- Associated Press - Wednesday, May 13, 2015

CEDAR RAPIDS, Iowa (AP) - An Iowa widow who admitted to illegally splitting up bank deposits of her late husband’s legally earned cash must pay a $2,500 fine in addition to giving up nearly $19,000 the IRS seized from her account, a judge ruled Wednesday.

Retired Dubuque real estate agent Janet Malone must also serve one year of probation, U.S. Magistrate Judge Jon Scoles ruled.

Malone’s prosecution is one example of a federal law enforcement practice that has recently been reined in after coming under criticism as unfair. The 68-year-old grandmother had faced up to one year in prison and a $100,000 fine after pleading guilty to knowingly committing a crime known as structuring.

When her businessman husband died of cancer in 2011 and left behind a large amount of cash from earnings and investments, Malone split up deposits into increments below $10,000 so the bank wouldn’t have to report the transactions to the federal government.

Malone mistakenly believed that doing so would reduce the chances of her facing an IRS audit, a prospect that worried her as a new widow, her attorney Jan Kramer said. All the money had been legally acquired, had been reported on their tax returns and wasn’t tied to any other criminal activity, she noted.

But instead of preventing hassles, Malone’s deposits of $89,000 cash over several months in 2012 at a Dubuque bank drew her into a lengthy federal investigation.

“I deeply regret what I did,” Malone told Scoles. “It has been a long time and I am really glad to have some closure right now.”

Banks are required to report withdrawals and deposits of more than $10,000 under a law meant to track cash tied to criminal activity such as drug trafficking and terrorism. But the IRS has been criticized for using it to initiate civil proceedings to seize money from people and small businesses who repeatedly deposit lawfully obtained money in increments below $10,000.

Facing a backlash, the IRS said last year it would no longer pursue cases involving legal sources of money unless there are “exceptional circumstances” and would focus on cash derived from illegal activity. The Justice Department announced in March that prosecutors would seek warrants to seize bank accounts only if they have probable cause of additional criminal activity or if the seizure “would serve a compelling law enforcement interest.”

Those policy changes weren’t retroactive and didn’t apply to Malone.

The IRS seized the $18,775 in Malone’s bank account in 2013 after Scoles signed a warrant finding her transactions likely amounted to structuring. Under a plea agreement, she agreed to forfeit that money to the government. Her lawyer asked Scoles not to impose an additional fine.

Scoles agreed that the forfeiture was “a fair amount of money” even for someone who is wealthy such as Malone. But he said there were “aggravating circumstances” that justified a $2,500 fine.

He noted that IRS agents had visited Malone’s home in 2011 to warn her dying husband that he was structuring his cash transactions and to stop doing so. Malone was present for part of the conversation, and was then reminded of the reporting requirement by a bank teller in spring 2012, Scoles said.

“She had been effectively warned about her illegal activity,” Scoles said.

Assistant U.S. Attorney Matthew Cole noted the government could have gone after other assets tied to the deposits, such as her second home in Arizona, her lakefront property in Washington state and her jewelry.

“Here, defendant has forfeited a small portion of what was subject to forfeiture,” he wrote in a sentencing memorandum.

LOAD COMMENTS ()

 

Click to Read More

Click to Hide