Tag Archives: Peter Schiff

Law Lets I.R.S. Seize Accounts on Suspicion, No Crime Required


Carole Hinders at her modest, cash-only Mexican restaurant in Arnolds Park, Iowa. Last year tax agents seized her funds. Credit Angela Jimenez for The New York Times

by Shaila Dewain

ARNOLDS PARK, Iowa — For almost 40 years, Carole Hinders has dished out Mexican specialties at her modest cash-only restaurant. For just as long, she deposited the earnings at a small bank branch a block away — until last year, when two tax agents knocked on her door and informed her that they had seized her checking account, almost $33,000.

The Internal Revenue Service agents did not accuse Ms. Hinders of money laundering or cheating on her taxes — in fact, she has not been charged with any crime. Instead, the money was seized solely because she had deposited less than $10,000 at a time, which they viewed as an attempt to avoid triggering a required government report.

“How can this happen?” Ms. Hinders said in a recent interview. “Who takes your money before they prove that you’ve done anything wrong with it?”

The federal government does.

Using a law designed to catch drug traffickers, racketeers and terrorists by tracking their cash, the government has gone after run-of-the-mill business owners and wage earners without so much as an allegation that they have committed serious crimes. The government can take the money without ever filing a criminal complaint, and the owners are left to prove they are innocent. Many give up.


The I.R.S. seized almost $33,000 from Ms. Hinders. Credit Angela Jimenez for The New York Times

“They’re going after people who are really not criminals,” said David Smith, a former federal prosecutor who is now a forfeiture expert and lawyer in Virginia. “They’re middle-class citizens who have never had any trouble with the law.”

On Thursday, in response to questions from The New York Times, the I.R.S. announced that it would curtail the practice, focusing instead on cases where the money is believed to have been acquired illegally or seizure is deemed justified by “exceptional circumstances.”

Richard Weber, the chief of Criminal Investigation at the I.R.S., said in a written statement, “This policy update will ensure that C.I. continues to focus our limited investigative resources on identifying and investigating violations within our jurisdiction that closely align with C.I.’s mission and key priorities.” He added that making deposits under $10,000 to evade reporting requirements, called structuring, is still a crime whether the money is from legal or illegal sources. The new policy will not apply to past seizures.

The I.R.S. is one of several federal agencies that pursue such cases and then refer them to the Justice Department. The Justice Department does not track the total number of cases pursued, the amount of money seized or how many of the cases were related to other crimes, said Peter Carr, a spokesman.

But the Institute for Justice, a Washington-based public interest law firm that is seeking to reform civil forfeiture practices, analyzed structuring data from the I.R.S., which made 639 seizures in 2012, up from 114 in 2005. Only one in five was prosecuted as a criminal structuring case.

The practice has swept up dairy farmers in Maryland, an Army sergeant in Virginia saving for his children’s college education and Ms. Hinders, 67, who has borrowed money, strained her credit cards and taken out a second mortgage to keep her restaurant going.

Their money was seized under an increasingly controversial area of law known as civil asset forfeiture, which allows law enforcement agents to take property they suspect of being tied to crime even if no criminal charges are filed. Law enforcement agencies get to keep a share of whatever is forfeited.

Critics say this incentive has led to the creation of a law enforcement dragnet, with more than 100 multi-agency task forces combing through bank reports, looking for accounts to seize. Under the Bank Secrecy Act, banks and other financial institutions must report cash deposits greater than $10,000. But since many criminals are aware of that requirement, banks also are supposed to report any suspicious transactions, including deposit patterns below $10,000. Last year, banks filed more than 700,000 suspicious activity reports. Owners who are caught up in structuring cases often cannot afford to fight. The median amount seized by the I.R.S. was $34,000, according to the Institute for Justice analysis, while legal costs can easily mount to $20,000 or more.

There is nothing illegal about depositing less than $10,000cash unless it is done specifically to evade the reporting requirement. But often a mere bank statement is enough for investigators to obtain a seizure warrant. In one Long Island case, the police submitted almost a year’s worth of daily deposits by a business, ranging from $5,550 to $9,910. The officer wrote in his warrant affidavit that based on his training and experience, the pattern “is consistent with structuring.” The government seized $447,000 from the business, a cash-intensive candy and cigarette distributor that has been run by one family for 27 years.

There are often legitimate business reasons for keeping deposits below $10,000, said Larry Salzman, a lawyer with the Institute for Justice who is representing Ms. Hinders and the Long Island family pro bono. For example, he said, a grocery store owner in Fraser, Mich., had an insurance policy that covered only up to $10,000 cash. When he neared the limit, he would make a deposit.

Ms. Hinders said that she did not know about the reporting requirement and that for decades, she thought she had been doing everyone a favor.


Jeff Hirsch, an owner of Bi-County Distributors on Long Island. The government seized $447,000 from the business, a candy and cigarette distributor run by one family for 27 years. Credit Bryan Thomas for The New York Times

“My mom had told me if you keep your deposits under $10,000, the bank avoids paperwork,” she said. “I didn’t actually think it had anything to do with the I.R.S.”

In May 2012, the bank branch Ms. Hinders used was acquired by Northwest Banker. JoLynn Van Steenwyk, the fraud and security manager for Northwest, said she could not discuss individual clients, but explained that the bank did not have access to past account histories after it acquired Ms. Hinders’s branch.

Banks are not permitted to advise customers that their deposit habits may be illegal or educate them about structuring unless they ask, in which case they are given a federal pamphlet, Ms. Van Steenwyk said. “We’re not allowed to tell them anything,” she said.

Still lawyers say it is not unusual for depositors to be advised by financial professionals, or even bank tellers, to keep their deposits below the reporting threshold. In the Long Island case, the company, Bi-County Distributors, had three bank accounts closed because of the paperwork burden of its frequent cash deposits, said Jeff Hirsch, the eldest of three brothers who own the company. Their accountant then recommended staying below the limit, so for more than a decade the company had been using its excess cash to pay vendors.

More than two years ago, the government seized $447,000, and the brothers have been unable to retrieve it. Mr. Salzman, who has taken over legal representation of the brothers, has argued that prosecutors violated a strict timeline laid out in the Civil Asset Forfeiture Reform Act, passed in 2000 to curb abuses. The office of the federal attorney for the Eastern District of New York said the law’s timeline did not apply in this case. Still, prosecutors asked the Hirsch’s first lawyer, Joseph Potashnik, to waive the CARFA timeline. The waiver he signed expired almost two years ago.

The federal attorney’s office said that parties often voluntarily negotiated to avoid going to court, and that Mr. Potashnik had been engaged in talks until just a few months ago. But Mr. Potashnik said he had spent that time trying, to no avail, to show that the brothers were innocent. They even paid a forensic accounting firm $25,000 to check the books.

“I don’t think they’re really interested in anything,” Mr. Potashnik said of the prosecutors. “They just want the money.”

Bi-County has survived only because longtime vendors have extended credit — one is owed almost $300,000, Mr. Hirsch said. Twice, the government has made settlement offers that would require the brothers to give up an “excessive” portion of the money, according to a new court filing.

“We’re just hanging on as a family here,” Mr. Hirsch said. “We weren’t going to take a settlement, because I was not guilty.”

Army Sgt. Jeff Cortazzo of Arlington, Va., began saving for his daughters’ college costs during the financial crisis, when many banks were failing. He stored cash first in his basement and then in a safe-deposit box. All of the money came from paychecks, he said, but he worried that when he deposited it in a bank, he would be forced to pay taxes on the money again. So he asked the bank teller what to do.

“She said: ‘Oh, that’s easy. You just have to deposit less than $10,000.’”

The government seized $66,000; settling cost Sergeant Cortazzo $21,000. As a result, the eldest of his three daughters had to delay college by a year.

“Why didn’t the teller tell me that was illegal?” he said. “I would have just plopped the whole thing in the account and been done with it.”

 

The New Great Depression

new poverty

by Mrs. Cogs

A few years back Peter Schiff opined the Great Depression of the 1930s would look like a Sunday school picnic compared to what is headed our way. Without a doubt the cat is out of the bag. Everyone knows things are not going well. Unfortunately, it seems most people think that fixing the system, changing the politicians, tweaking the rules and the return to honorable ways of yesteryear hold the solution to restoring our idea of a stable and prosperous society.

The disconnect is easy to perceive when we compare black and white faded photos from the 1930’s of dusty farms, soup lines and children who don’t smile to the modern edgy world images from our cell phones, televisions and computers of how things supposedly are now. We live in a bright and vivid world where descriptions have been meticulously spoon fed to us so we will largely act according to how others might see us and we can feel better about ourselves. This only works until financial or emotional changes crash into our lives such as the Big One roaring towards us all now.

The New Depression already began and the news blackout is deafening. Aside from malcontents who insist upon harping on unpleasant subjects and who have no desire to participate in society’s uniform “solutions”, one only has to watch a Sunday football game and it’s commercials to be refreshed in the programming that the American dream indeed lives on. It’s right there in front of us to see with our own eyes and if you are not living that life you are obviously doing something wrong. (And obviously this is sarcasm.)

americandream

As the government has altered the methods to compute inflation, unemployment and debt, the headlines are meaningless since we can no longer use these measures to compare with numbers from the past. Most people are so busy and programmed in their complicated lives that even if it is noticed, what could we possibly do about it? So we suck it up and proceed, feeling better after we catch that prescribed Sunday game. If we’re lucky we have a few like minded friends or family members to gripe to about the state of things before we carry on in the same manner. Until we can’t.

The modern day New Depression has indeed arrived, it just hasn’t been announced yet. Draw your own conclusions. The population of America: 319 million or 4.4% of the people in the world. Americans who are of working age and are “out of the work force”: 92 million. The average household worth compared to ten years ago: 36% less. Number of homeless people in America: 1.75 million (and those are the ones they can find to count). The percent of American college grads supported by parents two years after attaining their degree: 50%. The number of Americans who lead hungry lives: 31 million.

It is here and it’s about to get much uglier. How our personal future develops is largely dependent upon the mindset we each adopt now. As many of us have recently concluded, this postponement of announcing the reality and truth of the dire situation has bought us time. This is our wiggle room. It may last for a few more years or it may end next month.

What is required is something we can choose voluntarily or wait until it is forced upon us by circumstances. It is a critical examination and re-prioritizing of what we value. More than just taking for granted a roof over our heads and a meal when we are hungry a new mindset, or rather a return to what many consider old school views, is called for.

In a world of instant gratification and narcissistic attitudes, where many collect affirmation from unlimited sources via social media, all those “likes” aren’t going to mean so much when one is suddenly living in their car. Who won on the reality TV show of the week will quickly become meaningless when the kids are hungry. These rude awakenings happen every day for people and continue at an accelerated rate.

For years now I have followed the progress of well meaning people trying to change this downhill progression of behavior and the resulting events by means of protest, political change or through the alternative media. While more people are becoming aware of the true reality swirling around the pretty images of life still broadcasted to us, the system careens towards the tar pits and our efforts must first and foremost be focused upon ourselves. As I have stated many times before, if we are to help anyone else we must first put on our own oxygen mask and breathe deeply.

There are some tough truths to think about if you are going to save yourself. The one that knocked me off my feet was learning that if I don’t know how to take care of myself, then I am dependent upon others. And that is about to be a very bad thing. I realized I depended upon an employer to pay me so I could pay for food, water, heat, housing, basic sanitation; in essence every product I use. And I depend upon other people to do their job so I can access these goods and services. Many now depend upon the government to provide what they cannot. The opportunity to alter the way we depend upon others to fill our needs may or may to not be available or affordable in the future. And this deficiency exposes each of us to assured failure at some point along the line.

poverty in the USAWikiHow now supplies us with instructions on How To Live On The Street.

I was not really providing any of this for myself, but rather depending upon everyone else’s specialties to supply goods and services to me and others. The risk that another cannot or will not fulfill their end of this collective bargain is known as counter-party risk. As our systems degrade, this risk will be the weakest link for most people.

Being prepared for events or changing times is a very good idea, one I wholeheartedly endorse. But to only prepare yourself for a rough patch and then to expect life will continue with business as usual, because (after all) it always has, is foolish in the face of a paradigm change such as the magnitude the world is facing.

Never before have global systems of banking, food, natural resources and information been so over-leveraged and extended. When the music stops and everybody reaches for their chair, rather than one person being left without a seat, there will be one heavily protected chair for every 20 or 30 people. That is when the New Depression becomes official and is acknowledged in a public out loud voice.

It won’t matter whether the catalyst is blamed on an epidemic, terrorism or even Krugman’s alien invasion. Finally everyone will see that the music has stopped playing and be forced to recognize we are living in a very different world. May I humbly propose that what that world becomes for each of us ultimately largely depends upon what we do now.

For me, as I expect is also the case for many of you, making decisions that bring about big changes in our lives will be met with great disapproval of those closest to you. We live in a society where change is bad and should be resisted, unless of course it involves upward mobility and better “things”.

Moving to a smaller house? Yanking the kids out of the school system where their friends are? Leaving the urban jungle for parts unknown? This is just crazy talk. After all, in order to have these be positive changes, one would need to acknowledge that happiness does not come from what we have in life or how others perceive us. It requires a huge deliberate mental adjustment. I would suggest that this decision is your proverbial oxygen mask. Breathe deep and become comfortable with the new air. I think you’ll find it much fresher.

Rethinking the big picture involves “crazy talk” such as considering the liquidation of today’s luxuries and believed future security for a different goal. Try telling anyone who understands finance that you are thinking of quitting your job so you can get your hands on your 401k so you can cash it out after paying 45% in penalties and taxes. Then add the part about downsizing your home and lifestyle and for a while you will find you’ve become the new cautionary tale that person tells others about.

But here is the thing you can’t get around. When the music stops playing, whatever you have is all you have. Whether those ‘things’ consist of retirement funds, brokerage accounts or whatever you have at the bank, or public ‘benefits’ such as Social Security, disability, Medicare, Medicaid or EBT, all of them are just pieces of paper with a promise on it and you will NOT be on the short list of people to get what they expect. The late comedian George Carlin informed us many years ago, “It’s a small club and you ain’t in it.”

hungry

For now, those paper promises are still being delivered. The US Dollar has not become so debased it is worthless….yet. Capital controls have not yet been completely implemented to ‘protect’ your retirement funds from yourself. Even if you have no savings and are receiving food stamps and government aid, there are many choices everyone can make to be less dependent upon others, even if each seems like an inconsequential baby step. Every step you can take to provide something for yourself is a victory.

This is not your granny’s depression, this is the New Depression where anybody who really desires to can access the information highway and find alternatives, especially with a bit of help. As the systems we depend upon degrade, we can actually improve our lives with each decision we act upon as we learn that our needs and wants aren’t really what we were taught they are.

As the momentum of change progresses, the fear levels will increase and the herd will be corralled in various directions, often not ultimately in their best interest. The only way to avoid the majority of the chaos is to be able to depend upon yourself. Roll up your sleeves, it’s going to take a lot of time and hard work.

Many definitions are going to need revising such as what is ‘normal’ and what does one ‘deserve’. How we choose to look at life will determine the new normal and will predicate what we create and how we treat others. If the rules are all about to change, what better time to set an example such as showing small kindnesses or taking the generosity of our time to teach someone something useful? Maybe I cannot save the current system, but I certainly can turn to my neighbor and lend a hand.

I would suggest that before the brunt of the storm hits that all of us, even those far ahead of the curve, take some extra time to consider what we need and value. If you think because you are but one person that what you choose and how you act doesn’t make a difference, I am here to say you are wrong. How you write the narrative of your own reality makes all the difference in the world.

Teaching the next ones a better way.
Teaching the next ones a better way.