Randy and Karen Sowers are not your typical terrorists or mob financiers. They run the popular South Mountain Creamery and sell their produces at farmer’s markets and local events. The Somers however were confronted recently by FBI agents who informed them that the Justice Department was moving to seize their accounts under a law designed to thwart mob and terrorist financiers. They had made repeated deposits under $10,000. The Justice Department has seized their account of $62,936 under the law as illegal “structuring.” The criminal provision is written in a way to avoid the need for actual intent or knowledge of the illegality.
The FBI documented nearly three-dozen deposits into their company’s bank account just under $10,000. The Justice Department takes the position that the transactions alone are sufficient to seize private assets.
Yet few people are aware that such a pattern can be deemed illegal structuring. Perhaps our tax lawyers can fill in the details, but I assume that this money is still reported as income by the business regardless of the deposit amount. Thus, there is no evidence of a benefit to the company in structuring.
What is remarkable is that this is a trap intentionally set by Congress at the demand of the Justice Department. In 1994 in Ratslaf v. U.S, Justice Ruth Ginsburg “interpreted the “willfully” element under 31 U.S.C. Sec. 5324 to require proof that the defendant knew the structuring was illegal. That would seem to create a fair and workable solution to structuring — confining it to the truly criminal element. However, Congress responded to the opinion by removing wilfulness from the statute.
The provision states in part:
(a) Domestic Coin and Currency Transactions Involving Financial
Institutions. – No person shall, for the purpose of evading the reporting requirements of section 5313(a) or 5325 or any regulation prescribed under any such section, the reporting or recordkeeping requirements imposed by any order issued under section 5326, or the recordkeeping requirements imposed by any regulation prescribed
under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91-508 –
(1) cause or attempt to cause a domestic financial institution to fail to file a report required under section 5313(a) or 5325 or any regulation prescribed under any such section, to file a report or to maintain a record required by an order issued under section 5326, or to maintain a record required pursuant to any regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91-508;
(2) cause or attempt to cause a domestic financial institution to file a report required under section 5313(a) or 5325 or any regulation prescribed under any such section, to file a report or to maintain a record required by any order issued under section 5326, or to maintain a record required pursuant to any regulation prescribed under section 5326, or to maintain a record required pursuant to any regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91-
508, that contains a material omission or misstatement of fact; or
(3) structure or assist in structuring, or attempt to structure or assist in structuring, any transaction with one or more domestic financial institutions.
According to reports, Randy Sowers told agents that “during the farmers’ market ‘season,’ his weekly cash receipts were on the order of $12,000 to $14,000.” He admitted that “he kept his cash deposits under $10,000 intentionally so as not to ‘throw up red flags.’” He says that he was advised to keep the checks below $10,000 by a teller to avoid forms being filed. Yet, there is no charge of tax evasion. Thus, while the Justice Department insists that there is “a reasonable belief” that there was “an intentional scheme or plan to hold back cash receipts,” it is not clear what benefit the family derived from the practice beyond simply not being reported for such checks. I could understand if this was done for the purpose of some criminal benefit, but there is no indication of a collateral crime.
What do you think?
Source: Frederick News
Personanongrata:
“There are way too many federal prosecutors and FBI agents if they have the time and resources to harass people for these non-crimes being foisted upon the Sowers family.”
It’s not a “noncrime” — perhaps it should not be a crime, but it is, at present, a crime.
But your point concerning the use of resources for this is, in one sense, well-taken. For example, when I would try to get a bank fraud case prosecuted in the Central District of California in the 1990’s and early 2000’s, the U.S. Attorney’s Office in that district had a policy of declining any prosecution unless the loss was at least $1 million. Other districts had lower thresholds, but $500,000 was relatively common. In that sense, going after the Sowers seems like it should be a lower priority.
On the other hand, it certainly cost less than $30,000 to investigate and seize the accounts. All it took was someone to review the Suspicious Activity Report (about 5 minutes), someone to subpoena the bank records (maybe 10 minutes, since the format is computerized), a review of the bank records (maybe an hour), and perhaps an hour to prepare the seizure papers (again the format is computerized). Then they sent some number of FBI agents over to serve the papers on the Sowers and the bank. All in all, the government turned a tidy profit on this — which is why it was done. The Sowers were easy marks — they did not have a defense, but they did have money.
Oky1:
“but I’d like to see people with cases like this one successfully sue, get a positive judgment”
The problem is that they would lose that lawsuit; on the facts as given, it’s not even close — it would be resolved in favor of the government on summary judgment.
There are way too many federal prosecutors and FBI agents if they have the time and resources to harass people for these non-crimes being foisted upon the Sowers family.
All of these alphabet government departments need to be put on a boat, sent out to sea and sunk.
Couldn’t President Obama write a document telling the gov’t NOT to bother these types of seasonal cash businesses for their cash deposits of ANY amount. Then the ACLU should get on board and sue on behalf of folks like this who have standing if they gave up $$. (there must be many more). Then, people get ready with your chalk supplies and write lots of messages on lots of sidewalks all around DC.
Michael Beaton,
To respond to your request for Professor Turley to “chime in,” that is not his style. He prefers to throw out an interesting and often complex situation and let commenters drive the discussion. As for the government “taking” things, I think the best response to that is, “it depends.”
Governments everywhere have retained for themselves the right to tax and eminent domain. Same for seizing ill-gotten gains. Where this thing has gone off the rails is who and how “ill-gotten gains” are defined. I have heard numerous horror stories over the years. Also, if anyone thinks these seizure laws are applied equitably, they are living in a dream world.
There was an incident several years ago where a state prosecutor was notorious for applying seizure laws under the thinnest of pretexts. She seized vehicles, homes, farms, bank accounts and businesses if they had even the slightest taint of drug operations on the property, no matter whether the property owner knew about it or not. Then one day her son was arrested for dealing drugs from her home and car. Want to make a bet on whether the state seized that property?
As I said, when it comes to seizure and forfeitures, it depends. Every circumstance is different. The key is, who gets to make the decisions and what is their agenda?
This is what governments do. Until all you farm animals realize it and demand change, thats the way it will stay/
** Otteray Scribe 1, June 28, 2013 at 1:35 pm
Michael Beaton,
Good question. I did a little research and found stories datelined May 31, 2013 that the Creamery owners agreed to forfeit $30,000 in order to get the rest of the money back. They said they did this because they were over a barrel financially, and had to get as much of the money back as possible. **
I don’t know if this is the right case, the right time or if it would go before
the best courts,
but I’d like to see people with cases like this one successfully sue, get a positive judgment
& then as part of the judgment allow these people & others, drawn at random citizens,
be put into paid positions of oversight, with the aid of professional council,
with the courts backing them, with the mission of cleaning up the Public Menace that these bureaucracies have become.
Don’t worry, buddy. Just keep drinkin’ the Kool-aid
RTC, Thanks! Based on what you’ve said, what’s the problem w/ the IRS targeting these “ignorant” and “addle brained masses.” Hell, maybe we should have HHS take away their reproductive rights. I had no idea just how pernicious they are. Now, I’m scared!!!
Michael Beaton,
Good question. I did a little research and found stories datelined May 31, 2013 that the Creamery owners agreed to forfeit $30,000 in order to get the rest of the money back. They said they did this because they were over a barrel financially, and had to get as much of the money back as possible.
Story at the link.
http://overlawyered.com/2012/05/update-south-mountain-creamery-settles-structuring-charges/
Thank you O.Scribe. I still want J.T. to chime in and then take the next step and answer the question (since he started this whole thing!!) what is the justification, both legally as well as morally, for the government to take anything?
From my POV they should be paying reparations for the F*** up.
As I alluded to in my original post there are issues and sub-structure principles that are surfaced in this story. (And many others as well.) One obvious one, to me, is the whole fight over guns, and the 2nd Admendment folks who say they need them to fight off the gov. And then counterpoint that the other side makes that this is unjustified paranoia.
I am not a gun guy at all. But I understand the fear and frustration of those who are, and examples like this feed that fire. (And thus have tangential causative relationship to the gun culture; which enables the various tragedies we are living through. eg, Sandy School, and etc… Plus the thousands that don’t make the news).
I am not wanting to divert the discussion into that issue, but the larger “Meta” Issue that I raise.. of the constitutional relationship of the citizen to the government.
Please, J.Turley, provide the conclusion to this story… It is just another example of the cold freeze that is the “war” (this government does love its various “wars”) on the citizen, with all the tragic consequences?
So… I am hoping that you will tell us that the blatant error of this event was finally recognized by someone and fixed. And that these folks were compensated for their time and stress. At least were given an apology.
I am not attempting to be cyncial… but how can it come across as anything else when simple and obvious errors/mistakes are treated in this draconian fashion.
So… Really: What is the disposition of this case? And can you provide the links, or information where it can be read about/followed up on?
Blouise,
It doesn’t matter what bank they use. The reporting requirements are the same. Personally, I hope that the bank fired the teller who gave them that advice — first, for serving the bank’s customers badly, and second, for engaging in a violation of the law him- or herself by causing the bank to fail to file a proper CTR.
As I said above, for the vast majority of reportable transactions, the most that might happen after a CTR is filed is that someone at the Financial Crimes Enforcement Network (FinCEN) might look to establish whether this is a business that legitimately works with that much cash. Once that is established, no one in the government cares about the cash.
Most farmers markets in my area take place on Saturday and Sunday. If these people had deposited $12,000 in the bank on Monday, there would have been no problem. Either the bank would have filed a CTR (which would be routinely reviewed and dismissed), or it would have filed for a CTR exemption. But it sounds as if, acting on the teller’s bad advice, they attempted to evade the filing of a CTR by depositing that amount in two or more separate deposits. That caught someone’s eye, probably resulting in the filing of a SAR, and further scrutiny.
This law and the Treasury Department regulations are designed to catch money-launderers, but they only work if everyone complies. When I was in training at FinCEN, they had us run a CTR search for ZIP code 90210. Quite a few recognizable names showed up. The purpose was to demonstrate two things: First, that there are a lot of legitimate reasons to transact business in cash, so the existence of a CTR in itself means nothing, and second, that the CTR database is not to be used for recreational purposes — with the specific warning that anyone found using the database without a legitimate basis (say to look up celebrities or to check up on their neighbors) would be subject to termination for cause and possible criminal sanctions. Now, there may be those who comment here who don’t believe that such sanctions would ever be imposed, but the people I worked with took that possibility very seriously.
Hey Nick,
The Tea Party is a phony grass-roots, “astroturf” movement organized with startup money from The Koch Bros and their fellow ALEC members for the purpose of riling up the ignorant and addle brained mass of people who are angry about events they perceive as out of their control and are looking for someone to blame. The Tea Baggers are unwittingly playing right into the hands of the very forces of this abusive corporate hegemony that has become entrenched in government. The Tea Party is for saps.
The Wi. State govt. used all of their force against a farmer for selling raw milk. The trial lasted over a week and he was acquitted of all charges except for a minor violation that cost him a fine. But, the best part is 5 of the jurors have reached out to this farmer and want to become part of his co-op and promote the burgeoning raw milk business. People are getting fed up w/ the govt. and it’s not just those “Tea Baggers” as they’re derisively called in this forum.
The government hates cash. That’s why I’m in the upper stanine of people who use it. Certainly it makes it less convenient, but you also spend less. Even if you pay your restaurant bill w/ a credit card, tip your server[generously] in cash.
Sounds like thievery by the DOJ.
If, indeed, they had to give up half the amount seized then the crime was on the part of the FBI, no matter how “legal” which gives new meaning to the term, organized crime.
Hope they changed banks.
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