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Gun sellers asset forfeiture nightmare inspires federal legislation
Athens Clyde had $950,000 seized without warning by IRS before winning settlement
U.S. Attorney General Jeff Sessions addresses the issue of civil forfeiture while meeting with the nation's district attorneys July 17 in Minneapolis, Minn. Sessions said the Justice Department will soon make it easier for local law enforcement to seize cash and property from crime suspects and reap the proceeds. However legislation at both the federal and state level seeks to limit such seizures. - photo by Jerry Holt

Almost $1 million was drained from Andrew Clyde’s bank account on a Friday in 2013 as he worked in his store.

On April 12, 2013, Athens gun shop Clyde Armory was mostly empty after a buying frenzy at the height of America’s run on guns.

“We had sold everything in the store,” Clyde told The Times this month. “I normally have 1,500 guns in this store on display. There might have been 100 (left), maybe less than that.”

The merchant and Navy veteran had ordered hundreds of new firearms to replenish his stock. The bills had not yet been paid. Payday for his employees was coming up in a few days.

It should have been a high-water mark for Clyde Armory, which like other gun stores in the United States was riding a wave of record sales as Americans worried about potential new gun restrictions from the Obama administration.

But instead, that Friday launched a monthslong ordeal as Clyde fought to get his $950,000 back — from the IRS.

“I personally believe they thought I was an easy target,” Clyde said. “All they really wanted was money.”

“I’m sure they thought, ‘Wow, this guy is a gun dealer. He must be doing something under the table,’” Clyde later said.

He had been hit by civil asset forfeiture, a federal and state practice that allows governments to seize property that they believe has been illegally obtained.

It’s often used against suspected drug dealers, but the practice has been criticized by watchdog groups as being unconstitutional and for setting up a conflict of interest within law enforcement agencies that get to keep the money and sell the property they seize.

Civil asset forfeiture is back in the news after Attorney General Jeff Sessions issued a directive in July that rolls back federal restrictions on the practice.

In 2013, when Clyde was dealing with the IRS, the federal government seized about $3.5 billion through civil asset forfeiture, the Washington Post reported in 2015. The report also revealed that Americans lost more property through civil asset forfeiture than they did through burglary in 2015.

Georgia still allows civil asset forfeiture by state and local law enforcement, though there have been recent efforts at reform that would slow the process down.

In 2016, state Rep. Scot Turner introduced a bill that would require charges be filed against an individual before his or her assets could be seized. It was opposed by the Georgia Sheriffs’ Association and didn’t clear the Georgia House.

That same law at the state and federal level would have prevented Clyde’s run-in with the IRS.

He still owns and operates his shop, but staying open after his cash had been seized was a question for months.

“I didn’t have any money for payroll,” Clyde said. “I had to go borrow $80,000 in order to make payroll and to pay some of the accounts payable of the stuff that had started to come in.”

Clyde had been accused of “structuring,” or setting up bank deposits to avoid reports to the IRS. He maintains his innocence, saying his liability insurance only covered off-premise losses of up to $10,000, which meant he was making semi-regular trips to his bank to deposit amounts close to the reporting threshold.

“They audited my tax records for four years, and they found absolutely nothing,” Clyde said.

But whether he was innocent or guilty wasn’t part of the discussion in the battle from April to October in 2013; the IRS never brought charges against him even while its agents and United States attorneys refused to return his money.

In those six months, IRS agents and federal attorneys offered Clyde several settlements, using his own money as the lure, as the case went before U.S. District Court Judge Clay Land.

“You can’t penalize me until you convict me criminally. But they didn’t want to convict me criminally – they wanted the money,” Clyde said.

With pressure building, and after federal agents found no issues with Clyde’s books, the gun seller was eventually asked to name his price of settling. He decided to walk away with $900,000, leaving the remaining $50,000 to the IRS — about the cost of his attorney fees had the case gone to trial, Clyde said.

“At that point, I decided that $50,000 was going to be my retreat,” the former serviceman said. “It was going to guarantee my survival, and it was going to allow me to retreat so I could fight another day.”

Clyde’s case was considered so egregious by federal lawmakers that his name was put on a bill that tightens restrictions on civil asset forfeiture at the federal level.

The Clyde-Hirsch-Sowers Respect Act — named for Clyde and two other families that had their assets wrongfully seized — is co-sponsored by Rep. Doug Collins, R-Gainesville, whose district reaches to the edge of Athens.

In an April op-ed, Collins noted that civil asset forfeiture predominantly targets minority citizens and noted cases of extreme abuse of the practice, including a Chinese-American man from Georgia traveling to Louisiana carrying $75,195 his relatives had given him to buy a restaurant.

Alabama police pulled him over for speeding, Collins wrote, and then took the money. It took the Georgia resident 10 months to get it back.

In recent action from the U.S. Supreme Court, Justice Clarence Thomas noted problems with the country’s civil asset forfeiture laws.

“According to one nationally publicized report, for example, police in the town of Tenaha, Texas, regularly seized the property of out-of-town drivers passing through and collaborated with the district attorney to coerce them into signing waivers of their property rights,” Thomas wrote. “In one case, local officials threatened to file unsubstantiated felony charges against a Latino driver and his girlfriend and to place their children in foster care unless they signed a waiver.”

Some law enforcement agencies aggressively pursue civil asset forfeiture because it’s outside of the national or local appropriations process, meaning Congress doesn’t have to spend the money and local taxpayers don’t see their property taxes increase.

“That is scary — this is free money to them,” Clyde said. “Money they don’t have to go before Congress and budget. To me, this is evil money. It’s evil money in their hands ... because it will spawn more of the same behavior.”

Roskam’s bill was first introduced more than two years ago by Rep. Peter Roskam, R-Illinois. He told the House Committee on Ways and Means that he had “never seen such a display of bipartisan outrage before” when the bill was first introduced.

“This practice was so inherently wrong that no one rose to the defense of the Internal Revenue Service,” Roskam said on July 13.

The Illinois Republican noted that some progress has been made at the federal level. His bill cleared the committee after his remarks and is now headed to the House floor for a vote.

IRS Commissioner John Koskinen has apologized to Clyde and the other families for the actions of his agency.

In March, the IRS finished a review of the 454 contested cases of civil asset forfeiture and agreed that more than 80 percent of the money needed to be returned.

There’s a total of $22 million in federal coffers that’s being demanded back by citizens. Of that, $6 million has been delivered.

Clyde’s $50,000 has yet to be returned, but he’s far from given up hope.

“This is going to end up being a success story,” he said, “because hundreds of American citizens are going to get their money back that they never would have gotten back if this hadn’t had happened and if we hadn’t fought this fight and won.”