Yet another civil forfeiture case

[TimothyC]

He says he’s an innocent man, never charged with any crime, who doesn’t understand why — or how — the IRS could snatch $70,000 from his bank account.

Mark Zaniewski, owner of Metro Marathon in Sterling Heights, said the IRS emptied out his bank account twice over the course of a week this spring.

What’s he charged with? Nothing. What did he do? His attorney says he drew the suspicion of the IRS for repeatedly depositing less than $10,000 cash in his account. At $10,000 banks have to report the deposit to the feds, and under law, the IRS can seize assets under civil forfeiture laws if there’s a suspicion you’re trying to avoid the bank’s reporting mechanism.

Zaniewski is current on his taxes, according to his attorney Larry Salzman.

A call to the IRS’ spokesman in metro Detroit was not immediately returned.

Salzman works for the Institute for Justice, a West Virginia civil liberties legal service, and the Institute is asking the U.S. District Court for the Eastern District of Michigan (Detroit) for a prompt hearing to contest the seizure and for the immediate return of his property.

Because also under law, the government can keep the forfeited money as long as they want, usually until after a trial, which can take years to happen. The attorney said many people in situations like this choose to settle with the government to get 50 percent of their money back — because it’s cheaper and less hassle than a protracted trial.

“What’s most shocking is if the government takes your cash, the federal law provides no prompt way for you to get in front of a judge,” Salzberg said. “There’s just no way to get in front of a judge. He’s been waiting seven months for his cash.”

He added these types of cases may be more common than many believe.

“Michigan is ground zero for IRS forfeiture abuse,” said IJ Senior Attorney Clark Neily. “…The IRS is taking money from hard-working, law-abiding business owners merely because it doesn’t like the way they deposit their money in their bank accounts.”

Zaniewski’s case comes on the heels of another IRS forfeiture of a Michigan business owner’s bank account, Neily said. In September 2013, Terry Dehko and Sandra Thomas—owners of a family grocery store in suburban Fraser also went to the Institute for Justice for help when the IRS seized cash from them last January. That case has been set for a hearing on December 4, 2013, before Judge Terrence G. Berg in Flint, Mich.

“He’s a legitimate small businessman,” Salzberg said of Zaniewski. “His deposits are mostly, but not all the time, under $10,000. They didn’t investigate him. Their first action was to swoop into the bank.”

He added: “There’s no allegation of criminal wrongdoing, there’s no allegation of avoiding taxes, they punish first then investigate.”

For his part, Zaniewski said his livelihood is being threatened.

“I did nothing wrong and my business is being destroyed,” said IJ client Mark Zaniewski. “That’s why I teamed up with the Institute for Justice, to protect the rights of all Americans against civil forfeiture.”

This is how his situation unfolded: IRS agents came to his gas station in March to tell him that his money had been seized. They advised him to deposit whatever additional money he had into the account so that checks he wrote to his vendors would not bounce. One official assured him that only the money they had already taken would be seized. In order to pay for his weekly gas delivery, Zaniewski borrowed thousands of dollars from his family and deposited the funds into Metro Marathon’s account.

Before the check to his gas supplier cleared, the IRS returned to Zaniewski’s bank and emptied his account a second time, he said —causing his gas delivery check to bounce and forcing the closure of the station for more than two weeks. Another loan from Zaniewski’s family is the only thing that has allowed him to operate while the IRS has held on to his money, he said.

“Last year alone, the government took in more than $4 billion in forfeiture money,” said IJ Attorney Larry Salzman. “Taking money from innocent people like Mark Zaniewski and the Dehko family is wrong. Thankfully, they are prepared to go all the way to the Supreme Court if that’s what it takes to vindicate the due process rights of property owners everywhere.”

Can we all agree that civil forfeiture laws need to be revoked? Personally, I think it's a sign that the federal government has a hard time dealing with the tasks & responsibilities we've already given it, so it should be pared back, not expanded.

[Alferd Packer]

I think civil forfeiture happens at all levels of government, so to me, it bespeaks a much larger problem with all government officials, not just the feds.

[Simon_Jester]

Obviously they need a drastic revamp, so that seizure of money and property has to be at least clearly related to some due-process legal action that will be resolved in a timely fashion.

[Grumman]

I think civil forfeiture happens at all levels of government, so to me, it bespeaks a much larger problem with all government officials, not just the feds.

Doesn't the $10,000 reporting threshold exist only as a tool to combat terrorism and organised crime? The investigation should have ended as soon as it became apparent that he was transferring money because he ran a business with regular expenditures. To actually steal the money is an obscene abuse of this power.

What the government is saying here is that if your fortnightly paycheque is between $9,500 and $9,999, they should just assume that you are covertly being paid by the Mafia and they should therefore take all your money.

[HeavensThunderHammer]

What the government is saying here is that if your fortnightly paycheque is between $9,500 and $9,999, they should just assume that you are covertly being paid by the Mafia and they should therefore take all your money.

Agreed. It's pretty scary. "If you follow the rules just a bit too close to the limit we'll treat you like a criminal anyway."

[Bedlam]

What the government is saying here is that if your fortnightly paycheque is between $9,500 and $9,999, they should just assume that you are covertly being paid by the Mafia and they should therefore take all your money.

Agreed. It's pretty scary. "If you follow the rules just a bit too close to the limit we'll treat you like a criminal anyway."

The problem is that that is just what someone trying to launder money would do, the rules for such things are normally published and would have something like > £x you have to provide proof of identity and / or source of funds < £x you don't. So if you're trying to launder you'll try to put in regular amounts a bit under £x so to be effective you then have to look for that type of transaction. In this case it appears to have broken down but no system will work perfectly and will always get false positives and false negatives.

[Grumman]

Agreed. It's pretty scary. "If you follow the rules just a bit too close to the limit we'll treat you like a criminal anyway."

It's not even that. There is no law against transferring more than $10,000 - if there was, the real estate market would collapse, if nothing else. If the law works the same way it does in Australia, the only restriction is placed on banks, and the extent of that law is to say "Let us know if this happens, so we can check that everything is kosher". If someone has decided that transferring $9,999 should be punished but transferring $10,001 should not, because the former is supposedly an attempt to avoid transfer declaration laws, they are idiots and scum.

[Simon_Jester]

The problem is not that federal investigators get curious about someone who persistently transfers 9500$ payments through a bank account. The problem is that this "investigation" should have been wrapped up in no more time than it took to make a couple of phone calls:

"Hi, this is Bob Smith from the IRS. We recently had reason to talk to your bank, and you've been making a lot of $9500 bank transfers. What is the reason for this?"

"I run a business, its expenses are roughly $9500 per biweekly pay period."

[IRS sends Joe Jones down to check physical existence of the business, confirms with its own records that the business employs X people at Y dollars a month, makes some rough estimates of expenses, gets figure within a few hundred dollars a month of that]

"...Okay."

There. Done.

At NO point in this process should the IRS be randomly confiscating all the money in a bank account. Unless the business owner did something idiotic like shout "I ain't talking to no pigs!" over the phone to the IRS, there is no sane way to explain this.

[Dr. Trainwreck]

If someone has decided that transferring $9,999 should be punished but transferring $10,001 should not, because the former is supposedly an attempt to avoid transfer declaration laws, they are idiots and scum.

My only nitpick is that someone who constantly deposits 9500$ might truly want to avoid transfer declaration because it's a pain on his arse and he doesn't want to bother with the paperwork (I don't actually know how it's done, I only theorize here). It's not illegal, though, shouldn't be, and no matter what the guy did the IRS agents are criminals who can go strolling on the traintracks.

[Col. Crackpot]

Structuring or smufing in order to place funds into the banking system to avoid federal reporting, be it to avoid income taxes or to launder funds is a f elony punishable by up to five years in prison. Doing so knowingly shows mens rea. It has been my professional experience that the majority of people doing this are up to shady shit.

[Simon_Jester]

The question is, did this guy get flagged because he was structuring in order to place funds into the banking system to avoid federal reporting? Or did he get flagged because, say, his business actually does have receipts to the tune of $9000 a week and therefore drops $9000 in the bank every week?

[Grumman]

My only nitpick is that someone who constantly deposits 9500$ might truly want to avoid transfer declaration because it's a pain on his arse and he doesn't want to bother with the paperwork (I don't actually know how it's done, I only theorize here).

The client only has to do anything if they're using a foreign bank. Otherwise, it's all done on the bank's end.

[Beowulf]

Structuring or smufing in order to place funds into the banking system to avoid federal reporting, be it to avoid income taxes or to launder funds is a f elony punishable by up to five years in prison. Doing so knowingly shows mens rea. It has been my professional experience that the majority of people doing this are up to shady shit.

The last time I saw something like this pop up, it was that the insurance company had a limit of $10k for how much they'd insure against theft. Naturally, the store would make repeated trips to keep the cash on hand below that limit.

[Simon_Jester]

My problem isn't with the idea that repeatedly dropping off $9000 dollars in the bank can be a crime if it's done to evade federal regulations.

My problem is with the fact that (apparently) there was no step between "IRS finds out this is happening" and "IRS suddenly confiscates seventy thousand dollars without warning and refuses to give it back without a multi-year court battle." I don't care what a law enforcement organ thinks you did wrong, they should never punish or harm anyone without first making a serious attempt to investigate to be sure a crime has taken place.

This isn't like a policeman kicking down a door because they hear screams; the ground for reasonable suspicion that a crime is happening is weaker, and the scope of the harm done is a lot stronger, especially because the IRS is refusing to make restitution.

Now it's possible that we're all the targets of a spin campaign designed to make the IRS look bad and Mr. $9000 is actually a Mafia money launderer or something. But I'm not going to bet that way without actual evidence that we're being misled about the basic facts of the case.

[Col. Crackpot]

Two words Simon, Men's Rea.

Banks are required in accordance with the Bank Secrecy Act to monitor transactions at a certain threshold and forward them to the federal government if a pattern of behavior is observed that appears suspicious. This information is used to ensure everything from the income of self employed individuls and business and ensure comploance with the tax code, as well as monitoring for the proceeds of illegal activity.

After a decade in front line bank management and after filing countless CTR's and STR's I can tell you that once a depositors activity is passed on to federal authorities, some sort of criminal activity has been discovered. Based on a decade of experience, I know every individual I have reported was either hiding income, hiding the source of funds, or funding something shady with suspicious wire transfers.

[White Haven]

And the point I believe Simon is making is that punishment for a crime like that (which includes confiscation of what a small business considers a lot of money) needs to wait until after the investigation due to a fun little thing called presumption of innocence.

As to your certainty with regards to guilt, I was absolutely certain that I'd left my checkbook on the table by the door...until I found it in the glovebox of my car. Oops.

[Col. Crackpot]

And the point I believe Simon is making is that pnishment for a crime like that (which includes confiscation of what a small business considers a lot of money) needs to wait until after the investigation due to a fun little thing called presumption of innocence.

As to your certainty with regards to guilt, I was absolutely certain that I'd left my checkbook on the table by the door...until I found it in the glovebox of my car. Oops.

The details here are somewhat vague. Though from my experience the funds Involved in AML cases are generally subjuct to a levy hold as ordered by a judge until the outcome of the case is determined. At which point they are released or confiscated. The majority of structuring cases I have dealt with have been individuals hiding income from federal income tax reporting bit i will conceed that my perspective is limited.

[White Haven]

That sounds like a classic scale fuckup on the part of the government. From their perspective, lacking access to a few tens of thousands of dollars for a year or four is an inconvenience. Down at the bottom end of the small business scale (as an aside, am I the only person who thinks that there needs to be a fourth business-size category named 'actually small business?' 50 employees is not a small business out in the real world), it can very much result in going out of business and being financially ruined. When the outcome of standard investigative procedure being initiated is 'the business is destroyed utterly,' is it any wonder the IRS and other federal regulatory bodies catch a lot of hate?

[Terralthra]

Two words Simon, Men's Rea.

Autocorrect bite ya? It's mens rea, no possessive.

And the whole idea of mens rea is a legal proscription against assuming that commission of an act is automatically the same as commission of a crime. Depositing below $10k is not a crime, no matter how many times one does it.

[Simon_Jester]

See, Crackpot, it might well be that this guy keeps depositing $9500 in his bank account because he's a shady weirdo. Or it might not. We have no idea.

My point is simply that, before the IRS takes all your money and locks down your bank account, it would behoove them to at least double-check that you are involved in something shady. Rather than simply assuming "this person was reported to us, they must be a criminal" and immediately confiscating enough money to sink a small business without even thinking about it.

Because otherwise, sooner or later, some poor son of a bitch who kept depositing 8000 and 9000 dollars a pay period into his bank account while running his business with no criminal intent whatsoever WILL get fingered by the bank, referenced to the IRS... and financially ruined.

[Col. Crackpot]

Two words Simon, Men's Rea.

Autocorrect bite ya? It's mens rea, no possessive.

And the whole idea of mens rea is a legal proscription against assuming that commission of an act is automatically the same as commission of a crime. Depositing below $10k is not a crime, no matter how many times one does it.

Dastardly autocorrect doesn't speak latin!

Deliberately strucruting deposits to avoid government reporting is itself a violation of the law. If he is doing this intentionally to avid taxation or to hid where the money comes from, that is criminal intent.

[Col. Crackpot]

See, Crackpot, it might well be that this guy keeps depositing $9500 in his bank account because he's a shady weirdo. Or it might not. We have no idea.

My point is simply that, before the IRS takes all your money and locks down your bank account, it would behoove them to at least double-check that you are involved in something shady. Rather than simply assuming "this person was reported to us, they must be a criminal" and immediately confiscating enough money to sink a small business without even thinking about it.

Because otherwise, sooner or later, some poor son of a bitch who kept depositing 8000 and 9000 dollars a pay period into his bank account while running his business with no criminal intent whatsoever WILL get fingered by the bank, referenced to the IRS... and financially ruined.

Which is always done. For a bank to file a STR to the government it takes more than a few suspected structured deposits. There are always other red flags. Large purchase of negotiable instruments. Immidiate wires etc.

[Gaidin]

In other words, you're saying all we see in the article is word of the deposits less than 10,000$, but there had to be something else for the bank to say something, and the bank obviously can't just talk about that while the owner can just say 'this is all I was doing'?

[White Haven]

'There are red flags' and 'there have to be other warning signs' and what-have-you is all well and good. I'll even concede that in many (even most?) cases, this succeeds in nailing people trying shady business. The point that keeps sliding across your forehead is that the ideal outcome of a false positive in the justice system is a lack of harm to the defendant.

Having your business obliterated from on high by the full power and fury of the Internal Revenue Service as part of their investigative procedure is not a lack of harm. Instead, it is presumption of guilt before an investigation is completed.

[Terralthra]

Two words Simon, Men's Rea.

Autocorrect bite ya? It's mens rea, no possessive.

And the whole idea of mens rea is a legal proscription against assuming that commission of an act is automatically the same as commission of a crime. Depositing below $10k is not a crime, no matter how many times one does it.

Dastardly autocorrect doesn't speak latin!

Deliberately strucruting deposits to avoid government reporting is itself a violation of the law. If he is doing this intentionally to avid taxation or to hid where the money comes from, that is criminal intent.

"With intent to avoid government reporting" or "in order to avoid taxation" or "with intent to hide where money comes from" are all matters of intent that are settled in a court of law, not by the executive agency also capable of literally taking every cent of the money in question. That's the whole fucking point of a justice system.