May 18, 2015

IRS seizes man's bank account because deposits were too small: unknowingly triggered civil forfeiture by "structuring". Government offers him half his money back.

For most of his life, Lyndon McLellan has been in the business of country stores—the types of stores where the employees know customers’ names by heart and workers remain loyal for years and years.
His parents owned a general store and grill, and McLellan began helping out there at the ripe old age of 9. Then, 14 years ago, McLellan decided to try his hand at the family business and purchased his own store in the heart of the Bible Belt, naming it L&M Convenience Mart.
Business has been good for McLellan, and though L&M, located in Fairmont, N.C., began as just a convenience store and gas station, he’s since expanded it to include a restaurant that serves hot dogs, hamburgers and catfish sandwiches. 
While most of his employees and their families spend Sunday mornings making right with God, McLellan skips church to man the store. He’s there on Christmas Day and during Thanksgiving dinner—a sacrifice McLellan makes for his employees.
“It’s my livelihood,” he told The Daily Signal. “This is all I know how to do. I’m 50 years old, and if I had to do something else, I’d probably be in trouble. This is what I was brought up in. This is all I know.”
What McLellan didn’t know, though, was that the federal government could come in and take away what he’d worked so hard for.
On a summer day last July, McLellan, who hadn’t yet arrived at the store, received a phone call from one of his employees summoning him to L&M. More than a dozen federal agents had flooded into his business—officers from North Carolina’s Alcohol and Law Enforcement, the local police department and the Federal Bureau of Investigation—and they were asking for him. 
When McLellan arrived at the store, he met two federal agents dressed in suits who asked to speak with him in private. McLellan led the agents to L&M’s stock room, where they asked him if he knew of the term “structuring.”
He had no idea.
The federal agents then showed McLellan paperwork that included deposits to the store’s account at Lumbee Guaranty Bank. The statements showed two deposits made within a 24-hour period totaling $11,400.
The statements, they said, indicated he had a history of consistent cash deposits of less than $10,000, which is illegal.
Then, the agents told the small business owner something that shook him to his core: The Internal Revenue Service had seized all of the money in L&M’s bank account: $107,702.66.
“‘Are you telling me you took my money?’” McLellan recalled asking the agents. “I didn’t understand what was going on. They dropped a bomb on me. I was lost for five to 10 minutes. I can’t believe that y’all guys can walk in here and tell me y’all took every bit of my money out of the bank.”
After law enforcement cleared McLellan’s store, he drove to Lumbee Guaranty Bank. The agents had been there hours earlier and emptied his account, McLellan recalled, walking out of the building with a cashier’s check.
McLellan walked out of the bank with nothing.

Unknowingly Breaking the Law
Though he didn’t know it at the time, McLellan committed structuring violations when making cash deposits of less than $10,000.
McLellan himself doesn’t handle the deposits—that’s his niece’s responsibility—and a bank teller had previously advised her to make deposits of less than that amount. If cash deposits totaled more than $10,000, the bank had to file additional paperwork, the teller said.
“[Agents] asked if I knew what it was,” McLellan said of structuring. “I didn’t know what it was then, but I’ve learned a lot about it now.”
Structuring laws were originally put in place to catch drug trafficking and money laundering, but more and more instances have arisen where innocent Americans have committed structuring violations without even knowing it.
For unknowingly committing a structuring violation, the government seized all of the money in McLellan’s bank account by using a section of civil asset forfeiture laws that regulates cash deposits.
Civil asset forfeiture is a procedure that allows law enforcement to seize property if it’s suspected of being related to a crime. The practice began decades ago with good intentions.
However, law enforcement agencies have been using civil asset forfeiture to seize property and money for profit. 
In recent years, seizures executed because of structuring violations have increased dramatically. In 2005, the Internal Revenue Service made just 114 structuring seizures. By 2012, that number had risen to 639. During that same time period, the agency seized $242 million for structuring violations.
While banks must submit reports to the Department of the Treasury for cash deposits of more than $10,000, the government also receives “suspicious activity reports” on deposits below that threshold, Robert Johnson, a lawyer for the Institute for Justice and McLellan’s attorney, told The Daily Signal.
It’s likely the government received a suspicious activity report detailing McLellan’s deposits, which is how he “came onto the government’s radar.”
Johnson also noted that the IRS frequently teams up with local law enforcement to look through suspicious activity reports. By seizing property and money through the Department of Justice’s Equitable Sharing Program, law enforcement agencies share the proceeds of the forfeiture.
“The IRS deputizes these local law enforcement officers to go through suspicious activity reports and to identify cases where people are subject to forfeiture,” Johnson said. “So you have somebody who is not a federal official and yet is deputized to be enforcing federal law.”
In McLellan’s case, an affidavit was completed by a North Carolina law enforcement official, which indicated to Johnson that it was a state official likely combing through these suspicious activity reports who flagged the Fairmont convenience store, he said.

1 comment:

  1. This government has devolved into brigandage and looting of the serfs. They are no better than, and in some ways worse, than the medieval robber barons. I do not believe therer is a peaceful way out of this mess. If anyone else can think of one, please let me know.