FAIRMONT, N.C. -- Months after having the Internal Revenue Service (IRS) seized more than $107,700 from his bank account over "structuring violations," L&M Convenience Mart Inc. owner and president Lyndon McLellan has learned that the government has dismissed his case.
The IRS seized his funds because agents had "detailed a pattern of 301 deposits into the seized bank account between January 4, 2011, and April 24, 2014, totaling more than $2 million, which appeared to be structured to evade the Currency Transaction Report (CTR) threshold of $10,000," court documents said.
Under a subset of civil asset forfeiture laws that regulates cash deposits, the government can seize money from those accused of structuring violations, as it did in McLellan’s case.
"The declaration noted that 115 of these transactions involved deposits of between $9,077 and $9,999. The declaration further detailed some of these transactions, which included several instances of deposits being made on two consecutive days for amounts that together totaled more than $10,000, giving rise to probable cause that the deposits were deliberately made in amounts less than $10,000 for the purpose of evading federal CTR reporting requirements."
According to documents filed with the U.S. District Court for the Eastern District of North Carolina, U.S. Attorney Thomas Walker said that although Mary Floyd, McLellan's niece and vice president of the company, acknowledged that they were aware that the store would sometimes have more than $10,000 in cash to be deposited at one time, and that they split those deposits to avoid the threshold, the United States declined "to proceed further [with this] litigation in light of U.S. Department of Justice Policy Directive 15-3, effective March 31, 2015, under which a forfeiture action like this, where there is no probable cause that the funds structured were generated from otherwise unlawful activity, would not be commenced. … The plaintiff chooses to exercise its discretion not to continue with the litigation of this case at this time."
The "unlawful activity," for example, would be money laundering and drug trafficking, neither of which were involved in this case. McLellan was never charged with a crime.
Following media coverage of several high profile cases involving Americans who unknowingly committed structuring violations and had money seized, the IRS announced last year it would only pursue structuring violations in instances where the money was tied to a crime. In March, the Department of Justice followed suit.
“We’re thrilled that the government has recognized that what they were doing to Lyndon was wrong and that they’ve dropped the attempt to forfeit Lyndon’s money,” Robert Johnson, a lawyer representing McLellan, told The Daily Signal. “This case was a mistake and unconstitutional from the start, and we’re just glad the government has recognized that.”
“It’s a relief to know that you’re getting something back that’s yours to start with,” McLellan told the newspaper. “I wanted [the government] to do what was right, and I felt what was right was for me to get my money back.”
Johnson said it could be months before the government returns the money. Although the government will return all of the money it seized from McLellan, it dismissed the case without covering the store owner’s legal fees and expenses, as well as interest on the money, said the report.
In 2000, Congress passed a law that entitles McLellan to those fees and expenses, which total more than $20,000, said the report. Additionally, government policies require the $107,702 seized is kept in an interest-bearing account. Though McLellan will receive the money, the government wants to keep the interest earned.
Johnson told The Daily Signal he will fight to ensure McLellan has legal fees, expenses and interest repaid.
Click here to view the full Daily Signal report. For more about McLellan, click here.
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