At the beginning of this year, Attorney General Eric Holder attempted to close an exploitable loophole in asset forfeiture laws. State and local law enforcement agencies often sought federal “adoption” of seizures in order to route around statutes that dumped assets into general funds or otherwise limited them from directly profiting from these seizures. By partnering with federal agencies, local law enforcement often saw bigger payouts than with strictly local forfeitures.
The loophole closure still had its own loopholes (seizures for “public safety,” various criminal acts), but it did make a small attempt to straighten out some really perverted incentives. But deep down inside, it appears the DOJ isn’t really behind true forfeiture reform. In fact, it seems to be urging local law enforcement to fight these efforts by pointing out just how much money these agencies will “lose” if they can’t buddy up with Uncle Sam.
It’s been a while since I’ve reported on the lawless and barbaric practice of civil asset forfeiture. However, just because it hasn’t been a focus doesn’t mean it isn’t happening. Indeed, it appears the same federal agencies that couldn’t find a bank executive they didn’t want to coddle, take particular pleasure in harassing and abusing average Americans generally, and small businesspeople in particular.
The following case highlighted by the Huffington Post is an extremely sad and sobering expose. Below are some excerpts, but you can read the whole thing here: IRS Returns Bakery’s Money After 3 Years. Now It Wants To Put The Owners In Prison.
In May 2013, David Vocatura watched $68,000 disappear.
He was at his family’s bakery in Norwich, Connecticut, when a squad of armed IRS agents filed into the store. The agents wanted to know if Vocatura and his brother Larry were trafficking drugs or running a prostitution ring. The brothers had no idea what they were talking about.
The IRS refused to believe Vocatura’s Bakery was operating on the up and up. Agents said the business raised red flags because of a series of cash deposits in sums under $10,000, the amount at which banks are required to report transactions to the federal government. They said this behavior was consistent with a crime known as structuring, which the IRS defines as making calculated financial transactions in order to skirt reporting requirements. The agents had no evidence of other wrongdoing, but thanks to a controversial law enforcement tool known as civil asset forfeiture, they didn’t need any to seize every penny in the Vocaturas’ bank account: $68,382.22.
Under the practice of civil forfeiture, authorities can move to permanently take property they suspect of being linked to criminal activity, without obtaining a conviction — and, in cases like the Vocaturas’, without even charging the owner with a crime.
For the past three years, the brothers have been fighting to get their money back, maintaining they’d done nothing wrong. The IRS has responded by subjecting David, 53, and his brother Larry, 69, to a series of increasingly aggressive legal maneuvers — including threats of significant prison time and additional fines — in an attempt to strong-arm them into permanently forfeiting their assets.
On Tuesday, the Institute for Justice, a libertarian public interest law firm, filed a lawsuit in U.S. District Court for the District of Connecticut on behalf of Vocatura’s Bakery, demanding that the IRS promptly return their money. The suit argued that the Vocaturas were just the latest example of the government hastily seizing property, and then going to extreme and even unconstitutional lengths to justify it after the fact.
Hours after the suit was filed, the IRS said it would finally give the Vocaturas their money back. But the prosecutor didn’t drop the case. Instead, he now plans to mount an expansive investigation into the bakery’s finances, looking for a reason to bring criminal charges against the brothers.
At issue in the Vocaturas’ case are hundreds of deposits between March 2007 and April 2013 that ranged from $7,000 to $9,900 — a total of around $2.8 million. The Vocaturas say the deposited money was from the bakery’s sales, as they were doing mainly cash business at the time, and they have a less suspicious explanation for why the deposits were so close to the reporting limit. David Vocatura says a representative from their local bank told him that an employee had to fill out forms each time they brought in more than $10,000, so he decided to make life easier for the bank attendants by making smaller, more frequent deposits.
If the IRS has proof that the Vocaturas were deliberately structuring payments or hiding illicit proceeds, it hasn’t provided it.
Earlier this month, Peter S. Jongbloed, assistant U.S. attorney for the District of Connecticut, served the Vocaturas a grand jury subpoena calling for them to turn over every financial record from the six years between March 2007 and April 2013, so the agency could finally begin investigating the business’s tax and regulatory compliance. At the time, it was the latest reminder that the government was intent on taking the brothers’ assets, even if it had to change its approach three years after the fact.
The Institute for Justice argues that the subpoena is an attempt to retroactively justify an improper seizure and punish the Vocaturas for not rolling over.
“At this point, the government is in so deep, they’ve put these guys through three years of hell — and held onto their money for three years — and so they feel like they need to justify it,” said Robert Everett Johnson, an attorney for the Institute for Justice who is representing the Vocaturas. “So now they’re going to conduct this investigation into the bakery in some effort to try to find something that will make it look like they were doing the right thing all along.”
Yes, my fellow Americans, this is your government.
The government’s seizure of the Vocaturas’ account is part of a broader pattern of concerns about the use of civil asset forfeiture, a practice that brings in billions of dollars each year to federal, state and local law enforcement agencies.
Critics say each step of the process is ripe for abuse. Authorities frequently base seizures on weak circumstantial evidence. In some of the most publicized civil asset forfeiture cases, the mere presence of cash has constituted enough probable cause to justify a seizure. In cases like the Vocaturas’, the act of depositing cash isn’t necessarily illegal on its own, but authorities are quick to treat anyone who does it like a criminal.
Once the government seizes property, it’s difficult to get back. Unlike in criminal trials, where suspects are considered innocent until proven guilty, property owners must often prove their innocence in civil forfeiture cases.
Once someone’s assets are forfeited, those proceeds go to the agency that made the seizure — and there is very little oversight of how that money can be used. Critics of civil asset forfeiture say this dynamic incentivizes law enforcement officials to bring in as much money as possible, creating a motive to “police for profit” rather than for public interest or safety.
The IRS has used structuring allegations to seize hundreds of millions of dollars through civil asset forfeiture in recent years, some of which has been funneled directly into the agency’s coffers. A report from the Institute for Justice put the total value of forfeitures — money the government kept in IRS structuring cases — at nearly $125 million between 2006 and 2013.
Of the more than 2,500 seizures in the report, at least one-third involved no claims of criminal activity beyond the cash transactions themselves. Only 1 in 5 were ultimately prosecuted as a criminal structuring case. The numbers also show that the IRS failed to keep seized money in many cases, which could be a troubling sign of over-prosecution.
The Vocaturas’ home state of Connecticut is a hotbed for structuring-based seizures, according to IRS data provided to the Institute for Justice through a public records request. Among states with a single U.S. attorney, Connecticut ranks third worst for these sorts of seizures. Between 2005 and 2013, federal prosecutors in the state approved 9.2 seizures for suspected structuring for every 10,000 businesses in the state — a rate that the Institute for Justice says is dramatically higher than other states.
In February, 33 months after the bakery’s bank account was seized, Jongbloed broke his silence. He offered the Vocaturas an opportunity to end their ordeal, while also preventing the public backlash that had impeded recent structuring cases.
Though the federal government had still not filed criminal charges against the brothers, Jongbloed wanted them to plead guilty to structuring, a felony, and admit that they’d “acted with the intent to evade the reporting requirement.” By doing so, the Vocaturas would be subject to a potential four-year prison sentence and would have to agree to forfeit both the initial $68,000 and an additional $160,000 in personal assets between them.
But by getting the Vocaturas to admit guilt, the IRS would also have been able to keep the brothers from speaking out about their case. The plea deal would have served as an admission that the government had some cause to take their money. Nobody could accuse the government of once again abusing civil forfeiture if the victims ultimately handed over the money as punishment for a crime they had copped to.
Jongbloed noted that sanctions could be harsher if the case went to trial, and encouraged the Vocaturas to take the deal. The brothers, who still insist that they’ve done nothing wrong, rejected that offer.
On May 10, Jongbloed responded by demanding more than six years of business records documenting all of the bakery’s dealings. He finally wants to figure out if the Vocaturas had actually broken the law when IRS agents raided their account.
While the government is finally giving the Vocaturas their money back, the fact that they were able to hold it for so long without taking concrete action shows how much leeway they have in these cases.
As long as the current system of civil asset forfeiture remains intact, new federal guidelines or policy are unlikely to be effective, said Steven L. Kessler, a New York attorney who has defended a number of clients in high-profile forfeiture cases. He believes clear legislative action is needed to keep the government from compromising people’s property rights in the hunt for money.
“When the government says they’re going to do that on their own, they’re going to make the change, everyone is very happy and we move on to the next story,” said Kessler. “Rarely does anything change, because we’re dealing with a guideline — we’re dealing with something that is within the full discretion of the government.”
There are some rumblings in Congress for a legal overhaul.
Last week, Rep. Jim Sensenbrenner (R-Wis.) and a bipartisan group of co-sponsors introduced a bill to rein in civil asset forfeiture. Among the most significant measures, the Deterring Undue Enforcement by Protecting Rights of Citizens from Excessive Searches and Seizures Act of 2016, or the DUE PROCESS Act, would shift the burden of proof from the property owner to the government, and raise the standard needed to validate a forfeiture. If passed, the new law would require the government to provide “clear and convincing” evidence that property was substantially connected to criminal activity — still below the “beyond a reasonable doubt” standard for criminal convictions.
This needs to pass.
These legislative fixes would do little for Vocatura’s Bakery, however.
While their legal saga began as a civil forfeiture case, the IRS has now decided to pursue criminal forfeiture against them. That isn’t addressed in the DUE PROCESS Act, which only deals with civil cases.
Nor is it assumed that these bills will pass. Civil asset forfeiture reform has hit snags in Congress before, in part due to aggressive lobbying from law enforcement groups intent on preserving the practice.
“The way you would expect the criminal justice system to work if you were reading your high school civics textbook is that you’d expect the government first to investigate people, then to obtain an indictment if they think something wrong has happened, and then to obtain a conviction and then finally to punish them,” he said.
“But in this case that all has happened exactly backwards,” Johnson continued. “The government first punished the Vocaturas by taking their property, then they tried to get them to plead guilty to charges, and only when they refused to plead guilty did the government investigate.”
This is not what freedom looks like.