Back on March 31, the US Department of Justice (DOJ) announced what many media reports heralded as a big rollback in the use of structuring allegations to justify seizing assets from individuals. Yet, here we are less than three months later with the DOJ prosecuting former US House of Representatives Speaker Dennis Hastert (R-IL) for two crimes — structuring and lying to the Federal Bureau of Investigation (FBI) about why he employed structuring.
Despite the DOJ’s March 31 talking points used to allay people’s worries about the US government punishing people for the nonviolent action of moving cash in or out of their own accounts in a manner the US government disapproves, the Hastert prosecution shows that business as usual continues at the DOJ. In fact, the willingness of the DOJ to undertake this very high-profile prosecution where there is no alleged crime beyond structuring and lying about structuring may well indicate an escalation in the US government’s structuring crackdown.
According to the DOJ, Hastert faces punishment of up to 10 years in prison and a $500,000 fine if he is convicted. It is thus hard to argue that Hastert is in a better position than the many people whose money has been seized because of structuring allegations but who can choose to just walk away with a significant monetary loss. Hastert’s legal bills are mounting to defend himself against the DOJ that can spend without restraint in pursuit of a conviction. Even if Hastert can beat the charges or make a deal so he can walk free, his financial loss will be very high.
Though allegations are flying that Hastert has committed “sexual misconduct” (criminal or not), none of that is used as a basis for his prosecution. Instead, as Conor Friedersdorf notes in The Atlantic, “The alarming aspect of this case is the fact that an American is ultimately being prosecuted for the crime of evading federal government surveillance.” “That has implications for all of us,” continues Friedersdorf.
Indeed, Ludwig von Mises Institute President Jeff Deist categorizes Hastert’s prosecution as part of the US government’s larger war on cash that puts Americans’ privacy and liberty in peril.
One of the great benefits of using cash for transactions is the anonymity it can provide, allowing, for example, buyers and sellers to keep their identities secret from one another and from the snooping eyes of third parties, including governments. But, this benefit from using cash is under attack in America. One of the primary means of attack is the US government’s practice of seizing cash from individuals who at one time move $10,000 or more in cash, or who engage in multiple actions that together move $10,000 or more in cash.
Carl Menger Center for the Study of Money and Banking President Paul-Martin Foss lays out in his article “The Kafkaesque World of Financial Reporting and Asset Forfeiture” the process by which American financial institutions — from banks to money wiring services — have been ratting to the US government on their customers’ cash activities. Foss explains how the US government has in turn used that information to seize large sums of money from people without the presentation of any proof that the individuals committed any crimes — other than moving their own cash. As Foss details, financial institutions are required to report all cash transactions of $10,000 or more via a “currency transaction report” as well as, via a “suspicious activity report,” all transactions of less than that amount that may be seen as “structuring” to avoid the $10,000 reporting threshold. Foss points to the enactment of a law nearly thirty years ago as putting this process into high gear by relieving financial institutions of all liability for their betrayals of customers’ privacy:
Because the Money Laundering Control Act of 1986 released banks from liability for reporting “suspicious” transactions to law enforcement, there is no reason for banks not to report your transactions to the government. They cannot be held liable for reporting too much of your information, but they could be prosecuted by the government for reporting too little information, if the government decides that suspicious activity was taking place and was not being reported. So to cover their own derrieres and keep from going to jail, banks report as much information on you as they can.
The result is the government seizing people’s cash though there is no proof whatsoever that the individuals did anything illegal aside from moving their own cash. The burden is then on the seizure victims to go through a difficult and often unsuccessful effort to regain their funds. The process to regain seized money can be very costly with high lawyer fees that may be impossible to pay because of the deprivation of the seized funds that started all the legal mess. As Foss notes, this is Kafkaesque.
Ron Paul Institute Advisory Board Member Andrew Napolitano relates in an April Fox News interview some of the absurd travails of dairy farmer Randy Sowers from whom the US government — through the Internal Revenue Service — is keeping nearly $30,000 dollars it seized from him based merely on the fact that Sowers deposited large amounts of cash from his farm’s sales in his own bank account. Going to the root of the problem, Napolitano explains that “the true culprit is the Congress that intentionally wrote these laws very loose so that the IRS does not even have to have any evidence that the structuring is unlawful; it could just be coincidental.”
Rachel Wiener describes more of Sowers’ predicament in the Washington Post. Initially, she relates, the US government had seized $295,220 from Sowers. That seized money was used against Sowers as leverage to pressure him to agree to allow the government to keep 10 percent. Wiener concludes that, three years after the seizure, Sowers has not gotten back any of that 10 percent “and almost certainly never will.” This puts Sowers in the same boat with many other victims of the US government’s seizures program. Wiener explains:
Based on Freedom of Information Act requests, the libertarian Institute for Justice has reported that the Internal Revenue Service has seized almost a quarter-billion dollars in such cases from 2005 to 2012, about half of which was never returned. A third of those cases, like the Sowers case, did not involve allegations of criminal activity beyond the structured deposits themselves.
Some hope for restraint in the US government’s pursuit of such cash seizures may seem to be offered by the issuing on March 31 of a new DOJ policy directive. The press release announcing the policy directive does have a promising title: “Attorney General Restricts Use of Asset Forfeiture in Structuring Offenses.” But, from past experience with DOJ policy changes supposedly restricting prosecutions of people complying with state medical marijuana laws and “equitable sharing” of property seizures with state and local police, we are well advised to be very skeptical of any DOJ announcements of limitations on policing or prosecuting powers.
While the DOJ received some media coverage heralding its March 31 announcement, a close look at the supposed rollback shows that it is illusory, amounting to little more than an appeal by the US government for us to just trust it to behave better.
Continue reading at the Ron Paul Institute for Peace and Prosperity.
