Court Won't Let Government Screw Forfeiture Victim Out Of Legal Fees
from the no,-WE'LL-decide-how-this-case-is-dimissed dept
The government has made one last attempt to screw over a victim of an IRS bank account seizure. The screwing began in December of 2014, when the IRS -- despite stating it would not perform forfeitures if there was no clear evidence of wrongdoing -- lifted $107,000 from convenience store owner Lyndon McLellan. This was yet another one of the IRS's "structuring" cases, predicated solely on the fact that multiple deposits under $10,000 were made. ($10,000 triggers automatic reporting to the federal government.)
After the IRS announced it would not be pursuing questionable structuring seizures -- thanks mainly to several rounds of negative press -- it still continued to pursue McLellan's case, despite IRS Commissioner John Koskinen telling a Congressional subcommittee that this was exactly the sort of case the IRS would no longer be pursuing.
The prosecutor in charge of McLellan's case was less than enthused about the public discussion of the McLellan "investigation." He claimed the public discussion only made IRS investigators angrier and more likely to act vindictively (I'm paraphrasing) and claimed the "final offer" would only be 50% of the seized funds.
The "final offer" turned out not to be all that "final." The IRS eventually dropped the case and returned all $107,000 to McLellan. However, it did not feel McLellan was entitled to compensation for legal fees because he did not "substantially prevail" in his case against the IRS seizure.
The government's argument against the awarding of fees was basically nothing more than it illustrating how easy it is for it to rig the game. All it takes is a more sympathetic -- or less attentive -- judge.
The government tried to dismiss the case without prejudice, knowing that caselaw would side with it on the denial of fees.
Under CAFRA (Civil Asset Forfeiture Reform Act), a claimant can recover his reasonable attorney fees and litigation costs only if he has "substantially prevailed" in a civil forfeiture proceeding. 28 U.S.C. § 2465(b)(1 ). A number of courts have held that a claimant has not substantially prevailed where the forfeiture proceeding was voluntarily dismissed without prejudice.The government argued in its brief that the case should only be dismissed without prejudice, raising several of its own claims as apparent legal strawmen, but refusing to address the solitary argument raised by McLellan -- that dismissal without prejudice would preclude him from seeking legal fees.
[...]
Indeed, this court can find no examples of any court reaching the opposite conclusion. Those courts that have considered the issue primarily rely on the Supreme Court's rationale regarding fee-shifting provisions found in Buckhannon Bd & Care Home,. Inc. v. W Va. Dept of Health & Human Res., 532 U.S. 598 (2001). In Buckhannon, the Court held that prevailing party status requires an "alteration in the legal relationship of the parties." Id at 605. Thus, an enforceable judgment on the merits and a court-ordered consent decree carry the necessary "judicial imprimatur" to convey prevailing party status, while a voluntary change in a party's conduct -- despite being inspired by a lawsuit -- does not.
The court, fortunately, repays the government's refusal to address McClellan's sole argument by refusing to entertain its unrelated defense of its "dismissed without prejudice" strategy.
Certainly, the damage inflicted upon an innocent person or business is immense when, although it has done nothing wrong, its money and property are seized. Congress, acknowledging the harsh realities of civil forfeiture practice, sought to lessen the blow to innocent citizens who have had their property stripped from them by the Government. Through CAFRA, Congress provided for relief in such cases. This court will not discard lightly the right of a citizen to seek the relief Congress has afforded...Last-minute screwing averted. McLellan has a chance to recover $22,000 in legal fees along with any interest accrued on the $107,000 while in the government's possession. The Institute of Justice, which took on McLellan's case, is hoping this decision will aid them in its battle to recover fees from another questionable IRS seizure.
[...]
Therefore, a voluntary dismissal without prejudice would likely preclude prevailing party status under CAFRA, depriving Claimants of their right to bring a claim under that statute. Further, the court considers this likelihood of deprivation great enough to constitute a substantial legal prejudice. Accordingly, this action is DISMISSED with prejudice.
The Institute Justice is seeking CAFRA compensation in a similar structuring case involving Carole Hinders, an Iowa restaurant owner who got her money back after I.J. took up her cause. The U.S. Court of Appeals for the 8th Circuit will hear oral argument in that case next Tuesday. "The government cannot turn a citizen's life upside down and then walk away as if nothing happened," says Wesley Hottot, an I.J. attorney who is representing Hinders. "Now that Lyndon has been vindicated, we look forward to holding the government to account in Carole's case as well."Hinders' interest recovery should certainly be larger, if not the legal fees themselves. All told, the IRS seized $315,000 from the owner of a small, cash-only restaurant -- again, based on nothing more than sub-$10,000 deposits that traced back to a wholly legal enterprise.
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Filed Under: doj, forfeiture, irs, legal fees, lyndon mclellan
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Balance is nice
It is sad to know that imperious government agencies (I cannot think of one that doesn't think they aren't) still think justice does not matter, and behave accordingly.
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Hide everything to stay legal.
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Re: Hide everything to stay legal.
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Besides, these days many people don't use credit/debit cards in stores simply because they don't want to be tracked, and there is nothing illegal or funny or nefarious about that either. Sad, but nothing wrong.
The IRS needs to have something more than just cash deposits under $10,000 to make these charges, yet they don't. Either they don't take the investigative time to find them, or they are playing the odds that that poor peon they just stole from won't make too much noise or fight very hard.
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If the business does less than $10,000 in business per day, then each of those daily deposits would be less than $10,000, not one of more than $10,000 with several days receipts commingled.
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"If you are reporting that you make 10k a year but you are here owning ten cars including million dollar cars, a large expensive yacht, and 10 million dollars worth of property the IRS will start questioning where did you get all that money and they work backwards."
What is the intent of your general statement? To me, it is obviously an attempt to smear - a vague innuendo followed by disavowing any malicious intent, this is typical cheap shot material.
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It doesn't appear the IRS went after this business because of other signs that would indicate they are cheating on their taxes. It seems the IRS went after them because they frequently deposited money in increments under 10K dollars. Which alone is a stupid reason for the IRS to go after them. The IRS should first see how much they are reporting on their taxes and see if what they report is consistent with what they deposit before going after them. If it's not consistent then they can go after them. If it is then they should do nothing.
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Therefore, possible anti-competitive abuse needs to ALSO be investigated.
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"Cash only" does not automatically mean "under the table". The phrase "under the table" means unreported. In other words, the money is being hidden from the government.
As long as the money is being reported and a record of all transactions are kept, there is nothing illegal or even shady about running a cash only business.
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Bonus Round
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RICO
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It appears what the IRS is doing is legal. You may think it's wrong, but that isn't enough for a RICO suit.
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Fraud involves intentional deceit. Do you think the IRS knows it's misapplying the law, and is attempting to deceive its targets into thinking that it's not? Because I cannot see that claim ever holding up in court.
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That would be a fair conclusion from the stated facts, which are that
So, yeah, I'd say they are culpable.
Is it fraud? Well, fraud requires a misrepresentation of material facts, intention that the other side rely on the misrepresentation, and the other side relying on those facts, to their detriment. No doubt there was a mispresentation of material fact, to wit, the claim that they reasonmably could seek forfeiture. The other side was intended to rely on it, in that the hope is for a default or court victory letting the IRS keep the money.
The other side did not rely on the false representations. Instead, they fought. From that I conclude that this element is not met, and there is no fraud.
That does not mean the IRS is blameless. Far from it, they have acted reprehensibly. Were they not working for the govt, the IRS attys would be subject to bar discipline for deliberate false representations to the court.
What we call ``fraud upon the court'' is not the same as an actionable fraud. In US attorney offices, I expect it is more in the nature of standard practice than anomalous acts by rogue employees.
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When the government pays back the interest, effectively that will come out of taxpayers pockets, and the government employee gets to keep their illegally obtained interest.
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Are you saying it was kept in the personal bank accounts of IRS employees? I would like to read more about that if so.
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Remove the War on Drugs and you cut the bad guys' income in half. That will make it a lot easier to solve all of the other problems.
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Hey, why end it. Think of all the money City's get for it. All the jobs for the Police, and the jailers, and the whole system.
We have this whole abortion issue right? The right of the woman and what she can do to her own body. Ignore that she's killing another human that can't stand up for themselves. Doesn't the person taking Drugs doing it to their own body, and why should it matter what a person does to themselves? If anything there's a bigger problem with Alcohol abuse and yet that's allowed!!!
So it's OK to murder a human life with Abortion. It's OK to drink Alcohol which is just as bad if not worse, Yet Oh now, Drugs are evil.
I can go out and buy as much Alcohol as I want. Yet I rarely drink. A beer once in a while. I have beer right now in my fridge that's been there over a year!!! I've smoked weed before. If it was legal would I start smoking up a storm, NO. It's called self control. Some people have it and some don't, but throwing people in jail for doing drugs solved nothing. Now if they're on drugs and are wasted, well it's a DUI like with Alcohol. Same rules!!!
With drugs LEGAL, all that money wasted trying to stop it ends. In fact now you can Tax it like everything else and make money. Jails clear out for just the real criminals. Drug prices drop greatly. Drug cartels are done with. Competition puts them out of business. I really don't care what the drug of course is either. Have it all LEGAL!
Like the War on Poverty, this War on Drugs will NEVER end! It's as dumb as saying You can never have SEX. It's time to end this sillyness.
Some of the money saved from ending the drug war and making in taxes on the drugs can be used to help those that really want help with their drug addiction. Others can never be helped. Not like people aren't already dying from illegal drug use!!!
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See: Broken Window Fallacy
The rest of your rant seems to be GOP talking points, debunked many times by many people on numerous occasions.
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