Seized property: Arnolds Park case still has national impact

Wednesday, August 2, 2017
Carole Hinders didn’t accept credit or debit cards at her now-closed Mexican restaurant. Two IRS agents came to Hinders' Spirit Lake residence on the morning of May 22, 2013. “They came in and informed me that they thought I was depositing my money in order to avoid paying taxes — and that was called structuring, which is a federal crime. Because of that, my bank account at Northwest Bank had been closed and they confiscated all of my money. I found out later, that's called civil forfeiture,” said Hinders. Even though she was never charged with a crime, it took another year for Hinders and the non-profit Institute for Justice to get her $32,820.56 back. (Photo submitted)

Carole Hinders didn’t accept credit or debit cards at her now-closed Mexican restaurant.

Her customers paid with cash or checks back in 2013. The “insane taco” and sopapilla sales at Mrs. Lady’s added up to some robust bank deposits at the end of a day.

But, the transactions also raised a red flag at the IRS: Federal agents thought Hinders was intentionally trying to stay under a $10,000 reporting requirement with her frequent cash deposits.

She didn’t know investigators with the Iowa Department of Public Safety could examine her records without her permission — or feed federal authorities the details.

Two IRS agents came to Hinders' Spirit Lake residence on the morning of May 22, 2013.

“They showed me their badges,” she said, more than a year after her bank account was frozen. “They asked if they could come in and I said ‘sure.’ And I had no idea what it was about. I figured it was about one of my former employees. But, they came in and informed me that they thought I was depositing my money in order to avoid paying taxes — and that was called structuring, which is a federal crime. Because of that, my bank account at Northwest Bank had been closed and they confiscated all of my money. I found out later, that's called civil forfeiture. But, I had no warning of any kind. They just did it.”

Even though she was never charged with a crime, it took another year for Hinders and the non-profit Institute for Justice to get her $32,820.56 back.

Federal prosecutors rolled back the controversial forfeiture policy in 2015, but the practice is getting new life in the Trump administration.

The Department of Justice on July 19 said it will soon restore policies that make it easier for local authorities around the country to seize assets — as long as federal agencies sign off on the practice. U.S. Sen. Charles Grassley called asset forfeiture a useful tool in preventing future crimes and “helping to make victims whole.”

“But we must take care to ensure it is used properly and in a way that only targets criminal activity,” the Iowa Republican said.

Institute of Justice attorneys are calling the resurfacing practice of asset forfeiture “an assault on the property rights of ordinary Americans.”

“Everyone but the Justice Department understands the need for forfeiture reform,” Institute for Justice attorney Wesley Hottot said. “Polls show that 84 percent of Americans support reform. In the last three years, 24 states, including Iowa, have enacted major reforms to their forfeiture laws. And, bipartisan members of Congress are pushing reform measures. This is not the time for the Justice Department to be assisting state and local law enforcement in getting around the forfeiture measures that have been put in place in the states. ... The Republican and the Democratic platforms both condemn the use of civil forfeiture and call for reform. And yet, we have the current Justice Department doing what they perceive as being expedient. People’s property rights shouldn’t be this kind of political football. We should show more respect for the principles of property rights and due process in this country.”

The U.S. Supreme Court may soon consider the Arnolds Park-based case as part of a larger debate about government access to private information, according to Hottot.

“We’re going to be filing an amicus brief in the U.S. Supreme Court on Carole’s behalf in the coming weeks — in a case called Carpenter v. United States,” the attorney said. “... It’s a ‘friend of the court’ brief that wants to focus the Supreme Court on Carole’s story.”

Timothy Carpenter was convicted of armed robberies at cellphone stores. He was placed at the scene of the robberies by cell-site location data supplied by Carpenter’s cellphone provider.

“He’s carrying a phone with him and the cell company knows where you are because you’re ‘pinging’ their towers as you move around,” Hottot said. “The police were able to get his location from the cell company under something called the third-party doctrine.”

The doctrine allows investigators to use a third party to obtain a person’s private information without that person’s knowledge.

“That’s exactly what happened to Carole,” Hottot said. “She lost her business’ money because there was an Iowa State Patrolman who — deputized by the Internal Revenue Service — was reviewing people’s bank records.”

The state investigator had access to Mrs. Lady’s Mexican Food accounts because of a Supreme Court ruling from the 1970s, according to Hottot.

“When you give your information to the bank, the third-party doctrine applies,” the attorney said. “Now, that’s not what most Americans would think the arrangement is, right? We think our banking information is private and if the government gets it from the bank, they’ve got to have a warrant. So, this is an important case — in which the legitimacy of this third-party doctrine is at issue. We want Carole’s story to be told.”

The Institute for Justice’s brief is due Aug. 11. Hinders will not have to be in Washington, D.C., to testify.

“She is a fantastic woman and her commitment to this issue is total,” Hottot said. “I think a lot of people victimized by the government would be satisfied when they got their property back. But, Carole’s attitude has always been: This shouldn’t happen to me. It shouldn’t happen to anyone else in the future.”

AP explains: How police, US Feds team up to seize property

Local police departments can once again seize people’s property and cash with federal help under a Justice Department policy unrolled July 18. A similar program was so criticized as ripe for abuse that the Obama administration all but shut it down.

Officials insist they’ve now equipped the policy with safeguards to keep authorities from taking cash and property without justification. Law enforcement groups praised the initiative, which has helped them pay for everything from drug dogs and bulletproof vests to overdose antidotes.

But civil liberties groups and some members of Congress called Attorney General Jeff Sessions’ policy a dangerous reversal that opens the door for constitutional rights violations.

ADOPTIVE FORFEITURE

The program is a type of asset forfeiture that allows police to skirt often more restrictive state laws to seize property using federal law. They then share up to 80 percent of the proceeds with federal counterparts. For some police departments, the money can be an important funding source. More than $6 billion in forfeited funds has been shared with state and local law enforcement since fiscal year 2000, according to the Justice Department’s inspector general.

The department sees the program as a way to strip suspects of the proceeds of their activities, to deter crime and to compensate crime victims. Deputy Attorney General Rod Rosenstein said Wednesday the move will help fight drug dealing that has perpetuated the nation’s opioid epidemic.

“If we seize and forfeit criminal proceeds from drug dealing, it’s going to result in less money to reinvest in drugs by that dealer,” he said. “And it’s going to have a deterrent effect.”

THE PROBLEMS

Former Attorney General Eric Holder sharply curtailed the practice after critics said it was too easily abused, particularly with police seizures of small amounts of cash. The department’s inspector general this year reported what it called weaknesses throughout the overall asset forfeiture program — including with adoptive forfeiture — such as poor data collection and analysis, and inadequate training of local and state officers.

NEW PROVISIONS

Key changes include requiring more detail from police agencies about probable cause justifying a seizure before federal authorities get involved. Also, the Justice Department will have to decide more quickly whether to take on local seizures and also let property owners know their rights and the status of their belongings within 45 days of a seizure, faster than federal law requires.

Another key change will make it harder for police to seize less than $10,000 unless they have a state warrant, have made an arrest related to the seizure, have taken other contraband, such as drugs, along with the money, or the owner has confessed to a crime. Without at least one of those conditions, authorities will need a federal prosecutor’s approval to seize it under federal law.

Old rules set that threshold at $5,000, and the old process rarely required a federal prosecutor’s sign-off.

Critics say that doesn’t fix the larger problem, because police departments will still rely on forfeitures to foot their bills, creating a profit incentive to take property.

More than 20 states have enacted their own laws limiting asset forfeiture, either by first requiring a criminal conviction or by raising the threshold for when police can take property during an investigation. In at least one state, Pennsylvania, and in Washington, D.C., police are prohibited from referring their property seizures for federal adoptive forfeiture, which means they can’t take part in the program.

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