The Washington Post has recently been writing some very hard-hitting articles on an increasingly prevalent crime-fighting trend’s expansion to… well, something-other-than-crime-fighting, but you be the judge. Asset Forfeiture is in the news.
Asset Forfeiture is a legal tool that lets the government preemptively seize assets of individuals suspected of being involved in a crime. This article (and many of the recent articles in the post) have dealt with civil asset forfeiture – which uses a much more lenient (to the government) evidentiary standard of preponderance of the evidence to allow asset seizing… basically, if the government thinks there is a 51% chance money or property is crime-linked, it can be seized. Contrast that with criminal asset forfeiture, where the assets can only be seized if it is beyond a reasonable doubt that they are crime-linked.
Getting it Back…
Turning back to civil forfeiture, the legal wrinkle that allows this “guilty until proven innocent” style of forfeiture is that the subject of the case isn’t the person who currently holds the assets – the subject of the case is actually the assets themselves.
So, a person’s response to a civil asset forfeiture? You have to defend the source of that asset, while in the meantime it remains in a state of legal stasis and is held by the government. This generally means the US Marshalls, but through a program known as equitable sharing (and detailed excellently in the original Washington Post article), this also means that the seizing agency gets to share in the proceeds of any seized cash.
You can see the problem immediately: that means local agencies have an incentive to seize funds, but, more importantly for the aggrieved – the very assets that they have seized may have been the funds which could go to hire appropriate legal representation needed to get the funds back (minus the legal fees usually, of course)!
The Post lays out some disturbing statistics:
- Only 1/6 of the cases are challenged
- 41% of the challenges are successful
- 40% of the successful challenges took over a year to recover legal assets
- Those successes came with an agreement not to sue the government
- Many motorists are forced to sign “roadside property waivers” – pick, on the spot, whether you turn over your property and don’t face charges, or if you keep your property and face charges.
At first glace, you might say “hey, maybe agencies have a 5/6 – or even 11/12 success rate… that doesn’t sound too bad!”. While, undoubtedly, some of those funds were illegitimately obtained and could have been seized under criminal forfeiture as well, ask yourself this:
- Would you bother fighting the government over smaller sums? (The median amount was ~ $8800 in the Post’s article, but in some poorer areas it averages $500.)
- If the process took a year, could you afford a lawyer to guide you for that whole time? Would it cost less to pay a lawyer than the amount seized? (Where can you get a lawyer to work for a year for $500?)
- If you won, would you be willing to not talk about it nor sue the government for putting you through the process? (Although in some cases there were additional damages and attorney fees awarded)
- If you lost would you be happy about paying for representation?
If we’re being honest, often times it won’t be worth it – except maybe for the moral victory – to go through the whole process for a small sum.
Drugs, Terrorism, and Dirty Laundry
Like many “now in the spotlight” crime-fighting tools, asset forfeiture too has a good justification – to prevent criminally obtained money from being moved to hard to reach areas before the government can prove a case. It has become especially powerful since the 1980s, where many of its enhancements have come in the name of fighting the drug war, and recently to fight terrorism and to prevent the funding of rogue national states.
There is another major way that assets are seized: directly from holding accounts, such as at banks.
You’ve likely heard that transactions over $10,000 are subject to mandatory government reporting. At one point, “willfully” structuring your transactions to avoid that rule was a federal crime. An adverse ruling against the government in 1993 quickly led to the law being amended – so there is no longer any reference to ‘willingly’ in the code, leaving us with the legal minefield we’re in today. On top of that, financial services employees are mandated to work as an additional branch of government and report suspicious transactions with what’s known as a Suspicious Activity Report.
The result? Crazy asset forfeiture stories, such as this front page New York Times story on a small business owner having her life savings seized by the IRS for the ‘suspicious’ fact that she never deposited more than $10,000 at a time. That’s right – her not depositing over $10,000 was suspicious enough to seize $33,000 in life savings.
That same article ticks off a number of other ridiculous stories of injustice – small business owners caught up in guilty until proven innocent schemes because of small deposits over a long time. Most infuriatingly, keeping transactions below $10,000 is often used as business advice – the time to make a large deposit is greater than a smaller one, so many advisors are listed in the article as suggesting keeping deposits below 5 figures. Anecdotally, there is even an insurance policy listed which only insures $10,000 in cash at a store – why would a business risk keeping more than $10,000 on site in order to later make a deposit over $10,000 and trigger a SAR while the amount over $10,000 wasn’t even insured in the case of theft or disaster?
Even the IRS’s response to the Times article is suspicious:
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.”
Is that any different than how the law is supposed to work today? Is “where the money is believed to have been acquired illegally” a new policy? What was the old one, if so?
Politics, Policies, and Incentives
And if you’re of the mind that “Justice was served! The IRS apologized and is changing its policies!”, well – it’s another example of politics at work. The Times article features a number of sympathetic victims – a veteran who had college funds for his daughter seized (and never got back the full amount, and had to delay his daughter’s schooling by a year), numerous small business owners, and other people with wholesome jobs. What if the victims were running perfectly legal businesses – but in industries which are considered seedier?
Would you go to the mat for a pawn shop owner? A check cashing business? A payday loan firm? (For the finance readers!) A person engaged in manufactured spending (here from our friends at Saverocity, here, and here)? A bitcoin company?
How about a gambler?
If you think that paragraph is overwrought and you have any shred of honesty left, witness the disturbing story of John Kane and Andre Nestor. With tons of parallels to the history of blackjack card counting, using only their minds (and a bunch of luck), they discovered a bug in a common video poker machine which allowed them to literally beat the dealer. If you skip the article, it bears mentioning that they used no mechanical devices – just the learnings of what type of machine to look for and what features that must be enabled to beat the game.
For their efforts, they were banned from casinos (which is, of course, legitimate), arrested (Nestor’s roommate was arrested as well), had cash on their bodies confiscated, had their homes searched under no-knock warrants (a disturbing trend in its own right, also originally meant for drug crimes), faced criminal charges in Nevada and had their winnings confiscated, and during state jury selection suddenly faced Federal charges on a dubious hacking case, and spent a year and a half in pretrial motions.
That story, however, has a somewhat happy ending – once the Government realized the Computer Fraud and Abuse Act wasn’t going to cut it in this case (incidentally, the same law which was, arguably inappropriately due to only terms of service violations, used to charge the late Aaron Schwartz), charges were dropped.
But, the story isn’t over – at least from our perspective for this article… at least from when the Wired article went to press. Nestor is still seeking to get his seized winnings back.
Oh, and the IRS is seeking $239,861.04 in taxes owed on the seized winnings.
Your Take on Asset Forfeiture?
So, like other civil liberties issues currently burning in America – drones, warrant-less wiretapping, surveillance, no-knock warrants, IRS political scrutiny, corporate and government tracking, fourth amendment rights, border searches, the TSA, and everything else – civil asset forfeiture is a huge issue with the ability to adversely affect many law-abiding citizens through wrongful forfeiture and the hassle of additional scrutiny.
And, yes, it’s the very fact that it adversely affects certain classes of citizens that makes it so dangerous – consider that the well-connected legally and politically can avoid paying up even when convicted of a crime. Not that we even need to cite real world examples of the ability of criminals to prepare for legal eventualities – Saul Goodman in Breaking Bad, Maurice Levy of The Wire, Florrick-Agos of The Good Wife, Neil Mink of The Sopranos and Tom Hagen of The Godfather are all proof of… and a contribution to… the popular knowledge that the well-connected and represented have ways to structure their assets to avoid the sort of life-altering forfeiture described in this piece.
So, while the folks who forfeiture is targeted at diversify their assets to prevent seizure (even after judgements!), folks who don’t expect to even be at risk are getting hit incredibly hard.
Is that what we want? How would you change the procedure?