Civil Asset Forfeiture

IRS Steals Widow's Money Because Her Deposits Were Too Small

The agency's new, more enlightened "structuring" policy seems to have a big loophole.


Institute for Justice

Last October, after The New York Times started asking questions about the Internal Revenue Service's practice of taking legally earned money from innocent people based on allegations that they tried to evade bank reporting requirements, the IRS said it "will no longer pursue the seizure and forfeiture of funds associated solely with 'legal source' structuring cases unless there are exceptional circumstances." A case highlighted by ABC News, involving money snatched from an Iowa widow, suggests how big that "exceptional circumstances" loophole might be.

In 2011 an IRS agent named Jeff McGuire paid a visit to Ronald Malone, an Iowa publishing executive who at the time was dying from cancer. McGuire told Malone that bank deposits he had made looked fishy: They totaled $35,000, but each was less than $10,000, the threshold for transactions that banks must report to the Treasury Department. Deliberate evasion of that requirement is a federal crime, even when the money comes from legitimate sources, as Malone's did. McGuire explained that to Malone, who signed a form acknowledging the explanation. The IRS did not seize the money, and no charges were filed.

After Malone died, his widow, Janet, deposited another $19,000 of his savings in amounts below $10,000. This time the IRS seized the money and referred the case to the Justice Department for prosecution. The agency's attitude: We warned you once.

According to an affidavit quoted by ABC News, Malone conceded that she was home during McGuire's visit but noted that she did not sign the form and said she did not remember the details of the meeting because "she was in a state of despair over her husband's health." She predicted that "you won't prosecute a widow." They showed her.

Under an agreement with the government, Malone will give up the money and plead guilty to a misdemeanor that is punishable by up to a year in jail and a fine of up to $250,000. "This is shocking," Institute for Justice attorney Larry Salzman told ABC News, "because it demonstrates that prosecutors are not taking seriously the IRS's alleged policy change not to prosecute legal source structuring." I.J. has represented several business owners whose money the government seized based on suspicion of structuring but returned after I.J. challenged the forfeitures.

According to an I.J. report published last week, the IRS seized $242 million based on suspected structuring in more than 2,500 cases from 2005 to 2012. In at least a third of those cases, there were no allegations of criminal conduct aside from the purported structuring itself.

Update: As a reader noted in the comment thread, the individual deposit numbers provided by ABC News (with $5,800 the smallest, $9,000 the biggest, and some other amount in between) do not add up to the reported total of about $19,000. I have excised the smaller numbers to avoid confusion.

NEXT: Go Directly to Jail—And Then Stay There: How the Misuse of Jails Is Fueling America's Overincarceration

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  1. Why all of the sudden are journalists shining light on these bureaucratic cockroaches?

    1. Honestly? Probably because a GOPer stands a good chance of getting back into the WH and they want some “government sucks” stories at the ready in case it happens.

      Tha’s my working theory anyway.

      1. See what happens when you elect a white male cis-het Teathuglican shitlord???

  2. Under an agreement with the government, …

    Mistake #1

  3. My neighbor pays his half of the internet bill each month by giving me a check for $28. I better tell him to start making it $10,000 so I don’t get in trouble.

  4. After Malone died, his widow, Janet, deposited another $19,000 of his savings in amounts ranging from $5,800 to $9,000.

    Maybe I’m being a real nerd here, but I’m unable to come up with a combination of deposits that fit this range and total $19,000 with the largest deposit even approaching the $9,000 amount (which I would think would be the amount that triggered the “structuring” investigation). Methinks they had their eyes on this lady from the day her husband died and knew they had money squirreled away somewhere. They trotted out the $9,000 amount for the story because it looks more damning…even though ITS MATHEMATICALLY IMPOSSIBLE!

    1. Uh…how about $5,800, $9,000 and $4,200?

      1. WHO’S THE RETARD NOW? (Me)

        1. MATT DAMON!

          1. That’s a good picture of you Epi.

            1. I had it professionally taken! Do you really like it?

      2. “Ranging from $5800 to $9000” would imply the smallest deposit was $5800.

    2. There’s no combination of two deposits in that range or four or more deposits n that range that could total $19,000. And if two of the three deposits, the only number of deposits that could possibly have a total of $19,000, were at the low number, $5,800 each, the third deposit could only be $7,400 maximum.

      The feds trotted out $9,000 to make it look worse than it could possibly be. But a quick glance at the math tells me they’re looking at people making deposits that aren’t even 75% of the threshold…which means they’re just looking for anybody making decent size deposits so they can steal their money.

      Am I being overly paranoid?

      1. Nope. We see the government engage in (literal) highway robbery all the time, why wouldn’t they engage in this robbery as well? Who’s gonna stop them, your mom?

      2. It’s a “reasonable mistake of [mathematical] law”, sloopy.

  5. How is the IRS even aware of these under 10k deposits ?

    Banks are required to file a SAR ( Supicious Activity Report) any time they see whatever they may define as suspicious. It does not have to be any specific activity to generate a SAR.

    So the people’s own banks started the chain of events leading to the IRS investigations.

    Thanks Bank. How does a person trying to grow their business ever get over the 10k deposit level without having their money stolen ?

    1. You hope the IRS doesn’t decide you’re their next source of revenue. Have fun!

      Seriously, that’s where we’re at at this point. It’s fucking absurd. This is what government always eventually becomes.

    2. I’d wager any sum of money that the IRS contacted the bank and told them (read: demanded) to send a SAR for any deposit this lady made in cash after her husband’s death.

      It would be like if the ATF told (read: demanded) gun dealers sell to straw purchasers so they can stop crime). Would you blame the dealers in what I’m sure is a highly unlikely situation?

      1. Any money handling institution will have policies regarding Suspicious Activity Reports, and a lot of them will flag any transactions over $3,000 just to make sure they do not get prosecuted with an “actual criminal”, or so they don’t get bad press. The wonderful part is that the training for SARs mostly reiterates you aren’t allowed to discriminate based on anything, but you must report anything you feel is suspicious (which means, if I’m handling money transfers, I’m doing an SAR for anything over $3000, just to make sure I’m not getting fired for either discrimination or breaking policy). That’s the lovely way the government gets you. Make it so that you must report everything to avoid both discrimination lawsuits and to avoid getting fired for missing something.

  6. Again, if they know how much your depositing and when, why do they need you to report it?

    1. because by making you report it, they can also charge you with lying if you forget to include the “cents”

  7. So they did nothing illegal and the agency warned them not to do anything legal again, and then grabbed the dough?

    1. What else is needed to show that the US is just an open-air prison?

  8. We need names of the people at the IRS responsible for making this happen. Period. When that happens, we’ll start seeing this drop off severly.

    As asked earlier – Why wouldn’t they? There is no accountability. Even if it blows up into a media frenzy, no one will be fired. No one will be accountable.

    THAT is the problem and the disease. The rest is just addressing the symptoms and wasting effort.

  9. Are there even enought lampposts in the country to hang all these governmentally-sanctioned robbers?

  10. One would think even her congresscritter, Bruce Braley (D), would be outraged by this and reaching across the aisle to get a bi-partisan bill passed to address this issue. Of course, the GOP has the votes to address it on its own…if it had the cajones.

  11. This trap the Feds created reminds me of those “checkpoint ahead” signs on expressways just ahead of an exit. Turns out the chechpoint is at the top of the exit ramp.

  12. I have excised the smaller numbers to avoid confusion.

    Look who’s structuring his blog posts.

    1. Yeah, how come HE gets an Edit function?!

  13. “will no longer pursue the seizure and forfeiture of funds associated solely with ‘legal source’ structuring cases unless there are exceptional circumstances.”

    By the way, for people who’ve been sitting here the entire class, this is DC-Speak for “We’re not changing behavior at all”

  14. Doesn’t anyone see a fundamental problem with this issue (beyond it’s gross immorality)?

    They totaled $35,000, but each was less than $10,000, the threshold for transactions that banks must report to the Treasury Department.

    The transactions were below the reporting threshold, yet somehow the IRS found out about them. So if everything gets reported anyway, why is it illegal to make smaller deposits?

  15. my best friend’s ex-wife makes $65 an hour on the computer . She has been without a job for seven months but last month her check was $13740 just working on the computer for a few hours. try this…………..


  16. Fuck, I know I’m a day late (some people have to work), but I have a question maybe someone can answer.

    How come Tony will only come and argue theoretical issues, like minimum wage, that although we know how they affect people, are hard to prove one way or another.

    When we have actual proof of how corrupt the gov is (because its made up of people), he NEVER posts?


    I think I answered my own question.

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