Tax Subsidies for Drug Dealers, Gangsters, Bureaucrats, and Terrorists

Is there anyone with a functioning brain who thinks this is a good use of money? Great article from the LA Times:

The United States has been spending $69 billion a year worldwide for the last 40 years, for a total of $2.5 trillion, on drug prohibition -- with little to show for it. Is anyone actually benefiting from this war? Six groups come to mind.

The first group are the drug lords in nations such as Colombia, Afghanistan and Mexico, as well as those in the United States. They are making billions of dollars every year -- tax free.

The second group are the street gangs that infest many of our cities and neighborhoods, whose main source of income is the sale of illegal drugs.

Third are those people in government who are paid well to fight the first two groups. Their powers and bureaucratic fiefdoms grow larger with each tax dollar spent to fund this massive program that has been proved not to work.

Fourth are the politicians who get elected and reelected by talking tough -- not smart, just tough -- about drugs and crime. But the tougher we get in prosecuting nonviolent drug crimes, the softer we get in the prosecution of everything else because of the limited resources to fund the criminal justice system.

The fifth group are people who make money from increased crime. They include those who build prisons and those who staff them. The prison guards union is one of the strongest lobbying groups in California today, and its ranks continue to grow.

And last are the terrorist groups worldwide that are principally financed by the sale of illegal drugs.

Who are the losers in this war? Literally everyone else, especially our children.

The Unindicted Co-conspirator Trick Pt. 2

A prosecutor has many tools in his bag of dirty tricks. One we discussed in relation to Enron and AIG was the "unindicted co-conspirator trick” which allows the prosecution to block unfavorable witnesses from testifying for the defense. At the time we concluded, “The unindicted co-conspirator trick was so successful in the Enron, that we’re sure to see it used more frequently in the future.”

That didn’t take very long.

Today the WSJ Blog has a story about the feds using this tactic without even the pretense of justification:

According to a memo, filed today in Texas district court on behalf of the Islamic Society of North America and the North American Islamic Trust — both of which were named as “unindicted co-conspirators and/or joint venturers” in an appendix that was attached to the brief — the government allegedly violated the Fifth Amendment in providing no explanation for its description of them as unindicted co-conspirators. The organizations, rep’d by ACLU lawyers, argue that, under Fifth Circuit law, “no legitimate governmental interest is served by an official public smear of an individual when that individual has not been provided a forum in which to vindicate his rights.”

The relief? They want a Fifth Amendment violation declared by the court, an order expunging their names from any public document filed that identifies them as unindicted co-conspirators and an order enjoining the government from identifying them as unindicted co-conspirators in another context other than that specifically permitted by the court.

Guilty before proven innocent, thuggish prosecution tactics by the feds

The Kaleys simply want to use their own money to retain counsel of choice to defend them at trial," said one of their attorneys, Howard Srebnick of Black Srebnick Kornspan & Stumpf in Miami. "The government is interfering by freezing their assets, including the equity in the home they purchased more than a decade ago, without giving the Kaleys an opportunity pre-trial to confront witnesses and present evidence to establish they have committed no crime."

The Kaleys set aside about $1 million to pay attorneys by taking out a second home mortgage and cashing certificates of deposit. But prosecutors claimed the money was ill-gotten gains. They charged Kerri Kaley stored the medical equipment in the family's garage. Her husband was indicted after she refused a plea deal. Prosecutors said he knew about the conspiracy and managed the illegal profits.

On the face of it, this charge is absurd. As one commentator at the WSJ law blog asks, “he defendants make a good argument under the 5th and 6th. How can the government freeze assets BEFORE proving they were “ill-gotten”? That’s crazy!” In other words, in these cases, guilt is assumed.

Like many other corruptions of civil liberties, asset seizures got their start in drug cases:

Miami criminal defense lawyer Jane Moscowitz, who’s representing Miami criminal defense lawyer Ben Kuehne against money laundering charges, says that bad rulings in drug cases “eventually come and pollute the prosecution of white-collar cases.”

The linked article also touches on the cost of defending white collar charges. Just for document review alone costs are over one million dollars. We touched on how costs can affect the decision to settle in earlier posts. What chance does an individual stand against the resources of the state? Almost none, which is why no matter what the charge is, the only options for most people, is to cut a deal. Almost no one can afford justice; any win would be a pyrrhic one.

Third Time's the Charm for Fake Terrorism Case?

Way back in June of 2006 we reported that the Sears Tower terrorism case was a joke. This was pure entrapment by the feds as these guys were about as threatening as the Apple Dumpling gang. Here is what we said in 2006:

Despite the indictment mentioning Al Qaeda several times and Bin Laden for some reason, neither were involved in this alleged plot. There was a law entrapment, errr…enforcement officer who somehow convinced these boneheads they he was really part of Al Qaeda. He got them to swear allegiance to Al Qaeda and even got them to believe they would have a chance to blow up the Sears Tower.

They are so laughable inept that the idea they could be a threat to the Sears Tower is absurd. By the end of the indictment it is clear that this group has probably seen too many movies (just look at their materials list) and that even getting boots was a multi–step process that they could barely accomplish.

Unable to admit defeat, the US is dragging these guys to court for a third time, according to today’s New York Times. The story is here, and the best quote from it is below:

“These are the types of prosecutors Las Vegas is built on,” Mr. Turley said. “They keep returning to the table with the same losing hand.”

The Fed’s Sleazy Tactics– The unindicted co-conspirator trick

This dirty tactic was on full display during the Enron trial when the prosecution named nearly 100 co-conspirators. Normally, these are people who the prosecution believes are involved with a crime but has not yet charted them. However, during in the Enron trial the prosecution named everyone who might have exonerating evidence as a co-conspirator, which kept the witnesses in limbo and prevented them from testifying for the defense.

The unindicted co-conspirator trick was so successful in the Enron, that we’re sure to see it used more frequently in the future. Most recently it was used in the trail of Robert Graham, formerly of General Re. The charged lawyer says that the one man who can clear him has been named as an unindicted co-conspirator and cannot testify. Unsurprisingly the prosecutors will not give him immunity to get the full story. Something is rotten when the referees have a dog in the fight:

"It is absolutely clear that Rob was acting in good faith, trying to do the right thing, sharing his concern with the No. 1 lawyer in the entire company, a man who Rob had every reason to trust and to respect," Vinegrad told jurors.

McCaffrey, who left Gen Re in 2005, was named by the government as an unindicted co-conspirator. McCaffrey says that he would have testified as a defense witness if he had been granted immunity. But prosecutors denied the request.

Innocent Until Proven Guilty? Not to the Feds

Banks, brokerages, casinos, and other finance institutions are required to file Suspicious Activity Reports on their clients for ”…known or suspected criminal offenses, at specified thresholds, or transactions over $5,000 that they suspect involve money laundering or violate the Bank Secrecy Act“. With harsh penalties for failure to file, these financial institutions rat on their customers at the drop of a hat.

This had led to a proliferation of SAR filings, especially since 9/11.

Eliot Spitzer, the former NY Governor, is the higher profile victim so far of the Suspicious Activity Report flood. A cash deposit greater than $10,000 requires filing a “currency transaction report” so, as anyone with a brain would suspect, people try to avoid that hassle by depositing smaller amounts. Unfortunately, banks consider deposits under this amount “structuring,” as in, the deposit is designed to be under the limit and is suspicious. In other words, damned if you do and damned if you don’t. In practice, the majority of SARs are filed for this reason. The consequences are borne by the banks customers.

Since nearly anything can trigger an SAR filing, the Feds can pick and choose who to go after. Moreover, there doesn’t have to be any proof of criminal activity for the Feds to go in and snatch the funds. Aren’t you innocent until proven guilty? Not when it comes to your own money. But remember, it’s for your own good citizen!

Forbes magazine has two great articles on SARs and some example cases:

The young couple hauled in $40,000 in cash at their Greek wedding. They knew if they deposited $10,000 or more at once, the bank would have to file a "currency transaction report" and they'd have to wait in line to provide information. So they deposited their loot in smaller lumps. Soon, they were being investigated by Internal Revenue Service criminal agents and paying Chicago attorney Robert E. McKenzie $500-plus an hour to help them avoid seizure of their cash or worse. Carving up deposits to avoid a currency report is "structuring." Structuring is a felony. "It's scary. If you know of the $10,000 requirement and attempt to avoid it, you've committed a crime," says McKenzie, who convinced the irs to let the newlyweds go.

You don't have to be dealing drugs, cheating on your taxes or paying prostitutes to run afoul of the structuring law. Even if the money is from a legal source and used legally, the government can charge you with a crime and/or demand you forfeit cash. By contrast, with money laundering, the cash has to be related to an underlying crime.