Taken: Federal Lawsuit in Michigan Challenges Forfeiture Abuse

J. Justin Wilson
J. Justin Wilson · September 25, 2013

Arlington, Va.
—Can the government use civil forfeiture to take your money when you have done nothing wrong—and then pocket the proceeds?

That is the question to be answered by a major federal lawsuit filed today by Terry and Sandy Dehko—owners of a family grocery store in Fraser, Mich.—and the Institute for Justice (IJ). In January 2013, Terry and Sandy were astonished to discover the federal government seized their entire checking account without warning, even though the Dehkos did nothing wrong.

“Federal forfeiture law allows the government to take your entire bank account just because it doesn’t like the way you deposit or withdraw your money,” said IJ Senior Attorney Clark Neily. “The government should not be allowed to just show up at your doorstep like a playground bully and take away your milk money. But that’s exactly what the government did to Terry and Sandy.”

Like most grocery store owners, Terry and Sandy receive cash every day from their customers. Their commonsense practice has always been 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.

Over the past several years, however, the government has been collecting vast amounts of private information about Americans, including entrepreneurs like Terry and Sandy that deal in cash. In 2001, the Patriot Act amended federal law to make it easier for the government to seize money and other private property through civil forfeiture. Federal law requires banks to report cash transactions above $10,000, and it is illegal to “structure” cash deposits for the purpose of avoiding this requirement.

In 2010, the IRS visited Terry and Sandy and reviewed their banking practices. 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 Dehkos a clean bill of health. After the audit, the IRS sent Terry and Sandy a letter clarifying that “no violations [of banking laws] were identified.”

But 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.

Terry and Sandy are still waiting for a hearing before a judge. Unfortunately, civil forfeiture allows the government to violate due process by seizing private property from Americans without ever convicting or even charging them with wrongdoing. Perversely, the government then pockets the proceeds while providing no prompt way to get a court to review the seizure.

“Last year alone, the government took in more than four billion dollars in forfeiture money,” said IJ Attorney Larry Salzman. “Taking money from innocent people like Terry and Sandy is wrong. Thankfully, the Dehkos are prepared to go all the way to the Supreme Court if that’s what it takes to vindicate the right to private property for Americans everywhere.”

“We didn’t do anything wrong,” said IJ client Sandy Dehko. “That’s why we teamed up with the Institute for Justice, to protect the rights of all Americans against civil forfeiture.”

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 ownerof a truck seized in Texas. In 2010, IJ published the landmark report on civil forfeiture, Policing for Profit.