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.
Looking at what the policy directive says, its restrictions on asset forfeiture are underwhelming. A listing of a few of the significant problems with the supposed rollback follows.
First, to the extent the memorandum defining the DOJ policy directive includes restraints on asset seizures, those restraints only apply to seizures based on the allegation of structuring. The memorandum does not address, and thus leaves unrestrained, seizures arising from reports of deposits or withdrawals of $10,000 or more. It should go without saying that moving $10,000 or more in cash at one time is no more wrong and deserving of punishment than are several actions that over time add up to moving $10,000 or more in cash. Nevertheless, if you dare to move $10,000 or more in cash all at once, the memorandum does not offer you any hope whatsoever.
Second, the DOJ memorandum confesses no DOJ wrongdoing concerning any asset forfeitures it has ever undertaken or defended. Indeed, no concern whatsoever is expressed in the memorandum for victims of the asset seizures. The two introductory paragraphs of the memorandum make clear that the DOJ is in no way admitting even one instance, much less many, where its seizures based on structuring allegations were unjust. Instead, the policy announced in the memorandum is described as arising from the DOJ’s “ongoing review of the federal asset forfeiture program.” Consistent with this “housekeeping” explanation for the origin of the policy change, the memorandum declares that “The guidance set forth in this memorandum, which is the result of that review, is intended to ensure that our investigative resources are appropriately and effectively allocated to address the most serious structuring offenses, consistent with Departmental priorities.”
There you have it: The purpose of the policy change is entirely to promote DOJ efficiency in accomplishing its priorities. Those DOJ priorities are in no way changed by the policy directive. Liberty violations caused by asset seizures are not taken into account, and the priorities of asset seizure victims are not considered relevant.
Third, the DOJ memorandum continues to allow asset seizures based on nothing more than multiple cash transactions adding up to over $10,000. In the first paragraph of section one of the memorandum the Justice Department seems to be saying it is prohibiting seizing funds for structuring except when a criminal charge has been filed or “unless there is probable cause that the structured funds were generated by unlawful activity or that the structured funds were intended for use in, or to conceal or promote, ongoing or anticipated unlawful activity.” Even this language alone would leave incredible leeway for seizures as it allows the DOJ, based on its own assertion of probable cause, to seize funds without even having a court hearing at which the person whose funds are seized can argue his case. Further, the memorandum goes on to weaken even the internal affirmation that must be made in an asset forfeiture by stating that “For these purposes ‘unlawful activity’ includes instances in which the investigation revealed no known legitimate source for the funds being structured.” There you have it. The person whose cash is seized is assumed guilty until proven innocent.
Fourth, while the DOJ memorandum includes a promising general rule that cash seized based on structuring must be returned after 150 days if a prosecutor has not filed “a criminal indictment or a civil complaint against the asset,” that rule offers little real protection. Initially, this rule still allows keeping the cash with no court process even initiated for five months. The power to, on a whim, retain a person’s confiscated money for nearly half a year also gives the DOJ plenty of leverage to pressure an asset seizure victim to enter a deal allowing the US government to keep a chunk of the seized money, just like dairy farmer Randy Sowers did.
Further, the “protection” that kicks in after a victim has been deprived of his money for nearly half a year allows for the bypassing of the criminal system that can hold the government to higher burdens of proof. It also maintains the government-aiding fiction that the structuring of the cash itself is some sort of crime by terming the cash as the “defendant” in a legal action.
Even this rather weak protection can be entirely bypassed via an exception you can drive a truck through. Here is the exception: The cash can be kept forever if approval is obtained from the right higher up in the DOJ — a US Attorney or the Chief of the Asset Forfeiture and Money Laundering Section (AFMLS) of the DOJ, depending on the circumstances. So, the DOJ has to go to a court after several months unless a DOJ manager says not to bother with that.
Fifth, the DOJ memorandum “graciously” mandates that settlements that might provide for the return of a portion of cash seized for structuring must comply with requirements found in two DOJ policy manuals. If you maintain high hopes that these manuals will protect the rights of cash seizures victims, you haven’t been paying close attention. The system is stacked in the government’s favor. This provision, like other provisions in the policy directive, mandates little to no improvement in how victims will be treated.
Sixth, the concluding paragraph of the memorandum makes clear that the DOJ is not bound by anything in the memorandum, noting that the memorandum “is intended solely as a guide to the exercise of investigative and prosecutorial discretion, and does not alter in any way the Department’s authority to enforce federal law.” And to put suspenders on the belt, the paragraph continues with a sweeping renunciation of the idea that the memorandum amounts to any change that any victim may rely upon, stating, “This memorandum is not intended to, does not, and may not be relied upon to create any rights, substantive or procedural, enforceable at law by any party in any matter civil or criminal.”
The Hastert prosecution, however, is probably the clearest indication that the March 31 “rollback” is nothing more than public relations cover for the US government continuing its anti-structuring prosecutions, its asset seizures, and its larger war on cash. Initiating such a high-profile prosecution in direct conflict with the public relations message of the March 31 DOJ policy directive announcement is a pretty definitive way of saying “we really didn’t mean any of that rollback stuff.”
A real rollback, or even the total abandonment, of privacy and liberty violating policies comprising the war on cash can only be hoped for if public pressure for such a change increases instead of being mollified by government PR efforts.
The many Americans who despise Hastert for his activities in politics or alleged sexual misconduct should remember that in his legal battle against the DOJ Hastert is just another victim, like dairy farmer Randy Sowers and so many others, targeted for destruction by the US government. The government can persecute and steal from these individuals because it refuses to tolerate privacy from its prying eyes. If we want to end the US government’s war on cash, war on privacy, and war on liberty, how can we turn our backs on Dennis Hastert?
