Project Report:
Ending Civil Forfeiture and Strengthening Protections for Private Property Rights
Purpose
- Investigates causes tending to destroy or impair the free-market system.

Summary

Civil forfeiture is one of the greatest threats to property rights in the nation today. It allows the government to take cars, cash, buildings, and other property on the mere allegation that it was involved in a crime—no arrest or conviction necessary. What’s more, police and prosecutors often get to keep some, if not all, of the property they take, giving them a perverse incentive to pursue the property of innocent owners at the expense of legitimate law enforcement priorities. The Institute for Justice is tackling this problem head-on through litigation, strategic research, communications, and outreach. We are working to strengthen legal protections for private property, elevate this issue to national prominence, and ensure that no American can lose his or her property without first being convicted of a crime.

Description

IJ is leading the fight against civil forfeiture, and our litigation and other efforts have elevated this once underappreciated issue to national prominence. Since beginning our campaign to end civil forfeiture in 2010, we’ve secured seven victories and earned dozens of high-profile national media placements. In fact, our advocacy played a key role in the federal government’s decision in January to suspend a key component of the federal civil forfeiture program. This change in policy will strengthen protections for property owners across the country, but there is much more that needs to be done to ensure that every American’s property is safe.

We are aggressively pressing forward while the momentum is on our side and recently celebrated a victory in our client Carole Hinders’ fight against civil forfeiture. Carole owned Mrs. Lady’s Mexican Restaurant in Spirit Lake, Iowa, for nearly 40 years. Mrs. Lady’s was a cash-only business, which meant Carole made frequent trips to the bank to avoid having large sums of money at the restaurant. But in August 2013, on the cusp of her retirement, the federal government used civil forfeiture to seize Carole’s entire bank account even though she did nothing wrong. Federal law requires banks to report cash deposits larger than $10,000. Since Carole’s deposits were almost always less than $10,000, the federal government claimed, without any serious investigation, that she “structured” her cash bank deposits to evade the reporting requirement. Carole received no warning from either her bank or the government before her money was taken, and she was not charged with any crime. For more than a year, she had to borrow money, use credit cards, and beg vendors to extend her credit to keep the restaurant running. But under the Constitution, the government can’t take property from people who haven’t even been accused, let alone convicted, of a crime, and Carole teamed up with IJ in October to fight back. We leveraged her lawsuit in the media, securing a feature on the front page of the Sunday New York Times along with additional coverage from high-profile outlets like CNN, Forbes, and Fox News. This attention generated national outrage over civil forfeiture and put pressure on the federal government, which dropped its case against Carole in December and agreed to return her money.

In New York, we secured a victory on behalf of a family business that faced a similar nightmare. Brothers Jeffrey, Richard, and Mitch Hirsch own a small business that distributes candy, snacks, and other goods to convenience stores throughout Long Island. Most of their customers pay in cash, as is the standard practice in their industry, and the brothers regularly make large cash deposits at their local bank. But without seriously investigating the Hirsch brothers’ legitimate business practices, federal officials deemed their cash deposits to be suspect and simply cleaned out their account. For more than two years, the government refused to return the Hirsch brothers’ money or let them go before a judge despite the fact that they were never charged with any wrongdoing. In October 2014, the Hirsch brothers teamed up with IJ and sued to force the government into court. But rather than defend its bogus claims before a judge, the government folded and agreed in January to return all of the Hirsch brothers’ money.

Our litigation continues in Michigan, where we represent Terry Dehko. Terry owns Schott’s Market, a small grocery store located outside Detroit. As is common among small businesses, Terry’s insurance policy only covers him for theft or other loss of cash up to $10,000, so he frequently makes bank deposits below that amount. The government claimed that these deposits violated federal money laundering laws and used civil forfeiture to clean out Terry’s bank account in early 2013. But it’s not illegal to deposit less than $10,000; it’s only illegal to do so for the specific purpose of avoiding bank reporting requirements, and Terry had a legitimate business reason for how he chose to deposit his money. With IJ on his side, the government could no longer push Terry around, so it voluntarily dropped its case against him and returned his money in November 2013. But the fight isn’t over yet—we teamed up with Terry to sue the IRS and ensure that this never happens to him or anyone else again.

Unfortunately, what happened to Carole, the Hirsch brothers, and Terry were not isolated incidents, and IJ released a strategic research report in February to illustrate just how common these sorts of takings have become. Our report, “Seize First, Question Later: The IRS and Civil Forfeiture,” examines data IJ requested from the IRS about its use of forfeiture for suspected “structuring” violations—making bank deposits or withdrawals smaller than $10,000 to avoid federal reporting requirements. We found that from 2005 to 2012, the IRS seized more than $242 million for suspected structuring violations in more than 2,500 cases, and annual seizures increased fivefold over those eight years. Even more worrisome, there appears to be a substantial and growing gap between the sums the IRS seizes and the cash ultimately forfeited, raising concerns that the agency is seizing more that it can justify.

Elsewhere, we filed our first-ever class action lawsuit in August to end the Philadelphia forfeiture machine, which fleeces thousands of innocent property owners like our client Chris Sourovelis each year. In May, police showed up out of the blue to seize Chris’ family home in a middle-class, North Philadelphia neighborhood because Chris’ son was caught outside of it selling less than $40 worth of drugs. The entire Sourovelis family was thrown out of the house, even though Chris and his wife were never charged with any wrongdoing and had no knowledge of their son’s involvement in drugs. But Chris’ nightmare only got worse when he tried to assert his innocence and save his home from the government coffers. In order to get their property back, property owners like Chris must go to Courtroom 478, which isn’t a courtroom at all: There is no judge or jury, just a scheduler and the prosecutors who run the show. Property owners who ask for a lawyer are frequently told their case isn’t complicated and a lawyer isn’t necessary, but are then given a stack of complicated legal documents to fill out under oath. Time and time again, property owners must return to Courtroom 478—up to ten or more times in some cases. If they miss a single appearance, they can lose their property forever. Fearful of losing his house, Chris teamed up with IJ and two other property owners to fight back.

Thanks in part to widespread coverage from outlets like The Wall Street Journal, The Philadelphia Inquirer, HBO’s Last Week Tonight with John Oliver, CNN, the Associated Press, and BBC World News, Philadelphia’s Office of the District Attorney agreed in December to dismiss its state-level, civil-forfeiture proceedings against the family homes of the Sourovelises and another IJ client, Doila Welch. Although the dismissals mean that both families will no longer have to worry about losing their homes, Chris and Doila will continue to lead the federal, class-action legal challenge to Philadelphia’s entire civil-forfeiture scheme. A victory on their behalf will take the profit out of civil forfeiture and protect innocent people who are caught up in an upside-down legal process that violates their constitutional rights while treating them like ATMs.

In September, IJ released “Bad Apples or Bad Laws? Testing the Incentives of Civil Forfeiture.” In it, Chapman University economist Bart Wilson and attorney Michael Preciado designed a path-breaking computer game experiment to test whether the incentives created by civil forfeiture laws change behavior. Perhaps not surprisingly, they found that civil forfeiture laws do change behavior, and not in a good way: They create real incentives for law enforcement to seize property, not to help the public, but to pad their own budgets. The report makes clear that abuse is not the result of a few bad actors, as our opponents allege, but rather bad laws in need of fundamental reform. The report garnered media attention, including an article in Business Insider and an in-depth interview with Bart Wilson by ReasonTV. Furthermore, IJ’s forfeiture team distributed the report to legislative staffers on Capitol Hill.

Finally, in July, IJ launched our civil forfeiture website, EndForfeiture.com. EndForfeiture.com is a clearinghouse for all of IJ’s litigation and research as well as legislative developments and news. It is quickly becoming the go-to source for information about civil forfeiture, and we are using the website to create more interest in this issue among reporters, policymakers, and the public.

Purpose

Legal protections for private property are a vital part of the free-market system and give individuals the freedom necessary to build peaceful and prosperous communities. Civil forfeiture, however, undermines the rule of law by giving law enforcement at all levels of government the broad power to take property from individuals who haven’t committed any crime. Often, police and prosecutors get to keep at least some of the proceeds from civil forfeiture, and this incentivizes them to shift priorities from the fair and impartial administration of justice to the pursuit of property and profit. The Institute for Justice’s efforts to fight civil forfeiture in court and the court of public opinion are reinvigorating the property rights protections enshrined in the Constitution and ensuring that all Americans can participate in a vibrant free-market system.

Scope

Civil forfeiture is a national problem as most state laws provide few, if any, protections for innocent property owners. In fact, in IJ’s 2010 strategic research report "Policing for Profit," only three states received grades of B or better for their forfeiture practices and property rights protections. What’s more, federal “equitable sharing” laws make this problem even worse by allowing local police forces to partner with federal agencies and bypass even modest state-level restrictions on the use of civil forfeiture. Our work engaging judges, policymakers, activists, and media figures across the country will strengthen private property rights and undermine law enforcement’s ability to target innocent owners.

Project Link www.endforfeiture.com

Amount Approved
$10,000.00 on 6/10/2014 (Check sent: 7/10/2014)


  Related Organizations
Institute for Justice  


end-forfeiture-logo-final-negative.jpg

Attachments
end-forfeiture-logo-final-negative.jpg
New York Times 10-26-14 (PDF)
New York Times 11-10-2014 (PDF)
Des Moines Register 11-2-2014 (PDF)
Philadelphia Inquirer 8-8-2014 (PDF)
Wall Street Journal 9-2-2014 (PDF)
Seize First, Question Later (PDF)
Bad Apples or Bad Laws? (PDF)
Wall Street Journal 1-20-2015 (PDF)

Address
901 N Glebe Rd #900
Arlington, VA 22203


Phone
(703) 682-9320 ext 233
(703) 682-9321 (fax)

Contacts


Beth Stevens
Institute for Justice

Posted 3/25/2014 4:55 PM
Updated   8/6/2017 9:30 PM



 
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