Michigan Forfeiture Victims To Get Their Day in Court

J. Justin Wilson
J. Justin Wilson · November 8, 2013

Arlington, Va.—Afederal judge ordered a hearing for December 4 regarding the IRS’s seizure of a family grocery store’s entire bank account. The case has received significant media attention, including a recent profile in The Economist.

The order, issued by Judge Terrence Berg of the U.S. District Court for the Eastern District of Michigan, directs the IRS to produce witnesses to testify about the IRS’s practices in handling a forfeiture claim filed by Terry Dehko and Sandy Thomas. Terry and Sandy, the owners of Schott’s Supermarket in Frasier, Mich., were astonished in January 2013 to discover the IRS seized their store’s entire checking account without warning. On September 25, they teamed up with the Institute for Justice to challenge the seizure and to seek a prompt return of their property.

“We’re pleased that Terry and Sandy will finally get their day in court to challenge the seizure of their store’s entire bank account,” said IJ Senior Attorney Clark Neily. “But the fact that it took nearly a year for them to get that hearing highlights the due process problems with civil forfeiture law. No American should have to wait so long without an opportunity to challenge the seizure of their property.”

The judge further ordered the government to explain why it withheld the seizure warrant and supporting affidavit from Terry and Sandy. The order instructs the government to disclose these documents unless there is a legitimate reason for keeping them secret.

Unfortunately, civil forfeiture—unlike criminal forfeiture—allows the government to take cash, cars and other property from Americans without charging them, let alone convicting them, of any crime. Federal civil forfeiture law violates due process because federal law denies people who have had cash taken a prompt hearing before a judge to challenge the seizure. Perversely, the very agencies that seize the money pocket the proceeds of civil forfeitures.

Like most grocery store owners, Terry and Sandy receive cash every day from their customers. They make frequent deposits of cash at the bank across the street to avoid letting too much cash accumulate in their store. Moreover, their insurance policy specifically limits coverage for theft or other loss of cash to $10,000—a common provision for small-business policies. Federal law requires banks to report cash transactions above $10,000, and it is illegal to “structure” cash deposits into smaller amounts for the purpose of avoiding this requirement.

The IRS alleges that Terry and Sandy “structured” their store’s deposits. Yet in 2012, the IRS conducted an anti-money-laundering examination of Terry and Sandy’s store, thoroughly reviewing their books and policies, and gave the store a clean bill of health. Only nine months later, the IRS obtained a secret warrant and cleaned out Terry and Sandy’s entire bank account (over $35,000) on the grounds that their frequent cash deposits—deposits of which the IRS should have been well aware when it issued its clean bill of health—violated federal “structuring” law. The government never charged Terry and Sandy with any crime and refuses to return their money.

The Institute for Justice has come to the defense of Americans nationwide to fight forfeiture abuse, including the owners of the Motel Caswell in Massachusetts, the owner of a small commercial building in California, and the owner a truck seized in Texas. In 2010, IJ published the landmark report on civil forfeiture, Policing for Profit.

For more on today’s lawsuit, visit ij.org/case/miforf/. Founded in 1991, the Virginia-based Institute for Justice is the national law firm for liberty.