal charges.” [Nick Sibilla, Institute for Justice] We’ve covered the problems with structuring law, as well as asset forfeiture, for many years.
A victory worth cheering for due process and property rights: the U.S. House has unanimously approved a bill that would curb IRS seizure of bank accounts premised on the owners’ having engaged in a pattern of deposits or withdrawals below the $10,000 reporting threshold (“structuring forfeiture”). The measure would 1) codify a recent IRS practice of not keeping money if no underlying illegality were found such as tax evasion or income from unlawful sources; 2) assure account holders a quick hearing after a seizure, a process that can now drag out for long periods. [Institute for Justice press release; Michael Cohn, Accounting Today] The Treasury inspector general found that “in a whopping 91 percent of sampled cases, the laws were being used to forfeit assets from individuals and businesses found to have obtained their income legally.” [Michael Haugen, The Hill, April]
I’ve been writing on this issue for years. The bill, co-sponsored by Reps. Peter Roskam (R-IL) and Joseph Crowley (D-NY), is called the Clyde-Hirsch-Sowers RESPECT Act; I’ve written about the structuring case of Maryland farmer Randy Sowers here and here.
- “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.”
- Cato Institute reissues Jonathan Rauch’s classic Kindly Inquisitors: The New Attacks On Free Thought after 20 years, with new introduction by George F. Will and new afterword by the author [Jason Kuznicki; Reason Foundation] The free-speech Supreme Court decision without which there would have been no gay-rights movement [Rauch guestblogging at Volokh Conspiracy]
- Important stuff: Ken White vs. Mark Steyn on how to respond to lawsuits against speech [Popehat]
- “Blogger: Go Ahead and Sue; I’ve Got Nothing To Lose” [Greensboro, N.C., sued by developer; Romenesko] Is it possible to defame a business by putting up a Craigslist post linking to an online docket showing lawsuits against it? [Cook County Record]
- U.K. aims to tweak existing X-rated internet filters to block “extremist” websites [TechDirt] Europe’s hate speech laws may actually prepare the ground for sowers of hate [Jamie Kirchick, Tablet]
- Public Citizen’s Paul Alan Levy, ACLU of Maryland assist anonymous blogger targeted by Brett Kimberlin [Consumer Law & Policy]
- “Rhode Island Cops Vigilant In Face of Scourge of People Making Fun of State Representative Scott Guthrie” [Popehat]
- “If you are determined to sue 1,200 people for linking to a newsworthy article, you may begin with me.” [John Scalzi]
- Employer mandate not the only impractical reg being postponed: “IRS Delays Implementation of FATCA” [Paul Caron; earlier]
- Foreign banks whipsawed betwen U.S. terrorism-finance liability and privacy laws in home countries [Daniel Fisher]
- “NY Fed Official: Let’s ‘Facilitate’ The Seizure Of Underwater Loans” [Kevin Funnell]
- “If anything, the data suggest [home] ownership … inversely correlated with political stability and rule of law.” [Michael Greve]
- Revisiting the Randy and Karen Sowers structuring case [Kathleen Hunker, Bell Towers; earlier]
- “Can we improve payday lending?” [Andrew Sullivan]
- When if ever should the SEC pay bounties to attorneys to snitch on their clients? [Prof. Bainbridge]
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.”
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.”