IRS Drops Asset Forfeiture Case Against NC Business Owner After Media Scrutiny

Federal prosecutors have dropped an attempt to seize $107,000 from a North Carolina small business owner using asset forfeiture laws following several weeks of media scrutiny.

According to the Institute for Justice, a public interest law firm, the Internal Revenue Service and Justice Department moved Wednesday to voluntarily dismiss their case against Lyndon McLellan.

Last summer, IRS agents seized $107,000 from McLellan, who owns a small convenience store in rural North Carolina, using civil asset forfeiture laws. McLellan had unknowingly violated so-called “structuring” rules that prohibit businesses from making deposits less than $10,000. He was not charged with a crime, but his entire bank account was seized.

Structuring rules are intended to stop businesses from using small deposits to avoid triggering federal reporting requirements by banks, but civil liberties advocates such as the Institute for Justice say the IRS has used the obscure rules to seize the bank accounts of small business owners without charging them with a crime.

The New York Times reported on McLellan’s case, as did many other news outlets.

“I’m relieved to be getting my money back,” McLellan said in a press release from the Institute for Justice, which is representing him. “What’s wrong is wrong, and what the government did here is wrong. I just hope that by standing up for what’s right, it means this won’t happen to other people.”

The Institute for Justice said the IRS was violating policies announced last November that were supposed to prevent the agency from pursuing structuring cases against small business owners except in cases where it has probable cause that other criminal activity is occurring.

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