Skip to content

DOJ Unwilling to Admit Faults in Handling Civil Asset Forfeitures

June 21, 2018

The House Ways and Means Oversight Subcommittee, chaired by Rep. Lynn Jenkins (R-KS), held a hearing this week entitled “Update on IRS and DOJ Efforts to Return Seized Funds to Taxpayers.”  This hearing was a chance for the Subcommittee to hear from the Internal Revenue Service (IRS) and U.S. Department of Justice (DOJ) on their efforts to return funds to hardworking taxpayers after the government seized those funds using its civil asset forfeiture authority.

Chairman Jenkins highlighted at the start of the hearing reports that came to light a few years ago in which the IRS seized the bank accounts of dozens of small businesses—for no reason other than those businesses were making deposits under $10,000.

Because of these reports, the Subcommittee challenged the IRS to institute a fairer petition process for taxpayers whose funds had been unjustly seized. While work still remains, progress has been made.

Unfortunately, the same progress doesn’t ring true for DOJ.  As Chairman Jenkins said:

“While I was pleased to see the IRS finally do what is right for most of the taxpayers caught up in this issue, I was discouraged to see that DOJ has not taken the same approach.  Although the Department instituted a similar policy change to no longer pursue seizures solely based on structuring charges, it has elected not to make it retroactive.  This decision harms the very taxpayers that it was intended to help.  Furthermore, the Department has chosen to deny all but approximately 16 percent of the petitions it received, despite the IRS recommending that 76 percent be granted with the funds returned to their rightful owners.”

The Chairman stressed:

“I remain deeply concerned that taxpayers whose funds were seized solely based on structuring charges, and whose petitions were referred to DOJ, received vastly different outcomes from similarly situated taxpayers, whose petitions were reviewed by the IRS.”

The Subcommittee heard from John Cronan, Acting Assistant Attorney General of the Criminal Division for DOJ, and from Don Fort, Chief of Criminal Investigation at the IRS.

Due to the Subcommittee’s work, the IRS has changed its policy on seizing taxpayer funds based on structuring and has applied those changes retroactively.  As Mr. Fort told Rep. Suzan DelBene (D-WA) when she asked how the agency changed course:

We changing our policy in 2014, recognized that we need to focus our limited investigative resources on the most egregious violations.  And again, by going back and applying our policy retroactively for 5 years, we demonstrated that.”

The IRS admitted its flawed policies to the Subcommittee, recognizing it was hurting average small businesses.

DOJ, unfortunately, admitted it has not followed suit. In responding to a question from Rep. Darin LaHood (R-IL), Mr. Cronan confirmed that the DOJ policy change was not retroactive.  Mr. Cronan defended the prior policy, telling the Subcommittee:

The Department of Justice regularly does evaluate its prosecutorial enforcement priorities and can adjust its policies in accordance with that.  That is not necessarily a reflection that the prior policy was wrong or improper but a prospective look going forward as to how the Department should allocate its resources.”

Because of this unwillingness to address policy flaws, DOJ denied many taxpayers with only minor infractions the return of their own money.

Rep. Jackie Walorski (R-IN) asked about the standards both agencies used when reviewing petitions.  DOJ and IRS stated they followed the same criteria for reviewing petitions.  Mr. Fort acknowledged that with the IRS:

“I personally reviewed many of these and signed them myself.  We decided to give more weight to one particular factor, and that was whether it was a minimal violation or part of a larger criminal scheme.  We did that because it most closely aligned with our [new] policy.”

Rep. Walorski stressed that the gap in the two agencies’ results is unacceptable:

“How can the results be so vastly different?  What is DOJ doing that IRS isn’t doing? … I think the gap is unbelievable.”

Rep. Peter Roskam (R-IL), who has long advocated for having the IRS and DOJ expedite this process to help taxpayers, said that DOJ’s current practices are “indefensible.”

Rep. Roskam questioned why DOJ did not follow its own regulations when reviewing petitions related to relatively minor infractions.  He went on to say:

I think that the way the Department of Justice has approached this is not admirable…You’re defending something today that is indefensible.  And the notion that people at DOJ have this kind of power and this kind of discretion and can run roughshod over innocent people and basically get stiff armed and say well you pled guilty and now we’re going to use your guilty plea against you even though we manipulated a guilty plea — that’s shameful.”

The Subcommittee will continue its work to ensure federal agencies are truly putting taxpayers first.

CLICK HERE to learn more about the hearing.