When the IRS cleaned out his bank account in 2012, Maryland dairy farmer Randy Sowers told a congressional subcommittee last year, "I was really taken aback by that. I couldn't believe…they would just come in and take my money with no prior notice." But such was standard practice in so-called structuring cases, where the government suspected people had deposited money in amounts less than $10,000 to avoid a federal reporting requirement. It did not matter if, as in Sowers' case, the money came from legitimate sources and there was no evidence of any other illegal activity, since structuring itself is a crime. That made no sense to Sowers. "I thought the government was supposed to protect me," he said. "I didn't think they were supposed to come out and try to put me out of business…I think the government ought to give my money back." Yesterday the government finally agreed to do just that, a development that opens the door to righting hundreds of similar wrongs.
In October 2014, responding to negative publicity surrounding forfeiture cases like this, the IRS said it would no longer seize money from people whose only crime consisted of making deposits or withdrawals that the government deemed suspiciously small. The Justice Department announced a similar policy five months later. But the policy change came too late for Sowers, who ran afoul of the IRS because of what he describes as an attempt to avoid extra paperwork related to the cash he and his wife, Karen, took in at farmers markets. "My wife went to the bank one day, and she had $12,000 in cash because we do a festival," Sowers testified. "So we had a little bit of extra cash that week. And when she went to deposit it, the teller told her, 'Well, next time, just keep it under $10,000, and I don't have to fill out a form.' So that is what she did." The honest, hardworking, and otherwise law-abiding couple did not realize that courtesy was a felony.
The government, which conceded the money was legally earned, seized $63,000 but eventually agreed to return about $33,000 of it. Sowers testified that the federal prosecutor handling the case initially seemed inclined to return more than that, but his attitude changed after Sowers told his story to the Baltimore City Paper. Something similar happened in the structuring-related forfeiture case involving North Carolina convenience store owner Lyndon McLellan, who nevetheless persevered and ultimately won. Like McLellan, Sowers had help from the Institute for Justice, which is asking the Justice Department to apply the new guidelines for structuring cases to forfeitures initiated prior to the change.
I.J. filed a petition on Randy and Karen Sowers' behalf last July, noting that "the government has never even alleged that Randy and Karen did anything unlawful," aside from making deposits of less than $10,000. The petition described the couple's agreement to let the government keep $29,500 of their money as accepting "an offer they could not afford to refuse" and cited congressional criticism of the case. The petition was supported by nine members of the House subcommittee that heard Sowers' testimony. At the same hearing, they noted, IRS Commissioner John Koskinen had testified that "anyone who…was not engaged in processing and laundering illegally gained funds who ended up stuck in the system…deserve[s] an apology." If so, I.J. argued, how can the government let such injustices stand? "If it would be wrong to take the money today," I.J. attorney Robert Everett Johnson said in a February 16 letter to Attorney General Loretta Lynch, "it is equally wrong to keep it." Apparently Lynch agreed, or at least worried that most people would draw that conclusion.
Johnson thinks the decision bodes well for other people whose money was taken in similar circumstances. "If the IRS and Justice Department are willing to do the right thing for Randy, there is no reason why they should not do the same for hundreds of other property owners in exactly the same situation," he said.
Randy Sowers also hopes the resolution of his case sets a precedent. "This is exactly what we wanted," he said. "I hope they give other people's money back. And beyond that, I just hope they quit taking people's money."
Johnson and Nick Sibilla discuss the Sowers case and other structuring-related forfeitures in the August/September issue of Reason.