Opinion ID: 449211
Heading Depth: 2
Heading Rank: 1

Heading: The Alleged Conspiracy To Violate the Domestic Reporting Requirements of Sec. 5313

Text: 21 The domestic reporting requirements are governed by Sec. 5313, which provides, in pertinent part, as follows: 22 (a) When a domestic financial institution is involved in a transaction for the payment, receipt, or transfer of United States coins or currency (or other monetary instruments the Secretary of the Treasury prescribes), in an amount, denomination, or amount and denomination, or under circumstances the Secretary prescribes by regulation, the institution and any other participant in the transaction the Secretary may prescribe shall file a report on the transaction at the time and in the way the Secretary prescribes. 23 31 U.S.C. Sec. 5313(a). Section 5322(b) of the Act provides that 24 [a] person willfully violating this subchapter or a regulation prescribed under this subchapter (except section 5315 of this title or a regulation prescribed under section 5315), while violating another law of the United States or as part of a pattern of illegal activity involving transactions of more than $100,000 in a 12-month period, shall be fined not more than $500,000, imprisoned for not more than 5 years, or both. 25 The regulation setting forth the reporting requirements envisioned by the Act states, in pertinent part, as follows: 26 Each financial institution shall file a report of each deposit, withdrawal, exchange of currency or other payment or transfer, by, through, or to such financial institution, which involves a transaction in currency of more than $10,000. 27 31 C.F.R. Sec. 103.22(a) (1984). Since Sec. 5313, as implemented by the regulation, requires reports only by financial institution[s], the principal question on this appeal with respect to the alleged conspiracy to violate Sec. 5313 is whether defendants' activities involved such an institution. 28 The term financial institution is defined in both the statute and the regulations. Section 5312(a)(2) of 31 U.S.C. provides twenty-one definitions of financial institution, including an insured bank, Sec. 5312(a)(2)(A); a commercial bank or trust company, Sec. 5312(a)(2)(B); a private banker, Sec. 5312(a)(2)(C); a currency exchange, Sec. 5312(a)(2)(J); an issuer, redeemer, or cashier of travelers' checks, checks, money orders, or similar instruments, Sec. 5312(a)(2)(K); and another business or agency carrying out a similar, related, or substitute duty or power the Secretary of the Treasury prescribes, Sec. 5312(a)(2)(U). The Secretary's regulations define financial institution as follows: 29 Financial institution. Each agency, branch, or office within the United States of any person doing business in one or more of the capacities listed below: 30 (1) A bank (except bank credit card systems); 31 (2) A broker or dealer in securities; 32 (3) A person who engages as a business in dealing in or exchanging currency as, for example, a dealer in foreign exchange or a person engaged primarily in the cashing of checks; 33 (4) A person who engages as a business in the issuing, selling, or redeeming of travelers' checks, money orders, or similar instruments, except one who does so as a selling agent exclusively or as an incidental part of another business; 34 (5) A licensed transmitter of funds, or other person engaged in the business of transmitting funds abroad for others. 35 31 C.F.R. Sec. 103.11. We conclude that the part of definition (3) that defines a financial institution as [a] person who engages as a business in dealing in ... currency is sufficiently broad to encompass the activity alleged in count 1 of the indictment and that its breadth reflects Congress's intent. 36 The legislative history of the Act indicates that the Act's reporting requirements were designed to provide a sweeping law enforcement tool for locating, inter alia, large transfers, in currency, of the proceeds of unlawful transactions. The report by the House of Representatives Committee on Banking and Currency on H.R. 15073, which eventually became the Act, noted as follows: 37 Criminals deal in money--cash or its equivalent. The deposit and withdrawal of large amounts of currency or its equivalent (monetary instruments) under unusual circumstances may betray a criminal activity. The money in many of these transactions may represent anything from the proceeds of a lottery racket to money for the bribery of public officials. 38 ... [The Act] requires reports of cash transactions involving such amounts, or taking place under such circumstances, as the Secretary of the Treasury shall be regulation prescribe.... These reports may be of considerable value to law enforcement agencies in criminal investigations and prosecutions. 39 H.R.Rep. No. 975, 91st Cong., 2d Sess. 11-12, reprinted in 1970 U.S.Code Cong. & Ad.News 4394, 4396-97 [hereinafter cited as House Report]. See also California Bankers Assn. v. Shultz, 416 U.S. 21, 38, 94 S.Ct. 1494, 1506, 39 L.Ed.2d 812 (1974) (Congress recognized the importance of reports of large and unusual currency transactions in ferreting out criminal activity and desired to strengthen the statutory basis for requiring such reports.); 116 Cong.Rec. 16954 (1970) (statement of Rep. Patman) (If certain cash transactions are required to be reported to the Treasury Department, law enforcement agencies, particularly in the income tax field, will have a useful tool in their investigations and proceedings.) 40 In seeking to ferret out those engaged in criminal activity, Congress focused on criminals' increasing use of financial institutions to preserve or conceal the proceeds of their crimes: 41 During the last decade, law enforcement agencies have found that the increasing growth of our financial institutions has been paralleled by an increase in criminal activity utilizing these institutions. Petty criminals, members of the underworld, those engaging in white collar crime and income tax evaders use, in one way or another, financial institutions in carrying on their affairs. 42 House Report at 10, reprinted in 1970 U.S.Code Cong. & Ad.News 4394, 4395. Congress also recognized that a wide range of entities could be used to effect the transfers of large amounts of cash: 43 The subject matter with which we deal is indeed complicated. It involves the operation not only of our domestic and foreign banking but also other financial institutions involved in the exchange of currency or its equivalent, the equivalent being in the form of securities, money orders and a host of other financial instruments. 44 116 Cong.Rec. 16956-57 (1970) (statement of Rep. Widnall) (emphasis added). It thus sought to reach the maximum amount of criminal conduct possible, and to grant broad authority to the Secretary to impose reporting requirements. 45 Under the terms of [the Act], the Secretary of the Treasury is granted broad authority to impose reporting requirements on persons and all other entities cognizable as legal personalties [sic ] transferring money or monetary instruments to foreign countries. 46 Id. at 16957 (statement of Rep. Burton) (emphasis added). Congress's assumption was that the reporting requirements would be far-reaching, with the Secretary empowered to exempt normal business transactions from the reporting requirements. See id. at 16964-65 (statement of Rep. Hanley). 47 The Secretary's definition of a financial institution, from which a report is required, as [a] person who engages as a business in dealing in ... currency, 31 C.F.R. Sec. 103.11, is plainly consistent with Congress's goal of requiring reports from all ... entities cognizable as legal personal[i]ties that could be used as instrumentalities for transferring or exchanging currency. Since count 1 of the indictment, as amplified by the Moritz Affidavit, adequately charges that the defendants were engaged as a business in dealing in currency and that the defendants themselves constituted a financial institution that intended not to file reports we conclude that the indictment alleged activities that fit within this definition. 48 The district court concluded that there were two flaws in count 1's allegation of a conspiracy to violate Sec. 5313. First, it thought the indictment charged that each individual defendant was himself a financial institution, and saw such a characterization as contrary to the plain meaning of the Act. Second, the court read the indictment as charging but a single instance of currency dealing, and apparently concluded that the defendants, individually or jointly, could not be said to be in the business of dealing in currency. We disagree with both views. 49 As to the first, even assuming that the indictment charged that each defendant individually was a financial institution, we would not view such a characterization as outside the intended scope of the Act or the regulations. The regulations define a financial institution in part as a person. There is no indication in the statute or the regulations that a natural person cannot be considered a financial institution, and it seems strained to assume that the term person was intended to exclude natural persons. Nor is the term person limited to natural, discrete individuals. Section 5312(a)(4) of the Act defines person, in part, by incorporating the definition of that term found in 1 U.S.C. Sec. 1 (1982), which encompasses corporations and partnerships. We need not determine here, however, whether the indictment properly alleged that each individual defendant constituted a financial institution, for the indictment asserted that the defendants agreed together to violate the Act's reporting requirements and that they were engaged as a business in dealing in currency. The most natural reading of these allegations is that defendants were jointly so engaged. This view is supported by the Moritz Affidavit, which recounted, on the basis of taped conversations, that Goldberg and Dreifus suggested to Lotz various methods for transferring currency without reporting; that Goldberg's agreement on a reduced initial laundering fee was made expressly subject to his partners' approval; that Goldberg and Yorizzo insisted on searching Lotz for a wire; that Yorizzo (the only nonbanker among the defendants) brought to the bank a money-counting machine with which he and Goldberg proceeded to count Lotz's cash. Plainly it would be within the terms of the indictment for a jury to find that the defendants had acted as a partnership or joint venture to assist Lotz in laundering currency. We think it clear beyond peradventure that partnerships and joint ventures are among the entities from which Congress sought to require reports. 50 Further, we disagree with the district judge's view that the indictment failed to substantiate that the defendants engaged in the business of dealing in currency because it charged that but a single transaction was involved. Rather, the government charged that the interrupted $200,000 transaction was anticipated by the defendants to be but the first of a series of laundering transactions to take place over the course of several months; that that first $200,000 was less than 10% of the total amount defendants agreed to launder; and that defendants agreed to reduce their 30% laundering fee by more than half for the first $200,000 in anticipation of the fees they would receive for the remainder of the planned $3 million. Thus, while we agree with the district court that the terms engage[ ] as a business or deal[ ] in imply that ordinarily proof of more than one transaction would be required, cf. United States v. Tarr, 589 F.2d 55, 59 (1st Cir.1978) (deal[ing] in or engag[ing] in the business of firearms, within the meaning of 18 U.S.C. Sec. 922(a)(1) (1982), normally implies more than one isolated transaction, although court could conceive of a single transaction sufficiently large to be within statute), we conclude that the indictment alleged that a series of transactions had been agreed on and that it is a permissible inference that persons who agree to launder a total of $3 million over a three-month period for fees totaling some $900,000 are doing business. In sum, we conclude that the indictment sufficiently alleged that defendants, as a partnership or joint venture, had engaged as a business in dealing in currency. 51 Defendants urge us to reach the contrary conclusion by (1) interpreting the terms financial institution and business as referring only to legitimate enterprises, (2) adopting the view of the district court that the third definition of Sec. 103.11 reaches only persons whose primary occupation is exchanging or dealing in currency, or (3) employing the rule of lenity. We find no merit in any of these contentions. 52 First, the notion that the Act was meant to require reports only from legitimate entities is contrary to the entire thrust of the Act. Its very purpose was to give the Secretary authority which will facilitate investigation and prosecution of criminal activities. 116 Cong.Rec. 16957 (1970) (statement of Rep. Widnall). Thus, as to actors transferring money to a foreign country, the Act was intended to impose reporting requirements on all ... entities cognizable as personalities in the eyes of the law. Id. (statement of Rep. Burton). We find no support for defendants' argument in the Act, in its history, or in logic. 53 Nor is there any sound basis for imputing to Congress the intent to reach only persons whose primary occupation was dealing in currency. Defendants point only to the second example set out in the third definition of Sec. 103.11, which, after defining financial institution as [a] person who engages as a business in dealing in or exchanging in currency, illustrates by adding as, for example, a dealer in foreign exchange or a person engaged primarily in the cashing of checks. There is no indication that the word primarily should be read as applying to the regulation's basic definition. If the Secretary had intended such a limitation, it would have been a simple matter to insert the word primary before business, thereby defining a financial institution as a person who engages as a primary business in dealing in currency. The plain fact is that the regulation was not so written, and we see no support for the proposition that defendants are outside the reach of the Act because they may have engaged in the business of money laundering only as a sideline. 54 Finally, we reject defendants' contention that the rule of lenity sometimes employed in the construction of criminal statutes, see, e.g., Ladner v. United States, 358 U.S. 169, 177-78, 79 S.Ct. 209, 213-14, 3 L.Ed.2d 199 (1958), requires the conclusion that defendants' conduct was outside the Act's scope. The rule of lenity is used only to resolve an ambiguity, not to ... beget one. Callanan v. United States, 364 U.S. 587, 464 U.S. 16, 596, 81 S.Ct. 321, 326, 5 L.Ed.2d 312 (1961) (footnote omitted); Russello v. United States, 104 S.Ct. 296, 303-04, 78 L.Ed.2d 17 (1983). Nor is it used to narrow a statute that has an unambiguously broad thrust. See United States v. Moore, 423 U.S. 122, 145, 96 S.Ct. 335, 346, 46 L.Ed.2d 333 (1975). Since the statutory and regulatory provisions unambiguously cover the defendants' alleged conduct here, the rule of lenity does not come into play. 55 We conclude that the indictment adequately alleged activities of the defendants that, if proven, would permit the jury to find that they jointly engaged as a business in dealing in currency and thus were a financial institution within the meaning of the Act and the regulations. The district court erred, therefore, in concluding that the indictment failed to charge defendants with conspiring to commit acts that could be found to trigger the Act's reporting requirements. 56