Dubuque, IA- The IRS has seized almost $19,000 from an Iowa woman’s bank account because she was depositing her late husband’s savings in increments under $10,000. Janet Malone, 68, is also facing a criminal misdemeanor charge alleging that she knew the deposits were violating federal law.
The Bank Secrecy Act, passed in 1970 to combat money laundering, requires banks to file reports to the federal government when customers make cash deposits over $10,000. Individuals making cash deposits that are close to meeting the threshold in order to bypass this requirement are considered to be committing a crime called “structuring” whether or not that money was legally or illegally obtained.
Ronald Malone, Janet Malone’s husband, had been visited by IRS agent Jeff McGuire in 2011 to investigate possible structuring. At that time, Ronald Malone was dying of cancer. According to the Associated Press, Mr. Malone acknowledged that the small deposits amounting to $35,500 could be considered structuring and signed a form confirming that he’d been warned about the practice. Janet Malone was at the home for part of that meeting between McGuire and Mr. Malone, but had not signed anything.
Mrs. Malone was reportedly told by her husband shortly before his death in October 2011 about a briefcase containing $180,000 in cash from investment income, gambling winnings and income from his career as an publishing executive. Mrs. Malone then made deposits ranging between $5,800 and $9,000. Prosecutors charged Janet Malone last week with a criminal misdemeanor accusing her of knowingly making small cash deposits from her husband’s savings after he died.
According to an IRS affidavit, Mrs. Malone said that she didn’t remember the details of McGuire’s 2011 visit with her husband because “she was in a state of despair over her husband’s health.”
Last October, the IRS had announced that the agency “will no longer pursue the seizure and forfeiture of funds associated solely with ‘legal source’ structuring cases unless there are exceptional circumstances justifying the seizure and forfeiture and the case has been approved at the director of field operations (D.F.O.) level.” It is unclear if there are “exceptional circumstances” regarding Mrs. Malone’s deposits. Institute for Justice attorney Larry Salzman said that the government’s case against Mrs. Malone is “shocking because it demonstrates that prosecutors are not taking seriously the IRS’ alleged policy change not to prosecute legal source structuring.”
Restaurant owner Carole Hinders, also from Iowa, had nearly $33,000 seized in 2013 by the IRS for making frequent small cash deposits. Hinders maintained that she had been making small deposits from her cash-only restaurant at the same bank for decades and had never been warned by the bank that “I was making my deposits wrong.” The IRS later returned her money and dropped the case against her, but requested the authority to refile the case. Based on a plea agreement filed Monday, Janet Malone is expected to plead guilty next week and allow the government to keep the seized money. The charge is punishable by up to a year in jail and a $250,000 fine.
According to a review from the Institute for Justice, the IRS seized $242 million in 2,500 cases between 2005 and 2012. A third of those cases were simply cash transactions under $10,000. Nearly half was returned after challenges from owners disputing the seizures.