Opinion ID: 526736
Heading Depth: 1
Heading Rank: 4

Heading: THE 18 U.S.C. Sec. 1001 CONVICTIONS

Text: 51 Defendants contest their convictions for violating 18 U.S.C. Sec. 1001. The statute provides: 52 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, will be fined not more than $10,000 or imprisoned not more than five years, or both. 53 St. Michael's and Sacharczyk assert that: (1) the trial judge's instructions failed to apprise the jury that an affirmative act of concealment was a prerequisite to convicting for the offense; (2) the evidence was insufficient to establish such an act; and (3) the government failed to prove any concealment or misrepresentation concerning a matter within the jurisdiction of any department or agency of the United States. While we are unpersuaded by defendants' latter two contentions, we reverse the Sec. 1001 convictions because we find that the judge's jury instruction was fatally flawed.
54 The judge instructed as follows on the Sec. 1001 count: 55 It is the Government's charge that Barbara, Janice, and the Credit Union, knowingly, willfully concealed material facts by trick, scheme or device; that what they were doing was concealing the true nature of these large currency transactions from the Internal Revenue Service. And there is a statute which says that you may not knowingly, willfully conceal material facts from an agency of the Government performing its functions. That's a violation, if you personally do it, of a statute that bears number 1001 of Title 18. I'm sure that's of no particular interest to you. But if one assists another person in doing that, then the person who aids, abets, commands, induces or assists another is responsible as a principal, even though they are what people ordinarily call an aider and an abettor. 56 The quarrel defendants have with this instruction is that it allowed the jury to find them guilty based solely on the fact that they failed to file CTRs. What is lacking in the charge, they assert, is the requirement that the government prove some affirmative act of concealment beyond the failure to file CTRs. The government accepts this standard as well: Mere passive failure to reveal a material fact to a federal agency will not sustain a 1001 conviction; the government must prove an affirmative act by which a material fact is actively concealed. Brief for government at 39; see United States v. Shannon, 836 F.2d 1125, 1129-30 (8th Cir.), cert. denied, --- U.S. ----, 108 S.Ct. 2830, 100 L.Ed.2d 930 (1988); see also United States v. Woodward, 469 U.S. 105, 108 & nn. 4-5, 105 S.Ct. 611, 612 & nn. 4-5, 83 L.Ed.2d 518 (1985). We agree that an affirmative act of concealment is necessary to prove the trick, scheme or device element of the Sec. 1001 offense. See Woodward, 469 U.S. at 108 & nn. 4-5, 105 S.Ct. at 612 & nn. 4-5. 57 In an attempt to save the conviction on this count, the government seems to argue that, even though the jury was not specifically charged that an affirmative act of concealment must be found in order to convict, it necessarily must have concluded that defendants engaged in affirmative acts of concealment. Thus, it contends we may affirm because any error in the charge was harmless. See, e.g., United States v. Doherty, 867 F.2d 47, 57-58 (1st Cir.1989) (An erroneous instruction on an element of the offense can be harmless beyond a reasonable doubt, if, given the factual circumstances of the case, the jury could not have found the defendant guilty without making the proper factual finding as to that element.). The government offers the following evidence of affirmative acts to support the Sec. 1001 convictions: (1) Sacharczyk prepared the French and Perry CTRs for $10,000 transactions; (2) she showed copies of these to DiPerna telling him that they had been filed; (3) she never filed the CTRs with the IRS. 58 While the government is correct that these facts, if believed by the jury, would be sufficient to sustain a conviction under Sec. 1001 that does not dispose of the issue. Defendants maintain that the jury may have disbelieved the government's evidence concerning this incident and still have found them guilty under Sec. 1001 simply for not filing CTRs. We agree. In Doherty, we affirmed convictions based upon faulty instructions because we were certain that the jury must have found all of the necessary elements of the crime, see Doherty, 867 F.2d at 58. In this case, however, we cannot say with any degree of certitude that the jury would have come out the same way had they been correctly instructed. Given the closeness of this issue, such an error cannot be harmless beyond a reasonable doubt. See United States v. Mazza, 792 F.2d 1210, 1216-17 (1st Cir.1986) (describing harmless error standard). 59 There is one additional argument made by the government that requires a response. It argues that Sacharczyk's affirmative misrepresentations to DiPerna concerning the filing of the French and Perry CTRs, standing alone, would be enough to sustain the Sec. 1001 convictions. This argument is at best misguided. 60 The grand jury indicted the defendants in pertinent part as follows: 61 56. The defendant[s] ... concealed material facts from the Internal Revenue Service in a matter under its jurisdiction, as herein described: 62 a. The defendants ... failed to file, and caused the failure to file, Currency Transaction Reports (IRS Forms 4789).... 63 b. That in addition to the transactions referred to in paragraph 56(a) herein, the defendants ... further engaged in a trick, scheme and device which enabled them to withhold the filing of Currency Transaction Reports on behalf of St. Michael's Credit Union for two separate currency transactions, and thereby withhold and conceal material facts from IRS in a matter under its jurisdiction, by creating copies of false and fictitious Currency Transactions [sic] Reports and representing to bank examiners for the Commonwealth of Massachusetts they were retained copies of those Currency Transaction Reports which had been filed with IRS; said false representation and display causing the bank examiners to conclude that St. Michael's Credit Union was in compliance with Federal Currency Reporting Laws and further caused the examiners to abandon their investigation of St. Michael's Credit Union's compliance with said laws. 64 The judge's instructions to the jury mirrored the indictment. See supra pp. 588-589. 65 Section 1001 is written in the disjunctive; the offenses are separated by the word or. 18 U.S.C. Sec. 1001. The case law affirms that Sec. 1001 incorporates two separate and distinct offenses: (1) concealing material facts from a federal agency by trick, scheme or device or (2) making false or fraudulent representations to a federal agency or department. 2 See Anzalone, 766 F.2d at 682; United States v. Tobon-Builes, 706 F.2d 1092, 1096 (11th Cir.1983); United States v. Diogo, 320 F.2d 898, 902 (2d Cir.1963). The government might have prosecuted Sacharczyk for allegedly making false statements to IRS investigative agents, see United States v. Morris, 741 F.2d 188, 189-90 (8th Cir.1984), but it did not do so. The government might have prosecuted her for false statements made to DiPerna as a de facto federal agent, but it did not do so. St. Michael's and Sacharczyk were indicted for the trick, scheme or device offense of Sec. 1001. The law does not allow the government to advance a different theory of prosecution on appeal. This would nullify the purpose of an indictment. 66 The government asserts that misrepresentation alone may be enough to sustain a conviction under the trick, scheme or device offense of Sec. 1001. It is sufficient, however, only where the defendant has been charged with the offense of making false, fictitious or fraudulent statements or representations. 18 U.S.C. Sec. 1001. The case cited as support for the government's position is in accord with this. In United States v. Woodward, as the government points out, the Supreme Court stated in a footnote that an affirmative misrepresentation alone would support a Sec. 1001 conviction. If the entire footnote is read, however, it is clear that the Supreme Court was speaking only of a prosecution for making false statements. 67 In Woodward's case, the Government did not have to prove the existence of a trick, scheme, or device. Woodward was charged with violating 1001 because he made a false statement on the customs form. This type of affirmative misrepresentation is proscribed under the statute even if not accompanied by a trick, scheme, or device. 68 Woodward, 469 U.S. at 108 n. 4, 105 S.Ct. at 612 n. 4 (emphasis added). 69 The government also asserts that, in two circuits, concealment of material facts from the IRS in itself is violative of section 1001. In other words, the government argues that the mere failure to file might support a conviction under Sec. 1001 without additional proof of an affirmative act of concealment. We do not believe the cases cited by the government stand for that proposition. See United States v. Nersesian, 824 F.2d 1294 (2d Cir.), cert. denied, 484 U.S. 957, 108 S.Ct. 355, 98 L.Ed.2d 380 (1987); United States v. Puerto, 730 F.2d 627 (11th Cir.), cert. denied, 469 U.S. 847, 105 S.Ct. 162, 83 L.Ed.2d 98 (1984). Both of these cases presented more than a simple failure to file CTRs. In each case, the defendants affirmatively structured their currency transactions as part of a scheme to cause the Banks to fail to file CTRs. See Nersesian, 824 F.2d at 1312-13; Puerto, 730 F.2d at 632-33. That scenario is different from one where a bank has passively failed to file CTRs. Absent other acts that might form part of a scheme to affirmatively conceal facts from a federal agency, we do not believe the failure to file CTRs--standing alone--can support a conviction under Sec. 1001.
70 Section 1001 prohibits misrepresentations and affirmative concealments in any matter within the jurisdiction of any department or agency of the United States. Defendants argue that the affirmative acts of concealment proffered by the government--Sacharczyk's actions concerning the French and Perry CTRs--were not matters within the jurisdiction of the IRS. Even if the government's evidence is accepted, defendants contend that the most Sacharczyk has done is conceal facts from a state agency. We do not agree. 71 The Supreme Court has held that the statutory language requiring that knowingly false statements be made 'in any matter within the jurisdiction of any department or agency of the United States' is a jurisdictional requirement. Its primary purpose is to identify the factor that makes the false statement an appropriate subject for federal concern. United States v. Yermian, 468 U.S. 63, 68, 104 S.Ct. 2936, 2939, 82 L.Ed.2d 53 (1984). The Court has also consistently held that the jurisdictional clause of Sec. 1001 should be given a broad interpretation. See United States v. Rogers, 466 U.S. 475, 479-84, 104 S.Ct. 1942, 1946-48, 80 L.Ed.2d 492 (1984); Bryson v. United States, 396 U.S. 64, 71, 90 S.Ct. 355, 359, 24 L.Ed.2d 264 (1969); United States v. Notarantonio, 758 F.2d 777 (1st Cir.1985); see also United States v. Bramblett, 348 U.S. 503, 507, 75 S.Ct. 504, 507, 99 L.Ed. 594 (1955) (There is no indication in either the committee reports or in the congressional debates that the scope of the statute was to be in any way restricted.). 72 In this circuit, as in virtually all others, it has been held that a concealment or misrepresentation need not be made directly to a federal agency or department to sustain a Sec. 1001 conviction. See Notarantonio, 758 F.2d at 787 (collecting cases); United States v. Suggs, 755 F.2d 1538, 1542 (11th Cir.1985) (same); United States v. Richmond, 700 F.2d 1183, 1187-88 (8th Cir.1983) (same). The government, however, must prove a nexus, a necessary link, between the deception of the nonfederal agency and the function of a federal agency. United States v. Petullo, 709 F.2d 1178, 1180 (7th Cir.1983) (quoting United States v. Baker, 626 F.2d 512, 514 n. 5 (5th Cir. (1980)); see Notarantonio, 758 F.2d at 787. The link may be established by showing that the concealments or  'false statements ... result in the perversion of the authorized functions of a federal department or agency.'  Notarantonio, 758 F.2d at 787 (quoting United States v. Stanford, 589 F.2d 285, 297 (7th Cir.1978), cert. denied, 440 U.S. 983, 99 S.Ct. 1794, 60 L.Ed.2d 244 (1979)). 3 73 Defendants' argument that there is no necessary link between Sacharczyk's actions and statements concerning the French and Perry CTRs and the jurisdiction of the IRS is misplaced. All of the cases cited for support by the defendants concern prosecutions under Sec. 1001 for making false representations or statements to a non-federal agency. The question presented was whether the false statements impacted the function of a federal agency. See, e.g., Petullo, 709 F.2d at 1179-80 (false work vouchers submitted to city which used some federal funds to pay for the work); United States v. Baker, 626 F.2d 512 (5th Cir.1980) (false time sheets submitted to city for services provided under federal grant); United States v. Candella, 487 F.2d 1223 (2d Cir.1973) (false statements made to city agency to obtain federal monies), cert. denied, 415 U.S. 977, 94 S.Ct. 1563, 39 L.Ed.2d 872 (1974). 74 The case at bar presents a different scenario. Defendants were prosecuted for knowingly and willfully conceal[ing] and cover[ing] up, by trick, scheme, and device, material facts to the Internal Revenue Service, by failing to file, and causing the failure to file Currency Transaction Reports. The failure to file CTRs clearly falls within the jurisdiction of the IRS. Although not so explicitly stated, defendants' position is that the affirmative acts alleged by the government that form the basis for the trick, scheme, or device element of a Sec. 1001 offense also must have taken place within the jurisdiction of a federal agency. We do not agree. 75 The jurisdictional element of a Sec. 1001 offense is controlled by the substantive falsehoods or acts of concealment charged in the indictment. Whether the prosecution is for making a false statement or for concealing a material fact, the jurisdictional element of Sec. 1001 turns on whether the falsity or coverup would result in the perversion of the authorized functions of a federal agency or department. Notarantonio, 758 F.2d at 787 (quoting Stanford, 589 F.2d at 297). When the prosecution is for a coverup or concealment, however, there is the additional requirement of proving a trick, scheme or device. See Woodward, 469 U.S. at 108, 105 S.Ct. at 612; supra pp. 589, 590. To establish this the government must prove some affirmative act of concealment. See Shannon, 836 F.2d at 1129-30; supra at 589, 590. We do not construe this requirement to mean that every aspect of the scheme, trick or device must be confined within the jurisdiction of a federal agency. It is enough that the underlying concealment fall within that jurisdiction. Here, the failure to file CTRs places this case within the jurisdiction of the IRS. That failure perverts the functions of the IRS. Sacharczyk's actions concerning the French and Perry CTRs are the affirmative acts that must be proven to establish a trick, scheme or device under Sec. 1001. Since the trick, scheme or device is purely derivative of and dependent upon the underlying concealment, we believe the proper jurisdictional focus should be on the concealment. 76 Even if we accepted defendants' argument that the affirmative acts must also be within the jurisdiction of a federal agency, our result would remain unchanged. The government produced evidence that: (1) DiPerna, the state bank examiner, had been directed by the IRS to begin enforcing the rules and regulations concerning CTRs; (2) DiPerna examined St. Michael's in part to ensure their compliance with federal laws regarding CTRs; (3) during the examination, he discovered two reportable transactions for which no CTRs had been filed; (4) he informed Sacharczyk that if they were filed with the IRS he would not mention them in his report; (5) Sacharczyk filled out CTR forms for the two transactions; (6) she showed copies of them to DiPerna and stated that she had filed them with the IRS; (7) DiPerna did not report the credit union's previous failure to file these CTRs; (8) Sacharczyk never, in fact, filed the two CTRs. 77 These actions and representations perverted the functioning of the IRS. For these two reportable transactions, no CTRs were filed. But for the alleged ruse engineered by Sacharczyk, the IRS would have learned of the omissions from DiPerna's report. As DiPerna testified, he was at the credit union to ensure its compliance with the federal laws. The IRS must rely on such local examiners to ferret out violations. By allegedly duping this agent, Sacharczyk successfully avoided IRS discovery of St. Michael's failure to file CTRs. We believe this suffices to place her alleged actions within the jurisdiction of a federal agency even under the defendants' standard. 78 To sum up. There is no jurisdictional bar to the Sec. 1001 count. Although there was sufficient evidence for a conviction, the jury instruction was fatally flawed and the conviction cannot be salvaged by any of the theories advanced by the government. The conviction on this count must, therefore, be vacated. 79