STRUCTURED CASH DEPOSITS: WHAT DO I DO WHEN THE IRS CID AGENT COMES?
Posted on by Michael Lowe.
Now imagine that you want to buy a sweet piece of real estate so that you can break ground on your new Doctor’s office. You negotiate a purchase price of $650,000. You want to use all that stashed cash to buy the property.
Of course, the United States Treasury Department and the IRS don’t know you have that cash and you want to keep it that way so you won’t have to pay any income tax on that cash. If you decide to deposit the cash in the bank, you know that if you show up to your Bank of America, Wells Fargo or Chase Bank with $650,000 in cash or to get a cashier’s check, the Bank will file the CTR. You will likely get an IRS Criminal Investigation Division Special Agent (“IRS CID”) knocking on your door in short order.
Instead you decide that it would be great if your family and friends could help you out. Maybe you could convince them to take some of your money and deposit the money in numerous bank accounts under different names over the course of a year. You instruct your family members and friends that are helping you out with this endeavor, to only make deposits $10,000 or less, and do it in a way that makes it less likely the Bank will file a CTR.
Now picture you’ve deposited all of that loot and you want to show up to closing with enough money to pay “cash” for the land. You show up with several dozen cashier’s checks drawn upon numerous different bank accounts all of which add up to the purchase price of $650,000.
Little do you know that the title company is a little suspicious. Someone at the title company calls their favorite IRS agent to make a report concerning the transaction. You don’t know about the call. You buy the land and the title is transferred into your name. The next thing you know the IRS is contacting you about the source of the funds.
What will happen now? IRS Investigations of Structuring Cases: Enter the U.S. Attorney’s Office
The IRS will likely investigate you in conjunction with the United State Attorney’s Office. These are the attorneys who represent the federal government in criminal trials; they are the federal prosecutors who try structuring cases.
The IRS and the federal prosecutors will investigate their new Doctor’s Office case, as reported by the Title Company phone call, for at least two different violations of criminal law.
You may receive a US Attorney’s Office Target Letter, like this one.
This letter will come from an Assistant US Attorney in connection with one of two different proceedings, a forfeiture suit and a grand jury criminal investigation. If the money is subject to forfeiture, you can expect that the US Attorney’s Office will file a lawsuit in federal court and serve you with it. The procedure typically used to freeze the assets is called a “Warrant for Arrest of Property in Rem.” This is how the federal government goes after the money itself, so the government can take it as you “forfeit” your ownership and legal right to the cash.
The US Attorney’s Office will also file a Civil Complaint and will seek a forfeiture of the property you purchased with the structured funds claiming a violation of 31 U.S.C. section 5317(c) and 18 U.S.C. sections 981 and 984. Here, they are going after the land that you bought with the cash which you planned to be the site of the new Doctor’s Office.
You will also likely be subject to a Grand Jury investigation of federal criminal law violations, and you may be asked to provide discovery to the Federal Grand Jury or even to give testimony to the Federal Grand Jury. Of course, you would need to hire an experienced Federal Criminal Defense Lawyer, like me, to help you. (This is particularly important when Grand Jury proceedings are involved since individuals may not get the same protections in a grand jury proceeding that they may receive in a criminal trial or police investigation.)
But I’m Not a Criminal! I’m a Professional, Why Are They Coming after Me?
The above Doctor’s Office scenario is fictional, I made it up. It does not reflect, in any way, a real case that I’ve handled, although I have represented professionals facing similar allegations.
I understand what might be going through your mind when you find yourself in this sort of situation. I’ve heard it many times: “But I earned that money legitimately. I am not a criminal! I don’t do anything illegal. I am just a Doctor or a Dentist or a Pharmacist or a Lawyer. I am not involved in any criminal transactions. I am not a drug dealer! “
I know you earned the money legitimately. Your federal accusers may know it, too. The only concern the U.S. Attorney’s Office will have is whether you violated a couple of laws (Title 31 USC 5324 or Title 18 USC section 371) in conjunction with the aforementioned statute. It’s how you handled the cash that is the issue here, not how you earned it.
As the United States Supreme Court explained in the case of Ratzlaf v. U.S., 510 U.S. 135 (1994): “Undoubtedly there are bad men who attempt to elude official reporting requirements in order to hide from Government inspectors such criminal activity as laundering drug money or tax evasion. But currency structuring is not inevitably nefarious.”
Well, you say, prove it! They can’t prove I did this! That might be true, but my experience is that these cases are very easy to prove (The Feds call it “Low Hanging Fruit”). It’s mostly a paper case.
The Feds look at the deposit amounts, the dates and the locations of the bank deposit runs. The FBI or IRS talk to witnesses like bank employees, your CPA, and the other folks that might have helped to make the deposits. The U.S. Attorney’s Office isn’t going to take the case unless it comes to them on a silver platter and that’s exactly what the IRS Special Agent is trying to accomplish in their investigation. Banks keep lots of records; building a paper trial in these cases isn’t that hard to do.
What Professional Small Business Owners Can Face: Serious Prison Time
Back to the Doctor’s Office Scenario. Let’s assume the IRS Special Agent has done his job and the case has been made against you. What do you do? What do your family members do that may also be investigated for the same thing?
This is where having an experienced Federal Criminal Defense Attorney can make all of the difference between spending the next 10 years incarcerated behind bars in the federal Bureau of Prisons system (“BOP”), or getting probation, or a short trip your local Prison Camp. Because time behind bars in a federal facility is in your future if the federal prosecutor gets his or her way.
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