Carole Hinders has run a moderately successful, financially well-managed restaurant business in Spirit Lake, Iowa for years. But now she’s in debt up to her eyeballs and able to keep operating only on the goodwill of her suppliers and creditors. She can barely afford to eat, because she has to pour every cent she makes into her working capital.
Jeff Hirsch’s distributorship business in Long Island has been successful and in the black for nearly 30 years. Now he’s almost half a million dollars in the red and facing the loss of his family’s business.
What’s to blame for these sudden reversals of fortune? A sudden downturn in the market? Business bet gone wrong? Lawsuits? No — these were cases of asset forfeiture, as both of these small businesses had their bank accounts cleaned out without warning … by the federal government.
NOT Safe for Legal Tender
It’s all about the cash.
In Carole’s case, the government claimed that she “structured” her cash bank deposits to keep them under $10,000. Banks are required to report cash transactions in excess of $10,000 to the IRS. It’s illegal to break up one’s deposits or withdrawals — or “structure” them — for the purpose of evading those reporting requirements.
But it’s not illegal to deposit less than $10,000 in cash when you have a legitimate business purpose for doing so. Carole takes only cash at her restaurant, and her insurance doesn’t cover cash-on-hand amounts in excess of $10,000.
But the government grabbed Carole’s money with no warning, no notice, and has held it for more than a year without any hearing before a judge. That’s because “civil forfeiture,” the process used to take her money, doesn’t provide even the basic due process of a prompt hearing.
“The protections our Constitution usually affords are out the window,” says Louis Rulli, a law professor at the University of Pennsylvania, a leading forfeiture expert. Property doesn’t have the rights of a person. There’s no right to an attorney and no presumption of innocence. People whose funds are seized who want to fight back often find that the cost far exceeds the value of their lost money. Washington, D.C., charges up to $2,500 simply for the right to challenge a police seizure in court, which can take months, or even years, to resolve.
Asset Forfeiture: Good Work if You Can Get It
Between 2005 — when it made 114 seizures — and 2012 — when it made 639 — the IRS seized $242,627,129 in alleged “structuring” cases like Carole’s. The IRS held on to that money for an average of 356 days before it returned any of it. Only 20% of the cases resulted in any charges. The median amount seized by the IRS was $34,000, according to an Institute for Justice analysis, while legal costs can easily mount to $20,000 or more.
The New York Times reports informed critics of this practice describe a “law enforcement dragnet, with more than 100 multiagency task forces combing through bank reports, looking for accounts to seize.”
They do this because it’s profitable: government agencies can keep a slice of seized funds or property to use as they please. Local police forces are known to sponsor internal competitions to see who can seize the most cash, which is then used for guns, to top up pension funds or for office Christmas parties.
Banks, of course, are deathly afraid of the consequences of failing to inform the IRS about “suspicious” patterns of deposits. But they are strictly forbidden from warning customers that their deposit habits may be illegal or educate them about structuring — unless they ask, in which case they are silently handed a boilerplate IRS pamphlet.
Enough, Already: Why You Should Buy a Safe
With your bank account vulnerable to the greedy and indiscriminate hands of the government, one of the best courses of action to take is to purchase a household safe and assemble a stash of physical cash. The amount should be at least enough to cover several months’ expenses and should be in at least two stable currencies. This will give you a secure location outside the current banking system to protect your assets.
The first step accomplished will leave you confident to begin long-term planning for your protection, such as offshore investments and a second residence. This week I was on the lovely Caribbean island of Dominica doing some research for Offshore Confidential. The people weren’t rich, but they were unfailingly cheerful, positive and proud of their little country. Perhaps that’s because they don’t pay any income tax. The government has tried, but they just refuse.
I couldn’t help but admire the true freedom of these people, especially when compared to the feudal serfs we have become in the so-called “land of the free.” It reminded me that there are plenty of places on the planet to be happy, prosperous and free … as long as you search them out and take steps to get yourself and your wealth there before the U.S. government robs you blind.
Offshore and Asset Protection Editor
Enter your email below to get The Sovereign Investor Daily absolutely Free!