Judge Orders FBI To Return $57,000 Seized From A US Private Vaults' Customer Since It Apparently Can't Justify Keeping It

from the broad-speculation-isn't-probable-cause dept

The judge, who blocked the FBI from moving forward with forfeiting property from certain US Private Vaults' customers who haven't been accused of crimes, is now ordering the FBI to return money to one of the people contesting the seizures.

The FBI raided US Private Vaults in March, claiming customers, if not the owners of the business themselves, were involved in a host of crimes, including drug trafficking and money laundering. It's now August and no one has been charged. The FBI, however, has millions of dollars in currency and other property in its possession and is refusing to give any of it back.

The FBI's warrant specifically said agents would only search the content of safety deposit boxes to determine ownership. The contents were to be inventoried but the FBI's affidavit suggested the agents performing the raid would not be searching the contents for evidence of criminal acts.

That self-imposed restriction was ignored. And the FBI was able to move forward with seizures even without bringing criminal charges because civil asset forfeiture remains a thing in this country: the taking of people's property using only the unproven assertions that they may be the result of illegal activity. This vagueness didn't sit well with Judge R. Gary Klausner, who blocked the FBI from moving forward with some forfeitures early last month.

The FBI insists it is right to keep this process in motion. However, as the judge points out in his latest order [PDF], its insistence hasn't been accompanied by any plausible justifications. (h/t FourthAmendment.com)

The facts of this case raise two questions of constitutional import: first, "Why does the Government have [Joseph] Ruiz's $57,000?"; and second, "Why won't the government give it back?"

According to the government, the why is self-explanatory. A grand jury convicted the business of conspiring with customers to launder money, distribute drugs, and structure transactions to hide income from the IRS. The judge says the FBI's decision to seize the contents of boxes makes sense, given that it had to seize property containing many small boxes of property.

Though the Court makes no ruling as to the constitutionality of the Government's March 22, 2021 search and seizure, the Government's story makes practical sense. Assuming the Government was authorized to seize the nests of safety deposit boxes at USPV, then, by necessity, the Government was authorized to seize Ruiz's nest egg which was locked up in Box 7622.

That answers the first "why," and that answer largely rests on the assumption the search and seizure was proper, which the court assumes for the sake of argument, but not as a matter of law.

The second "why," however, has not been answered satisfactorily by the FBI.

The Government goes on at length as to the general difficulties in returning peoples' property to them, but the upshot of the Government's argument is that returning property to hundreds of people is a slow bureaucratic process.

As to the justification for continuing to seize the $57,000 found in Box 7622, the Government's answer falls flatter still. The Government asserts, without further explanation, that it is keeping Ruiz's $57,000 because "the cash is the subject of [] pending in rem forfeiture proceedings."

But why? The FBI notice sheds little light on the issue.

The court points out the notice only informs Ruiz his cash has been seized because of suspicion violations of US laws. But the laws referenced cover up to 35 different crimes and the government has yet to state which specific crimes it suspects Ruiz has committed. It's not enough to say things are the way they are because things are the way they are, as the FBI has done here.

Why has the Government kept the $57,000 now that Ruiz has come forward and sworn under the penalty of perjury that it is his? The Government doesn't really say. Instead, the Government states that it continues to seize Ruiz's property because "the cash is the subject of… pending in rem forfeiture proceedings." This explanation is not a justification. Merely stating that the Government has initiated forfeiture proceedings against the property does not offer any insight into how the Government's continued retention of the $57,000 complies with the dictates of the Fourth Amendment.

The result is an order for the FBI to justify this seizure or give back the money within seven days. This order follows 106 days of the FBI keeping Ruiz's cash without justification.

The FBI has chosen to try to justify the seizure. However, the assertions made in its affidavit don't offer any better explanations for the continued seizure. All the affidavit [PDF] does is declare the FBI can't say for sure how Ruiz ended up with this money. And, according to the FBI, this uncertainty should be all it needs to maintain permanent control of Ruiz's cash.

The affidavit claims agents can find no legal records pertaining to insurance/injury settlements that would add up to the $57,000 Ruiz claims came from insurance payouts. It also points out Ruiz hasn't filed a tax return since 2018, which it assumes means Ruiz has made no legitimate money since that point. Of course, this could simply mean Ruiz has made income he hasn't paid taxes on, but that's not included in the statutes listed in the government's forfeiture notice.

It also claims Ruiz is connected to unlicensed distribution of marijuana paraphernalia. But it also points out this potentially illegal business does NOT generate much cash flow, so by its own admission, the FBI is stating that the money seized could not have come from this.

On USPV Executor/Conservator paperwork, which Joseph RUIZ (“RUIZ”) left in the box, he listed his email address as holysmokescrafts@yahoo.com. Holysmokescrafts@yahoo is an on-line marijuana paraphernalia business, specializing in turning liquor bottles into marijuana smoking devices. On-line businesses do not typically generate cash, but this business suggests RUIZ may be involved in the cannabis industry in other ways. According to the California Department of Cannabis Control, RUIZ is not licensed in California to participate in the cannabis industry in any way.

The FBI also absurdly suggests that the mere existence of a bank account in Ruiz's name means he has a way to pay for living and medical expenses even without the $57,000 the FBI took from him.

Finally, the February 26, 2021 CTR by J.P. Morgan Chase, referenced above, demonstrates that RUIZ had an active bank account at J.P. Morgan Chase within weeks of the execution of the USPV seizure warrant, suggesting that he had a readily available avenue to pay for rent, groceries and other expenses.

I'm not sure if the Special Agent is aware of this, but the bank does not pay for these expenses. The bank merely holds a person's money and gives them a convenient way to pay for these using their own money, not the bank's. The FBI has Ruiz's money at the moment, not the bank. And I have no doubt that if there were any significant amount of money in that account, the FBI would be trying to seize that too.

This is going to be a tough sell in front of this judge. The FBI is saying the absence of evidence backing Ruiz's claims about the money's origin is the same thing as evidence of criminal wrongdoing. The FBI obviously doesn't know where the money came from but it wants to use a list of 35 federal crimes as probable cause for keeping it. The judge has already smacked the FBI twice for its vague justifications. Presenting a lack of evidence as culpatory evidence of criminal acts likely isn't going to fly.

Filed Under: civil asset forfeiture, fbi, forfeiture, in rem, legalized theft, safety deposit boxes, warrants
Companies: us private vaults

So Much For The Fifth Amendment: Man Jailed For Seven Months For Not Turning Over Password

from the enjoying-your-rights,-citizen? dept

The FBI recently spent more than $1 million for assistance in decrypting a device's contents. It may have overpaid. Alternatives exist, whether it's a $5 wrench or indefinite imprisonment for not helping the government with its prosecution efforts.

A Philadelphia man suspected of possessing child pornography has been in jail for seven months and counting after being found in contempt of a court order demanding that he decrypt two password-protected hard drives.

The suspect, a former Philadelphia Police Department sergeant, has not been charged with any child porn crimes. Instead, he remains indefinitely imprisoned in Philadelphia's Federal Detention Center for refusing to unlock two drives encrypted with Apple's FileVault software in a case that once again highlights the extent to which the authorities are going to crack encrypted devices. The man is to remain jailed "until such time that he fully complies" with the decryption order.

The Fifth Amendment should prevent the government from punishing a person for not testifying against themselves, which is what's being argued by the defendant's representation in its appeal to the Third Circuit. (Although it's actually indirect representation. The government's case is actually against Doe's devices ["United States of America v. Apple MacPro Computer, et al"] and his lawyer is hoping for a stay of the contempt order during the appeal process.)

Mr. Doe… has a strong likelihood of success on the second issue: whether compelling the target of a criminal investigation to recall and divulge an encryption passcode transgresses the Fifth Amendment privilege against self-incrimination. Supreme Court precedent already instructs that a suspect may not be compelled to disclose the sequence of numbers that will open a combination lock — clearly auguring the same rule for any compelled disclosure of the sequence of characters constituting an encryption passcode.

Doe's rep also argues that the All Writs order obtained by the government has no jurisdiction over Doe or his devices.

Mr. Doe’s first claim is that the district court lacked subject matter jurisdiction. The claim stems from the government’s apparently unprecedented use of an unusual procedural vehicle to attempt to compel a suspect to give evidence in advance of potential criminal charges. Specifically, the government took resort not to a grand jury, but to a magistrate judge pursuant to the All Writs Act, 28 U.S.C. § 1651. (Ex. F at 1).

It is black letter law that the All Writs Act never supplies “any federal subject-matter jurisdiction in its own right[.]” Sygenta Crop Protection, Inc. v. Henson, 537 U.S. 28, 31 (2002) (citation omitted). It is equally well-settled that the Act has no application where other provisions of law specifically address the subject matter concerned. Pennsylvania Bureau of Correction v. United States Marshals Service, 474 U.S. 34, 40-42 (1985). The compelled production of evidence in advance of criminal charges is specifically addressed by Rules 6 and 17 of the Federal Rules of Criminal Procedure, which authorize the issuance and enforcement of grand jury subpoenas; and by 28 U.S.C. § 1826(a), which specifies the authorized penalties for a witness who refuses without good cause to give the evidence demanded by the grand jury.

As it stands now, Doe is still being held in contempt of court for refusing to decrypt his devices for investigators. The district court that held him in contempt has refused direct appeal of that order, resulting in the labyrinthine legal strategy of using the government's case against Doe's devices as a vehicle for challenging the lower court's contempt order.

Doe has not been charged, yet he's in prison. Backing up the government's assertions for holding him in contempt are two dubious pieces of hearsay. One is from his estranged sister, who claims to have seen child porn on Doe's computer, but can't actually say whether it was located on the devices the government is seeking to have decrypted. The other is from some sort of law enforcement encryption whisperer, who can apparently see things in the scrambled bits.

The government’s second witness was Detective Christopher Tankelewicz, a forensic examiner with the Delaware County District Attorney’s Office. He testified only that it was his “best guess” child pornography would be found on the hard drives. (Ex. J at 346). According to Tankelewicz’s understanding of the Freenet online network (in which he admits having no training), there were signs on an Apple Mac Pro computer seized with the hard drives of a user accessing or trying to access message boards with names suggestive of child pornography. (Ex. J at 306, 311-312, 339-340). In rather ambiguous testimony, Tankelewicz did not appear to say this meant any image traded over these boards was on the hard drives. (See Ex. J at 303-317, 336-340, 345-350). Instead, he identified a single image he believed there to be a “possibility” was on the drives. (Ex. J at 308-309). As he described it, the image was of “a four or five-year-old girl with her dress lifted up, but the image itself was small so you really couldn’t see what was going on with the image.” (Ex. J at 308).

No one wants to see a sex offender walk away from charges, but at this point, Doe hasn't even been officially charged with anything more than contempt. The problem with that charge is it has no end date. He can either stay in jail or comply with the order, even when the order conjures jurisdiction out of nowhere and violates his Fifth Amendment rights. If the government doesn't have enough evidence to pursue a case against Doe, it should cut him loose until it does.

Filed Under: all writs act, child porn, contempt, encryption, fifth amendment, in rem, jail, password, philadelphia

DEA Takes $16,000 From Train Passenger Because It Can

from the no-due-process-for-dead-presidents dept

There were no drugs and nothing to enforce, but that didn't stop the Drug Enforcement Agency from taking $16,000 from a passenger on a train headed to California.

After scraping together enough money to produce a music video in Hollywood, 22-year-old Joseph Rivers set out last month on a train trip from Michigan to Los Angeles, hoping it was the start of something big.

Rivers changed trains at the Amtrak station in Albuquerque, New Mexico, on April 15, with bags containing his clothes, other possessions and an envelope filled with the $16,000 in cash he had raised with the help of his family, the Albuquerque Journal reports. Agents with the Drug Enforcement Administration got on after him and began looking for people who might be trafficking drugs.

Rivers said the agents questioned passengers at random, asking for their destination and reason for travel. When one of the agents got to Rivers, who was the only black person in his car, according to witnesses, the agent took the interrogation further, asking to search his bags. Rivers complied. The agent found the cash -- still in a bank envelope -- and decided to seize it on suspicion that it may be tied to narcotics. River pleaded with the agents, explaining his situation and even putting his mother on the phone to verify the story.

No luck.

Leaving aside the unsavory hint of racial profiling, there's the fact that the DEA helped itself to cash simply because it was cash. It had no reason to suspect Rivers of anything, but the money was apparently too much to pass up. Even having his story corroborated was useless. And, sure, the DEA agents had no reason to believe anyone Rivers put them in touch with was a trustworthy source of information. (After all, he's some sort of drug dealer, right?) But to grant the DEA the benefit of the doubt for its refusal to believe Rivers' mother's statements is to cut the agents an absurd amount of slack for everything preceding that.

Because what did the DEA actually have here? A young guy and $16,000 in cash. According to the DEA's own statements, it doesn't need anything more than that to effect an asset seizure. And, according to the DEA's own statements, it has no reason to bother with anything more than a cursory look that "confirms" what it wants it to confirm.

[Sean] Waite [DEA - Albuquerque] said that in general DEA agents look for “indicators” such as whether the person bought an expensive one-way ticket with cash, if the person is traveling from or to a city known as a hot spot for drug activity, if the person’s story has inconsistencies or if the large sums of money found could have been transported by more conventional means.

If we leave it to the DEA to define drug activity "hot spots," it becomes any destination any traveler is headed to, especially if there's seizable cash involved. As for story inconsistencies, we're back to "eye of the beholder" territory. If agents are motivated to perform asset seizures, any story can be found to have enough flaws to justify the forfeiture. Waite's statement is very unhelpful, other than to show how completely screwed up asset forfeiture programs are.

As if on cue -- and as if the DEA's Sean Waite is completely unaware of the level of scrutiny and negative public opinion centered on asset forfeiture programs -- he delivers the most tone-deaf of talking points:

“We don’t have to prove that the person is guilty,” Waite said. “It’s that the money is presumed to be guilty.”

Boom. There's your problem. Or rather, Rivers' problem. And the problem of far too many Americans who made the mistake of leaving home with cash on their person. The government doesn't need to prove shit. It can just take and take and take and force those wronged by its "presumptions" to jump through multiple expensive and mostly futile hoops if they hope to recover their "guilty" belongings.

So, what do you tell people like Rivers? "Don't carry cash?" Cash is universal and accepted everywhere. But it's also apparently inherently guilty. Just don't carry large amounts of cash? From Virginia's asset forfeiture stats:

Contrary to the oft-stated defense that these programs are necessary to cripple powerful drug lords and multimillion dollar fraudsters, more than half the cash seized from 2001-2006 fell in the $614-1,288 range and the average worth of vehicles seized has hovered at about $6,000.

And Philadelphia, PA's:

A City Paper review of 100 cases from 2011 and 2012 found the median amount of cash seized by the District Attorney was only $178.

Any cash is inherently suspicious and can be deemed "guilty" by the seizing agency with no corroborating evidence. $16,000 has just made its way into the DEA's funds and if Rivers wants it back, he's likely going to lose a great deal of it to legal fees. He's currently trying to raise the money the DEA took from him via crowdfunding site GoFundMe. Hopefully, he'll get another chance to make his music video without being sidelined by government agents looking to bust some "guilty" cash.

Filed Under: asset forfeiture, civil asset forfeiture, dea, in rem, joseph rivers, legalized theft, money, stealing

IRS Also More Than Willing To Steal Money Under The Pretense Of Crime Fighting

from the because-involuntary-taxes-aren't-thieving-enough dept

The Department of Justice and its underlings (the FBI and nearyl every law enforcement agency in the nation) have turned the ideal of asset forfeiture (defund drug dealers; return money to the defrauded, etc.) into a free-roaming, many-tentacled opportunistic beast, one that "liberates" any amount of "suspicious" cash from tourists, legitimate business owners or anyone else who just happens to have "too much" cash in their possession.

The IRS is in on this as well. The agency doesn't need to prove anyone is guilty of anything before seizing assets. It just needs to feel that things aren't quite right.

For almost 40 years, Carole Hinders has dished out Mexican specialties at her modest cash-only restaurant. For just as long, she deposited the earnings at a small bank branch a block away — until last year, when two tax agents knocked on her door and informed her that they had seized her checking account, almost $33,000.

The Internal Revenue Service agents did not accuse Ms. Hinders of money laundering or cheating on her taxes — in fact, she has not been charged with any crime. Instead, the money was seized solely because she had deposited less than $10,000 at a time, which they viewed as an attempt to avoid triggering a required government report.

The person whose money has been seized isn't necessarily guilty of anything. Hinders hasn't been arrested, nor does there appear to be any sort of ongoing investigation. The IRS hasn't hit Hinders with tax liens for unpaid taxes or subjected her to an audit. All it did was look at records for her deposits and decide that because none of them surpassed the $10,000 mark (which triggers automatic reporting), everything in the account must be somehow illegal.

Here's the brain-bleeding explanation of IRS's civil forfeiture program.

Civil forfeiture is an in rem proceeding against the property itself, not the owner of property. Civil forfeiture is a process that is separated from, and not dependent on, a criminal prosecution. Civil forfeiture can proceed administratively or judicially.

Hinders never needs to be charged. In fact, she never needs to be heard from again. The IRS can seize and hold this money indefinitely and decide whether or not the $33,000 is "guilty" without any input from Hinders. To opportunistic agents, any sub-$10,000 deposit is "evidence" that the depositer is deliberately avoiding reporting requirements, rather doing so for any number of more mundane, less criminal reasons.

Take this IRS seizure from last year, for example.

Since he bought it in 1978, Terry Dehko has owned Schott’s Supermarket in Fraser, Michigan. His daughter, Sandy, began working at the store when she was 12 and now helps her father run it. The IRS has not argued before a court of law that Terry and Sandy have committed a crime, but that has not stopped it from seizing their entire bank account, worth over $35,000. The IRS claims that Terry and Sandy violated federal anti-money laundering laws by making regular deposits of cash in amounts less than $10,000.

But the IRS has offered no evidence that money laundering has occurred. In fact, it has done nothing more than seize Dehko's money. The explanation for Dehko's deposit patterns make perfect sense, but perfect sense won't fund further IRS activity.

Their insurance policy, aimed at small businesses like their grocery store, protects them from theft, but only up to $10,000. Since any dollar over 10,000 left in the store is liable to uninsurable theft, Terry and Sandy make sure their revenues are deposited in their bank account before accumulating above $10,000.

Anyone nailed by an IRS seizure can fight for the return of their money, but there's nothing resembling due process here. Those choosing to do so would have to file a lawsuit intervening in the IRS's forfeiture case. In other words, the situation must be forced. Simply showing up and defending money from accusations of wrongdoing isn't enough. In fact, it isn't even a possibility, at least not in this case. Prosecutors for the Dehko case offered the them a "deal:" an implicit admission of guilt via a plea bargain (presumably on behalf of the guilty money) and the return of 20% of the seized funds.

There are more stories like this. A dairy had $70,000 seized by the IRS after a string of deposits following the sale of farm equipment raised bank eyebrows. Again, prosecutors offered a pennies-on-the-dollar settlement to the couple whose assets were taken. A 27-year-old vending business, heavily reliant on cash flow, had nearly $450,000 seized. Again, "structuring" of deposits was the excuse used to justify the government's theft of earned income. The IRS civil forfeiture system is every bit as crooked as the one being abused by law enforcement agencies. Perverted incentives have demolished restraint and fairness and turned it into an extremely efficient way to stockpile cash.

According to the Institute for Justice, the Department of Justice’s Asset Forfeiture Fund held $93.7 million of seized assets in 1986. In 2008, that fund was greater than $1 billion…

Fortunately for the Dehkos, they won their battle against the government and had the seized funds returned. The IRS was ordered to produce proof of wrongdoing or release the funds. It chose the latter and was additionally held responsible for $71,500 in attorneys' fees. Dropping the case also allowed the IRS to walk away from the debacle without further legal examination of its civil asset seizure policies. So, while the Dehkos obtained a win, the IRS ultimately learned nothing from the experience. The fact that the average forfeiture battle racks up over $20,000 in legal fees means that more often than not, the IRS will get to keep nearly everything it seizes.

Filed Under: cash, civil forfeiture, government, in rem, irs, stealing