Out of the blue, on April 12, 2013, two IRS agents barged into his place of business and seized nearly a million dollars from his company's bank account - without a warrant and without notifying him of any wrongdoing. All done legally - under the U.S. Bank Secrecy Act.
You don't have to be a criminal to be treated like one in this country. You just have to be suspected of
being one. Clyde's experience with the IRS is just one of many who find themselves on the wrong end of an overbearing federal program (Bank Secrecy Act) that allows several agencies to seize assets that they suspect might be tied to a criminal activity - even when there is no criminal activity.
Clyde joined others in recalling their nightmarish encounters in front of a House hearing on Wednesday, where IRS Commissioner John Koskinen also testified.
Koskinen, who apologized to those snared by the IRS practice, gave promises that the agency stopped seizing assets without clear wrongdoing in October.
But the law that allowed Clyde and others to be targeted and their assets seized without probable cause, is still on the books.
During his testimony, Clyde said,“I did not serve three combat tours in Iraq only to come home and be extorted” by the government, Clyde testified Wednesday. He urged Congress to change the law.
The law in question falls under the Bank Secrecy Act. Under the law, financial companies must report cash deposits more than $10,000. But since terrorists and other criminals know this rule, banks also must report patterns of deposits slightly below the $10,000 threshold.
Clyde was accused of what's known as "structuring" -- that is, making deposits deliberately calculated to skirt reporting requirements -- because he made frequent deposits just under $10,000.
But Clyde says he only did that because of his insurance policy.
While most transactions at Clyde Armory are not in cash, the Sandy Hook school shooting in Newtown, Conn., and the potential for new firearms laws, drove sales. Clyde's business made millions of dollars, about 15 percent of it in cash transactions. Clyde's business manager made daily deposits, and based on the dollar value of his insurance policy -- capped at $10,000 -- the company policy was to not ever hold more than $10,000 cash.
The total cost of the IRS ordeal for Clyde ran over $150,000 – including legal fees and a $50,000 settlement with the IRS to get the rest of his money back.
He pleaded Wednesday for Congress to change the law so that no one else would be hurt like he has.
"You've been violated by your government," Rep. Mike Kelly, R-Pa., thundered at Wednesday's House Ways and Means Committee's oversight subcommittee hearing.
Clyde wasn’t the only one. Maryland creamery owner Randy Sowers and Jeff Hirsch, a tobacco and candy distributor in New York, also run legitimate businesses. Yet the IRS seized their assets anyway, creating massive legal bills and hurting their businesses.
Hirsch and Sowers lost at least $60,000 each when the IRS seized their assets for making suspicious-looking deposits. They also suffered embarrassment.
In a recent statement, Koskinen defended current IRS practices. "The IRS pursue seizures only when there is probable cause that the money is subject to forfeiture -- and only after seizure affidavits have been reviewed by a federal prosecutor and authorized by a federal judge," he said
The Institute for Justice, a Washington-based public interest law firm, is demanding reform. The institute found that in one-third of the IRS cases it examined, there was no claim of any criminal activity -- just the allegation of “structuring.” It took an average of one year to get the money back, and only half of it was returned, according to the study. The firm's analysis showed the median amount seized was $34,000.
House oversight subcommittee members showed sympathy to the panelists on Wednesday and appeared to voice bipartisan support for reworking the law.
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