Tag: civil asset forfeiture

The IRS Folds, Returns 100% of Lyndon McLellan’s Money

Defying a demand from the federal government to stop publicizing his case, today Lyndon McLellan was told the IRS is abandoning its efforts to keep more than $107,000 it took from his bank account without ever charging him with a crime.

The case received national attention and outrage, including from a member of Congress, which led to this threatening message from an Assistant U.S. Attorney to McLellan’s lawyers:

Whoever made [the case file] public may serve their own interest but will not help this particular case. Your client needs to resolve this or litigate it. But publicity about it doesn’t help. It just ratchets up feelings in the agency. My offer is to return 50% of the money. 

So much for that; Mr. McLellan will be receiving 100% of his money back.  

Montana Reins in Civil Asset Forfeiture

It’s been a nice few weeks for civil liberties in Montana.  On the heels of the nation’s most comprehensive restrictions on police militarization, Montana Governor Steve Bullock (D) has signed a bill reforming civil asset forfeiture in the state.

HB463 requires a criminal conviction before seized property can be forfeited, requires that seized property be shown by “clear and convincing evidence” to be connected to the criminal activity, and bolsters the defenses for innocent owners by shifting the burden of proof to the government.

The effort was spearheaded by State Representative Kelly McCarthy (D), who credited the work of the Institute for Justice and other civil liberties organizations for bringing the abuses of civil asset forfeiture to light.

McCarthy told the Daily Caller News Foundation:

“After looking into Montana laws and working with the Institute for Justice, we found that our laws provided no greater property rights protections than those states who were identified with rampant abuse, (Texas, Kentucky, Pennsylvania, Virginia, etc.).

From that time I began meeting with stakeholders and working on the bill.”

Montana is now the second state in less than a month to heavily restrict state-level civil asset forfeiture, following New Mexico. It must be noted that the Montana reforms are less robust than those that passed in New Mexico last month. 

Unlike the New Mexico law, the Montana law does not restrict law enforcement agencies’ exploitation of federal forfeiture laws that maintain the lower burdens of proof and the civil proceedings that Montana now restricts at the state level. The bill also allows Montana law enforcement to keep the proceeds of their seizures, whereas the New Mexico law requires that such proceeds be deposited into the general fund, thus depriving police of any profit motive for initiating seizures.

That said, the Montana law represents substantial progress for a state that the Institute for Justice labeled “terrible” on civil asset forfeiture, and all those who worked for its passage should be commended for striking a blow in favor of due process and property rights.

That a traditionally red state like Montana with a Democratic governor and a traditionally blue state like New Mexico with a Republican governor have both passed substantial civil asset forfeiture reforms this year is a testament to the bipartisan consensus building around restricting this inherently abusive practice.

 

North Carolina Forfeiture Case Reveals Limits of Executive Reform, Government Defensiveness

In March, we detailed reforms announced by Attorney General Eric Holder to federal asset forfeitures under the Bank Secrecy Act’s “structuring” law.  Those changes mirror an earlier policy shift by the Internal Revenue Service.  Unfortunately for some, those changes were not made retroactive, meaning people whose property was seized before the announcements in a way that would violate the new policies did not automatically have their property returned.

Lyndon McLellan, the owner of a North Carolina convenience store, has not been charged with a crime.  He has, however, had his entire business account totaling $107,702.66, seized by the federal government.  As Mr. McLellan attempts to recover his money, he is now being represented by the Institute for Justice, which issued this release:

“This case demonstrates that the federal government’s recent reforms are riddled with loopholes and exceptions and fundamentally fail to protect Americans’ basic rights,” said Institute for Justice Attorney Robert Everett Johnson, who represents Lyndon. “No American should have his property taken by the government without first being convicted of a crime.”

In February 2015, during a hearing before the U.S. House of Representatives Ways & Means Oversight Subcommittee, North Carolina Congressman George Holding told IRS Commissioner John Koskinen that he had reviewed Lyndon’s case—without specifically naming it—and that there was no allegation of the kind of illegal activity required by the IRS’s new policy. The IRS Commissioner responded, “If that case exists, then it’s not following the policy.”

The government’s response to the notoriety Mr. McLellan’s case has received was nothing short of threatening.  After the hearing, Assistant U.S. Attorney Steven West wrote to Mr. McLellan’s attorney:

Whoever made [the case file] public may serve their own interest but will not help this particular case. Your client needs to resolve this or litigate it. But publicity about it doesn’t help. It just ratchets up feelings in the agency. My offer is to return 50% of the money. 

What “feelings in the agency” could possibly be “ratchet[ed] up” by highlighting a case in which the owner is accused of no wrongdoing while both the Department of Justice and the Internal Revenue Service have announced reforms to prevent these seizures from occurring?

Perhaps the government is sensitive to the avalanche of negative press that civil asset forfeiture has received over the past several years (thanks to the tireless efforts of organizations like the Institute for Justice and the ACLU).  Perhaps the government feels that the game is nearly up, after dozens of publicized cases of civil asset forfeiture abuse.

Cases like this show that the executive branch, now under a new Attorney General who has her own controversial civil forfeiture history, cannot be trusted to stay its own hand.  State and federal legislators must take the initiative, as some already have, if this abusive practice is going to end.

President Obama Wields Much More Influence over Police than He Admits

Taking time out of his press conference with Japanese Prime Minister Shinzō Abe on Tuesday, President Obama addressed the chaos in Baltimore following the unexplained death in custody of Freddie Gray. 

While pleading for calm, President Obama lamented his lack of authority to fix the problem:

Now, the challenge for us as the federal government is, is that we don’t run these police forces.  I can’t federalize every police force in the country and force them to retrain.  But what I can do is to start working with them collaboratively so that they can begin this process of change themselves. 

Obama also lamented the lack of political momentum to address the poverty and violence afflicting communities like Baltimore:

That’s how I feel.  I think there are a lot of good-meaning people around the country that feel that way.  But that kind of political mobilization I think we haven’t seen in quite some time.  And what I’ve tried to do is to promote those ideas that would make a difference.  But I think we all understand that the politics of that are tough because it’s easy to ignore those problems or to treat them just as a law and order issue, as opposed to a broader social issue.

Both of those lamentations are misleading.

While it’s true that the federal government generally lacks the power to “force” local police departments to change their behavior, Obama’s comments completely omit his role in administering several federal policies that facilitate, and even incentivize, the abuses and tensions he condemned.

The federal drug war tears apart families through mass incarceration and violence and unjustly forces millions of (especially poor, minority) Americans to carry the stigma of being a convicted criminal. Prohibition, just as it did in the 1920s and 30s, has turned huge swaths of urban America into battlefields in the competition for black market real estate. President Obama has already demonstrated a willingness to ease federal drug enforcement in several states, and there is nothing keeping him from expanding that rollback.  He has also pardoned several non-violent drug offenders, even while federal prosecutors convict new ones every day.

Loretta Lynch Confirmed as Attorney General

After one of the longest confirmation processes in the history of the Attorney General’s office, Loretta Lynch was confirmed by the Senate today as Eric Holder’s successor.

From a criminal justice perspective, whether Lynch will embrace or abandon Holder’s position on state-level drug legalization and his announced commitment to reforming civil asset forfeiture are two questions that spring immediately to mind.

Loretta Lynch zealously defended civil asset forfeiture during her confirmation hearings, and was a devoted practitioner of it as a U.S. Attorney in New York.  One of her seizure cases, that of the Hirsch brothers [$], garnered widespread attention and condemnation, and helped spur the nationwide calls for reform to which Eric Holder responded.

New Mexico Gov. Susana Martinez Signs Civil Forfeiture Abolition Bill

A quick and happy update from New Mexico: Gov. Susana Martinez (R) has signed HB 560, which I detailed here, into law. New Mexico has thus effectively abolished civil asset forfeiture by requiring a criminal conviction before the government can seize property.

Gov. Martinez’s statement can be read here.

House Bill 560 (HB 560) makes numerous changes to the asset forfeiture process used by law enforcement agencies in New Mexico. As an attorney and career prosecutor, I understand how important it is that we ensure safeguards are in place to protect our constitutional rights. On balance, the changes made by this legislation improve the transparency and accountability of the forfeiture process and provide further protections to innocent property owners.

As expected, civil liberties advocates across the political spectrum cheered the move.

ACLU-NM Executive Director Peter Simonson:

This is a good day for the Bill of Rights. For years police could seize people’s cash, cars, and houses without even accusing anyone of a crime. Today, we have ended this unfair practice in New Mexico and replaced it with a model that is just and constitutional.

Institute for Justice Legislative Counsel Lee McGrath:

New Mexico has shown that ending policing for profit is a true bipartisan issue with broad public support. America is ready to end civil asset forfeiture, a practice which is not in line with our values or constitution. This law shows that we can be tough on crime without stripping property away from innocent Americans.

Emily Kaltenbach of the New Mexico chapter of the Drug Policy Alliance:

New Mexico has succeeded today in reining in one of the worst excesses of the drug war. Like other drug war programs, civil asset forfeiture is disproportionately used against poor people of color who cannot afford to hire lawyers to get their property back. This law is an important step towards repairing some of the damage the drug war has inflicted upon our society and system of justice.

Civil asset forfeiture is an inherently abusive practice that provides perverse incentives to law enforcement, encourages “policing for profit,” and allows the government to take the property of individuals and businesses that are never charged with any wrongdoing. Hopefully the bipartisan spirit of the New Mexico abolition (HB 560 passed the legislature unanimously) will serve as a model for other legislatures around the country who wish to restore our cherished concepts of due process and private property to their proper status.

Eric Holder Issues New Asset Forfeiture Restrictions for Structuring Offenses

Today Attorney General Eric Holder issued new guidelines to federal prosecutors tightening the rules for seizing assets for so-called “structuring” offenses.

Under the Bank Secrecy Act, structuring occurs when someone is suspected of arranging their financial transactions as to avoid triggering a report to the federal government by the financial institution.  Some of civil asset forfeiture’s most egregious abuses are the result of federal prosecutors utilizing this nebulous statute to empty the bank accounts of unwitting citizens and small businesses who are never charged with any crime or even aware that their transactions are considered illegal. 

The new rules require:

1. That structuring seizures against people for whom there is no criminal charge be based upon probable cause that the funds were either generated by unlawful activity or intended for use in anticipated unlawful activity.  Alternatively, prosecutors must procure a warrant from a court and with the approval of either the U.S. Attorney (for Assistant U.S. Attorneys) or the Chief of the Asset Forfeiture and Money Laundering Section (AFMLS) (for Criminal Division trial attorneys).

2. That when the prosecutor determines subsequent to a structuring seizure that the government lacks the necessary evidence to succeed at either a civil or criminal trial, the seizing agency must return the full amount.

3. That when a prosecutor seizes property pursuant to suspicion of structuring, the prosecutor must file either a criminal indictment or a civil complaint, or receive an exception from either a U.S. Attorney or Chief of AFMLS within 150 days or else return the seized assets.

4. That all settlements must be complete and in writing.  Informal settlements are expressly prohibited.