IRS Agrees to Return Money Seized From Bakery After Institute for Justice Files Lawsuit But Continues with Retaliatory Tax Investigation
- Three years ago, the IRS used civil forfeiture to seize more than $68,000 from Vocatura’s Bakery because the bakery’s owners deposited cash in the bank in amounts under $10,000.
- The IRS kept the Vocaturas’ money for three years and sought to pressure the Vocaturas to plead guilty to criminal charges of “structuring” bank deposits.
- In retaliation for the Vocaturas’ refusal to give up their property, however, the IRS has launched an unbounded fishing expedition into eight years of the bakery’s financial records.
- Just hours after the Institute for Justice filed a federal lawsuit on Tuesday, the IRS agreed to return all of the bakery’s money but is continuing its retaliatory investigation.
Arlington, Va.— Three years ago, IRS agents conducted an armed raid of Vocatura’s Bakery, a nearly 100-year-old family bakery in Norwich, Connecticut and seized more than $68,000 because the business deposited cash in the bank in amounts less than $10,000.
When the Vocaturas refused to give up their property, the IRS retaliated by launching a criminal tax investigation and demanding eight years’ worth of practically every business record for the bakery. On Tuesday, just hours after Vocatura’s Bakery and the Institute for Justice sued the IRS to get the money back, the IRS announced it would return all of the money but is continuing with its retaliatory tax investigation.
“Three years after taking the Vocaturas’ money and forcing them into a prolonged legal nightmare, the IRS is still desperately searching for some way to retroactively justify the seizure,” said IJ Attorney Robert Everett Johnson, who is representing Vocatura’s Bakery. “The IRS should not be launching a fishing expedition into eight years of a business’s financial records just because the owners will not voluntarily agree to forfeiture of their money.”
“We finally got our money back, and now we just want the government to leave us alone,” said David Vocatura, one of the family members targeted by the IRS. “The last three years have been the longest of my life, and all because of how we deposited our money in the bank. Now we feel like the government just refuses to let us go.”
The IRS seized the bakery’s money under so-called structuring laws—laws that were intended to target real criminals but that allow the IRS to seize the entire bank accounts of legitimate businesses. The government has continued to pursue forfeiture of the bakery’s money despite an October 2014 change in IRS policies that was supposed to prevent precisely this type of case.
In the three years since the seizure, federal prosecutors never once brought their case before a judge and instead sought to pressure the bakery’s owners to agree to a “voluntary” forfeiture. Most recently, in February 2016, a prosecutor demanded that two Vocatura brothers sign an outrageous plea agreement: Plead guilty to criminal charges of structuring, agree to a three-to four-year prison sentence, forfeit the $68,000 seized from the bakery and hand over an additional $160,000 of personal assets.
The Vocatura brothers refused to sign the agreement because they believe they have done nothing wrong. In retaliation, and in an attempt to retroactively justify the seizure, the IRS and the federal prosecutor served the bakery with a wildly overbroad grand jury subpoena demanding practically every record generated by the business over the past eight years.
“This is yet another example of prosecutors using strong-arm tactics to threaten forfeiture victims with prosecution and jail time in order to pressure them to surrender their property in a plea deal,” explained IJ Attorney Dan Alban, who is also representing the bakery. “The government threatened the Vocaturas with an investigation if they refused to give up their money. The Vocaturas refused anyway, and now the government is carrying through with that threat.”
Today, the House Ways and Means Oversight Subcommittee will hold a hearing at 9:30 a.m., investigating IRS enforcement of the structuring laws. The Subcommittee held its first hearing on this issue in February 2015. Today’s hearing is expected to examine the IRS’s ongoing abuse of structuring laws and refusal to return money that has been wrongly seized. IJ attorney Robert Everett Johnson will testify at the hearing, as will IJ client Randy Sowers, a Maryland dairy farmer whose money was forfeited because of alleged structuring of his bank deposits.
Additionally, Congress is preparing to take action to curb abuse of forfeiture laws. On Thursday, May 19, the DUE PROCESS Act was introduced, which would limit civil forfeitures for structuring to cases in which the funds are derived from an illegal source or used to conceal illegal activity. This important reform will help to prevent small businesses like Vocatura’s Bakery from being unlawfully targeted for a legitimate business practice.
The Institute for Justice is aided by local counsel Ross Garber of Shipman & Goodwin LLP. IJ is leading the fight against civil forfeiture nationwide. To learn more about this case and IJ’s national efforts, visit www.ij.org