Lyndon McLellan fought the law -- and apparently, he won.
The North Carolina business owner for months has been battling the federal government after IRS agents last fall seized $107,000 from him, under a controversial practice known as civil forfeiture. But his attorneys at the Institute for Justice announced Thursday that the IRS and Department of Justice have moved to dismiss the case and give him back his money.
“What’s wrong is wrong, and what the government did here was wrong,” McLellan said in a statement Thursday. “I just hope that by standing up for what’s right, it means it won’t happen to other people.”
FoxNews.com reported earlier this week on McLellan's struggle to get his money back. The Institute for Justice said the feds moved to drop their case on Wednesday. Asked about the claim, an IRS official told FoxNews.com they could not comment on the case; a representative with DOJ has not yet responded to a request for comment.
McLellan is just one of thousands of Americans the IRS has seized money from, supposedly for “structuring” funds to avoid a law requiring banks to alert the government of deposits over $10,000. The law was instituted to help the government ferret out drug dealers, terrorists or other criminals -- but the IRS occasionally flags deposits of just under $10,000 as suspicious even if there's no evident criminal wrongdoing, in turn ensnaring people who may be innocent.
That's what allegedly happened in McLellan's case. His convenience store in North Carolina was raided in October by IRS agents who said he made a series of just-under-$10,000 deposits in a 24-hour period. They suspected he was “structuring” his cash, and seized his account.
Robert Everett Johnson, the lead attorney on the case, told FoxNews.com Thursday that small business owners like McLellan, who deal mostly in cash, were being unfairly targeted by the law.
"There is no crime in this country for doing business in cash," he said. "But the government treated Lyndon worse than a criminal, by taking his property and forcing him to prove his own innocence to get that property back."
According to Johnson, despite an IRS pledge in November to curb forfeitures that weren't connected to criminal activity, the Department of Justice filed a claim in December saying McLellan had violated the structuring law. The money was held in what is called a "customs suspension account" under the Treasury Department while his case was in limbo.
McLellan had been struggling for months to recover the $107,000, while keeping his business – a store, restaurant and gas station operation – afloat.
In that time, the government never pressed any criminal charges against McLellan. Meanwhile, the DOJ changed its own policy to rein in its restructuring prosecutions in March. But that didn't necessarily mean that McLellan could get his savings back retroactively.
At a February 2015 hearing before the House Ways and Means Oversight Subcommittee, Rep. George Holding, R-N.C., mentioned to IRS Commissioner John Koskinen that he had reviewed McLellan's case -- though he did not specifically name it.
"If that case exists, then it's not following in the policy I've been advised," Koskinen testified, adding that he had "lengthy meetings with the senior leadership" of the IRS's criminal investigation division and was assured that employees were trained in and advised about the new policy.
Two months ago, the government offered McLellan 50 percent of his money back and warned him against chasing publicity, even going so far as to suggest it would rile people inside the IRS and could hurt his chances of seeing his cash again, his attorneys said.
“Today the the DOJ is giving him 100 percent,” said Institute for Justice spokesman J. Justin Wilson. “We got him an enormous amount of publicity – and it did work.”
Wilson said McLellan had other resources to keep his business, “L & M Convenience Mart,” open since last October. But he had to fork over $3,000 for his initial legal fees, and some $19,000 for an accountant to audit his business to prove to the government there wasn’t anything untoward going on. The government said it will not repay those costs or any interest on the seized money.
According to the Institute for Justice, in many civil forfeiture cases, the government will make a deal with the owner where he or she will agree to turn over half their seized money in order to make a lengthy and costly legal fight go away.
Before the seizure, McLellan, 50, had spent more than a decade running the store, located in Fairmont, N.C. When the feds took his money, rumors quickly spread in the tiny hamlet that McLellan's money was frozen because of suspected ties to drugs, fraying the good reputation he'd spent years building in the community.
"Several people thought it was drug-related but when I told them what really happened they said, 'How in the world can they take your money?' That's the answer I've been waiting on too," he told FoxNews.com earlier this week.
From 2005 to 2012, the IRS seized more than $242 million from alleged structuring violations in more than 2,500 cases, according to an Institute for Justice study. In more than 830 of those cases, no other criminal activity was alleged.
Scott Bullock, another attorney with the Institute, said in a statement Congress needs to pass "binding reform" to make sure there are no more McLellans at risk of losing all.
FoxNews.com's Barnini Chakraborty and Kelley Vlahos contributed to this report.