IRS Used Asset Forfeiture to Steal Business Owner’s Life Savings For no Reason

Lyndon McLellan, a rural North Carolina convenience store owner, woke up one day to discover the IRS had seized every penny of the $107,000 in his bank account. It was all the money he had put away over the course of 13 years of assiduous, hard work.

“This is all I’ve ever done. I was raised in the store business; I’m here 12-13 hours a day, seven days a week,” he explains. “To make this kind of money selling soft drinks, cigarettes and hot dogs, somebody’s gotta work, okay? It wasn’t just handed to us. It was taken from us – but it wasn’t handed to us.”

McLellan hasn’t been accused of a crime. The IRS just seized his money. And even though the IRS announced it was changing its civil forfeiture policy in October of last year – a result of growing public outcry in opposition to the practice – it didn’t relent in McLellan’s case, which predated the announcement by a few months.

For years, McLellan had been making periodic cash deposits into his account. The federal government requires that bank customers fill out a currency transaction report to document any single deposit in excess of $10,000. But McLellan had been depositing his earnings in increments beneath that threshold – for more than a decade.

The IRS had, until its policy change last year, exercised its own discretion in invoking its power of civil asset forfeiture against these smaller depositors. The spirit of the forfeiture law, as it applies to McLellan’s case, assumes that he was sitting on a stack of currency but elected to deposit it in small increments to avoid the government’s reporting requirements.

But that’s clearly not what he was doing – he was depositing what he was earning, as he was earning it.

It took McLellan years to accumulate the small nest egg the IRS took away, and each deposit represented a small milestone. There was never a giant stash of cash. And both before and after its policy change, the IRS didn’t care. In the aftermath of a February congressional hearing on forfeiture practices, the IRS’ position revealed itself in pretty cruel fashion.

From The New York Times:

During a congressional hearing in February, Representative George Holding, a Republican from North Carolina, referred to Mr. McLellan’s case, saying no crime other than structuring had been alleged. “If that case exists, then it’s not following the policy,” John Koskinen, the commissioner of the I.R.S., said.

But the prosecutor on the case, Steve West, was unmoved. Notified of the hearing by Mr. McLellan’s lawyer at the time, he responded with concern that the seizure warrant in the case, filed under seal but later given to Mr. McLellan, had been handed over to a congressional committee, according to an email exchange provided to The New York Times by the Institute for Justice, a libertarian public interest law firm that has taken over the case.

“Your client needs to resolve this or litigate it,” Mr. West wrote. “But publicity about it doesn’t help. It just ratchets up feelings in the agency.” He concluded with a settlement offer in which the government would keep half the money.

So, as it stands, the government is offering McLellan the sweet deal of getting back half of his $107,000 in order to make the forfeiture case – a case in which McLellan hasn’t been charged with a crime, but which forces him to bear the burden of proof if he wants all his money returned – go away.

The Institute for Justice, which produced the video above, is advocating on McLellan’s behalf in the ongoing effort to right this injustice and return all of his hard-earned money. You can read more about that effort here.