Due Process for Cash Civil Forfeitures in Structuring Cases

IntroductionOn January 22, 2013, Tarik "Terry" Dehko sat down to pay the bills for his small Michigan grocery store when a federal agent entered his office.1 The agent told Dehko that the Internal Revenue Service (IRS) had executed a seizure warrant and taken the market's entire bank account -more than $35,000.2 When Dehko asked how he could run his business without its bank account, the agent replied, "I don't care."3The government did not charge Dehko with a crime that day.4 In fact, Dehko had never been charged with any crime in his life.5 Instead, the government waited until July 19 to bring a civil forfeiture action against Dehko-ninety-one days after Dehko filed a claim with the IRS asserting his property interest in the seized money.6 During that time, Dehko could not access those funds to pay his employees, rent, utility bills, or vendors. For the first time, Dehko was late on his payments.7The government's action alleged that Dehko violated federal structuring law.8 Federal law establishes reporting requirements for bank deposits over $10,000.9 But the law also bans "structuring" deposits-making more than one deposit arising from the same transaction in amounts less than $10,000 to avoid the reporting requirement.10 The ban prevents both money laundering and spreading profits from criminal enterprises.11 But Dehko had a legitimate business reason for regularly depositing less than $10,000 into his business's bank account: like many small businesses, the grocery's insurance policy limited cash losses to $10,000 out of risk.12 Thus Dehko did not need to report his deposits, because he was not "structuring."13 On top of that, the IRS had examined Dehko for potential structuring violations just nine months earlier and concluded that "no violations were identified."14 Ultimately, the government voluntarily dismissed the forfeiture action against Dehko on November 15.15 But not without harm to Dehko and his market.Law enforcement seized Dehko's bank account through civil forfeiture. Civil forfeiture statutes authorize the government to seize and keep property it suspects is involved in criminal activity, without prosecuting an underlying offense.16 Forfeiture proceedings are technically in rem actions against property, not its owner.17 To join the lawsuit, the owner must file a claim opposing forfeiture and asserting her interest in the property, or else forfeit the property.18 This process is similar to intervention in a civil suit. The alleged conduct used to justify the forfeiture-here, structuring-is criminal. But civil forfeitures are civil: the higher burdens of criminal proceedings, like proof beyond a reasonable doubt, do not apply.19 The government can seize and keep property without ever securing a criminal conviction in the related offense.20Terry Dehko is not alone: many others face cash seizures by the IRS for alleged structuring. Months after Dehko's seizure, the IRS seized $33,244.85 from Mark Zaniewski, the owner of a gas station in Michigan.21 As a result, a vendor refused to supply gasoline, causing the station to close for two weeks. Zaniewski then had to assign receipts directly to the supplier and pay a higher rate due to his newly bad credit.22 The same year, the IRS seized the $33,000 checking account of Carole Hinders, the owner of a cash-only restaurant in Iowa, after she deposited less than $10,000 into the account.23 The IRS also seized a $66,000 account from Army Sgt. Jeff Cortazzo, who, on the advice of a bank teller, made several sub-$10,000 deposits into a safe-deposit box to save for his daughter's college education.24 There, the government settled-at a $21,000 cost to Cortazzo. That settlement caused his daughter to delay college for a year.25Current seizure practices extend well beyond anecdote. The government regularly seizes cash without prosecuting the underlying structuring offense. While IRS seizures for alleged structuring increased fivefold over seven years, to 639 seizures in 2012, law enforcement criminally prosecuted only one in five cases. …