For 38 years, Carole Hinders ran Mrs. Lady’s Mexican Food, the restaurant she founded with her mother. Even at 68 years old, Carole could be found working there 6 days a week. She was the restaurant’s manager, cook, and bookkeeper. It was a labor of love, and the residents of her small town came back season after season for Carole’s food.
Mrs. Lady’s only accepted cash, because Carole didn’t like the idea of paying credit card fees just to collect her own money. She made regular cash deposits to her bank, and in 2013 Mrs. Lady’s had $32,820.56 in the company checking account.
That August, Carole’s life was turned upside-down when two Internal Revenue Service (IRS) agents knocked on her door and told her that the IRS had seized everything in Mrs. Lady’s checking account—all based on a secret warrant. Carole wasn’t even charged with a crime.
How could this happen?
The process is called “civil asset forfeiture.” Civil asset forfeiture lets the government confiscate ordinary Americans’ property—cash, cars, and even houses—even if there’s no evidence of wrongdoing.
In normal criminal procedure, the state accuses someone of a crime; that person can then defend themselves in court. In a bizarre twist, civil asset forfeiture cases aren’t brought against people—they’re brought against the property itself. This leads to wacky case names like Nebraska v. One 1970 2-Door Sedan Rambler (Gremlin) and United States v. Article Consisting of 50,000 Cardboard Boxes More or Less, Each Containing One Pair of Clacker Balls.
The problem? Property has no presumption of innocence, and no legal right to defend itself. In order to get their money, cars, or clacker balls back from the state, property owners must prove that their property wasn’t involved in any crime, which can be next to impossible to do.
“How can this happen?” Carole, now 71, asked. “Who takes your money before they prove that you’ve done anything wrong with it?”
The IRS claimed that Carole had engaged in something called “structuring.” Structuring is the act of breaking large bank deposits up into smaller deposits (under $10,000) to avoid federal reporting requirements. Money launderers sometimes structure their deposits in small amounts to avoid certain legal reporting requirements that might otherwise tip off the authorities. The IRS claimed that Carole was making small cash deposits to cover up for some kind of financial crime.
But depositing small amounts of cash is perfectly legal as long as it’s not done to avoid reporting requirements, and there are numerous legitimate reasons to make small deposits.
“My mom had told me if you keep your deposits under $10,000, the bank avoids paperwork,” Carole said. “I didn’t actually think it had anything to do with the I.R.S.” She had never even heard of the term structuring.
But the IRS didn’t ask why Carole had made the deposits. They didn’t contact Carole or her bank. They simply took her money. “They didn’t read me my rights,” Carole said. “They didn’t say ‘you need to get a lawyer.’ There was no notice of any kind.”
Between 2005 and 2012, the IRS seized more than $242 million in structuring cases according to the Institute for Justice (IJ), a public interest law firm that specializes in fighting civil asset forfeiture. A 2017 report by a government watchdog group analyzed 278 cases where the IRS confiscated the contents of bank accounts based on what they considered to be a suspicious pattern of deposits. In over 90 percent of these cases, the owners had obtained all of their money legally.
Carole’s finances were thrown into chaos as she tried to save her restaurant . She borrowed money and took out a second mortgage just to keep the doors open. The IRS referred the case to the Justice Department, which filed a lawsuit against her money to try to keep it. Carole looked for a lawyer to help her fight back, but was told that paying legal fees might be more expensive than just letting the government have her money.
In 2014, IJ took her case pro bono. The IRS claimed that Carole had engaged in a, “clear pattern of manipulating bank deposits below $10,000 in order to avoid the reporting requirements.” But Carole’s deposition showed that she was a hardworking and honest entrepreneur who hadn’t been trying to skirt the law. The government recommended that the case be dropped instead of going to trial, and returned Carole’s money.
But the government refused to pay for her court fees and interest on the seized money (which combined would have been $72,000), and doubled down on the rightness of seizing her money in the first place. Carole and IJ appealed the case, but the U.S. Court of Appeals for the Eighth Circuit ruled in favor of the government. Carole would have her money returned, but the IRS wouldn’t refund her court fees.
Sadly, cases like Carole’s are all too common. An entrepreneur works hard and plays by the rules, but the IRS treats them like mob bosses over the mere suspicion of criminality. People like Carole have their property seized for engaging in perfectly legal activities that some criminals also do. While Carole eventually got her money back, the case took a toll on her business and her mental health. She sold Mrs. Lady’s in 2014.
Still, Carole feels vindicated that she took on the government and won.
“We talk about bullying all the time but we let our government go ahead and bully us and we need to stand up to them and you can win. I did.”
