Land of the free?
Tue, 2015-05-26 19:49
News Staff
Cash Bank Deposits Risky
I was talking to a banker a few months ago who told me:
“In the old days, cash was king. Today, cash is $#@%.”
He was talking about the risks posed to both businesses that deal in cash and border banks who deposit their money.
With who knows how many federal agents now inhabiting the RGV border region, with little to do apparently other than busting small-time politiqueras, while the big fish remain free, the feds have now apparently taken to going after small fry that deal in cash.
I mean, it’s not like there’s any serious border crime that might demand better use of their time.
The banker I spoke to said he hasn’t yet known of any small Valley businesses to suffer the way a guy named Lyndon McLellan has, but it’s probably not a question of if it’s going to happen here, but when.
Who is Lyndon McLellan, you ask. He’s the poor working slob who had his life turned upside down last year by overzealous federal agents working the beat in North Carolina. With no notice, they went to his bank and cleaned out his business account to the tune of $107,700, claiming he was guilty of “structuring violations.”
Here in the Valley, no one should probably care about what happened to poor Lyndon McLellan, except for one simple fact: what happened to him can happen to any small border business owner that handles cash.
That, and the fact that what happened to him flies in the face of what most of us perceive as a Free America. Something we’ll be celebrating, in fact, in just a little over a month as July 4 quickly approaches.
If you own a restaurant, or a used car lot, or a convenience store or any small business that handles cash on a daily basis, be careful of how you deposit your money, because in the eyes of federal agents, you’re guilty until proven innocent.
McLellan had such a store in Fairmont, North Carolina – a small convenience store and gas station. Worked his fingers to the bone, according to a story written about him and published in The Daily Signal (written by Melissa Quinn, May 11, 2015). His L&M Convenience Mart was one of those small businesses that are apt to take up almost the entire life of the owner. If you’re not actually at work, you’re probably at home thinking about it. Or worrying about how to pay the bills, the taxes. The overhead.
When McLellan purchased his store 14 years ago, it was only a convenience store and gas station, but with a lot of hard work, he expanded the foot print to include a restaurant that serves hot dogs, burgers, catfish sandwiches.
Like most small business owners, he’d make his daily cash bank deposits. He was legit. Had a checking account. Paid his taxes.
Then one day, according to the Daily Signal story, a bank clerk told him that if he kept his bank deposits just below a $10,000 threshold, he could save the bank some time. They wouldn’t have to fill out additional paperwork and submit it to the government.
So, being the good guy he was – why create extra work for people if he could help it – he tried to keep his bank deposits under the $10k threshold, even though the deposits were actually his niece’s responsibility.
Then, wham, like a freight train, federal agents and state agents, apparently with nothing better to do than scratch their #@@, rolled up to a stop at McLellan’s store one day and accused him of “structuring his bank deposits.”
The agents asked McLellan if he knew what that was.
According to the Daily Signal, he told them no. “But I’ve learned a lot about it now.”
The thing that really floored the poor guy – lucky, actually, that he didn’t have a heart attack, considering he fits the profile, big and beefy with a florid flush – was when the federal agents told him that they’d already been at his bank and had cleaned out his entire operating bank account to the tune of $107,702.66.
As a backdrop, bank structuring laws were enacted by the federal government, AKA, the gang that couldn’t shoot straight, as part of the Bank Secrecy Act (BSA) of 1970. Its intent was to catch drug traffickers, loaded with cash, looking for a bank in which they could launder their ill-gotten gains. As part of the BSA, the $10,000 threshold was put in place. Any cash deposits above that amount must be reported to the government.
Tied to the BSA, under civil asset forfeiture laws, law enforcement agencies can seize property if it’s suspected of being related to a crime.
By the looks of the pictures attached to the Daily Signal story, one quick drive past Lyndon McLellan’s store, a look at his books, would have told federal agents that the store owner was guilty of nothing but hard work. But apparently it was easier to simply stop by his bank and rob the guy blind. Bank robbers with a federal badge, in other words, with the full weight of federal law at their backs.
In recent years, like shakedown artists run amok, federal agents have dramatically increased their seizure of assets, citing violations of structuring laws. According to the Daily Signal story, in 2005, the IRS made just 114 structuring seizures. Seven years later, that number had risen to 639. The total amount stolen, I mean, seized: $242 million.
While banks must report cash deposits above the $10k threshold, they’re also burdened by the federal government to submit to the government “suspicious activity reports” on deposits under the $10,000 limit. According to a source cited in the McLellan story, it was probably one of those such reports that caught the attention of the IRS, which often teams up with local law enforcement to scour the paperwork, looking for suspicious activity.
Maybe McLellan was selling one too many hamburgers, hard to say, what caught the attention of the IRS, who then turned the serious crime case over to the FBI, its agents quick to jump into their non-descript government cars and race to McLellan’s bank and clean out his $107,700.
According to the Daily Signal story, they were nice about it though. At one point, they even offered to return his money to him, 50 cents on the dollar. In other words, the federal shakedown scam artists would take out a cool $53,850 for their hard work, and return the big guy his change.
A lawyer quoted in the Signal story, who works for real American justice at the Institute for Justice, and who later served as McLellan’s attorney, told the Daily Signal:
“The government has a financial incentive to broadly apply the forfeiture laws. When an agency like the IRS takes money under the forfeiture laws, that money goes back into the pockets of the agency and it’s available to the IRS to fund law enforcement activities without appropriation from Congress. It’s a powerful incentive for law enforcement to abuse civil forfeiture laws.”
Thanks to McLellan’s competent attorney and some media attention, the federal government finally agreed to return the entire $107k. But it refused to pay interest, legal fees, expenses, or even offer a simple apology to the hardworking business owner.
During those 10 months, by the way, the federal government earned interest on the store owner’s money, but that stays in the federal coffers.
Made to look like the fool it often is, thanks to several high-profile structuring cases portrayed in the media, the IRS announced last year that from here going forward it would only pursue structuring violations in cases where the money is obviously tied to a crime. Earlier this year, the U.S. Justice Department followed suit. Promising it, too, would play fair from now on.
If you believe that, I have a bridge to sell you.
But back to the RGV. I asked the banker I sourced at the top of this story what local businesses should do that deal in cash business transactions on a daily basis? And along the border, there are a lot of them dotted up and down the highway. Offering easy potential pickings for federal agents looking for some action. The cases of the Donna politiqueras and their campaign manager have proven that. Not to mention the shakedown racket they tried a few years back on the wellknown and respected local oral surgeon.
“Business owners should make sure they keep good financial records,” the banker said. “And make daily deposits. Don’t worry about the amount.”
So, this July 4th, as we sit back and wave Old Glory and sing battle hymns about the Land of the Free and the Home of the Brave, as we blow off fireworks and lie to ourselves that we still live in the freest country on earth, lest we not forget the sad tale of poor Lyndon McLellan. The guy to whom the federal government owes an apology. Not to mention interest, expenses and legal fees. But an apology Lyndon McLellan will never, ever see.