American Freedom Initiative spotlights Iowa restaurant owner who battled IRS

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Carole Hinders | Courtesy Institute for Justice

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Former acting U.S. attorney general Matt Whitaker says that the way an Iowa woman has been treated by the Internal Revenue Service is a vivid example of government overreach and abuse.

Carole Hinders had to fight the IRS to get back nearly $33,000 it seized from her bank account because it deemed her cash deposits suspicious. In fact, Hinders owned and operated Mrs. Lady’s Mexican Food in Arnolds Park for nearly 38 years. It’s a resort area where people from across the Midwest come to enjoy the Iowa Great Lakes, five five lakes that attract thousands of people every year.

Iowa native Whitaker, director of the American Freedom Initiative and a former acting U.S. attorney general, said the manner in which Hinders was treated points to the need for reform. 

“Changes are needed to federal and state forfeiture laws to make sure we are justly punishing criminals while protecting the rights of innocent citizens,” said Whitaker, a former U.S. attorney for the Southern District of Iowa.

Hinders’ restaurant was a cash-only business, both because many tourists carried cash, and to avoid credit card costs. It was the way her mother taught her to operate the restaurant, she said. She regularly deposited cash in the bank to avoid having large sums on the premises. Then, on May 22, 2013, as she started to work on a crossword puzzle with her grandchildren, two IRS agents stopped at her home.

They told her they had seized $32,820.56 from her bank account. The reason for the civil forfeiture? The IRS suspected the 67-year-old Iowa woman of being involved in criminal acts and cited the Civil Asset Forfeiture Reform Act of 2000 (CAFRA) in taking her money.

When she explained the cash came from her restaurant, the agents said they still were taking the money. When she asked how she was supposed to pay her employees and cover other bills, she was told that was her concern, not theirs.

Hinders fought back and nearly two years later, the IRS returned her money after a federal court ruled in her favor and all charges were dismissed. But when Hinders sought to recover the money she had spent on court costs, along with interest on the money that had been seized, she was denied by a district court and the 8th U.S. Circuit Court of Appeals.

Worn down by the legal battle, she sold the restaurant in late 2014.

Hinders’ case is far from unique.

According to a Politico story, from 2005-12, the IRS seized more than $242 million in cases like Hinders’. The report said at least one-third of the cases involved deposits of under $10,000, which the IRS dubbed suspicious.

The Institute for Justice, a national public interest law firm, assisted Hinders in her battle with the IRS and the Department of Justice. 

The American Freedom Initiative (AFI) was established to reorient the American justice system around restorative justice and self-governance, Whitaker said.

“By highlighting instances when citizens have been abused by the criminal justice system and administrative state, AFI will use those examples to advocate for needed regulatory and policy reforms,” said Whitaker, who served as an aide to President Trump and chief of staff for Attorney General William Sessions before serving as acting attorney general in 2018-19.

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