A convenience store owner who had his entire bank account seized under an Internal Revenue Service policy meant to target drug dealers and money launderers will be repaid in full, his lawyer told CNBC on Friday.
Khalid "Ken" Quran has been fighting for months to have more than $150,000 returned from the IRS with the help of Washington-based nonprofit public interest firm The Institute for Justice.
Quran, a Middle Eastern immigrant, says he unknowingly forfeited his entire bank account in June 2014 to agents who visited his Greenville, North Carolina, store, accusing him of skirting reporting laws.
The business owner had been making withdrawals of less than $10,000 regularly, and drew a red flag for potential "structuring," a tactic used by criminals who break up their banking transactions to evade authorities. Transactions over the $10,000 threshold must be reported, and these rules intended to target criminals have been applied in some cases in recent years to small-business owners who operate mostly in cash.
"He said, 'You need to sign a paper,' and I told him my English is not right," Quran told CNBC. "Then he read it to me like you would read the newspaper and said you need to sign it."
Quran said he did nothing wrong. "No bank told me that. No bookkeeper told me that," he said.
The IRS changed its policies in October 2014, restricting asset forfeitures to cases in which the property owner is suspected of criminal activity. The Department of Justice followed suit with a new policy directive for structuring in March 2015, which says the asset forfeiture program will focus on the "most serious illegal banking transactions."
The two agencies work closely together on structuring cases, but unfortunately for Quran and other business owners, these changes were not retroactive.
The Institute for Justice took up Quran's case and filed a petition for mitigation or remission, essentially a pardon, in July 2015, and sent a follow-up letter this Tuesday to the IRS, seeking answers.
The nonprofit received a fax Friday morning, dated Feb. 18, that says "mitigation of forfeiture is granted in full," signed by the chief of criminal investigation at the IRS.
"The IRS took Ken's money without ever accusing him of doing anything wrong," said Robert Johnson, the attorney representing Quran and other small businesses impacted by the IRS policy. "The IRS realized it was wrong when it changed its policies and it has done the right thing in giving it back. That money should have never been taken in the first place, and I hope this is just the beginning."
The IRS did not respond immediately to a request for comment. (See the IRS letter below)
"I am very, very happy, and I believe there is justice in this country," Quran told CNBC.