Extorted by the government: How the IRS wrongly targeted a small business owner-Iraq war vet

Targeting scandal 2? IRS criminally profiles small biz owner

Small biz owner and others locked in battle with IRS over obscure federal program that allows agencies to seize assets they suspect could be tied to criminal activity -- even without proof

This is a rush transcript from "On the Record," February 12, 2015. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: They are the worst. If you thought you could not hate the IRS any more than you already do, brace yourself for this one. The IRS is seizing the bank accounts of small businesses, forcing business owners who have done nothing wrong to do battle with the tax agency.

One of the business owners is Andrew Clyde, an Iraq war veteran. He opened a small firearms store in Georgia. Clyde says he was wrongly targeted by the IRS because of a murky federal program. The program allows the IRS to seize assets they suspect could be tied to criminal activity, even without actual criminal activity. And now Clyde taking his case to Capitol Hill.

(BEGIN VIDEO CLIP)

ANDREW CLYDE, SMALL BUSINESS OWNER & IRAQ WAR VETERAN: I did not serve three combat tours in Iraq to come home and be extorted by government's forfeiture laws. That's what I feel they have done to us. I need you to stop it from happening to anyone else.

(END VIDEO CLIP)

VAN SUSTEREN: Business owner, Navy veteran, Andrew Clyde, joins us.

Good evening, sir.

CLYDE: Good evening, Greta. How are you?

VAN SUSTEREN: I'm very well.

So tell me what happened? You were running your business, and what happened?

CLYDE: I was running my business, and on April 12th, 2013, two IRS agents showed up with a seizure warrant and took $940,313 from my company's bank account. And they told me that --

(CROSSTALK)

VAN SUSTEREN: Have you ever --

CLYDE: Go ahead.

VAN SUSTEREN: I'm sorry. And told you what?

CLYDE: And they told me I was -- that I had been structuring.

VAN SUSTEREN: All right. By structuring, what they mean is that the IRS -- that the laws are such that if you deposit more than $10,000 in the bank, that the banks are obliged to notify the federal government. But structuring is, for instance, if you keep putting $9,000 in to beat the $10,000 requirement, right?

CLYDE: That's what they said. That's correct. I had no idea even what it was.

VAN SUSTEREN: OK. So tell me, what were you doing?

CLYDE: We were just depositing less than $10,000 in the bank on a regular basis. As a small business, you want to manage risk. You know, and any time that you send cash out of the store to deposit, you know, that's risk.

VAN SUSTEREN: Have you ever heard from the IRS before that? They just suddenly showed up and seized your $900,000?

CLYDE: That's correct. I never heard from the IRS before.

VAN SUSTEREN: Then what happened? After they seized money, what did you do? That's a lot of cash to have seized by the IRS.

(LAUGHTER)

CLYDE: It's a lot of cash to be seized. It was most everything we had in that bank account. They said call my attorney and have him talk to the assistant United States attorney. So we had a conference about six days later between my accountant, the IRS agents and the assistant United States attorney. And we showed them this was legitimate money, you know, properly earned, properly reported, and we wanted it back. And they said no, we are not going to give it back. They came about three weeks later with an offer to give me back of $600,000 of it if I would forfeit $325,000 to the federal government. And I said, no, absolutely not.

VAN SUSTEREN: So where does it stand now? Of course, let me understand, you have never been charged with no crime, right? There is no crime involved with this?

CLYDE: That is correct. There is no crime involved with this. In fact, in that offer, they specifically noted that I had not been accused of -- I had not been charged with any crime and that they noted that the money was clean, and that it was appropriately handled, that all taxes were paid. They noted that in the offer.

VAN SUSTEREN: Did they return the $940,000?

CLYDE: No, ma'am, they did not. We went to it a hearing three and a half months later, where a judge forced the IRS to return $440,000 of it and then gave me an expedited trial. We never actually went to trial. It was my tactical retreat, if you will, so I could fight another day. And I ended up forfeiting $50,000 to the IRS and they gave me the $450,000 back.

VAN SUSTEREN: How much did you pay in legal fees?

(LAUGHER)

CLYDE: Everything -- the forfeiture and legal fees cost me $149,000, Greta.

VAN SUSTEREN: That's disgraceful.

Anyway, Andrew, thank you. Maybe the IRS won't apologize directly to you but I will.

Thank you, sir.

CLYDE: Thank you, Greta.