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Growing Use of Civil Forfeiture Creates Nightmares for Small Business Owners

The opinions expressed by columnists are their own and do not necessarily represent the views of

Imagine that you run a grocery store with your daughter, a store you have owned for thirty years. Imagine that just last year the IRS found no violations in an audit of your store. Now imagine that, despite continuing your sound business practices, you awake one day to find the IRS has seized your entire bank account. The IRS has used a technique called civil forfeiture against you and you find your Constitutional guarantee of innocence until proven guilty has been completely reversed. That is the nightmare that Terry Dehko and his daughter Sandy Thomas found themselves in on January 22, 2013.

Since he bought it in 1978, Terry Dehko has owned Schott’s Supermarket in Fraser, Michigan. His daughter, Sandy, began working at the store when she was 12 and now helps her father run it. The IRS has not argued before a court of law that Terry and Sandy have committed a crime, but that has not stopped it from seizing their entire bank account, worth over $35,000.

The IRS claims that Terry and Sandy violated federal anti-money laundering laws by making regular deposits of cash in amounts less than $10,000. Since banks are required to report deposits larger than $10,000 to the IRS, a firm that consistently makes deposits less than this minimum may draw the attention of the IRS.

Dehko and Thomas state that they have nothing to hide and have offered a simple explanation. Their insurance policy, aimed at small businesses like their grocery store, protects them from theft, but only up to $10,000. Since any dollar over 10,000 left in the store is liable to uninsurable theft, Terry and Sandy make sure their revenues are deposited in their bank account before accumulating above $10,000.

The IRS seized Terry’s and Sandy’s assets using a process called civil forfeiture, which is a power government bodies may use to seize property that is suspected to have been used in a crime. While the IRS has not proved in a court of law that Terry and Sandy committed fraud, it has been able to seize their assets because it suspects that they may have done so.

Worsening the situation is a lack of due process for victims of civil forfeiture. While Terry and Sandy have explained their sounds business practices since their property was seized in January, they have not been able to argue their case before a court of law. Property owners who have their assets seized do not have a clear path to a speedy trial before a judge. Instead, they are required to file a lawsuit intervening in the forfeiture case. Civil forfeiture has made the idea of “innocent until proven guilty” a complete joke.

The Institute for Justice, a national civil liberties law firm, have come to the defense of Terry Dehko and Sandy Thomas. The Institute will assist them in two lawsuits related to the case. In the first, Dehko and Thomas will fight the forfeiture of their assets by demonstrating that their case deposits were for the purpose of sound business practices, rather than the evasion of money laundering laws. In the second, they are fighting the government’s ability to use civil forfeiture. A victory could mean protections for property rights of small-business owners all across the country.

Civil forfeiture is on the rise throughout the United States. According to the Institute for Justice, the Department of Justice’s Asset Forfeiture Fund held $93.7 million of seized assets in 1986. In 2008, that fund was greater than $1 billion.

In a recent profile of the case inthe Economist, Thomas stated that prosecutors offered her and Dehko 20% of their seized assets in a plea bargain, with the government to keep the remaining 80%. Thomas and Dehko declined, because “if [they] settle, it looks like [they’re] guilty of something, which [they’re] not.”

Michigan’s civil forfeiture laws are particularly heinous. In their 2010 report “Policing for Profit: The Abuse of Civil Asset Forfeiture,” the Institute for Justice gave Michigan a “D-” grade for their forfeiture laws. The Institute found the standard of evidence used in Michigan for forfeiture cases “is significantly lower than the beyond a reasonable doubt standard required to actually convict someone of criminal activity.” Furthermore, assets seized through civil forfeiture go towards “law enforcement efforts, creating an incentive to pursue forfeiture more vigorously than combating other criminal activity.” Between 2001 and 2008, more than $149 million were seized through this process in Michigan.

In their 2010 report, the Institute for Justice identifies a few avenues for reform. Property owners subject to civil forfeiture should have access to a prompt trial before a judge. They should also be presumed innocent until proven guilty. To prevent conflicts of interest, seized assets should be separated from the budgets of law enforcement.

These arbitrary seizures of private property must be stopped. Civil forfeiture as it exists today has no place in the American legal system, where citizens are innocent until proven guilty and granted due process to prove their innocence. People subject to civil forfeiture are powerless against law enforcement agencies who gain from these takings. Until civil forfeiture is abolished or radically reformed, more innocent Americans will face nightmares similar to that of Terry Dehko and Sandy Thomas.

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