California Property Owner Wins Forfeiture Fight

Tony Jalali stood to lose his entire commercial building inAnaheim,Calif., even though he was never charged with – let alone convicted of – any crime.  This is what property owners throughout American face when confronted with the tyrannical doctrine of civil forfeiture.

But, in October, Tony prevailed.  The government, which tried to take Tony’s property, dropped its civil forfeiture suit against the building – United   States of America v. Real Property located at 2601   W. Ball Road.  

The federal government sought Tony’s property simply because he rented space to a medical marijuana dispensary, which is completely legal inCalifornia.  Tony had no involvement in the operation of the dispensary or with the marijuana industry.  He was merely a landlord who rented space to a lawfulCaliforniabusiness, as he had to a dentist and an insurance company in the same building.

Not only is medical marijuana legal inCalifornia, but state law prohibits the forfeiture of homes and buildings like Tony’s without convicting the property owner of a crime.  In other words, government officials could not forfeit Tony’s building since he was never even accused of a crime.  But the city ofAnaheimteamed up with the federal government to do an end-run aroundCalifornialaw to deprive Tony of his property.  If they were successful, the Department of Justice would keep 20 percent of the value of Tony’s $1.5 million property while the remainder would go toAnaheimlaw enforcement officials.

The U.S. Attorney’s office for the Central District of California, whereAnaheimis located, aggressively used civil forfeiture against landlords in attempt to enforce the federal prohibition of marijuana, filing more than 30 lawsuits against landlords renting to medical marijuana dispensaries during the past two years.  But on August 29, 2013, the U.S. Department of Justice issued a memorandum to all U.S. Attorneys instructing them not to bring cases enforcing the federal ban on marijuana in states where it is legal unless the activity involves “criminal enterprises, gangs, cartels” or implicates important national concerns.

The government agreed to dismiss our case with prejudice, which means the government gives up any right to file the case again in the future and threaten Tony’s property.  This is the second time this year [the Institute for Justice] (IJ) has taken on the federal government on civil forfeiture and prevailed.  Earlier this year, a court inBostonruled in favor of our clients Russ and Pat Caswell and their family-owned motel.

But, as another article in Liberty & Law makes clear, our fight on behalf of property owners against the federal government’s forfeiture spree is far from finished.  We are delighted Tony’s property is now safe, and we will continue our fight against the injustice of civil forfeiture in federal and state courts across the nation.

Fighting the Forfeiture Machine in Michigan

Terry Dehko and his daughter,Sandy, run Schott’s Supermarket inFraser,Michigan.  Terry is the embodiment of the American Dream.  He came to American fromIraqin 1970 and bought the grocery store in 1978.  Today, the store employs about 30 people and is popular for its quality deli selection and freshly baked bread. Sandyhas worked at the market since she was 12 years old.

On January 22, 2013, Terry and Sandy discovered that all the money in their store’s bank account – more than $35,000 – was gone.  Later that day, they learned that the IRS seized their money using civil forfeiture.

As Liberty & Law readers know, civil forfeiture is the governmental power to take a property merely suspected of being involved in a crime.  Unlike criminal forfeiture, in which the ill-gotten gains of criminal activity may be seized after an individual is convicted of a crime, prosecutors use civil forfeiture to take property without convicting a person of, or even charging them with, any crime.  Shockingly, the civil forfeiture proceeds are often used to pad the budgets of the very agencies that seize the money.

Federal law requires banks to report to the U.S. Treasury cash transactions larger than $10,000.  It is illegal to deposit or withdraw less than $10,000 in cash for the purpose of evading these reports.  The government collects vast amounts of information about the banking activities of Americans each year, looking for, among other things, this so-called “structuring” of cash transactions.  This is what the IRS says Terry and Sandy did wrong.

But it is not illegal merely to make deposits of less than $10,000 in cash when one has a legitimate business purpose like Terry andSandydid.  They have a commercial insurance policy that limits losses of cash to $10,000 and like most grocery stores; Schott’s Supermarket has many customers who pay in cash.  To avoid accumulating too much cash in their store, they make frequent deposits at the bank across the street.

Instead of asking Terry and Sandy why they deposit money the way they do, the IRS got a secret warrant and seized their store’s entire operating account without warning.

It gets worse.  Federal civil forfeiture law provides no way for someone whose entire bank account is seized to quickly contest the seizure before a judge.  Nine months after the seizure, Terry and Sandy still had not had an opportunity to challenge the forfeiture in court.  They have struggled to keep their store open after being deprived of their operating funds.  IJ took their case in September and immediately demanded a hearing, arguing that even if federal civil forfeiture statutes do not provide for a prompt hearing, the U.S. Constitution requires it.

The Dehko family and IJ are committed to going all the way to the Supreme Court if that’s what it takes to stop the government from using civil forfeiture to seize  money from people who have done nothing wrong.

Clark Neily and Scott Bullock are Senior Attorneys with the Institute for Justice.  This article was reprinted with permission of Liberty & Law – a bi-monthly publication by the Institute for Justice which litigates to secure economic liberty, school choice, private property rights, freedom of speech and other vital individual liberties and to restore constitutional limits on the power of government.  For more information, visit www.ij.org.

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