Federal prosecutors have agreed to return nearly $447,000 to a small business whose assets had been seized by the Internal Revenue Service and Treasury Department agents as part of the controversial civil forfeiture program.
In 2012, the IRS seized $446,651.11 from a Long Island convenience store distributor, Bi-County Distributors, and its owners, the Hirsch family, based on a pattern of cash deposits that had been deemed suspicious by federal agents. Federal law requires banks to report cash deposits larger than $10,000 to the IRS. Since the Hirsches frequently made deposits in amounts less than $10,000, the government claimed they were seeking to evade the reporting requirement.
Civil forfeiture laws allow the government to seize property without charging anyone with, let alone convicting them of, a crime. The government acknowledged in its agreement to return the money that the Hirsch brothers, who operate Bi-County, were never charged with any crime. In fact, all of the money deposited by the Hirsches was lawfully earned from their small business, according to the Institute for Justice, a libertarian law firm in Arlington, Va., that represented the Hirsches. The Institute for Justice is the same organization that won a victory against the IRS in 2013 in the case of Loving v. IRS that invalidated the IRS’s efforts to require mandatory testing and continuing education of tax preparers.
“This is a significant victory not only for the Hirsch brothers, but for property owners around the country,” said Institute for Justice attorney Larry Salzman in a statement. “No American should lose their bank account or other property to law enforcement without even being charged with a crime.”
In the settlement, federal authorities noted that Bi-County had retained a forensic accountant who analyzed the cash activity in the bank account and the income that Bi-County had reported to the IRS in its corporate tax returns and helped prepare a report that Bi-County submitted to federal authorities during the settlement negotiations in the case.
“Nobody in America should have to live through the nightmare we’ve experienced,” said Jeffrey Hirsch, the oldest of the three brothers. “Civil forfeiture nearly destroyed our business even though we did nothing wrong.”
The case generated national attention including a front-page article in The New York Times and an editorial in The Wall Street Journal. During the two-and-a-half years that the government held the money, federal prosecutors filed no formal action in court to complete the forfeiture, which deprived the Hirsch brothers of an opportunity to contest the seizure in court.
Last October, the family teamed up with the Institute for Justice and sued to force the government into court. Rather than defend its actions in response to the lawsuit, the government agreed to return all of the seized money and to not pursue forfeiture of the funds in any civil or criminal action in the future.
Two high-ranking members on the House Ways and Means Committee, former chairman Dave Camp, R-Mich., and ranking member Sander Levin, D-Mich., recently filed bipartisan legislation to curb civil forfeiture abuses similar to the Hirsches’ case (see Congressmen Introduce Bill to Curb IRS Civil Asset Forfeitures). Civil forfeiture has also become an issue in the confirmation of the nominee for U.S. Attorney General, Loretta Lynch, whose office presided over the Hirsches’ case.
Last month, the Institute for Justice convinced federal prosecutors to drop a separate civil asset forfeiture case involving the IRS (see Prosecutors Drop IRS Civil Forfeiture Case).
“Unfortunately, this case is far from unique, and the nightmare continues for other property owners,” said Institute for Justice attorney Robert Everett Johnson. ”This case vividly illustrates the dangers associated with civil forfeiture, which turns the principle of innocent-until-proven guilty on its head by forcing property owners to prove their own innocence to get their property back.”