1994 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

6-8-1994

United States of America v. Retos

Precedential or Non-Precedential:

Docket 93-3341

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1 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

---------- 

No. 93-3341 

---------- 

UNITED STATES OF AMERICA 

v. 

GEORGE RETOS, JR., 

 Appellant 

---------- 

On Appeal from the United States District Court 

for the Western District of Pennsylvania 

(D.C. Crim. No. 92-00110-01) 

 

---------- 

Argued Monday, May 2, 1994 

BEFORE: GREENBERG and GARTH, Circuit Judges 

and ROBRENO, District Judge0

---------- 

(Opinion filed June 8, 1994) 

 George Retos, Jr., Pro Se

 Retos, Held & Mascara 

 70 East Wheeling Street 

 Washington, Pennsylvania 15301 

 Richard A. Sprague 

 James J. West (Argued) 

 Bill Wolf, Jr. 

 Sprague & Sprague 

 135 South 19th Street 

 Wellington Building, Suite 400 

 

0 Honorable Eduardo C. Robreno, United States District Court for 

the Eastern District of Pennsylvania, sitting by designation. 
2 

 Wellington, Pennsylvania 19103 

 Attorneys for Appellant

 Frederick W. Thieman 

 United States Attorney 

 Paul J. Brysh 

 Assistant U.S. Attorney 

 Michael L. Ivory (Argued) 

 Assistant U.S. Attorney 

 633 United States Post Office 

 & Courthouse 

 Pittsburgh, Pennsylvania 15219 

 Attorneys for Appellee

---------- 

OPINION OF THE COURT 

---------- 

GARTH, Circuit Judge: 

 Defendant George Retos ("Retos") was convicted on nine 

counts of an eleven-count indictment, including two counts of 

income tax evasion, in violation of 26 U.S.C. § 7201, and one 

count of currency structuring, in violation of 31 U.S.C. 

§§ 5324(3) and 5322(a). On appeal, Retos contests a number of 

rulings made by the district court during trial. He also argues 

that the district court's jury instruction with respect to the 

structuring count was inconsistent with the Supreme Court's 

holding in Ratzlaf v. United States, ___ U.S. ___, 114 S. Ct. 655 

(1994), a case decided while Retos' appeal was pending before us. 

 We have jurisdiction pursuant to 28 U.S.C. § 1291. 

Although the bulk of Retos' appeal is without merit, we conclude 

that, in the aftermath of Ratzlaf, the jury instruction given by 

the district court without objection constituted plain error, 

which we may review. We will vacate Retos' structuring 
3 

conviction and will remand to the district court for retrial on 

the structuring count and for resentencing on Retos' remaining, 

valid convictions, which we will affirm. 

I 

 George Retos was the managing partner of Retos, Held & 

Mascara, a Washington, Pennsylvania law firm. He also advised 

clients as a solo practitioner, separate from, and apparently 

concurrent to, his association with the law firm. On May 21, 

1992, a federal grand jury returned an eleven-count indictment 

against Retos alleging numerous federal offenses arising out of 

his professional and personal financial activities, and the 

convergence of the two. 

 Counts 1 through 3 charged Retos with income tax 

evasion in violation of 26 U.S.C. § 7201.0 The government 

alleged that Retos had understated his taxable income in 1985 

("Count 1"). A government audit of Retos' 1986 tax return 

revealed that he had understated his taxable income in 1986 by 

$218,714.96 ("Count 2"). Retos never filed an income tax return 

in 1987 ("Count 3"). 

 

0 Section 7201 provides as follows: 

 Any person who willfully attempts in any 

manner to evade or defeat any tax imposed by 

this title or the payment thereof shall, in 

addition to other penalties provided by law, 

be guilty of a felony and, upon conviction 

thereof, shall be fined not more than 

$100,000 ($500,000 in the case of a 

corporation), or imprisoned not more than 5 

years, or both, together with the costs of 

prosecution. 
4 

 Count 4 charged Retos with structuring a currency 

transaction in violation of 31 U.S.C. §§ 5324(3)0 and 5322(a).0

The government alleged that in connection with the purchase of an 

automobile dealership by a Retos client, Robert Bruno, Retos 

caused $15,000 to be paid over to the seller, Bud Spesak, in two 

separate checks, each made out to "Cash" in the sum of $7,500 

(i.e., below the $10,000 currency transaction report threshold). 

 Count 5 charged Retos with scheming to defraud by use 

of wire communications, in violation of 18 U.S.C. § 1343. In 

1987, Retos applied for a residential loan from a federally 

insured savings and loan institution using allegedly fraudulent 

income tax returns. In connection with his application, Retos 

wired $216,264.49 into his own personal bank account. 

 Count 6 charged Retos with making false statements in 

connection with a credit application, in violation of 18 U.S.C. 

§ 1014. In 1988, Retos obtained a line of credit from a 

federally insured bank by providing the bank with false 

information concerning the status of his income tax liability and 

by using falsified copies of his never-filed 1987 tax return. 

 

0 31 U.S.C. § 5324 provides as follows: "No person shall 

for the purpose of evading the reporting requirements of section 

5313(a) . . . (3) structure or assist in structuring, or attempt 

to structure or assist in structuring, any transaction with one 

or more domestic financial institutions." 

 After the indictment issued on May 21, 1992, Congress 

amended § 5324, designating the existing text as subsection (a), 

and adding a new subsection (b). Section 5324(3) is now codified 

at § 5324(a)(3). 

0 31 U.S.C. § 5322(a) provides as follows: "A person 

willfully violating this subchapter or a regulation prescribed 

under this subchapter . . . shall be fined not more than 

$250,000, or imprisoned for not more than five years, or both." 
5 

 Counts 7 through 10 charged Retos with mail fraud, in 

violation of 18 U.S.C. § 1341. Retos had been retained by a 

client, Samir Gayed, to incorporate Gayed's investment company, 

Golden Falcon, Inc. Retos never did so. Rather, Retos falsely 

held himself out as the president of Golden Falcon and had Golden 

Falcon's interests transferred to him. The effect of this 

transfer was that Retos knowingly and fraudulently received, and 

caused to be received, through the United States mail, four 

revenue checks which rightly belonged to Golden Falcon. 

 Count 11 charged Retos with the interstate 

transportation of stolen property, in violation of 18 U.S.C. 

§§ 2314 and 2. Retos unlawfully transported a stolen limited 

partnership certificate from Midland, Texas to Washington, 

Pennsylvania. 

 Trial commenced on November 30, 1992. Retos 

immediately objected to a number of statements made by the 

prosecutor in his opening statement, and moved for a mistrial. 

The district court denied Retos' motion. On December 18, 1992, a 

jury found Retos guilty on nine of the eleven counts charged, 

including two of the three tax evasion counts and the one 

structuring count.0 Thereafter, on May 4, 1993, the district 

court denied Retos' post-trial motion for judgment of acquittal. 

 On June 29, 1993, Retos was sentenced to concurrent 

terms of 27 months imprisonment on Counts 2, 3, and 6 through 11. 

 

0 Count 5 was dismissed by the district court judge 

pursuant to Federal Rule of Criminal Procedure 29. The jury 

acquitted Retos on Count 1. 
6 

He was sentenced to a consecutive term of three months 

imprisonment on Count 4, the structuring count. Retos also was 

fined $30,000 and ordered to pay restitution in the amount of 

$42,886.88 and a $450 special assessment. This appeal followed. 

II 

 Retos challenges a number of pronouncements made by the 

prosecutor during his opening statement which, Retos claims, 

prejudiced the jury against him. In particular, Retos objects to 

the prosecutor's reference to (1) drug use, (2) Retos' frequent 

cash withdrawals of sums under $10,000, and (3) Retos' "crooked" 

law practice. 

 We review a district court's denial of a motion for 

mistrial arising out of alleged prosecutorial misconduct for 

abuse of discretion. United States v. Gambino, 926 F.2d 1355, 

1365 (3d Cir. 1991); United States v. Tyler, 878 F.2d 753, 756 

(3d Cir. 1989). We will vacate a defendant's conviction if "the 

prosecutor's remarks, taken in the context of the trial as a 

whole, were sufficiently prejudicial to have deprived [the 

defendant of his] right to a fair trial." United States v. 

DiPasquale, 740 F.2d 1282, 1297 (3d Cir. 1984). Even if a 

prosecutor does make an offending statement, the district court 

can neutralize any prejudicial effect by carefully instructing 

the jury "to treat the arguments of counsel as devoid of 

evidentiary content." United States v. Somers, 496 F.2d 723, 738 

(3d Cir. 1974). Accord United States v. Leftwich, 461 F.2d 586, 

590 (3d Cir. 1972) (finding no prejudice where trial judge 
7 

carefully instructed jurors that arguments of counsel were not 

evidence). 

A. 

 Here, the reference by Assistant United States Attorney 

Garrett to drug-dealing was for the sole purpose of illustrating 

to the jury the meaning of "structuring."0 The portion of the 

prosecutor's opening statement, challenged by Retos, was as 

follows: 

 One of the charges you heard mentioned 

of in this case involves a currency 

transaction. The particular violation is 

that Mr. Retos did what is known as he 

structured a currency transaction. A 

currency transaction that is affected by this 

particular offense is a transaction for 

currency in excess of $10,000. 

 Now, within the past couple of decades, 

I guess it has been determined by the United 

States Congress that there is a substantial 

risk that persons engaged in criminal 

activity will utilize currency. The reason 

for that is simple. 

 When currency exchanges hands between 

two individuals, there is no record made. If 

you think about it, when you write a check, 

the check goes through your bank account. The 

bank has to keep a record of that check 

because the bank has to keep your account 

straight. They don't want to be crediting 

your $10,000 against somebody else's account. 

 So that the bank keeps a record. So 

whenever you use a check or some written 

instrument in connection with the financial 

transaction, there is a record. But if you 

simply use currency, there is not any record. 

So in order to fill that gap, in 1971, I 

think it was, the United States Congress 

passed a law that provided that whenever a 

 

0 We discuss Count 4, the structuring count, in Section 

IV, infra. 
8 

bank engages in a transaction with a customer 

involving more than $10,000 in cash, the bank 

must file a report. 

 So, in other words, if I go to my bank 

because I am a drug dealer or because I am a 

tax cheat, and I want to create a transaction 

that does not have any record to it, and I 

get my $15,000 in currency, there is going to 

be a record because the bank has to file a 

report saying Garret [i.e., the prosecutor] 

got 15 grand. 

 So it does not necessarily say what I 

did with the 15 grand, but it says I had it. 

So there is at least that much of a record. 

 Now, when Congress passed the law, as I 

say, it required the bank to file a report 

and if the bank engaged in a transaction for 

more than $10,000, and did not file a report, 

the bank itself and bank employee who engaged 

in the transaction could be prosecuted for 

violating the law. 

 In more recent years, I guess it has 

probably been about within the last ten years 

or so, the Congress also passed a law that 

provided that, if an individual designs or 

structures a transaction in such a way as to 

prevent the bank from filing a currency 

transaction report, then that individual is 

violating the law. In other words, Garret 

does not go to the bank once and get $15,000, 

Garret goes to the bank twice -- see, I am a 

smart guy. I get $7500 one time and $7500 

the next time. There was never any $10,000 

that the bank gave me, so the bank never had 

a $10,000 transaction to report. 

 Well, Congress said time out; no. If 

you, Garret, structure your transaction in 

order to avoid ever exceeding $10,000, you 

have violated the law because you prevented 

the bank from filing the currency transaction 

report. 

(Emphasis added.) 

 It is clear from this passage that the prosecutor did 

not tell the jury that Retos was a drug dealer, nor did the 

prosecutor charge Retos with a drug offense. As the district 

court explained in denying Retos' motion for mistrial: "Mr. 
9 

Garret [the prosecutor] did that in the context of explaining the 

congressional context in that statute. At no point is there any 

indication Mr. Retos is charged with a drug offense or is there 

any faintly remotely connecting him." See United States v. 

Strissel, 920 F.2d 1162 (4th Cir. 1990) (denying appellant's 

request for new trial based on argument that prosecutor had 

compared him to "Al Capone" where reference to Capone was for the 

purpose of illustrating that RICO statute applies to anyone who 

engages in racketeering activity, not just gangsters). 

B. 

 Second, the prosecutor's reference to Retos' numerous 

currency transactions involving sums under $10,000 did not amount 

to an accusation of uncharged criminal conduct, as Retos argues. 

The portion of the prosecutor's opening statement, challenged by 

Retos, was as follows: 

 Now, you will hear in this particular 

case that Mr. Retos was well aware of the 

currency transaction report law. In fact, we 

will demonstrate for you some transactions in 

which currency reports were filed in 

connection with Retos transactions. 

 You will also hear that Mr. Retos in 

fact on a frequent basis obtained currency in 

less than $10,000 by various banking 

transactions . . . The charge before you 

involves a particular transaction in which on 

behalf of a client Mr. Retos structured a 

currency transaction deal in order to avoid 

the report. 

 We have held that "[i]f an opening statement is an 

objective summary of evidence the government reasonably expects 

to produce, a subsequent failure in proof will not necessarily 
10 

result in a mistrial." United States v. Wright-Barker, 784 F.2d 

161, 175 (3d Cir. 1986). Here, the prosecutor's statement was an 

"objective summary" of the evidence the government expected to 

produce and, ultimately, there was no failure in proof. At 

trial, witnesses testified as to Retos' practice of breaking down 

deposits of $10,000 or more into smaller amounts. This evidence 

was directly relevant to the issue of whether Retos purposefully 

engaged in structuring the $15,000 currency transaction alleged 

in Count 4 of the indictment. 

C. 

 Finally, the prosecutor's reference to Retos' "crooked 

law practice" was clearly related to the tax-evasion offenses 

charged in the indictment. The portion of the prosecutor's 

opening statement, challenged by Retos, was as follows: 

[T]he evidence that you will hear in this 

case will delve into the law practice of the 

defendant, George Retos, . . . The evidence 

will show that it was a crooked law practice, 

crooked in that Mr. Retos violated his legal 

duty to maintain a wall between his own 

business on matters being handled for 

clients, crooked in that Mr. Retos transacted 

his business in such a manner as to hide his 

income and evade his income taxes, and 

crooked in that Mr. Retos helped himself to 

client's money. 

 Evidence presented at trial supported the prosecutor's 

characterization of, and allegations with respect to, Retos' 

shady professional practices. Those practices were directly 

connected to the specific criminal offenses with which Retos was 

charged, and which the government was required to prove. 
11 

D. 

 In any event, the district court thoroughly and 

repeatedly instructed the jury that the parties' opening 

statements were not to be considered as evidence. In the context 

of Retos' trial as a whole, we find no lingering prejudicial 

effect which can be imputed to the prosecutor's opening 

statement. 

 In sum, the prosecutor's statements were not improper, 

there was no failure of proof, and the district court gave 

curative instructions to the effect that the prosecutor's 

arguments were not to be considered as evidence. Accordingly, we 

hold that the district court did not abuse its discretion in 

denying Retos' motion for mistrial. 

III 

 Retos next argues that the district court erred in 

permitting James Celestine to testify as to $36,000 in family 

trust funds which Celestine had given to Retos to manage, but 

which Retos transferred into his own personal bank account. Retos 

argues that Celestine's testimony was both irrelevant, under 

Federal Rule of Evidence 402,0 and inadmissible, under Federal 

 

0 Rule 402 provides as follows: "All relevant evidence is 

admissible, except as otherwise provided by the Constitution of 

the United States, by Act of Congress, by these rules, or by 

other rules prescribed by the Supreme Court pursuant to statutory 

authority. Evidence which is not relevant is not admissible." 
12 

Rule of Evidence 404(b).0 Retos claims that he ultimately 

transferred the money from his personal account to the law firm's 

client trust account, the firm divided the partnership's income 

among the partners, and the individual partners paid taxes on the 

"embezzled" $36,000. In addition, Retos emphasizes that he was 

prepared at trial to stipulate that in 1986, he had received the 

$36,000 in his personal income. 

 The government argues that Celestine's testimony was 

relevant to establish Retos' 1986 income level. The government 

claims that Retos did not, and could not, establish conclusively 

that the $84,283.62 in funds transferred from Retos' personal 

account to the firm's account during 1986, included the $36,000 

which Retos had embezzled from Celestine. The government refused 

Retos' offer to stipulate to the $36,000 as income to Retos 

because it wanted Celestine to testify. The government contends 

that when Celestine told Retos that IRS agents had been asking 

him questions about the $36,000, Retos had instructed Celestine 

to tell the authorities that Celestine had loaned the money to 

Retos. Proceeds from a loan, of course, do not constitute 

taxable income, while embezzled funds do. The government argued 

that this evidence was probative of willfulness, an element it 

was required to prove to convict Retos of tax evasion. 

 We review a district court's decision to admit or 

exclude evidence for abuse of discretion. United States v. 

 

0 Rule 404(b) provides in relevant part as follows: 

"Evidence of other crimes, wrongs or acts is not admissible to 

prove the character of a person in order to show action in 

conformity therewith. . . ." 
13 

Console, 13 F.3d 641, 656 (3d Cir. 1993); United States v. 

Eufrasio, 935 F.2d 553, 571 (3d Cir. 1991). 

 At trial, the district court judge held that the 

Celestine testimony was relevant, even if marginally so, under 

Rule 402. In so holding, the district court concluded that 

Celestine's testimony would establish the source of the 

unreported income, as well as part of Retos' level of income for 

1986. In addition, the district court determined that 

Celestine's testimony could demonstrate willfulness. It 

therefore concluded that the probative value of Celestine's 

testimony outweighed any prejudicial effect under Federal Rule of 

Evidence 403.0 The court explicitly held that Rule 404(b) was 

not implicated in its ruling because the embezzlement evidence 

had relevance independent of Retos' character.0

 Our review of the record reveals that the testimony 

with respect to Retos' embezzlement of Celestine's $36,000 trust 

fund was somewhat complicated. The inference of willfulness the 

government sought to establish through this testimony was subtle, 

yet highly probative. Despite Retos' arguments to the contrary, 

the government's expert did not concede that the $36,000 became a 

"wash" transaction once Retos transferred a total of $84,283.62 

 

0 Rule 403 provides as follows: "Although relevant, 

evidence may be excluded if its probative value is substantially 

outweighed by the danger of unfair prejudice, confusion of the 

issues, or misleading the jury, or by considerations of undue 

delay, waste of time, or needless presentation of cumulative 

evidence." 

0 Thereafter, the district court reconsidered and 

reaffirmed its ruling which admitted the Celestine testimony, two 

more times. 
14 

to the law firm's trust account. Nor do we believe that there is 

record evidence supporting Retos' characterization of the 

transaction as a "wash," inasmuch as the $36,000 could not be 

identified as a part of the total monies transferred. 

 Rather, the record demonstrates that after Retos 

transferred the $36,000 to his personal account, his ledger card 

reflected a balance of $35,671. That is, Retos immediately used 

at least part of the $36,000 to cure an existing negative balance 

in his personal account. 

 In addition, there is no record evidence that the firm 

of Retos, Held & Mascara, as distinct from George Retos, solo 

practitioner, in any way earned a fee for legal work performed on 

behalf of James Celestine. Nor does the record contain evidence 

that Retos forwarded the $36,000 to the firm because he believed 

it was a fee owed to the firm on the Celestine matter. In fact, 

Retos freely admits that he was prepared to stipulate at trial to 

the fact that the full $36,000 should have been recorded as 

income to him on his 1986 personal income tax return. 

 It is the trial court, of course, and not the Court of 

Appeals, which is in the best position to consider the 

complicated evidentiary issues involved in a given case, and to 

strike the balance required by Rule 403. United States v. Gatto, 

995 F.2d 449, 457 (3d Cir. 1993; United States v. Sampson, 980 

F.2d 883, 889 (3d Cir. 1992). Here, the district court 

scrupulously analyzed the propriety of the government's evidence 

when it was first offered, and re-analyzed its ruling throughout 

the course of the trial. It concluded on each of these occasions 
15 

that the testimony elicited by the government was relevant in 

proving the underlying elements of the offenses charged. 

 Retos has not cited a case which even suggests that the 

district court committed legal error.0 From our vantage point -- 

based on the record before us -- we are satisfied that the 

district court's Rule 403 balancing of prejudice and probity 

 

0 Among other of Retos' arguments, he asserts that the 

embezzlement evidence was inadmissible under Federal Rule of 

Evidence 404(b). Retos argues that under United States v. 

Sampson, 980 F.2d 883 (3d Cir. 1992), the government was 

obligated to (1) proffer a logical chain of inferences consistent 

with the government's theory of the case, and (2) articulate 

reasons why the evidence goes to show something other than 

character. 

 The district court concluded, however, and we agree, 

that the Celestine testimony was not introduced to prove criminal 

propensity or bad character but was admitted, rather, as direct

substantive evidence bearing on the two elements of tax evasion: 

(1) Retos' level of income, and (2) willfulness. Rule 404(b) 

simply was not implicated. 

 Retos also objected to the government's summation which 

referred to the embezzlement evidence as that evidence related to 

Counts 7 through 11, the mail fraud counts. The district court 

denied that objection on the grounds urged by the government, 

i.e., that Celestine's testimony properly had been admitted as 

substantive evidence. We agree. 

 As we have explained previously, it is unavoidable that 

evidence, once admitted as substantive evidence for certain 

counts, may convey unfavorable impressions to the jury with 

respect to other counts for which it was not offered. See United 

States v. Blyden, 964 F.2d 1375, 1377-79 (3d Cir. 1992) (noting 

that admitting evidence to prove an essential element of one 

count, but "excluding" it as to other counts for which it might 

have been inadmissible under Rules 403 and 404(b), would have no 

practical effect). However, as we recognized in Blyden, 

unforeseen developments can occur during trial which would 

warrant rulings or instructions concerning the use of the 

evidence with respect to counts for which it was not introduced. 

Id. at 1379. Nevertheless, in this case, we do not believe that 

the district court abused its discretion in denying Retos' motion 

for mistrial. The evidence properly was before the jury, and the 

prosecutor's summation was not so prejudicial as to have deprived 

Retos of his right to a fair trial. United States v. Gambino, 

926 F.2d 1355, 1365 (3d Cir. 1991). 
16 

constituted a proper exercise of its discretion. Simply stated, 

to convict Retos, the government was required to prove 

willfulness and income level. The embezzlement evidence, and 

Retos' effort to have Celestine characterize the $36,000 as a 

loan, was probative of both. Consequently, we hold that the 

district court did not abuse its discretion in admitting the 

Celestine evidence. 

IV 

 Finally, Retos argues that the district court's jury 

instruction with respect to currency structuring was inconsistent 

with the Supreme Court's decision in Ratzlaf v. United States, 

___ U.S. ___, 114 S. Ct. 655 (1994), and that, therefore, his 

conviction for violating 31 U.S.C. §§ 5324(3) and 5322, must be 

vacated. 

A. 

 Because Retos failed to object to the jury instruction 

at trial, our review is limited to plain error under Federal Rule 

of Criminal Procedure 52(b).0 United States v. Olano, ___ U.S. 

___, 113 S. Ct. 1770 (1993). For plain error to exist: 

There must be an "error" that is "plain" and 

that "affects substantial rights." Moreover, 

Rule 52(b) leaves the decision to correct the 

forfeited error within the sound discretion 

of the Court of Appeals, and the court should 

not exercise that discretion unless the error 

"'seriously affect[s] the fairness, integrity 

 

0 Rule 52(b) provides: "Plain errors or defects affecting 

substantial rights may be noticed although they were not brought 

to the attention of the court." 
17 

or public reputation of judicial 

proceedings.'" 

Id. at 1776 (internal citations omitted). 

 A deviation from a legal rule is "error." Id. at 1777. 

A "plain" error is one which is "clear" or "obvious." Id. In 

most cases, an error will "affect substantial rights" where it is 

prejudicial: "It must have affected the outcome of the District 

Court proceedings." Id. at 1778. 

 Finally, Rule 52(b) is a permissive, not a mandatory 

rule. "If the forfeited error is 'plain' and 'affect[s] 

substantial rights,' the Court of Appeals has authority to order 

correction, but is not required to do so." Id. at 1778. We 

will, however, exercise our discretion "in those circumstances in 

which a miscarriage of justice would otherwise result," id. at 

1778-79, quoting United States v. Young, 470 U.S. 1, 15 (1985), 

that is, where the defendant is actually innocent, or where, 

regardless of the defendant's innocence or guilt, the error 

"seriously affect[s] the fairness, integrity or public reputation 

of judicial proceedings." Olano, 113 S. Ct. at 1779, quoting

United States v. Atkinson, 297 U.S. 157, 160 (1936). Accord

United States v. Martinez-Hidalgo, 993 F.2d 1052, 1057 (3d Cir. 

1993); Government of Virgin Islands v. Smith, 949 F.2d 677, 681 

(3d Cir. 1991). 

1. 

 Our first inquiry then is whether the district court 

committed error in failing to charge the jury in accordance with 
18 

the Supreme Court's decision in Ratzlaf v. United States, ___ 

U.S. ___, 114 S. Ct. 655 (1994). In Ratzlaf, the Supreme Court 

held that "[t]o convict Ratzlaf of the crime with which he was 

charged, violation of 31 U.S.C. §§ 5322(a) and 5324(3), the jury 

had to find he knew the structuring in which he engaged was 

unlawful." 114 S. Ct. at 663. Because the Ratzlaf district 

court had failed to instruct the jury in this regard, the Supreme 

Court reversed Ratzlaf's structuring conviction. 

 Here, the district court instructed the jury with 

respect to Count 4 as follows: 

 In order to prove the defendant guilty 

of Count 4, the Government must establish, by 

proof beyond a reasonable doubt, the 

following four elements. 

 First, that on or about the dates 

alleged in the indictment June 26, 1987 and 

June 29, 1987, George Retos knew that the 

currency transaction reporting requirements 

required banks to report currency 

transactions in excess of $10,000 in one 

business day. 

 Second, that George Retos knowingly and 

willfully structured or assisted in 

structuring a currency transaction in excess 

of $10,000. A currency transaction includes 

the negotiation of a check for cash, but does 

not include a wire transfer or other 

transaction which does not include the 

physical transfer of currency. Structuring 

refers to a person, acting alone, or in 

conjunction with other persons, conduct or 

attempts to conduct one or more transactions 

in currency, in any amount, at one or more 

financial institutions, on one or more days, 

in any manner, for the purpose of evading the 

reporting requirements applicable to 

financial institutions. Here, the Government 

claims that the transactions were the 

negotiation of two $7,500 checks drawn on Mr. 

Retos' firm's account at the Gallatin 

National Bank. 
19 

 The third element that Mr. Retos' 

specific intent in structuring the 

transaction was to avoid activating the 

banks' reporting requirements established by 

law. And fourth, the transaction involved 

one or more domestic financial institutions. 

With respect to this last element, I charge 

you that as a matter of law the two banks 

alleged in the indictment to have been 

involved in this count, Pittsburgh National 

Bank and Gallatin National Bank are domestic 

financial institutions. 

 If you find that the Government has 

proved all four elements beyond a reasonable 

doubt, then you should find the defendant 

guilty on this count. If you find that you 

have a reasonable doubt as to any one or more 

of the elements, you must find the defendant 

not guilty. 

(Emphasis added.) 

 Our review of the charge given in the present case 

reveals that the district court only instructed the jury that it 

was required to find that Retos knew of the bank's obligation to 

file a currency transaction report, and that Retos intended to 

avoid activating the bank's reporting obligation, in order to 

convict. The law of this circuit, prior to Ratzlaf, required no 

more, and no different, a charge than that given by the district 

court judge here. Thus, the content of the district court's 

instruction, and Retos' failure to object to the district court's 

instruction, were quite understandable. Accord United States v. 

Jones, No. 93-2164, slip op. at ___ n.9 (7th Cir. April 5, 1994). 

 Nevertheless, the district court's charge did not 

explicitly instruct the jury that the government was required to 

prove, and that the jury was required to find, that Retos had 
20 

actual knowledge that structuring was unlawful. Under Ratzlaf, 

the absence of such an instruction now constitutes legal error. 

2. 

 The second stage of our inquiry under Olano is to 

determine whether the error committed by the district was 

"plain," i.e., clear and obvious. In Olano, the Supreme Court 

noted that it "need not consider the special case where the error 

was unclear at the time of trial but becomes clear on appeal 

because the applicable law has been clarified." 113 S. Ct. at 

1777. That, however, is the case before us now. 

 Although the structuring charge offered by the district 

court judge at the time of trial in December 1992 was consistent 

with the law of this circuit, while Retos' appeal was pending, 

the applicable law was clarified by the United States Supreme 

Court. That is, on December 16, 1992, when the district court 

judge charged the jury in the instant case, its instruction 

essentially was correct -- the district court judge was not 

required to instruct the jury that Retos had to know that 

structuring was illegal. Not until January 11, 1994, when 

Ratzlaf was decided and the "knowledge" element of § 5322(a) 

clarified, did the error committed by the district court judge 

become clear and obvious, i.e., "plain." 

 The question, therefore, arises whether Retos should be 

given the benefit of the change in the structuring law brought 

about by Ratzlaf. We have no hesitancy in holding that full 

retroactive effect should be accorded to Ratzlaf in the present 
21 

appeal. Griffith v. Kentucky, 479 U.S. 314, 322 (1987); United 

States v. Jones, No. 93-2164, slip op. at ___ (7th Cir. April 5, 

1994). See also United States v. Rogers, No. 93-5002 (4th Cir. 

March 14, 1994). As the Supreme Court held in Griffith: 

[A] new rule for the conduct of criminal 

prosecutions is to be applied retroactively 

to all cases, state or federal, pending on 

direct review or not yet final, with no 

exception for cases in which the new rule 

constitutes a "clear break" with the past. 

479 U.S. at 328. 

 Griffith was decided in a constitutional context. 

However, the government has not argued that the same principle is 

inapplicable to the present statutory context involving the 

currency structuring statute, 31 U.S.C. § 5324, and we know of no 

reason why the holding in Ratzlaf should not benefit Retos in the 

instant action. Thus, inasmuch as the district court's 

structuring charge was clearly and obviously erroneous under 

current law, we hold that it constituted "plain" error. 

3. 

 Our final "plain error" inquiry is whether or not the 

district court's plain error "affect[ed Retos'] substantial 

rights." Olano, 113 S. Ct. at 1778. As mentioned above, in most 

cases, an error will affect substantial rights where it is 

prejudicial: "It must have affected the outcome of the District 

Court proceedings." Id.0

 

0 We note that, under Rule 52(b), it is the defendant who 

bears the burden of persuasion with respect to prejudice. Olano, 

113 S. Ct. at 1778. 
22 

 Since Ratzlaf was decided, two Courts of Appeals have 

reversed structuring convictions which were returned on nonRatzlaf jury charges. Both cases held that the erroneous charges 

constituted error which was plain, and which had "affected 

substantial rights" of the respective defendants. 

 In United States v. Jones, No. 93-2164 (7th Cir. April 

5, 1994), the Seventh Circuit held that the district court's 

instruction was "clear and obvious error under Ratzlaf." The 

Court of Appeals also held that the erroneous jury instruction 

was prejudicial, inasmuch as it "clearly affected the outcome of 

the unlawful structuring charge because the government had 

presented no evidence at trial to establish this element of the 

offense." 

 The Fourth Circuit, too, in United States v. Rogers, 

No. 93-5002 (4th Cir. March 14, 1994), reversed a structuring 

conviction because the district court's charge was at odds with 

that required under Ratzlaf: 

[T]he failure to instruct on the defendant's 

knowledge of the illegality of his own 

conduct is an erroneous omission of an 

essential element of the offense charged, and 

thus meets the first two tests of Olano. We 

are of the opinion that this failure to give 

an instruction on a required element of the 

crime is an error that affects substantial 

rights and one that seriously affects the 

fairness, integrity or public reputation of 

judicial proceedings, as required by Olano, 

since due process requires "proof beyond a 

reasonable doubt of every fact necessary to 

constitute the crime with which he is 

charged." In re Winship, 397 U.S. 358, 364 

(1970). We have no doubt that the failure to 

instruct on an essential element of the crime 

prejudiced the defendant here, because the 
23 

jury could not have been expected to make a 

finding beyond a reasonable doubt as to 

Roger's knowledge of the illegality of his 

structuring, in the face of an instruction to 

the contrary. 

Id., slip op. at 7. 

 Unlike the defendants in Jones and Rogers, however, 

Retos is an attorney-at-law. As the government argued before us, 

a jury certainly could have inferred that Retos knew his actions 

were unlawful. By that token, it was urged that the district 

court's error -- its omission of an essential element of the 

offense charged -- did not affect the outcome of the district 

court proceedings and, thus, was not prejudicial. We cannot 

agree. 

 Rather, we find ourselves constrained by the Supreme 

Court's decision in In re Winship, 397 U.S. 358, 364 (1970), and 

our own decision in United States v. Xavier, 2 F.3d 1281, 1287 

(3d Cir. 1993), to hold that Retos was indeed prejudiced by the 

district court's error. In Xavier, we held that the district 

court's failure to instruct the jury as to a required element of 

the crime charged constituted a plain error which had affected 

the defendant's rights. We explained: 

Here, there can be no question that the 

failure to instruct had an impact on the 

jury's deliberations, because the jury could 

not have been expected to make a finding 

beyond a reasonable doubt as to Xavier's 

knowledge of his brother's status as a felon 

in the absence of an instruction to do so. 

The question, then, is whether the error in 

failing to instruct was prejudicial. In 

light of Winship's instruction and the 

evidence presented, we must conclude the 

failure to instruct on an essential element 

of the offense affected Clement Xavier's due 
24 

process rights in a manner that "'seriously 

affect[ed] the fairness, integrity or public 

reputation of judicial proceedings.'" Olano, 

113 S. Ct. at 1779. 

2 F.3d at 1287 (vacating conviction for aiding and abetting exfelon's possession of firearm). Cf. United States v. Curran, No. 

93-1444 (3d Cir. March 30, 1994).0

 We remain unprepared to adopt a per sé rule that the 

omission of an essential element of an offense constitutes "plain 

error." Xavier, 2 F.3d at 1287 (3d Cir. 1993); United States v.

Anderson, 859 F.2d 1171, 1175-76 (3d Cir. 1988).0 Here, however, 

 

0 In Curran, we held that the district court's erroneous 

explanation of the law on the defendant's duty to report to the 

Federal Election Commission, under 18 U.S.C. § 2(b), constituted 

plain error and that the case had to be retried. We then alerted 

the district court to other deficiencies in its jury instruction, 

one of which was its failure to give a Ratzlaf instruction on 

§ 2(b)'s "willfulness" requirement. 

0 In Anderson, the defendant was convicted of four drug 

offenses, as well as one count of operating a continuing criminal 

enterprise, in violation of 21 U.S.C. § 848(d). We upheld the 

defendant's conviction on the latter count even though the trial 

judge had failed to instruct the jury as to an essential element 

of the crime, i.e., that to find a "continuing series of 

violations" under § 848(d), the jury must unanimously find and 

agree upon three violations of the federal drug laws. 

 While recognizing that the district court's charge to 

the jury was legally erroneous, we refused to find "plain error," 

inasmuch as our review of the entire record revealed that 

Anderson had not been prejudiced by the district court's error: 

The jury unanimously found Anderson guilty of 

three counts of distribution of heroin and 

one count of conspiracy to possess with 

intent to distribute heroin and cocaine in 

addition to the continuing criminal 

enterprise count. In such a circumstance it 

is impossible to conclude that the jury may 

not have been in unanimous agreement that 

Anderson was guilty of three underlying drug 

crimes. Thus, it cannot be said that the 

district judge's error in any way prejudiced 
25 

the evidence presented by the government on Retos' structuring 

count, while sufficient, was not conclusive. In such a case, we 

cannot be certain that the jury found beyond a reasonable doubt 

that Retos knew his actions were unlawful, absent a specific 

instruction from the district court judge.0

 

the jury's deliberations or resulted in 

manifest injustice. 

859 F.2d at 1176. 

 In contrast, in Xavier, we reversed the defendant's 

conviction for aiding and abetting an ex-felon's possession of a 

firearm. We held that the district court judge had committed a 

clear error in failing to instruct the jury that it was required 

to find that Xavier had knowledge that his brother -- the exfelon at issue -- was, in fact, an ex-felon. In addition, after 

a thorough review of the record, we held that Xavier was, in 

fact, prejudiced by the district court's error, despite the 

existence of record evidence from which the jury could have 

inferred the requisite knowledge: 

[A] jury could have inferred, on a 

preponderance of the evidence presented at 

trial [internal reference omitted] that 

Xavier knew his brother was an ex-felon, that 

evidence is not so conclusive as to have 

assured Xavier's due process right to "proof 

beyond a reasonable doubt of every fact 

necessary to constitute the crime with which 

[a defendant] is charged." Winship, 397 U.S. 

at 364. 

2 F.3d at 1287 (emphasis in original). 

0 We recognize that Henderson v. Kibbe, 431 U.S. 145, 154 

(1977), has been cited consistently for the proposition that 

"[i]t is a rare case in which an improper instruction will 

justify reversal of a criminal conviction when no objection has 

been made in the trial court." We note, however, that Henderson

arose in a habeas context, and that the Supreme Court itself 

acknowledged in its opinion that "[t]he burden of demonstrating 

that an erroneous instruction was so prejudicial that it will 

support a collateral attack on the constitutional validity of a 

state court's judgment is even greater than the showing required 

to establish plain error on direct appeal." 431 U.S. at 154 

(emphasis added). 
26 

B. 

 Having determined that plain error permits our review, 

the only remaining issue, then, is whether we should exercise our 

discretion under Rule 52(b) and take corrective action. Our 

review of the record satisfies us that the district court's 

understandable but, nevertheless, erroneous failure to instruct 

Retos' jury in accordance with Ratzlaf, "seriously affect[ed] the 

fairness" of Retos' trial, United States v. Olano, 113 S. Ct. at 

1779, and thereby resulted in severe prejudice to him, a hallmark 

of manifest injustice. Accord United States v. Jones, No. 93-2164 

(7th Cir. April 5, 1994); United States v. Rogers, No. 93-5002 

(4th Cir. March 14, 1994). 

V 

 Thus, we will vacate Retos' conviction on Count 4, the 

structuring count. The government, of course, may, in its 

discretion, retry Retos on Count 4, inasmuch as our vacatur of 

Retos' structuring conviction did not result from a finding of 

insufficient evidence. United States v. Beros, 833 F.2d 455, 467 

n.13 (3d Cir. 1987); United States v. Pervez, 871 F.2d 310, 319 

(3d Cir. 1989). 

 We will affirm Retos' convictions on Counts 2, 3, and 6 

through 11, but we will remand to the district court for 

resentencing. We do so, because we cannot be certain that the 

district court would have imposed the same sentence had Retos not 

been convicted on Count 4, the structuring count. 
27 

 Although it is clear that Retos was sentenced to a 

consecutive term of three months imprisonment on the Count 4 

conviction, we note that the district court failed to explain how 

it allocated the $30,000 fine which it had imposed, among the 

nine counts upon which Retos was convicted. Consequently, we 

cannot ascertain what part, if any, of the $30,000 fine was 

imposed as punishment for the structuring conviction, as distinct 

from punishment for Retos' other convictions. 

 That being said, we express no opinion on resentencing. 

The district court is free to impose the same sentence -- and the 

same fine -- on the remaining convictions, if it deems such 

sentence appropriate and lawful, providing of course that it 

allocates the fine among the particular counts on which Retos was 

convicted.