This article originally appeared on watchdog.org.
Carol Hinders caught the attention of the Internal Revenue Service because she ran a Mexican restaurant.
No, it wasn’t the burritos or enchiladas that caught the eye of a hungry federal agent. Instead, it was the fact Hinders’ restaurant was cash only, meaning she had to make large cash deposits to her bank account on a weekly basis.
Those deposits never exceeded the federal limits of $10,000 at a time, and in the eyes of the taxman that only made her more suspicious.
When the IRS seized her business and bank accounts in August 2013, the feds argued her deposits seemed like the kind of metered efforts made by drug traffickers and dealers who also deal with large amounts of cash and are known to “structure” their deposits carefully to avoid that same $1,000 daily limit.
That might seem like flimsy evidence to anyone who is familiar with America’s judicial system — where the government must prove guilt “beyond a reasonable doubt” before anyone can be jailed or otherwise punished — but thanks to federal forfeiture laws, the IRS was able to effectively shut down her business and freeze her assets without ever setting foot in a real courtroom or facing the same burden of proof as would happen in a trial.
There’s plenty of reasonable doubt about what the IRS did to Hinders. And now, thanks to dozens of cases like that around the country, there are members of Congress and, maybe soon, justices of the Supreme Court with similar doubts about how federal law enforcement agencies use forfeiture laws.
“The government is seizing billions of dollars of cash and property from Americans often without charging them with a crime,” said U.S. Rep. Jim Sensenbrenner, R-Wisc.
Civil asset forfeiture “has proven a far greater affront to civil rights than it has a weapon against crime,” he said.
Sensenbrenner chairs a legislative subcommittee on crime, terrorism and homeland security, which earlier this monthexamined the forfeiture issue. He hopes the hearing is part of a process that will correct Congress’ failure to pass adequate laws to limit how federal law enforcement uses forfeiture.
States have been battlegrounds over forfeiture laws in recent years, but the issue has only bubbled up at the federal level in the past few months.
In addition to the recent congressional hearing, outgoing U.S. Attorney General Eric Holder announced some, most cosmetic, changes to how the Department of Justice would be allowed to use forfeiture. President Barack Obama’s pick to replace Holder, U.S. Attorney Loretta Lynch, faced tough questions during her confirmation hearing about the aggressive use of forfeiture by attorneys working under her in New York.
Watchdog.org has previously reported on one of those cases — eerily similar to Hinders’ situation — in which a Long Island business was effectively shut down by Lynch after making cash deposits the feds said resembled drug dealing activity, with no proof of drugs actually being sold.
At her confirmation hearing, Lynch defended the use of forfeiture and said those procedures are done “pursuant to the court.”
Kenneth Blanco, deputy assistant attorney general, told Sensenbrenner’s committee forfeiture is “a critical legal tool” and the department was committed to “ensuring that federal asset forfeiture laws are appropriately and effectively used consistent with civil liberties and the rule of law.”
And it’s being used much more often than it used to be.
The Department of Justice seized more than $550 million in 1993, a total that ballooned to more than $4 billion in 2013, according to Sensenbrenner.
Other federal agencies are in on the game too.
The IRS, which went after Hinders’ Mexican restaurant in 2013, seized more than $240 million between 2005 and 2012, according to the Institute for Justice, which challenges forfeitures in court and presses for legislative changes.
“Current federal law incentivizes forfeiture by allowing law enforcement agencies to keep 100 percent of the proceeds,” said Darpana Sheth, an attorney with IJ. “At a time when government at all levels face serious budget shortfalls, it’s no surprise that forfeiture has become ever more attractive.”
At least a third of those cases were based on nothing more substantial than a series of cash transactions of less than $10,000. Those deposits are entirely legal under federal law.
The issue could soon be before the Supreme Court as well. This week, the court announced it would hear oral arguments in a case that deals with the FBI’s seizure of guns from a man who was convicted of selling marijuana. Though federal law says it’s illegal for a felon to possess firearms, Tony Henderson had agreed to sell his guns before his conviction — but the government seized them and refused to allow the sale to go through.
Reformers like the Institute for Justice are hopeful the Supreme Court will use the case to place limits on how forfeiture laws can be used.
The courts have been the biggest check on forfeiture abuses so far.
Hinders, with help from IJ, recently got the government to settle her case and return the money that was seized years ago.
But real reform lies with Congress, said Sensenbrenner. He sees the problem as being one of inadequate laws, not abusive law enforcement.
On that point, there is a growing bipartisan consensus. At the hearing on Feb. 11, U.S. Rep. Sheila Jackson Lee, D-Texas, said there needs to be a better balance between law enforcement and constitutional protections for those accused of a crime.
“Unfortunately, it is increasingly apparent that our laws are not sufficient in this regard,” she said.
