'Right or wrong, the law is the law and it must be obeyed to the letter."'That is the line of antagonist Inspector Javert in the 1935 adaptation of Victor Hugo's 1862 novel Les Miserables. Hugo wrote, "the highest law is conscience.'
"I agree that the law must be obeyed. But in a just government and a government of limited resources, federal agents and prosecutors must choose which violations to pursue--and when that decision is made, they must examine the situation closely to decide if there has been any violation at all.
"This is our Subcommittee's second hearing this Congress on the IRS's use of its civil asset forfeiture authorities. During our hearing last year, we heard testimony about how the IRS has used a law that's meant to help catch drug runners and terrorists to instead punish farmers and small business owners. The law I'm talking about prohibits people from structuring their financial transactions to keep them below $10,000 to avoid reporting requirements.
"Sometimes, it may look like someone is structuring their bank deposits to avoid the reporting requirement, but as we heard from a Georgia store owner last year, Andrew Clyde, some businesses have insurance policies that only protect cash on hand up to $10,000. Every time he got close to $10,000, he would deposit his money. Because the IRS thought that looked suspicious, they seized his entire bank account--$900,000. They didn't investigate whether Mr. Clyde was trying to avoid the reporting requirement before they took his savings. After they seized the money and he explained the insurance policy to them, the IRS didn't give the money back. And when Mr. Clyde took the matter to court, the government lawyer handling the case said that if he wouldn't settle and give up $50,000, the government lawyer would try to prosecute him on criminal charges. That's unethical, it's wrong, and it's happened in more than one case.
"In other cases, we have seen sworn testimony that a bank teller asked a customer to keep deposits under $10,000 to avoid additional paperwork for the bank. In that instance, the customers didn't know that was illegal -- they just thought they were helping out the bank tellers. Other people just didn't want to be reported to the IRS--because who does?-- and didn't know that it's illegal to avoid those reports.
"The IRS knew that seizing money from farmers and store owners who appeared to be structuring their transactions wasn't right unless they were doing it to cover up other crimes. That's why the IRS announced a new policy in October 2014, that it wouldn't seize money unless it was "derived from an illegal source." That's a better policy than what the IRS was doing before, and we were pleased to hear about the acknowledged need to do better. Now, a year and a half later, we want to know how things are going under that new policy.
"And, indeed, a new policy doesn't right all wrongs. Those people whose assets were seized under the old policy were not treated fairly. Several of them have sent petitions to the IRS and DOJ asking for their money back. The IRS granted one of those petitions and gave back $154,000. From all accounts, the IRS did this because it was the right thing to do. However, DOJ has not provided any relief, either financially or procedurally, to those who have petitioned for return of their funds. Those petitioners deserve a fair, transparent review process and an answer.
"Furthermore, every single member of this Subcommittee has called upon the DOJ and IRS to review all IRS civil asset forfeiture cases brought based solely on allegations of structuring. We have sent two letters asking for that review, and I met with Mr. Weber and DOJ representatives back in February and reiterated that request. While we received letters in response, we haven't actually received answers to those questions. Despite our request for a review of those cases brought under the previous, and now corrected policy, it does not appear any comprehensive review has taken place. I hope we get those answers today."