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Asset Forfeiture Revisited.

Instituti-for-Justice-Grunge---ROHWe have been following the IRS’s actions in seizing funds from Schott’s Market and Marathon Gas in Michigan for awhile now.

Here’s a brief rundown of the history:

Terry Dehko and his daughter Sandy Thomas own Schott’s Grocery, a small grocery store in Fraser, Michigan. The store employs roughly 35 people and has served the neighborhood for decades.

In 2010, an IRS agent visited Schott’s Grocery to inform the owners of laws dealing with “structuring.” The laws require that any deposit made to a bank for the amount of $10,000 or more be reported to the IRS by the bank. In addition, it was also illegal to make deposits under $10,000 with the intent to avoid the reporting requirement to the IRS. The intent of the law was to limit the “laundering” of illegally gained money such as money gained from illegal drugs.

Schott’s insurance company would not insure any money lost or stolen over $10,000 and so the Dehko and his daughter made sure the store did not have more than $10,000 on hand. They accomplished this by sometimes making multiple deposits at their bank which was located across the street.

In 2012, Schott’s Grocery was audited by the IRS and given a clean bill of health. Dehko and his daughter were acting within the law.

In January of 2013, an IRS agent came into Schott’s Grocery and informed the owners that the IRS had seized over $35,000 in funds – the contents of the store’s operating account. The seizure was done via a secret warrant, one which Dehko and his daughter had no knowledge of and could not contest. Without operating funds to pay salaries and vendors, the owners were forced to beg, borrow and max out credit cards in order to keep their store open.

Neither Terry Dehko nor his daughter were ever charged by the IRS with any wrongdoing, but yet the IRS had seized their money and Dehko could not get it back.

In stepped the Institute for Justice, who had taken up asset forfeiture cases before. The IJ sought the return of the funds for Schott’s Grocery and another man, Mark Zaniewski, from whom the IRS had seized over $70,000 in operating funds for his Metro Marathon Gas Station in Sterling Heights, Michigan via a secret warrant while not charging Zaniewski with any wrongdoing or crime.

The IJ pressed the IRS in court to return the money or show cause why they had seized it to begin with. The IRS delayed and in November of 2013, a judge essentially told the IRS to “put up or shut up” – either produce documents and witnesses or give the people their money back.

Later that month, the IRS dropped the case and ordered to pay $71,500 in legal fees. Dehko, Thomas and Zaniewski did not fight the dismissal of the case as they wanted and needed their operating funds back.

Yet while the businesses had their funds returned, the underlying principle – whether the IRS could seize money from a business without showing cause or allowing the owners of those businesses to contest the seizure in a timely manner – remained unchallenged and unaddressed.

The Institute for Justice continued to press that issue.

On June 11, 2014, Judge Terrance G. Berg of the United States District Court Eastern District of Michigan, Southern Division, dismissed the suit seeking to invalidate the procedures and regulations the IRS used in seizing the money. Moreover, the IJ wanted people who had funds seized to have a speedy hearing on the basis of the seizure and to able to make the government prove the seizure was legal.

The opinion, seen below, is maddeningly frustrating in its reasoning.
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Institute For Justice In Court Over Government Seizures Of Money.

ij The Institute for Justice is back in court today in the continuing case of a Michigan grocery store and a separate Michigan gas station from which the IRS seized over $35,000 from the owners of the grocery store, Tarik “Terry” Dehko and his daughter Sandy as well as nearly $71,000 from the owner of the gas station, Mark Zaniewski. The money was seized under “banking structuring” laws. The IRS has laws that require banks to report any deposit(s) over $10,000. The statute is designed to prevent money laundering of illegally gained funds, and was generally targeted at drug money. The statutes also say that deposits cannot be “structured” to avoid the $10,000 reporting requirement.

So while the government requires that banks report more than $10,000 deposited in a day, if a deposit is made that seems to be trying to skirt that requirement, the IRS can seize the assets within the bank account.

There are several issues that are highly distressing about these cases. First, the seizures are done with a secret warrant. There is no chance for the person whose money is being taken to contest the warrant. There is no hearing on the issue prior to the seizure of the funds and the IRS will fight to have a hearing on the seizures after the money has been taken. In the case of the Dehkos, the government seized the money in January 2013 and it was only after fighting the case that the IRS decided to return the money to the Dehkos in November 2013.

Secondly, in the case of the Dehkos, an IRS agent came into their grocery store in 2012, conducted an audit specifically designed to ferret out structured deposits. His conclusion was that the Dehkos had done nothing wrong and they were within the law. The IRS then seized the money at a later date.

Mark Zaniewski’s case is similar, but perhaps even more disturbing:
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Should You Need the Government’s Permission to Work?

Via the Institute for Justice:

You can get the report mentioned in the video here.

The video echos what is found in the book “The Right to Earn a Living,” by Timothy Sandefur of the CATO Institute.

The book chronicles how the government erects barriers to people entering the market through excessive and unwarranted licensing regulations. Sandefur takes the reader not only through the issues, but also the genesis (both social and legal) of such licensing schemes as well as showing licenses often hurts competition, keeps prices artificially high, prevents people from starting new businesses as well as denying the fundamental right of people to make a living.

It is a great read.



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