In a recent asset forfeiture case involving a client of the criminal defense and litigation law firm of Lasnetski Gihon Law, the state attorney’s office in South Florida agreed to return approximately $2.5 million of forfeited funds to the client, which constitute approximately 90% of the funds originally seized by the state.
In this case, Lasnetski Gihon Law’s client was a legitimate business in South Florida. The company was operating normally when the president learned that its main operating account had been frozen by law enforcement officials. The company was constantly ordering merchandise and paying vendors so that operating account was crucial for the normal operation of its business on a daily basis. However, with no notice of any kind, the state severely handicapped the business by seizing, and freezing, that account. The terms of the seizure allowed funds to be deposited into the bank account, but no money could be taken from that account. As a result, the company was at risk of bouncing checks to customers and vendors and was unable to make the regular payments required to make payroll and run the business.
After the initial sabotage of the company’s bank account, we learned that the state was accusing the company and its president of money laundering and money structuring. Money laundering occurs when a person or company obtains money that comes from an illegitimate source (such as drug money) and runs that dirty money through a business and mixes it with the business’s legitimate stream of income in a bank account in order to hide the source of the money, or clean it. Money structuring occurs when a person or company receives cash in excess of $10,000 and breaks that cash into lesser amounts to avoid the financial reporting requirement. When a business receives cash in an amount greater than $10,000, that business is required to prepare and file a form 8300 which provides identification information about the person providing the cash. The purpose of this requirement is to provide information to the government about people dealing in large amounts of cash so they can investigate the source of the cash. If a company receives $12,000 in cash from a customer and deposits $7,000 one day at one bank branch and $5,000 another day at a different branch, that is money structuring if it is done to avoid the financial reporting requirement.
In any case, the Lasnetski Gihon Law client was a business that sold its merchandise internationally. It sold tens of millions of dollars worth of products yearly to customers all over the world. The state was tipped off by the customer’s bank that the client was receiving cash in varying amounts under $10,000 at bank branches in different locations. Based on this evidence, the state decided to seize the client’s entire bank account without regard for how much money was in the account and what that might do to the business.
After a long course of litigation, it was determined that the state had very little to support the seizure and attempted forfeiture of the client’s bank account. The state made blanket allegations of money laundering but could not provide any evidence that the seized funds came from any illegitimate or illegal source or that anyone in the company was aware of any drug or other illegal activity by any customers. This, however, is a requirement if the state seeks to prove that the company was laundering money. The state also made blanket allegations of money structuring based solely on the denominations of the money deposited in the company’s bank account without any evidence of who deposited the money and whether the various deposits came from separate customers and transactions which would be a defense to structuring. Additionally, the state did not consider that the company had met the majority of its reporting requirements with regard to the seized funds.
For a majority of the $3 million dollars seized by the state, it was shown that the state could not prove it had any connection to drug money, money laundering or money structuring. For the small remainder of the funds seized, there was evidence of deposits into the company’s bank account that were just under $10,000 but no evidence that the deposits were broken down from amounts greater than $10,000 with the intent to avoid the reporting requirements. It was clear that the state intended to strong-arm the company into a quick settlement by seizing and attempting to forfeit as much money as possible thereby crippling the company and scaring it into thinking the state had a valid money laundering and money structuring case. This appears to happen often in South Florida. However, fortunately, the company was run well enough that it was able to survive the temporary seizure of its operating account and the longer but still temporary seizure of the almost $3 million in that operating account. Once the company decided to put up a fight and shine a light on the state’s (lack of) evidence, it was determined that the state had significant holes in its case and theory. The case was ultimately resolved favorably with the large majority of its money was returned.
However, at the end of the day, it was very troubling to see a state law enforcement agency go after a legitimate business in such a way with so little evidence of any wrongdoing. We imagine this probably happens often, and when it happens on a smaller scale with less money involved, the companies probably settle the forfeiture action quickly as it may be easier and more cost effective than fighting the forfeiture for a year or two. In other words, the government is probably often successful in squeezing money out of legitimate companies who settle on unfavorable terms because they are too worried about the potential consequences, need to settle to keep their business running or decide not to incur the expense of litigation for a year or two to fight the government.