Cato’s Caleb Brown interviews Larry Salzman of the Institute for Justice in this podcast about the federal practice of seizing and keeping small businesses’ bank accounts when it claims to find a pattern of deposits below the $10,000 reporting threshold. Earlier here, etc.
“’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.
Jacob Sullum traces how a gambling jackpot magically became a forfeiture jackpot (also from him, a history of how forfeiture law got so bad). The Washington Post followed up last month on its multi-part, front-page exposure of forfeiture law (Tim Lynch and Scott Shackford summarize some of its findings) with an op-ed from two former DoJ officials calling for abolition of the program they once helped run; Scott Greenfield has commentary on that as well as more generally on the costs of defense in forfeiture cases and on Nassau County, N.Y.’s resumption of the seizure of cars being driven by persons arrested for drunk driving, whether or not owned by those persons.
From today’s Washington Post: “Activists and Hill staffers meet to discuss curbs to asset-forfeiture laws”. And George Leef writes in Forbes: “Time For Civil Asset Forfeiture Laws To Meet The Same Fate As Jim Crow.”
Canadians should be careful of carrying large sums of currency on their trips south of the border, warns the CBC’s senior Washington correspondent, Neil MacDonald, since “U.S. police are operating a co-ordinated scheme to seize as much of the public’s cash as they can. … if you’re on an American roadway with a full wallet, in the eyes of thousands of cash-hungry cops you’re a rolling ATM.”
There’s an element of self-interest involved: when foreign states arrange to participate in the seizure of property of alleged wrongdoers even absent proof that can withstand trial, it can redound as a revenue source to U.S.-based law enforcement under various cooperation schemes. But remember the days when the U.S. sought to export the rule of law, property rights and strong constitutional protections to other lands? [Eapen Thampy, Forfeiture Reform]
“The City of Brotherly Love can’t get enough of its citizens’ property and cash. The city is in a class by itself in the world of civil asset forfeiture, says Institute for Justice attorney Darpana Sheth” in this Cato podcast with interviewer Caleb Brown. More on IJ’s suit challenging Philadelphia’s forfeiture practices: Philadelphia Inquirer, Nick Sibilla/Forbes, Dave Weigel/Slate, and Scott Shackford/Reason.
And by way of balance on the Philadelphia story: one who defends forfeiture law as “good law” that “works” is “CNN legal analyst and consumer attorney, Brian Kabateck,” seen before in this space and elsewhere in his role as a class-action plaintiff’s attorney.
In Philadelphia, the city has seized a widow’s home and car for forfeiture after her son was nabbed on charges of selling pot [Inquirer] “Minneapolis police plan to keep $200,000 seized in a raid of a tobacco shop, even though they didn’t find any evidence to merit criminal charges. Meanwhile, a former Michigan town police chief awaits trial on embezzlement and racketeering charges for allegedly using drug forfeiture money to buy pot, prostitutes and a tanning bed for his wife.” [Radley Balko] Nebraska cops seize nearly $50,000 from a Wisconsin man driving from Colorado, “a known source state for marijuana,” but a court orders it returned [same]. Connecticut police use forfeiture proceeds “to buy new police dogs, undercover vehicles, technology, fitness equipment — and to pay for travel to events around the country.” [New Haven Register]
More: Half-forgotten history of how the feds pushed the states to embrace forfeiture [Eapen Thampy, Forfeiture Reform] And for once good news: “Rand Paul introduces bill to reform civil asset forfeiture” [Balko again] And: Rep. Tim Walberg introduces a bill on the House side; video of Heritage panel today with Balko, Walberg and IJ’s Scott Bullock, Andrew Kloster of Heritage moderating.
Critics of asset forfeiture have warned for years that it not only warps the priorities and incentives of law enforcement agencies, but creates a slush fund ripe for abuse by sidestepping the appropriations process. Now investigators accuse longterm Brooklyn D.A. Charles Hynes of using forfeiture funds to pay more than $200,000 to a P.R. consultant whose labors were largely devoted to advancing Hynes’s campaign. The consultant’s firm was paid more than $1 million over a decade. [New York Times]
I’m a little late in getting to this, but last month Radley Balko wrote the definitive blog post on the appalling state of federal bank structuring law, which makes it a felony to arrange bank transactions in quantities of less than $10,000 so as to avoid reporting requirements that kick in at that threshold. He hits virtually every point we’ve made in this space over the past couple of years, including the trend toward “freestanding” structuring prosecutions not arising from any underlying criminal activity, the close connection to forfeiture law, the enlistment of banks as a covert surveillance/informant network not disclosed as such to customers, Congress’s removal of willfulness as a condition of the offense, the unusual concentration of cases coming out of the state of Maryland, the white-knight role played of late by the public-interest law firm Institute for Justice, and of course the jarringly atypical leniency extended to the most famous structurer of all, New York’s Eliot Spitzer.
The immediate news event that prompted the coverage, summarized by Eugene Volokh: a Seventh Circuit decision, in U.S. v. Abair, reversing and remanding for retrial the conviction of an Indiana woman convicted for withdrawing her own money from her bank in violation of the statute so as to finance her purchase of a house; the government took the house from her in forfeiture.
Would that other newspapers were as forthright as calling for an end to “policing for profit” as the Grand Forks Herald. North Dakota is already considered to be one of the states that does best at curbing the abuse of civil forfeiture; adjoining Minnesota does less well.
Last week the Department of Justice announced a deal with Toyota in which the Japanese automaker would fork over $1.2 billion and place itself under supervision for allegedly not being forthcoming enough with information at the height of the 2009-2010 panic over claims of unintended acceleration in its cars. The acceleration claims themselves had turned out to be almost entirely bogus, and were refuted in a report from the federal government’s own expert agency, NHTSA. Instead, the prosecution relied on a single count of wire fraud: Toyota had supposedly given regulators, Congress and the public an erroneously positive view of its safety efforts. It should therefore have to “forfeit” a huge sum supposedly related to the volume of business it did over a relevant period.
I’ve got an opinion piece in Monday’s Wall Street Journal (unpaywalled Cato version here, related Cato post here) about this whole appalling affair, which should frighten other businesses that might face draconian charges in future not just for compliance infractions, but more broadly for defending their products in the court of public opinion. Meanwhile, the Justice Department’s grandstanding and demagogic press release goes to some lengths to leave the impression “that unintended acceleration is some mysterious phenomenon of auto design unrelated to flooring the accelerator.” Someone here is irresponsibly misleading the motoring public and withholding vital safety information, but it’s not Toyota.
A few related links: NHTSA unintended acceleration report, Car & Driver’s coverage, and my 2010 opinion piece. And Holman Jenkins at the WSJ (paywalled) compares the still-unfolding story of ignition problems at GM, also discussed by Paul Barrett at Business Week.
Radley Balko has a roundup of critical reactions to what he calls the “astonishingly awful” 6-3 Supreme Court decision last week. Cato had filed an amicus brief on the side that did not prevail, urging recognition at least of an opportunity to challenge the seizure after the fact. Earlier here.