Tag Archives: Civil asset forfeiture

The IRS Intentionally Targeted Innocent Small Business Owners in Order to Steal Millions Via Forfeiture Laws

Earlier this month, a report from the Treasury Department’s Inspector General detailed how the Internal Revenue Service used a restriction on deposits to bilk otherwise law abiding individuals and businesses of millions of dollars using asset forfeiture laws. Those restrictions require that any deposits made to a bank above $10,000 be reported to the IRS. The stated intention of that restriction is to draw attention to profits generated by illegal acts, such as terrorism and the violation of drug prohibitions.

In order to escape that scrutiny, many of those involved in such activities employ what is called “structuring,” which consists of splitting large deposits into multiple smaller deposits that are below that $10,000 threshold. However, many others involved in completely legal activities also do the same thing for various innocent reasons. Those reasons include a lack of awareness of those restrictions, insurance policies that limit coverage of deposits to less than that amount, and simply an effort to avoid extra paperwork (often on the advice of bank employees).

While structuring is illegal under the federal Bank Secrecy Act, according to the Inspector General it is really just a technicality that is intended to allow the initiation of an investigation into whether the deposits in question were derived from illegal activities. Instead, the IRS often used the practice of structuring alone as a justification to seize those deposits, via civil asset forfeiture. They also intentionally targeted small businesses and individuals engaged in legal activities due to the fact that they were less likely to be able to fight the forfeitures and in order to avoid “time consuming” investigations of actual criminals.

Via the Washington Post:

They “were not put in place just so that the Government could enforce the reporting requirements,” as the IG’s report puts it.

But according to the report, that’s exactly what happened at the IRS in recent years. The IRS pursued hundreds of cases from 2012 to 2015 on suspicion of structuring, but with no indications of connections to any criminal activity. Simply depositing cash in sums of less than $10,000 was all that it took to arouse agents’ suspicions, leading to the eventual seizure and forfeiture of millions of dollars in cash from people not otherwise suspected of criminal activity.

The IG took a random sample of 278 IRS forfeiture actions in cases where structuring was the primary basis for seizure. The report found that in 91 percent of those cases, the individuals and business had obtained their money legally.

“Most people impacted by the program did not appear to be criminal enterprises engaged in other alleged illegal activity,” according to a news release from the IG. “Rather, they were legal businesses such as jewelry stores, restaurant owners, gas station owners, scrap metal dealers, and others.”

More troubling, the report found that the pattern of seizures — targeting businesses that had obtained their money legally — was deliberate.

“One of the reasons why legal source cases were pursued was that the Department of Justice had encouraged task forces to engage in ‘quick hits,’ where property was more quickly seized and more quickly resolved through negotiation, rather than pursuing cases with other criminal activity (such as drug trafficking and money laundering), which are more time-consuming,” according to the news release.

In most cases, the report found, agents followed a protocol of “seize first, ask questions later.” Agents only questioned individuals and business owners after they had already seized their money.

In many cases, the property owners provided plausible explanations for their pattern of deposits. But these explanations appeared to have been disregarded or ignored.

“In most instances, we found no evidence that attempted to verify the property owners’ explanations,” according to the report.

It probably shouldn’t be that surprising that the Feds’ official revenue generators at the IRS jumped on an opportunity to go the extra mile and generate even more cash to fund our disfunctional, violent uncle’s war machine. Nor should it be particulary shocking that they avoided the tedious work of investigating actual criminals in favor of preying on innocent people that lack the ability to fight back.

Incidentally, it’s unknown exactly how much money the IRS stole from innocent businessmen, because they don’t voluntarily disclose those figures and refused to honor Freedom Of Information Act (FOIA) requests for that information even after those requesting it said pretty please.

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Megaupload Founder Kim Dotcom’s Extradition Hearing to be Livestreamed on YouTube

Update: the livestream link has been added at the bottom of this post.

A New Zealand judge has granted Kim Dotcom’s request to livestream his hearing over an extradition request by the United States government to face copyright and money laundering charges based on his ownership of the online file sharing site “Megaupload.”

Dotcom has been fighting extradition since a 2012 raid in which he was arrested by New Zealand police on behalf of the U.S. Justice Department, who in turn were acting to protect the copyright interests of U.S. movie and music companies.

Officials from the United States also attempted to use civil asset forfeiture laws to seize millions of dollars in property and cash from Dotcom. His legal team has been fighting an up and down battle over that effort since his arrest with New Zealand courts ruling in his favor, but U.S. courts (surprisingly!) ruling against him.

While the United States government maintains that Dotcom’s fight against extradition makes him a fugitive and therefore allows them to freeze his assets, he has countered that such a policy prevents him from exercising his legal right to fight against being extradited to a country he has never even visited before.

Via Rueters.com:

A major issue in the case was whether a government could hold storage providers liable for users’ acts and the issue was of widespread global interest, he said.

“We hope the court finds in favor of Livestreaming so the global community from Silicon Valley to Wellington, New Zealand, can access the courtroom in a case that can impact the entire internet community,” (Dotcom’s lawyer Ira) Rothken told Reuters in an email.

Rothken said he expected the judge to make a decision on live streaming on Tuesday.

A spokeswoman for New Zealand government prosecutors, who are representing the United States, said it was not appropriate to comment while the matter was before the courts.

Lawyers representing the United States had previously argued that Megaupload’s practices, such as paying rewards to repeat copyright infringers, were evidence that Megaupload was made with the aim of providing access to pirated files.

U.S. authorities say Dotcom and three co-accused Megaupload executives cost film studios and record companies more than $500 million and generated more than $175 million by encouraging paying users to store and share copyrighted material, such as movies and TV shows.

Years of legal wrangling followed Dotcom’s arrest in New Zealand police raid in 2012, and it emerged that the Government Communications Security Bureau had illegally spied on him before the raid.

The case has been watched by the media industry and developers in the file-sharing business for signs of how far the United States is willing to go to protect U.S. copyright holders.

Megaupload accounted for about 4 percent of total traffic on the Internet in its heyday as users stored and shared files containing everything from wedding videos to Hollywood films.

Kim Dotcom stated prior to the ruling (via Twitter):

“US defends mass surveillance programs with ‘If you have nothing to hide, you have nothing to fear’ but opposes live streaming of my hearing.”

The court apparently agreed.

According to another Twitter statement by Dotcom, the livestream should begin as early as today (August 30th).

Once all that is worked out, a link will be provided to the video feed:

Meanwhile, Kim Dotcom has framed his case as a larger battle against corruption by the United States and for personal responsibility by the users of a service or product. According to him, providing everyone the opportunity to witness that was the main motivation behind wanting to have the hearing(s) available for public view.

Updates:

Link to Livestream on Youtube:

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Civil Asset Seizure Restrictions Now in Effect in Montana and New Mexico

Asset Forfeiture ProfitsOn Wednesday, laws enacted earlier in the year in Montana and New Mexico went into effect, limiting the ability of police and other law enforcement agencies to use civil asset seizure laws within those states. Civil asset seizures, also commonly known as forfeiture laws, have been some of the biggest drivers of police abuses since they were partnered with the “War on (Some) Drugs” back in the eighties. The size, militarization, and lethality of police departments have all increased in leaps and bounds over the past few decades, as a result of that unholy partnership.

Once the easy access to cash that seizure laws created became a temptation and, in many cases, evolved into a budgetary necessity for police departments and local governments across the country, abuses skyrocketed. Oftentimes, lethal raids and prosecutions have been predicated more on the desire and expectation of collecting assets from the target than ant actual strength of evidence. Along the way, there’s been numerous high profile cases where that evidence and other probable cause elements were even fabricated outright.

Civil Asset Forfeiture IncreaseThe hunger for cash has precipitated an increasing tendency toward the prosecution of victimless crimes and prohibitions. No-knock raids, carried out by heavily armed SWAT teams, have become the norm in most large cities and even some smaller ones throughout the United States, as a result. Mistakes, or even intentional acts of malfeasance, have led to an exponential growth in deaths of non-violent offenders, most of whom don’t actually harm anyone except maybe themselves, and even innocent people caught up in the deadly cross fire.

The even bigger reality is that forfeiture laws themselves are an abuse of the legal system and an affront to basic civil rights . In theory, they allow law enforcement to eliminate illegally earned assets that have been laundered and to hurt criminal enterprises’ ability to fund their operations. In practice, very tenuous links to criminal activity have been used to seize money from people with very little to no due process involved. If you set out with the express purpose of creating a police state it would be difficult to find a better method to bring that to fruition.

Completely innocent people, who happened to be in possession of what police consider to be unusually large amounts of cash, have essentially been victims of highway robbery, even when they’ve had perfectly reasonable justifications for having it and despite the fact that shouldn’t even be a requirement. Other people have had property, such as real estate or transportation equipment (i.e. planes, trains, and automobiles), stolen from them even though they were just renting it to someone else and had no actual control over or knowledge of its specific use.

Forfeiture AbusePretty central to those two abuses has been the lack of a requirement for a conviction (or even charges in most instances) for seizures to be upheld, as well as the reversal of the normal judicial roles. In civil forfeiture cases, the accused has the burden of proving their innocence and that burden is often very high and prohibitively expensive. That’s especially true since the one they are required to prove that to many times is also dependent on the ill gotten gains generated by seizure profits.

Montana’s version of seizure reform addresses some of those issues by making it a requirement for targets of asset forfeiture to be convicted of a crime before their property can be taken. It also forces prosecutors to prove that third party owners were involved in the criminal acts where their property was used, in order for it to be seized.

New Mexico went one better and took the purse strings out of the hands of local law enforcement altogether. As Montana’s did, the new law makes seizures contingent upon a criminal conviction. However, even in the event of that, funds generated by forfeiture go into a “general fund,” rather than directly to a defacto slush fund for police departments making those seizures. Not allowing law enforcement entities to fund themselves through asset seizures obviously removes some of the incentives for them to look for opportunities to bring that proverbial hammer down.

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Like most reformist measures, both of these represent a step in the right direction, but not a complete solution. Requirements for convictions and due process within forfeiture procedure can go a long way toward preventing the outright stealing of assets. However, Montana still allows police to directly profit off seized funds. While there’s more protection after the fact, the temptation to risk “breaking a few eggs” in order to make that golden omelet remains.

Also, while the general fund in New Mexico doesn’t directly finance police departments, their budgets are included within it. Therefore, the amount that is sent their way can be shifted in relation to the revenue generated by forfeiture to ensure they get their “cut” by politicians wishing to curry law enforcement’s favor and/or wishing to pump their own budgets up. Loopholes are not hard to find and they rarely take long to be exploited by people whose jobs largely consist of doing exactly that.

Beyond those issues, the real and most dire problem is that once an innocent person is killed or a baby’s face is permanently disfigured in a money driven paramilitary raid, that bell just can’t be unrung. A truer solution would be to abolish both civil asset seizure and the War on (Some) Drugs that spawned its abusive crime spree in the first place, altogether.

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