Civil Forfeiture Puts Bank Accounts – and More – At Risk

By: CJMcKinney  //  Legal, US News

by C.J. McKinney

Carole Hinders runs a little Mexican restaurant in Iowa called Mrs. Lady’s Mexican Food.  She’s been in business for nearly forty years.  But when the IRS seized her bank accounts in 2013 and left her business in ruins, this law-abiding restaurateur became the face of civil forfeiture abuse in America.

The problem?  Hinders took cash payments from her customers, which meant she was making regular cash deposits to her bank account. That raised red flags about a practice called “structuring,” used by drug dealers and other criminal types who deal in cash to avoid a bank’s mandate to report big deposits to the government.

Current federal law requires banks to notify federal authorities of cash deposits over $10,000. So drug traffickers and others involved in illegal transactions of all kinds devised a way around that by making numerous smaller deposits – “structuring” them to avoid hitting that $10,000 mark that would trigger a report to the feds.

But in an ironic twist, because that’s a strategy employed by illegal operators to avoid reporting, regular cash deposits of less than $10,000 now trigger reporting as well.  That’s what trapped Carole Hinders – and numerous other small business operators, investors and everyday savers as well – in the legal black hole of civil forfeiture.

Civil forfeiture laws are arcane and ancient. They’ve been around as long as the United States, and they allow law enforcement bodies on every level to seize the bank accounts, homes and property of people who haven’t committed a crime.

That’s because, in a feat of logic-defying legal maneuvering, civil forfeiture cases are pressed not against people, but against the property itself.  This legal fiction has its roots in a medieval legal structure called “deodand,” which held that inanimate objects involved in cases of death and criminal activity could be charged and tried just like human beings.  That led to cases like a wagon going on trial for running over someone, or a cooking pot sued for causing fatal burns.

That idea worked nicely in the early days of the new country, when the Founders needed revenue.  They applied it in a new set of laws that allowed them to seize ships suspected of smuggling. They’d never be able to actually try the owners of these vessels, who lived in places like France and England, so they “accused” the ships themselves and appropriated them and their contents.

In the years that followed, civil forfeiture laws gathered dust in the legal books.  They were used sparingly during the Civil War and Prohibition – but rarely against ordinary citizens and never on the scale being practiced today.

Federal authorities rediscovered civil forfeiture in the 1980s, when the “War on Drugs” became a driving force for justifying a variety of law bending practices. Just like in those early cases involving suspected smuggling ships, in the twentieth century civil forfeiture laws allowed bodies like the FBI and IRS to seize the property and money of anyone suspected of drug trafficking.  That’s also when banks received the mandate to report large cash deposits.

Whether civil forfeiture seizures actually deterred drug activity remains unclear, but the increased application of the laws led to a windfall for law enforcement – and opened the door for widespread abuse.

In 1984 Congress established the Asset Forfeiture Fund, which gave federal agencies the right to keep and use assets seized under civil forfeiture for their own purposes – or to sell them and keep the proceeds.

With the creation of that Fund, civil forfeiture took a new and darker turn. The number of cases skyrocketed across the country, with seizures of more than $60 million in just one year in Philadelphia alone.  “Policing for Profit” allowed police, federal investigators and the IRS to confiscate cash at traffic stops, homes owned by relatives of people connected to crime, and bank accounts of innocent people like Carole Hinders.

And those law enforcement entities kept most of what they seized.  Of course, victims of civil forfeiture can challenge the seizure of their property and money. But since they aren’t being charged with a crime, they don’t have the legal protections afforded to criminals, such as the right to legal counsel and the presumption of innocence.

Since it’s the property itself that’s accused of a crime, not the owner, the burden of proving innocence falls on the victims. That means hiring a lawyer, covering court costs and enduring a long, tough legal battle to get back what’s been seized.

In most cases, they don’t. Court challenges to civil forfeiture typically end with a settlement offer – usually for far less than the property’s full value.  According to the Institute for Justice, which is assisting victims of civil forfeiture with their legal struggles, in one case involving a seized house (dubbed “State of Pennsylvania vs. the home’s street address”), the owner had to settle for splitting the proceeds from the home’s sale with the IRS, which effectively left her homeless.

Civil forfeiture cases are on the rise, and many of them are in full public view, thanks to social media and video cameras that capture police officers confiscating cash and other goods from motorists at routine traffic stops. That’s why the American Civil Liberties Union, the Institute for Justice and other legal aid services are partnering to educate the public, help victims and challenge the legality of civil forfeiture laws themselves.

The Institute of Justice is working to help Carole Hinders recover her money and save her Mrs. Lady’s Mexican Food.  They’re using her case to demonstrate that anyone can become a victim of a civil forfeiture case at any time – and that the threat of such a seizure is a clear violation of citizens’ civil rights.

Their efforts may force changes in US civil forfeiture laws – but those changes will likely be a long way off. And in the meantime, cases like “State of Texas vs. One 2004 Chevy Silverado.”

Image: Flickr/Great Beyond