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How An Obscure Banking Law Let The IRS Seize Bank Accounts From Innocent Americans

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With only $3,000 in his pocket, Ken Quran left his life as a firefighter near Ramallah to start his own business in Greenville, North Carolina. Over the next 17 years, Ken worked 70-hour weeks at his convenience store, eventually scrimping and saving over $150,000 as a nest egg for retirement. During this time, Ken, his wife and their four children even became American citizens.

But his American dream has become a legal nightmare. Last summer, the IRS seized Ken’s entire bank account for “structuring” withdrawals. Under the Bank Secrecy Act, enacted by Congress to combat money laundering, banks must report all deposits, withdrawals and other cash transactions over $10,000. Meanwhile, the Act also bans “structuring” transactions in amounts under $10,000 to avoid filing those reports, but only if someone deliberately intends to evade filing. Ken had no idea withdrawing cash from his own account could run afoul of the government.

With the power of civil forfeiture, the federal government never even had to charge Ken with a crime. Hundreds of innocent Americans have fallen victim to similar seizures by the IRS. Now Ken is leading a new petition effort to regain what was unjustly taken.

Ken Quran in his store. (Photo courtesy of the Institute for Justice.)

On June 20, 2014, agents from the IRS Criminal Investigation Division and officers from the Dublin County Sheriff’s Office stormed Ken’s business. First sweeping the premises with a dog, agents blocked customers from entering and interrogated Ken. Agents handed him a form titled “Consent to Forfeiture.” By signing this document, Ken would “knowingly and voluntarily” agree to forfeit all of his seized cash.

Ken, whose native tongue is Arabic, said he didn’t know English well enough to understand fully what he was reading. (After all, civil forfeiture can be an immensely complex subject.) In response, one agent yelled at Ken and said refusing to sign disrespected the government’s authority.

As further incentive, agents said they would pay his wife a visit, if Ken did not sign away his cash. He took that as an implied threat. So without the advice of counsel, Ken gave in. (Embedded above is a dramatic re-enactment of the raid, shot on location at Ken’s convenience store.)

The raid proved devastating. Ken had to take a massive line of credit to keep his previously debt-free store afloat; he even had to use his home as collateral. Now 60 years old, Ken worries that he can no longer afford retirement. “I feel like the United States government stole my money,” Ken said in a statement. “I did nothing wrong.”

Ken is not alone. According to an IJ report released in February, the IRS seized over $240 million in 2,500 cases for alleged structuring violations from 2005 to 2012. Half of all seizures were worth over $34,000. Notably, a third of all seizures “arose out of nothing more than a series of transactions under $10,000, with no other criminal activity, such as fraud, money laundering or smuggling, alleged by the government.” Property owners who chose to fight back faced court battles lasting months, even years to retrieve their cash.

Fortunately, there is hope. With help from the Institute for Justice, Ken has filed a “petition for remission or mitigation” with the IRS. Under this little-known procedure, which dates back to the First Congress, victims of civil forfeiture can ask the government to return all or a portion of wrongfully taken property. Remission or mitigation petitions are akin to asking for a presidential pardon, but for civil forfeiture. According to IRS guidelines, the petitions are “designed to lessen the harshness of the forfeiture sanction” and “promote the interest of justice.”

The IRS can grant mitigation petitions if the petitioner has a “lack of a prior record or evidence of similar criminal conduct” and if the “violation was minimal and was not part of a larger criminal scheme.” Making a series of cash withdrawals under $10,000 is certainly “minimal,” particularly as Ken was never charged with a crime during this ordeal. He should qualify. Indeed, his past “criminal record” consists entirely of minor traffic tickets and a citation for selling beer once on a Sunday morning—hardly the profile of profligate money launderer.

To reduce the severity of forfeiture, internal IRS guidelines cite several other mitigating factors, including a “language barrier,” “inexperience in banking matters,” “cooperation with IRS officials” and a “humanitarian factor.” All should apply for Ken.

Moreover, the IRS can mitigate forfeitures if doing so “will not diminish the deterrent effect of the law.” New federal policies mean deterrence is no longer an issue. In response to high-profile media attention brought by the Institute for Justice, the IRS stated it would “no longer pursue the seizure and forfeiture of funds associated solely with ‘legal source’ structuring cases.” In March, the Justice Department announced it would start “restricting civil or criminal forfeiture seizures for structuring until after a defendant has been criminally charged or has been found to have engaged in additional criminal activity.”

Had these new policies been in place last summer, the IRS would never have had seized Ken’s cash. Not to mention it can be difficult to deter lawbreaking if Americans like Ken have no idea they are breaking the law.

Joining Ken in his quest for restitution is Randy Sowers, a dairy farmer in rural Maryland. For over three decades, Randy and his wife Karen have raised cows, and now they sell glass-bottled milk, hand-made ice cream and other mouth-watering morsels. The Sowers sell on-site at their farm and at farmers’ markets, where customers often pay only in cash.

A few years back, a bank teller told Karen that if she made her deposits under $10,000 that would save the bank “paperwork.” (The teller did not mention federal banking laws or the connection between structuring and the IRS, and did not even clarify that the federal government required this paperwork.) Karen followed the teller’s advice to her detriment.

In February 2012, the IRS seized nearly $63,000 from the Sowers—their entire bank account. Adding insult to injury, the federal government served a grand jury subpoena, meaning Randy and Karen could face criminal charges just for depositing their own money. A conviction could mean up to five years in prison.

“We had no idea there was supposedly a law against it,” Randy told the Baltimore City Paper. “We weren’t laundering money. We’re farmers, we struggle every day to pay bills.”

Federal prosecutors made Randy and Karen an offer they couldn’t refuse: In exchange for forfeiting $29,500, prosecutors would settle the case and offer the Sowers immunity from criminal prosecution. Facing costly legal bills and with no guarantee of winning in both civil and criminal court, the Sowers accepted the deal in May 2012.

But now, the Sowers have teamed up with the Institute for Justice and filed their own petition for remission or mitigation with the IRS. Hopefully, the IRS will recognize the injustice of what happened to Ken Quran and Randy and Karen Sowers and move to make amends. In recent months, the IRS has already returned cash to many innocent entrepreneurs, including the owner of a Mexican restaurant in Iowa, a family-run distribution business in Long Island and the proprietor of another convenience store in rural North Carolina.

If their petitions are successful, they could set a powerful precedent for hundreds of other victims. “I thought I lived in America until three years ago,” Randy remarked. “Now I wonder whether I live in America or not, when the government can come in and take your property and not convict you of a crime.”

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If you or anyone you know has been a victim of civil forfeiture, please contact the Institute for Justice. For more information on civil forfeiture, visit endforfeiture.com.

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