Asset Forfeiture

Convenience Store Owner Stands Firm Against Outrageous IRS Money Grab, and the IRS Blinks

The feds drop a forfeiture case that violated their own policies.

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Institute for Justice

When the Institute for Justice helped bring attention to an outrageous IRS money grab in North Carolina, the federal prosecutor assigned to the case was peeved. "Your client needs to resolve this or litigate it," Assistant U.S. Attorney Steve West wrote in an email message. "But publicity about it doesn't help. It just ratchets up feelings in the agency. My offer is to return 50% of the money. The offer is good until March 30th COB." That deadline came and went, but Lyndon McLellan, the convenience store owner who lost $107,000 to the IRS because it considered his bank deposits suspiciously small, refused to fold. That turned out to be a smart move, because West was bluffing. Yesterday the government agreed to drop the case and return all of McLellan's money.

"I'm relieved to be getting my money back," McLellan says. "What's wrong is wrong, and what the government did here is wrong. I just hope that by standing up for what's right, it means this won't happen to other people." 

It is unlikely McLellan would have prevailed without the publicity that I.J. brought to the case, which seemed to violate IRS and Justice Department policies regarding forfeitures based on allegations of "structuring," i.e., making deposits of less than $10,000 to avoid bank reporting requirements. Both agencies had said they would no longer pursue such forfeitures unless there was evidence that the money came from illegal sources. In McLellan's case there was no such evidence. He paid an accountant $19,000 to help prove that all the money came from his perfectly legal business.

The government is not compensating McLellan for that expense, or for the $3,000 retainer he paid a lawyer before I.J. took on the case pro bono. Nor is it paying interest on the money, which it held for more than a year. "The government cannot turn Lyndon's life upside down and then walk away as if nothing happened," says Robert Everett Johnson, an I.J. attorney who represents McLellan. "Lyndon should not have to pay for the government's lapse in judgment. And the government certainly should not profit from its misbehavior by keeping the interest that it earned while holding Lyndon's money. We'll continue to litigate this case until the government makes Lyndon whole."

I.J. has pressured the government to back down in several other structuring cases. The new policies adopted by the IRS in October and by the DOJ in March are largely attributable to the publicity I.J. has generated—especially a front-page New York Times story last fall. McLellan's case was especially striking because the government refused to return his money even after the new policies were announced. While testifying before a congressional committee last fall, IRS Commissioner John Koskinen said any forfeiture without allegations of illegal activity beyond structuring "is not following the policy."

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69 responses to “Convenience Store Owner Stands Firm Against Outrageous IRS Money Grab, and the IRS Blinks

  1. Nice. I’ll take a Bizarro nut-punch any day.

  2. IRS Commissioner John Koskinen said any forfeiture without allegations of illegal activity beyond structuring “is not following the policy.”

    But daddy, you *said* I could have my own Oms to play with! You never let me have any fun.

    1. Is that a Fantastic Planet reference, Eyes?

      If so, +1 Mind Imagery Learning Headset

  3. Is “Assistant U.S. Attorney Steve West” in jail yet? If not, this is still a nut-punch.

    1. You can’t unpunch nuts.

      1. Truer words have never been spoken.

      2. Just another confirmation that ditching mine was the right decision.

      3. That’s why it’s safer to let the wife keep them in her purse. She’ll let me use them when I want…or so she told me.

  4. So the best we can get from these fuckers is our money back, but only when they violate one of their own blatantly unconstitutional guidelines.

    Free at last! Free at last! The money that was illegally pilfered from me is free at last!

  5. To: The IRS
    From: Institute for Justice

    Subject: Fuck You!
    .
    Message received on May 14, 2015

    1. Body of message: And the horse you rode in on.

      1. Adios, Tonto…

  6. “But publicity about it doesn’t help. It just ratchets up feelings in the agency.”

    Did I misread this, or did the IRS just complain that this guy hurt their feelings?

    1. I saw it as more of a threat: Go to the media and we’ll really be on your ass about this. Keep quiet and maybe we’ll give you back some of the money we stole from you.

      1. Yes, this clearly sounded like a threat, not only to keep the money, but perhaps to use the power of the IRS to further harass this business owner.

        It certainly seems like this sort of behavior should be illegal. Like criminally illegal, not like “against agency policy”.

        1. He can look forward to a decade of audits, which the I.J. will contest and prevail, and receive atty’s fees from the IRS.

    2. They didn’t specify what feelings specifically were ratcheted up, so it is hard to say. I won’t claim to understand the minds of people who willingly work for the IRS.

    3. Counselor,
      Fuck ur feelings

    4. We’re not sorry for what we did. We’re sorry for getting caught.

    5. We’re just trying to make the evil business PAY THEIR FAIR SHARE!

      /IRS Employee Butthurt Council

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  8. Always nice to see my charitable contributions doing good.

    1. I’m donating $100. Thanks for the reminder.

      1. I’m donating $100. Thanks for the reminder.

        Seconded.

        1. I’m taking it out of my “Sheldon Richman Reserve Fund”

        2. Heading that way myself.

  9. My offer is to return 50% of the money

    What, are we in a flea market or something? What is this “negotiation” even based on? His actions were either in violation or they weren’t. Glad he called their bluff.

    1. That alone is a blatant admission that the motherfucker didn’t have a legal leg to stand on. If McLellan was a crook, why give him back ANY of the money?

      I really want to see McLellan go to a grand jury and ask for a presentment to charge every one of these goddamned thieves with grand larceny and civil rights violations under color of authority.

      -jcr

      1. Yeah I’m sure you’ll find 12 people who want to get on the IRS shitlist.

    2. I don’t understand the reasoning of this part either.

      I mean, aside from the, “Because we’re the government and fuck you. That’s why.” reasoning.

      Actually that’s the only reason they have. They can legally extort people with the threat of further harassment.

    3. Fucking this. I was thinking the exact same thing when I read it. “Hey, it’s really not cool of you to point out publicly that we’re violating our own policy, not to mention the spirit if not the letter of the law and the constitution. Tell ya what, if you shut up about it, we’ll give you back half”. How ’bout fuck you? How ’bout you give it all back plus damages?

  10. “But publicity about it doesn’t help. It just ratchets up feelings in the agency.”

    What a slime-ball tactic; ‘You better watch it! We’ll get mad!’

    1. How is that not intimidation? He is free to speak publicly all he wants, and for exercising that right the government threatens him.

  11. and THIS, is why the IJ is so awesome.

    keep fighting the good fight guys.

    1. No shit, might have to consider donating to the cause

  12. For the record, Assistant U.S. Attorney Steve West is not a law man. He’s a thieving cunt who belongs behind bars.

    -jcr

  13. Lets say there’s a 10 year statute of limitations on Armed Robbery. I’d say we’re overdue to prosecute the IRS and all of its saff for roughly 161,720,000,000 counts still prosecutable.

    1. *adjust this value to reflect the actual statute of limitations.

  14. He paid an accountant $19,000 to help prove that all the money came from his perfectly legal business.

    The government is not compensating McLellan for that expense, or for the $3,000 retainer he paid a lawyer before I.J. took on the case pro bono. Nor is it paying interest on the money, which it held for more than a year.

    McAllen should deduct all of that from any taxes he may owe in the future.

    -jcr

    1. I bet the IRS is hoping he does soemthing that gives them another crack at him. They want revenge.

      The only way to solve this is to abolish the IRS.

  15. But-but-but government is us, and so really that’s just the government’s money anyway!

    1. is that you, ESB?

  16. Lyndon should not have to pay for the government’s lapse in judgment. And the government certainly should not profit from its misbehavior by keeping the interest that it earned while holding Lyndon’s money.

    As unpopular as the IRS is, you would think his senator or representative in Congress would be interested in making a (probably useless but still public) stink about this. It could mean face time on camera, after all.

    1. Nah, only if his elected representative is a zealous anti-tax guy to begin with.

      Otherwise, complaining about this would be fucking around with his own God powers and most elected critters are power hungry assholes who want to be able to fuck with people’s lives.

  17. So, what the hell is the proper process for making daily deposits of a few thousand bucks in case every day?

    Seriously, the bank fills out the suspicious activity report, not him. What could he have done different?

  18. Remember this the next time you’re tempted to paint all lawyers as being crooks. As a former State Bar Investigator, I’m well acquainted with crooked lawyers. Here, the attorneys at the Institute of Justice did a fine job fighting the government on behalf of their client. People have to keep fighting for their rights. It can be frustrating and exhausting, but we have to do it. It is depressing to think how the government has become the enemy of the people rather then it’s representative. We have our politicians to thank for that.

    1. “It is depressing to think how the government has become the enemy of the people rather then it’s representative. We have our politicians to thank for that.”

      That is romanticizing the past. No government has ever been representative of the people. That is snake oil sold for votes. Political people – hell, people in general – have always been the same. The stars aligned in the 1700’s and a small group of honest men who signed the constitution/bill of rights managed to establish a huge fence in America around basic civil and legal rights with those documents, to protect said rights from their peers and other thugs at the time, as well as from politicians and thugs who have been trying to climb over and break down that fence every day since those docs were ratified. The fact that the C/BOR has even stood up to erosion this long defies belief.

  19. What are the odds that the IRS tries to tax the money again for returning it to him?

    1. Complete with late penalties. Which will make it come to, hmm, about $107,000.

  20. If they had tried this shit with a Wall St firm there would be executions happening right now.

  21. The problem with the IRS is that more than 1,500 of their own agents are behind on paying their taxes. And as many as over a 100 lied on their taxes, according to a Fox News report recently. Yet they face no fines or criminal prosecutions. If that was us non- government actors we would already be on our way to fed prison, courtesy of those jerk off fed judges, fed law enforcement, and fed prosecutors. Also, Fox recently reported that over three million former and current fed workers are not paying their taxes. And of course no one at IRS is going after them to the best of my knowledge and recent media reports. What utter hypocrisy!!

  22. I’m really surprised some nutjob(hero who has had enough) hasn’t gone after the IRS… I nominate John, you seem angry enough.

    1. Check out this guy:

      http://abcnews.go.com/Internat…..d=31009777

      Like, he was already living in the United States, and he figured he should go to _ASIA_ to go to war against the United States.Here’s the plan: He’d leave any firearms at home, go to the airport and go through a security checkpoint staffed by TSA feds, and go to the caliphate and have them issue him another firearm with which to go to war against the feds, but actually going out and killing innocent Yazidis, Shiites etc. Go figure.

  23. Lyndon McLellan is a true American Hero.

    Thank you, sir. You have the guts far too many of us don’t have.

  24. I doubt that the Government can find a sympathetic judge who will quash a demand for interest and expenses, the same things the Government wants when they prevail.

  25. “Both agencies had said they would no longer pursue such forfeitures unless there was evidence that the money came from illegal sources. ”

    So what if there _IS_ evidence that the money came from illegal sources? Evidence is not proof. Besides, even if it came from selling cocaine, the depositor is no less innocent than the convenience store owner. You don’t have to buy any of the cocaine.

  26. Another important thing to remember is that this can only be fixed using the system itself, because bank deposits have only imaginary value, a certain amount of fiat currency enforced by the government. If the bank does not turn the dollars over to IRS, the IRS does not even have to visit the bankers. The government can simply confiscate the bank’s deposits at the Federal Reserve and say that the courts will no longer send gun-toting goons in bulletproof vests after the people who default on court judgments obtained by the bank. It might be slightly different if the bank had actual money in its vaults and a security force willing to take on law enforcement, continue operating after its charter is revoked, etc. but the bank only has loan contracts which the government can easily stop enforcing. They don’t even need to use any force at all. Go ahead, bank, refuse to comply. We’ll simply disconnect you from the check-clearing systems so people can only withdraw by visiting the bank and withdrawing cash. The bank will be out of business fast.

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  28. IRS stands for: Insanely **Retarded Shitheads.

    *formal usage
    less advanced in mental, physical, or social development than is usual for one’s age.

    *informal usage
    very foolish or stupid.
    “in retrospect, the IRS is a totally retarded idea”

  29. “While testilying …”

    FIFY

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  36. IRS Commissioner John Koskinen is an outright liar who even lies when it’s obvious to everyone he’s not telling the truth. He is also not the least bothered by lying to Congress when called to testify which means, of course, that it will be very nearly impossible to control the IRS. The only practical answer to this problem is to make the IRS unnecessary by eliminating all forms of taxation that require their services.

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