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Virginia Attorney General Used Asset Forfeiture Funds For Staff Pay Raises

When assets are seized during federal investigations, the proceeds can be shared with law enforcement agencies who participate with federal agencies during the process. This is called Equitable Sharing, and both the Justice Departments and Treasury Departments can do it.  The funds received have rules that govern how they are spent.

Therefore it was surprising that a Power Point presentation created by the Justice Department in 2015 suggested a way to circumvent those rules; typically they don’t allow funds to be spent on salaries or raises but this presentation gave a clear way for an agency to get around that restriction. “The presentation advises that instead of using the seized funds money to fund raises, agencies can use it to cover routine costs — such as maintaining vehicle fleets — and then redirect money already budgeted for maintenance into salaries. The PowerPoint says redirecting money in that manner is acceptable “so long as your overall budget does not decrease.”

It appears the Virginia’s Attorney General, Mark Herring, took that suggestion to heart. The “AP raised questions about significant pay raises for several of Herring’s employees at a time when state workers’ pay was stagnant elsewhere. Some staff attorneys’ salaries rose as much as $15,000 in a year — one had a 30-percent increase.” This investigation revealed the existence of the Power Point presentation, and is the reason 64 attorney received a raise in their pay floor, with the median raise of $7,000.

“Virginia received more than $100 million in asset forfeiture money under a joint state-federal settlement with Abbott Laboratories for an anti-seizure drug’s off-label marketing. Herring spokesman Michael Kelly said raises were made possible in part by using some of the funds to pay allowable expenses involving the agency’s rent, vehicle maintenance and operational costs.

The Abbott settlement money was administered by the Treasury Department, but Kelly cited the PowerPoint as justification for using the funds to make raises possible. He said the PowerPoint was part of 2015 training for accountants in the state attorney general’s office.”

The AP noticed the pay raises in the Office of Attorney General and requested documents about the aberration; last year, the rest of the Commonwealth canceled pay raises that were scheduled for state employees when budget problems got difficult.

It is unfathomable that a state agency, under the guidance and direction of a federal agency, could move money around in a ploy to give themselves pay increases.  If one state agency, as part of a training exercise for accountants, could conclude that this action was both just and allowable, how many other agency partners in the Equitable Sharing program have done this?

 

The IRS Scandal Continues: Judge Orders Release Of Target List

We’re coming up on three years since the IRS scandal broke in May 2013. Most Americans have certainly forgotten about it, especially since the former head, Lois Lerner, went wholly unpunished. But some targeted groups have not forgotten about it, and continue to fight for transparency with the entire affair.

Earlier this week, a federal appeals court “ordered the IRS to quickly turn over the full list of groups it targeted so that a class-action lawsuit, filed by the NorCal Tea Party Patriots, can proceed. The judges also accused the Justice Department lawyers, who are representing the IRS in the case, of acting in bad faith — compounding the initial targeting — by fighting the disclosure.”

The IRS, of course, claimed that no targeting happened — that it was merely an issue of poorly trained employees. Of course, we all know better. A vast majority of the targets were conservative or tea-party groups, there were secret buzz words to identify them, and some of the groups still have not attained 501c3 status after 5 years!

According to the Washington Times, Tea Party groups have been trying for years to get a full list of nonprofit groups that were targeted by the IRS, but the IRS had refused, saying that even the names of those who applied or were approved are considered secret taxpayer information. The IRS said section 6103 of the tax code prevented it from releasing that information.

Judge Kethledge, however, said that turned the law on its head. ‘Section 6103 was enacted to protect taxpayers from the IRS, not the IRS from taxpayers,’ he wrote.”

This particular ruling certified the NorCal case as a class-action lawsuit. Others who were targeted may be permitted to join the case, but until that list is revealed, it is unknown who exactly among the 200 or so groups involved were actually targeted.

Now, “the case moves to the discovery stage, where the tea party groups’ lawyers will ask for all of the agency’s documents related to the targeting and will depose IRS employees about their actions.”

As a CPA intimately involved with the IRS for many years, I have been following this case since the beginning and have continued to report on updates. The actions of the IRS were particularly egregious and overreaching, and no one was appropriately punished for it. It’s good that some of the groups remain dedicated to getting more answers that what has been divulged by the Department of Justice to date.

No DOJ Charges for IRS Officials in Scandal


The cynic in me was wholly unsurprised when the Associated Press reported the Department of Justice (DoJ) concluded that no formal charges would be filed against any of the IRS officials embroiled in the IRS scandal of 2013. In a letter to Congress, the DoJ announced that they found “no evidence that any IRS official acted based on political, discriminatory, corrupt or other inappropriate motives that would support a criminal prosecution.”

Never mind the fact that computer hard drives and emails disappeared, secret email accounts were maintained, interoffice messaging systems were used to avoid written records, only one conservative group received approval under Lerner in three years, and some groups remain unapproved after 5 years — all while Obama’s brother received retroactive tax-exempt approval in less than 30 days.

According to the DoJ letter, such actions were merely, “mismanagement, poor judgment and institutional inertia.” That is utter nonsense.

Stephen Dinan at the Washington Times did a decent round up of the news and reactions to the decision.

The IRS did mishandle tea party and conservative groups’ nonprofit applications, but their behavior didn’t break any laws, the Justice Department said in a letter to Congress Friday that cleared the tax agency and former senior executive Lois G. Lerner of any crimes.

“Ineffective management is not a crime,” Assistant Attorney General Peter J. Kadzik said in a letter to the House Ways and Means Committee. “The Department of Justice’s exhaustive probe revealed no evidence that would support a criminal prosecution. What occurred is disquieting and may necessitate corrective action — but it does not warrant criminal prosecution.”

The decision comes more than two years after the IRS’s internal watchdog reported that auditors singled out tea party groups’ applications for special scrutiny and delayed those applications beyond reasonable timelines, preventing the groups from being able to say they were officially recognized nonprofits.

The agency initially admitted its bad behavior, and President Obama vowed an investigation — but he later said, in the middle of the probe, that there was no evidence of corruption.

Some Republicans have questioned the validity of the probe from the beginning, after learning that one of the Justice Department lawyers assigned to the investigation was a contributor to Mr. Obama’s political campaigns.

In its letter Friday the Justice Department specifically cleared Ms. Lerner, a senior executive in charge of approving the groups’ applications, who had authored a number of emails that suggested a bias against the tea party movement.

Investigators said none of the witnesses they interviewed believed Ms. Lerner acted out of political motives, and said that Ms. Lerner seemed to try to correct the inappropriate scrutiny once she “recognized that it was wrong.”

“In fact, Ms. Lerner was the first IRS official to recognize the magnitude of the problem and to take concerted steps to fix it,” Mr. Kadzik wrote.

Congressional Democrats said the decision confirmed what they’d figured out years ago — that there was no underhanded political dealing at the agency.

“Over the past five years, Republicans in the House of Representatives have squandered literally tens of millions of dollars going down all kinds of investigative rabbit holes — IRS, Planned Parenthood, Benghazi — with absolutely no evidence of illegal activity,” said Rep. Elijah E. Cummings of Maryland, the top Democrat on the Benghazi investigation and ranking member of the House Oversight Committee.

The House Ways and Means Committee conducted its own investigation into the IRS’s tea party targeting, as did the Senate Finance Committee. The House panel was the one that voted to refer Ms. Lerner’s behavior to the Justice Department for criminal investigation.

Rep. Paul Ryan, the chairman of the Ways and Means Committee, called the Friday letter “deeply disappointing,” but said it wasn’t a surprise given the bent of the Obama administration.

He said his committee’s probe did find “serious and unprecedented actions” by Ms. Lerner that deprived tea party groups of their rights.

“The American people deserve better than this. Despite the DOJ closing its investigation, the Ways and Means Committee will continue to find answers and hold the IRS accountable for its actions,” he said.

Ms. Lerner’s lawyers, in a statement, said they were “gratified but not surprised” by the announcement.

“Anyone who takes a serious and impartial look at the facts would reach the same conclusion as the Justice Department,” they said, adding that she cooperated with the investigators and answered their questions.

That stands in contrast to her interaction with Congress, where she refused to answer questions, invoking her Fifth Amendment right to remain silent — but only after she delivered a statement declaring her innocence.

The House Oversight Committee concluded that she was not, in fact, able to invoke the Fifth Amendment at that point, and when she refused to answer questions, the House voted to hold her in contempt of Congress.

The Justice Department declined to pursue that case, too, arguing that her claim of Fifth Amendment rights was likely to succeed.

Groups that faced targeting by the IRS were infuriated by Friday’s decision.

“To say there is no evidence of discrimination makes a mockery of all we witnessed in the last two years,” said Catherine Engelbrecht, founder of True the Vote, which had its application for nonprofit status delayed as it and another group she was involved in faced scrutiny by everyone from the FBI to federal occupational health authorities.

Another IRS Civil Asset Forfeiture, Return

The media recently profiled another large civil asset forfeiture case, much like the Hirsch Brothers and the restaurant owner. This particular case involved a North Carolina man who has owned a convenience store since 2001. Last July, the IRS seized $107,000 from his bank account.

The owner, Lyndon McLellan, was visited by the FBI, who informed him that his habit of depositing less than $10,000 cash on repeated occasions drew suspicion by the government, also known as “structuring”. What started as a means to go after drug trafficking and money laundering has entangled many American citizens in recent years who have had their money seized under suspicion of criminal activity.

Recently, several cases have received substantial news coverage, resulting in the IRS, and then the Department of Justice changing their policy of asset forfeiture; now, no assets will be seized without an actual tie to a crime. Suspicion of activity is not enough anymore.

The plight of his latest victim of asset forfeiture was given several “opportunities” to settle with the government for a partial return of his money. The owner, who had done nothing wrong — since much of his business was run in cash — refused each offer. Three days after his story gained national coverage, the government dropped their case against him, citing the IRS and DoJ policy change. The owner had never been charged formally with anything. McLellan was fortunate; in such cases, the burden is on the victim to prove his innocence.

The Institute for Justice has been successfully representing many of these victims of civil asset forfeiture. However, “though the government will return all of the money it seized from McLellan, it dismissed the case without covering the store owner’s legal fees and expenses, as well as interest on the money.

In 2000, Congress passed a law that entitles McLellan to those fees and expenses, which total more than $20,000.

Additionally, government policies require the $107,702 seized is kept in an interest-bearing account. Though McLellan will receive the money, the government wants to keep the interest earned.”

Though the new policy reforms will hopefully keep from ensnaring more innocent Americans, others have not been so lucky.

In recent years, seizures executed because of structuring violations have increased dramatically. In 2005, the Internal Revenue Service made just 114 structuring seizures. By 2012, that number had risen to 639. During that same time period, the agency seized $242 million for structuring violations.

While banks must submit reports to the Department of the Treasury for cash deposits of more than $10,000, the government also receives “suspicious activity reports” on deposits below that threshold.

It’s likely the government received a suspicious activity report detailing McLellan’s deposits, which is how he “came onto the government’s radar.”

Also, “the IRS frequently teams up with local law enforcement to look through suspicious activity reports. By seizing property and money through the Department of Justice’s Equitable Sharing Program, law enforcement agencies share the proceeds of the forfeiture.”

Though Lyndon McLellan is supposed to receive his $107,000, he may still have to wait several more months. By July, the government will have held his money for a year. It’s amazing what a little sunlight and media coverage on these unconstitutional seizures can do for the government to come to its senses.

The Ninth Circuit Thinks The Raisins You Grow Aren’t Protected By the 5th Amendment

In recent years, the Ninth Circuit Court has provided the lion’s share of the cases that have come before the Supreme Court. A full ¼ of the cases (25.7%) come from the Ninth while the other 3/4ths come from a combined 10 other Courts. During the last four terms, the Supreme Court has vacated or sent back nearly 80% of the cases it has reviewed from the Ninth Circuit.

Far more cases come to the Court from the Ninth Circuit than any other court, and — not surprisingly — Ninth Circuit rulings make up a sizeable portion of the docket of argued and decided cases – 75 cases, or 25.7% for the last four Terms including the current session. During that period, the Court has reversed or vacated and sent back 79.5% of the Ninth Circuit decisions it has reviewed.

The Ninth Circuit seems to have particular ideas it wishes to push, making no difference as to what the law is. They reach a particular conclusion and then use a court case that comes before them as an example. In a consummate instance of their ineptitude, “in one per curiam opinion last month, the Supreme Court even rejected the Ninth Circuit’s reasoning in a single word: “No.”

Take the recent raisin case (Horne v. Department of Agriculture) as another example. The Ninth Circuit decided that the “Taking Clause” under the 5th Amendment applies less to personal property than real property — as if you can take someone’s gold to regulate the market but not their land. What’s more, under “just compensation”, if the government does take your property, it creates a scarcity which (could) raise prices, so a confiscation produces compensation for property in that manner. Does that mean if I steal one of your two cars, I can argue that the remaining car is potentially worth more now because there are less cars on the market? Of course not. But the Ninth Circuit seemed fit to argue so.

The only positive thing that could come out of this egregious display of legal impropriety by the Ninth is that it could hopefully clarify property rights. As the Wall Street Journal contends, “The Horne case is one of the most significant property rights cases in years—probably since the Court’s infamous 5-4 ruling in 2005 in Kelo v. New London…The majority Justices in Kelo have a lot to answer for. This is a chance to make partial amends.”