Opinion ID: 418085
Heading Depth: 1
Heading Rank: 2

Heading: 18 U.S.C. Sec. 1001: Concealment

Text: 6 The indictment charged Tobon with violating Sec. 1001 by knowingly and willfully concealing and causing to be concealed, by trick, scheme, or device, material facts within the jurisdiction of the Department of Treasury of the United States. The material facts concealed were the existence, origin, and transfer of approximately $185,200 in cash. Tobon, by his own admission, sought to prevent banks from filing Currency Transaction Reports by structuring his cash purchases of $185,200 in cashier's checks as a number of smaller cash purchases, each being less than $10,000. Tobon's purpose for doing this was to prevent the Internal Revenue Service from learning about the large sum of cash he purportedly won gambling. Tobon's main contention on this appeal is that he could not have violated the concealment prohibition of Sec. 1001 because he was under no legal duty to report any of his cash transactions. Tobon points out that, under 31 U.S.C. Sec. 1081 and 31 C.F.R. Sec. 103.22, the legal duty to file Currency Transaction Reports for transactions exceeding $10,000 applies only to the financial institutions from which he purchased the cashier's checks. Section 1001 of Title 18 U.S.C., provides: 7 Whoever, in any matter within the jurisdiction of any department or agency of the United States knowingly and willfully falsifies, conceals or covers up by any trick, scheme, or device, a material fact, or makes any false, fictitious or fraudulent statements or representations, or makes or uses any false writing or document knowing the same to contain any false, fictitious or fraudulent statement or entry, shall be fined not more than $10,000 or imprisoned not more than five years, or both. (Emphasis added.) 8 This section is designed to protect the authorized functions of governmental departments and agencies from the perversion which might result from the deceptive practices described. United States v. Gilliland, 312 U.S. 86, 92-93, 61 S.Ct. 518, 521-522, 85 L.Ed. 598 (1941). It is well established that this section encompasses two distinct offenses, false representation and concealment of a material fact. United States v. Diogo, 320 F.2d 898, 902 (2nd Cir.1963). False representations under Sec. 1001 require proof that the defendant knowingly made a false or fraudulent statement; concealment requires proof of willful nondisclosure by means of a trick, scheme, or device. Id. at 902. Generally, concealment violations under Sec. 1001 relate to the nondisclosure of statements required by statute, government regulation or form. See United States v. Irwin, 654 F.2d 671, 678-79 (10th Cir.1981); also see Goldstein,Conspiracy to Defraud the United States, 69 Yale L.J. 405, 454 (1959). The Irwin case is illustrative of the distinction between false statement and concealment under Sec. 1001. There, the defendant, a grant expediter aided a city in obtaining Economic Development Administration grant funds to finance an industrial park project. In the grant application, Irwin stated that he had not and would not be compensated for his assistance in obtaining the grant, even though he already had received compensation for grant services from the city and was to receive additional compensation from Adams, the eventual industrial park project engineer. This supported a false statement charge under 18 U.S.C. Sec. 1001. Id., 674-76. After the EDA approved the grant, Adams agreed to pay Irwin $18,000 out of grant funds for services which Irwin knew were ineligible for payment under the EDA grant. Nevertheless, Irwin, in his newly assumed capacity as city manager, approved and submitted to the EDA for reimbursement the three bills from Adams; each bill included charges for the ineligible services performed by Irwin but those charges were not indicated on the face of the bills. Irwin's submission of these bills supported three false claim charges under 18 U.S.C. Sec. 287. Id., 675, 680-83. However, the court held that these submissions would not support a concealment charge under Sec. 1001 because no one had any legal duty to disclose the charges for ineligible payments. The court emphasized that the government completely failed to show any statute, EDA regulation, or form requiring disclosure of the facts the defendant was convicted of concealing. Id. at 678. 9 In contrast to Irwin, however, in the case before us there are statutory and regulatory provisions requiring the disclosure of Tobon's currency transactions. Section 1081 of Title 31 of the United States Code, provides: 10 Transactions involving any domestic financial institution shall be reported to the Secretary at such time, in such manner, and in such detail as the Secretary may require if they involve the payment, receipt, or transfer of United States currency, or such other monetary instruments as the Secretary may specify, in such amounts, denominations, or both, or under such circumstances, as the Secretary shall by regulation prescribe. 11 The purpose of this section was to aid the government in criminal tax and regulatory investigations. California Bankers Association v. Shultz, 416 U.S. 21, 37-38, 94 S.Ct. 1494, 1505-1506, 39 L.Ed.2d 812 (1974). See 1970 U.S.Code Cong. & Ad.News, 4394-4396. By its terms Sec. 1081 does not explicitly require Tobon to report any transaction in currency. Although the Secretary of Treasury is clearly authorized under 31 U.S.C. Sec. 1082 1 to require both private individuals and financial institutions to file currency reports, the Secretary has, pursuant to 31 C.F.R. Sec. 103.22(a), 2 required only that financial institutions file currency reports when they participate in a transaction in currency of more than $10,000. A transaction in currency is defined, under 31 C.F.R. Sec. 103.11, as [a] transaction involving the physical transfer of currency from one person to another, and person is defined to include an individual, partnership, association, and joint venture. Finally, the Secretary has prescribed Form 4789, (Dept. of Treasury 1980) which states: [m]ultiple transactions by or for any person which in any one day total more than $10,000 should be treated as a single transaction, if the financial institution is aware of them. 12 Considering the foregoing statutes, regulations, and form, we believe that Tobon was involved in at least ten separate transactions in currency of more than $10,000, which were clearly within the ambit of the financial institution reporting requirements of 31 U.S.C. Sec. 1081 and 31 C.F.R. Sec. 103.22. The undisputed evidence showed that Tobon and Roman, acting on Tobon's behalf, went to ten different financial institutions and made virtually simultaneous pairs of cash purchases of cashier's checks, each pair totaling around $18,000. It is clear that Tobon and Roman acted as a person under the broad definition in 31 C.F.R. Sec. 103.11, whether as a principal/agent, an association, or a joint venture. According to Tobon, all of the money involved in the transactions was his money from poker winnings, while Roman simply helped make purchases for him. Each pair of purchases happened at the same financial institution on the same day. And, by Tobon's own admission, his use of false names and his structuring of single $18,000 transactions as two sets of $9,000 cash transfers represented nothing more than a scheme to prevent the financial institutions from fulfilling their legal duty to file reports for these transactions. 13 In United States v. Thompson, 603 F.2d 1200 (5th Cir.1979) that court adopted a sensible, substance-over-form approach in dealing with schemes to circumvent financial institution reporting requirements. In Thompson, the defendant, a chairman of the Board of a bank, was convicted of violating Sec. 1081 by causing his bank to fail to file a Currency Transaction Report on a $45,000 loan to a customer, Welch, to finance drug transactions. The defendant structured the loan as five separate $9,000 loans. On appeal the court rejected the defendant's claim that he could intentionally structure a single transaction in currency as multiple smaller transactions to avoid the reporting requirements of Sec. 1081 and 31 C.F.R. Sec. 103.22. The court reasoned: 14 Appellant analogizes this to a taxpayer structuring a financial transaction in a certain manner to avoid, rather than evade, the payment of taxes. The analogy is inapposite. Congress has lawfully required reporting of transactions in currency of more than $10,000 as an aid to criminal, tax, or regulatory investigations or proceedings. In the instant case, appellant intentionally sought to defeat the statutory requirements by engaging in an unreported transaction in currency of more than $10,000. Appellant cannot flout the requirements of Sec. 1081 with impunity. The decision to structure a $45,000 transaction in currency as five $9,000 loans with the intent to annul the reporting requirements does not equate to a decision to structure a financial transaction in a lawful manner so as to minimize or avoid the applicability of a tax covering only specific activity. 15 Id., 1203-04. (Emphasis added.) See also United States v. Hajecate, 683 F.2d 894, 896-97 (5th Cir.1982) (Acts which are themselves legal lose their legal character when they become elements of an unlawful scheme.) 16 Tobon claims, however, that Thompson is inapposite because the defendant there was a bank official who had a legal duty to disclose a currency transaction exceeding $10,000. Tobon suggests the case before us is closer to the Irwin case in that Tobon had no personal legal duty under any statute or regulation requiring him to disclose any transaction exceeding $10,000. Although the Thompson court does not indicate whether the bank official had a legal duty to file a currency report on his transaction, it does state that the responsibility for filing the report lay upon the teller who disbursed the $45,000. Thompson, 603 F.2d at 1202. More important, however, the Thompson court made clear that the defendant's liability, like Tobon's liability here, stemmed not from his duty to file a currency report but rather from his causing the financial institutions to fail to file the required report. Id. at 1201. 17 Furthermore, the requirement that a defendant must have a legal duty to disclose before he can be convicted of concealment under Sec. 1001 has no application where, as here, the government charged and proved that Tobon willfully and knowingly caused financial institutions not to report currency transactions that they had a duty to report and would have reported if they had known about such transactions. Support for this holding is found in 18 U.S.C. Sec. 2(b) which provides that one who willfully causes an act to be done which if directly performed by him or another would be an offense against the United States, is punishable as a principal. Section 2(b), a definitional provision, is directly applicable to convictions under Sec. 1001. See Revisor's note to 18 U.S.C.A. Sec. 1001 ([r]eference to persons causing or procuring was omitted [from Sec. 1001] as unnecessary in view of definition of 'principal' in Section 2 of this title.) 3 Also see Pereira v. United States, 202 F.2d at 836-37 (5th Cir.), aff'd., 347 U.S. 1, 8-9, 74 S.Ct. 358, 362-363, 98 L.Ed. 435 (1954). In United States v. McClanahan, 230 F.2d 919 (5th Cir.1956), cert. denied 352 U.S. 824, 77 S.Ct. 33, 1 L.Ed.2d 47 (1956), the court applied Sec. 2(b) to the concealment provision of Sec. 1001. In that case the defendant was charged under Sec. 1001 and Sec. 2 with willfully and knowingly causing, by scheme, trick, and device, veterans to conceal the fact that they did not intend to occupy premises to be purchased. The defendant's scheme involved using veterans as straw purchasers of dwellings in order to obtain low-interest Veterans Administration mortgage loans. The defendant caused the veterans to falsely affide to the Veterans Administration that they would occupy the dwellings as homes. Despite the fact that only the veterans had the duty to provide truthful information concerning occupying the homes, McClanahan's conviction for causing the concealment was upheld. Id., 922-23. 18 The instant case is admittedly distinguishable from the McClanahan case in one respect. Unlike in McClanahan, here those who had a legal duty to disclose--the financial institutions--were wholly innocent, having no knowledge of Tobon's scheme to circumvent reporting requirements. This distinction, however, is not controlling because it is well established that Sec. 2(b) was designed to impose criminal liability on one who causes an intermediary to commit a criminal act, even though the intermediary who performed the act has no criminal intent and hence is innocent of the substantive crime charged, in this case concealment. See United States v. Pereira, 202 F.2d at 836-37. (Court applies Sec. 2(b) in finding defendant liable as principal under Sec. 18 U.S.C. 2314 for willfully causing innocent bank clerk to mail into interstate commerce a fraudulently obtained check.) Also see United States v. Ruffin, 613 F.2d 408, 412 (2nd Cir.1979) (It is ... clear that under 18 U.S.C. Sec. 2(b) one who causes another to commit a criminal act may be found guilty as a principal even though the agent who committed the act is innocent or acquitted.); United States v. Catena, 500 F.2d 1319, 1323 (3rd Cir.1974) (under Sec. 2(b), a person may be guilty of causing a false claim to be presented to the United States even though he uses an innocent intermediary, e.g., insurance carriers, to actually pass on the claims to the United States); United States v. Lester, 363 F.2d 68, 72-73 (6th Cir.1966), cert. denied 385 U.S. 1002, 87 S.Ct. 705, 17 L.Ed.2d 542 (1967); United States v. Inciso, 292 F.2d 374, 378 (7th Cir.1961). 19 The legislative history behind Sec. 2(b) supports this interpretation. As recognized in Pereira, 202 F.2d 837, the revisor's note to Sec. 2 of Title 18, as enacted in 1948, indicates that Sec. 2(b) was intended to remove all doubt that one who causes the commission of an indispensable element of the offense by an innocent agent or instrumentality, is guilty as a principal. 4 The same revisor's note also states that Sec. 2(b) was designed to accord with such decisions as United States v. Giles, 300 U.S. 41, 57 S.Ct. 340, 81 L.Ed. 493 (1937). In Giles the Supreme Court affirmed the conviction of a bank teller for violating a statute prohibiting a national bank employee from making intentionally false entries in its books. The court held that although the bank teller had not personally made any false entries he could nevertheless be found guilty on the basis of evidence that he caused such entries to be made by innocent intermediaries. Id., 300 U.S. 48-49, 57 S.Ct. 344. In view of language and legislative history of Sec. 2(b), we have little doubt that Tobon is liable under Sec. 1001 for causing the financial institutions not to file the required currency reports even though the financial institutions had no criminal intent and thus were innocent of any concealment under Sec. 1001. 20 Also, because of the operation of Sec. 2(b), Tobon's legal incapacity to commit the crime of concealment by himself, owing to his lack of any duty to report currency transactions exceeding $10,000, does not detract from his liability under Sec. 1001 for willfully causing the innocent but duty-bound financial institutions not to disclose such transactions. Other Courts have interpreted Sec. 2(b) to find that a person, like Tobon, who is incapable of committing a substantive criminal offense if he acted alone may nevertheless be liable as a principal where he willfully causes the prohibited conduct (e.g., nondisclosure of a currency transaction exceeding $10,000) to be committed by intermediaries (e.g., the financial institutions) who have the capacity to commit the substantive criminal offense but who lack the criminal intent to be guilty of that offense. See United States v. Ruffin, 613 F.2d at 412 (Defendant, although legally incapable of personally committing offense of fraudulently obtaining Economic Development Act funds (42 U.S.C. Sec. 2730), nevertheless liable as the principal where he willfully caused innocent agent meeting capacity requirement to engage in proscribed conduct. (Sec. 2(b)). United States v. Lester, 363 F.2d 68, 72-73 (Under Sec. 2(b) defendants liable for conspiring to willfully cause police officers to act under color of state law to deprive third party of civil rights (18 U.S.C. Sec. 242) even though police officers were found innocent of any wrongdoing and defendants lacked legal capacity to act under color of state law.); United States v. Wiseman, 445 F.2d 792, 794-95 (2d Cir.1971) (Under Sec. 2(b) defendants, private process servers, liable for violating civil right under color of state law (18 U.S.C. Sec. 242) by willfully causing a civil court clerk, a state employee, to enter judgment against a third person, where the clerk was unaware that defendants had fraudulently procured such judgments, and where defendants lacked capacity to act under color of state law.) 21 The legislative history and purpose behind Sec. 2(b) supports this interpretation. Prior to 1951, 18 U.S.C. Sec. 2(b), provided: Whoever willfully causes an act to be done which if directly performed by him would be an offense against the United States is also a principal and punishable as such. However, in 1951, Sec. 2(b) was amended to read: Whoever willfully causes an act to be done which if directly performed by him or another would be an offense against the United States, is punishable as the principal. The Congressional purpose in adding the words or another was to ... make certain the intent to punish [persons embraced within Sec. 2] ..., regardless of the fact that they may be incapable of committing the specific violation. 1951 U.S.Code Cong. & Ad.News, pp. 2578, 2583. Also see Lester at 73. We agree with the Court in Ruffin, 613 F.2d at 413, that Congress amended 18 U.S.C. Sec. 2(b) to enlarge the scope of criminal liability under existing substantive criminal laws so that a person who operates from behind the scenes may be convicted even though he is not expressly prohibited by the substantive statute from engaging in the acts made criminal by Congress. By adding the words or another, Congress sought to extend criminal liability to defendants, like Tobon, who cause an intermediary to commit criminal acts where the intermediary, though innocent of the substantive offense, has the capacity to commit that offense and the causer lacks such capacity. See Wiseman, 455 F.2d at 794-95. As Judge Mansfield succinctly expressed in Ruffin, 613 F.2d at 416: In causing an innocent intermediary to commit a criminal act, the causer adopts not only the intermediary's act but [also] his capacity [to commit the crime]. 22 Finally, we can discern no sound policy reason why Tobon should escape criminal liability for causing concealment here either because he lacked a personal duty to report or because the financial institutions he caused to fail to report did not have the sufficient criminal intent to conceal and thus were innocent of concealment under Sec. 1001. A cogent analysis of the rudimentary principals of criminal law underlying our application of Sec. 2(b) here was provided in United States v. Lester, 363 F.2d at 73: 23 It is but to quote the hornbook to say that in every crime there must exist a union or joint operation of act, or failure to act, and intent. However, this is far from suggesting that the essential element of criminal intent must always reside in the person who does the forbidden act. Indeed, the latter may act without any criminal intent whatever, while the mens rea--willfulness--may reside in a person wholly incapable of committing the forbidden act. When such is the case, as at bar, the joint operation of act and intent prerequisite to commission of the crime is provided by the person who willfully causes the innocent actor to commit the illegal act. And in such a case, of course, only the person who willfully causes the forbidden act to be done is guilty of the crime. 24 In the instant case, Tobon's willfullness was clearly established by evidence showing he knew about the currency reporting requirements and that he purposely sought to prevent the financial institutions from filing required reports by using false names and by structuring his transactions as multiple smaller transactions under $10,000. Moreover, because of Tobon's deceptive transactions, the financial institutions, i.e., the innocent intermediaries, were duped into not reporting currency transactions they would have had a duty to report and indeed would have reported had they known about Tobon's scheme. Thus, by operation of Sec. 2(b), Tobon's criminal intent to cause a concealment is joined together with his innocent intermediaries' duties to report (i.e., their capacity to commit the crime of concealment) and their failure to report (i.e., the forbidden act) to constitute the elements of actionable concealment under Sec. 1001. See Ruffin, 613 F.2d at 415. 25 We conclude by emphasizing that the application of Sec. 2(b) to uphold Tobon's conviction for concealment is wholly consistent with the purposes of Sec. 1001. As mentioned above, Sec. 1001 was intended to cover deceptive practices aimed at frustrating or impeding the legitimate functions of government departments or agencies. See United States v. Gilliland, 312 U.S. at 93, 61 S.Ct. at 522 (1941). To permit Tobon to escape liability under Sec. 1001 here would amount to condoning deceptive schemes designed to deprive the Department of Treasury of valuable information contained in Currency Transaction Reports.