Opinion ID: 526736
Heading Depth: 1
Heading Rank: 3

Heading: the currency transactions reporting act convictions

Text: Our analysis is governed by the following: 19 [T]he standard of review for a judgment of acquittal notwithstanding the verdict is identical to the test employed to measure the sufficiency of evidence supporting a guilty verdict. The test is whether, considering the evidence as a whole, taken in the light most favorable to the government, together with all legitimate inferences that can be drawn from such evidence, a rational trier of fact could have found guilt beyond a reasonable doubt. United States v. Hensel, 699 F.2d 18, 33 (1st Cir.), cert. denied, 461 U.S. 958, 103 S.Ct. 2431, 77 L.Ed.2d 1317 (1983); United States v. Patterson, 644 F.2d 890, 893 (1st Cir.1981) (citing Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 2789, 61 L.Ed.2d 560 (1979)). We must resolve any issue of credibility in favor of the jury's verdict, United States v. Winter, 663 F.2d 1120, 1127 (1st Cir.1981), and we must defer to the jury's verdict if the evidence can support varying interpretations, United States v. Rivera-Sola, 713 F.2d 866, 869 (1st Cir.1983). In other words, the prosecutor need only produce that quantum of evidence by which a reasonable trier of fact could find guilt beyond a reasonable doubt; there is no requirement to produce evidence that would compel a finding of guilt beyond a reasonable doubt. 20 United States v. McNatt, 813 F.2d 499, 502 (1st Cir.1987). 21 In order to sustain the defendants' felony convictions under 31 U.S.C. Sec. 5322(b) the government must prove the following beyond a reasonable doubt: 22 First, that a financial institution was involved in a currency transaction exceeding $10,000; 23 Second, that in connection with such a currency transaction, no currency transaction report was filed at the time required; 24 Third, that the failure to file the Currency Transaction Report at the time required was willful; and 25 Fourth, that the failure to file was part of a pattern of illegal activity involving transactions of more than $100,000 during a twelve month period. 26 Brief for the government at 24; see 31 U.S.C. Secs. 5313 & 5322. Of these elements, the defendants assert that the evidence is insufficient to establish that the failure to file: (1) was willful, i.e., done with either actual knowledge or willful blindness and/or (2) was part of a pattern of illegal activity. We deal with each of these contentions separately. 27
28 Our analysis focuses upon the propriety of the trial judge's willful blindness instruction and the sufficiency of the evidence. Sacharczyk argues that the lower court should not have instructed the jury on willful blindness because the government failed to produce any evidence to support such an instruction. She maintains that the government has not presented evidence of a conscious course of deliberate ignorance, i.e., of purposeful blinding while knowing that a crime was likely in progress.... United States v. Masse, 816 F.2d 805, 812 (1st Cir.1987) (emphasis in original). Lastly, she contends that even if the instruction was warranted, the evidence was insufficient to establish willful blindness beyond a reasonable doubt. The failure to file CTRs, she asserts, was due to negligence and oversight rather than to criminal intent. We disagree. 29 A willful blindness instruction is appropriate when: (1) defendant claims a lack of knowledge, (2) the facts suggest a conscious course of deliberate ignorance, and (3) the instruction, taken as a whole, cannot be misunderstood by a juror as mandating such an inference. United States v. Hogan, 861 F.2d 312, 316-17 (1st Cir.1988) (emphasis added); see United States v. Littlefield, 840 F.2d 143, 147 (1st Cir.), cert. denied, --- U.S. ----, 109 S.Ct. 155, 102 L.Ed.2d 126 (1988); United States v. Kaplan, 832 F.2d 676, 682 (1st Cir.1987), cert. denied, --- U.S. ----, 108 S.Ct. 1080, 99 L.Ed.2d 239 (1988); United States v. Masse, 816 F.2d at 812; United States v. Martin, 815 F.2d 818, 823 (1st Cir.), cert. denied, 484 U.S. 825, 108 S.Ct. 89, 98 L.Ed.2d 51 (1987); United States v. Krowen, 809 F.2d 144, 148 (1st Cir.1987); United States v. Rothrock, 806 F.2d 318, 322 (1st Cir.1986); United States v. Picciandra, 788 F.2d 39, 46 (1st Cir.), cert. denied, 479 U.S. 978, 107 S.Ct. 481, 93 L.Ed.2d 425 (1986). 30 In the case at bar, there is no issue concerning requirements one and three. Sacharczyk's main line of defense was that she had no knowledge of the failures to file CTRs or of the consequences of such omissions. And the trial judge took care to instruct the jury that a willful blindness instruction does not mandate an inference of willful blinding. 1 31 We thus limit our discussion to the second willful blindness prerequisite: did the government present evidence that suggested a course of deliberate blindness by Sacharczyk? We believe it did. The following evidentiary facts might support a finding that Sacharczyk deliberately chose a course of willful blindness to the CTR violations. First, in the fall of 1983, DiPerna spoke with her concerning the filing of CTRs. While the regulations he provided her omitted any mention of civil or criminal penalties, their discussion put her on notice that CTRs needed to be filed for certain currency transactions that exceeded $10,000 and that the credit union had participated in at least two such transactions in the preceding year. Second, in February, 1984, DiPerna again spoke with Sacharczyk concerning the necessity of filing CTRs. At that time she told DiPerna that she had filed the French and Perry CTRs with the IRS. She showed him xeroxed copies of these filled-out forms. Third, on the backs of these CTRs were directions for answering the questions asked on the fronts of the forms. Also detailed were the civil and criminal penalties that could result from a failure to file. Fourth, when agents of the IRS questioned Sacharczyk concerning her knowledge of CTRs, she explained that DiPerna had been the first to inform her of their existence and that on his request she had filled out and filed two CTRs. She produced copies of these for the agents along with the CTR regulations that DiPerna had given her. Finally, the government asserted that in her role as treasurer/bookkeeper/clerk, Sacharczyk would have had the opportunity to learn that currency transactions exceeding $10,000 were taking place at the credit union. 32 The purpose of the willful blindness theory is to impose criminal liability on people who, recognizing the likelihood of wrongdoing, nonetheless consciously refuse to take basic investigatory steps. Rothrock, 806 F.2d at 323; see United States v. Zimmerman, 832 F.2d 454, 458 (8th Cir.1987) (willful blindness instruction allows the jury to impute knowledge to [a defendant] of what should be obvious to him, if it found, beyond a reasonable doubt, a conscious purpose to avoid enlightenment.). While individually none of the facts here point to a deliberate course of willful ignorance, taken together, we believe, they present a sufficient basis for the willful blindness instruction. 33 Though the evidence was not overwhelming, the jury had a reasonable basis for inferring that Sacharczyk had read the backs of the CTRs in order to fill them out. As noted, the backs of these forms also contained warnings concerning the penalties for not filing CTRs. Given these facts, the jury could have inferred that Sacharczyk knew that the failure to file CTRs was against the law. Based on DiPerna's discovery of the two unreported transactions, Sacharczyk was put on notice that the credit union, in fact, handled reportable transactions. These inferences, and Sacharczyk's position at the credit union, support a finding that if she did not know about the specific transactions charged in the indictment, it was only because she consciously chose to be ignorant of them. We believe that the evidence and inferences permissibly drawn therefrom were sufficient to support both the willful blindness instruction and the jury's ultimate determination of willful failure to report beyond a reasonable doubt. 34
35 The Currency Transactions Reporting Act defines both felony and misdemeanor offenses for knowing and willful failures to file CTRs. The felony provisions are implicated when: 36 A person willfully violat[es] 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.... 37 31 U.S.C. Sec. 5322(b). In the case at bar, the government charged the defendants with felonious violations, alleging that the acts named in the indictment constituted a pattern of illegal activity involving transactions of more than $100,000 in a 12-month period. The trial judge instructed the jury that it could find there was a pattern of illegal activity if it determined beyond a reasonable doubt that there were repeated and related violations of the Act. The defendants argue that the government has failed to produce any evidence that could support a finding that the transactions named in the indictment formed a pattern of illegal activity. We cannot agree. 38 In United States v. Bank of New England, N.A., 821 F.2d 844 (1st Cir.), cert. denied, 484 U.S. 943, 108 S.Ct. 328, 98 L.Ed.2d 356 (1987), we dealt with the issue of what constitutes a pattern of illegal activity under 31 U.S.C. Sec. 5322(b). We affirmed the felony convictions of the Bank for failing to file CTRs for thirty-one currency transactions, each involving the same individual customer and the same form of currency transfer. In interpreting the meaning of the phrase pattern of illegal activity, we examined the limited case law on point. See United States v. Valdes-Guerra, 758 F.2d 1411, 1414 (11th Cir.1985); United States v. Dickinson, 706 F.2d 88, 92 (2d Cir.1983); United States v. Beusch, 596 F.2d 871, 878 (9th Cir.1979) (interpreting same language in 31 U.S.C. Sec. 5322(b)'s predecessor statute). We concluded that to form a pattern under the Act, the transactions must be repeated and related. Bank of New England, 821 F.2d at 853 (emphasis in original). Although the trial judge in that case had charged the jury that a pattern could be established by proving repeated violations, she did not instruct that the transactions also must be related. We found that did not constitute plain error because: 39 Under the evidence adduced, it was clear that the repeated failures by the Bank to report were directly related to the withdrawals by McDonough [the individual customer]. These failures were not isolated events; they entailed repeated failures to file CTRs on similar transactions by the same customer. The similarity of the transactions, coupled with the frequency and regularity of their repetition, establish a related scheme. 40 Id. 41 Sacharczyk and St. Michael's argue mightily that here, unlike in Bank of New England, there is absolutely no evidence that would link the currency transfers named in the indictment to one another. They stress that the indictment charged fifty different violations of the Act involving twenty-five different customers. They point out that the transactions named in the indictment consisted of differing forms of currency transfers: cash withdrawals, cash deposits, purchases of Treasurer's checks, loan proceeds, and the cashing of third-party checks. Absent evidence of some relation among these transactions, Sacharczyk and St. Michael's contend that they are simply repeated, isolated events, which are prosecutable only under the misdemeanor provision of the Act. See Bank of New England, 821 F.2d at 853; Dickinson, 706 F.2d at 92 (The requirement that the violations be part of a pattern merely excludes cases where the violations are isolated events and not part of a common or systematic scheme.). Although this is a plausible reading of the repeated and related standard set forth in Bank of New England, we believe it proves too much and refuse to read that standard so narrowly. 42 At the outset, we reaffirm that to establish a pattern of illegal activity under the Act, the government must prove that the transactions involved were both repeated and related to one another. See Bank of New England, 821 F.2d at 853. In the normal prosecution under 31 U.S.C. Sec. 5322(b), a financial institution is indicted for failing to file CTRs for a limited number of transactions; the institution has filed CTRs for certain transfers while failing to file them for others. To prove a pattern of illegal activity in such a case, the government must establish an underlying relationship or linkage among the unreported transactions. To do this it might prove, inter alia, a common feature among the customers involved, the forms of transfers of currency, and/or the purposes for which the funds were used. See, e.g., Bank of New England, 821 F.2d at 853. 43 In a case like the one at bar, however, where a financial institution has systematically failed to file any CTRs, the above approach is inapt. While a relationship must still be established, it may be proven without linking the underlying transactions. The necessary connection can be shown by proving that the financial institution chronically and consistently failed to file any CTRs. By showing a consistent failure to report, the government has proven an overall relationship among the transactions. There is a pattern of not reporting. 44 The language of the statute and its legislative history support this interpretation. 31 U.S.C. Sec. 5311 declares that the purpose of the statute is to require certain reports or records where they have a high degree of usefulness in criminal, tax, or regulatory investigations or proceedings. We agree with the Second Circuit that, in passing this legislation 45 Congress was largely concerned with the fact that the relative freedom accorded domestic and foreign currency transactions by American law in combination with the secrecy accorded currency transactions by certain foreign nations facilitated major criminal schemes, such as the laundering of money earned in criminal enterprises, the evasion of income taxes by gambling establishments, and the perpetuation of multinational securities frauds. In selecting among remedies, Congress rejected substantive restrictions on monetary or currency transactions but instead provided for a system of compulsory recordkeeping and reporting designed to diminish the advantages accorded such illegal activities by existing domestic and foreign law. See generally Currency and Foreign Transactions Reporting Act: Hearings on H.R. 15073 Before the House Committee on Banking and Currency, 91st Cong., 1st and 2d Sess. 11 (1970); Currency and Foreign Transactions Reporting Act: Hearings on S. 3678 and H.R. 15073 Before the SubComm. on Financial Institutions of the Senate Committee on Banking and Currency, 91st Cong., 2d Sess. 13 (1970); H.R.Rep. No. 975, 91st Cong., 2d Sess. (1970), reprinted in 1970 U.S.Code Cong. & Ad.News 4394-4416. 46 Dickinson, 706 F.2d at 91-92; see also California Bankers Ass'n v. Shultz, 416 U.S. 21, 26-30, 94 S.Ct. 1494, 1500-02, 39 L.Ed.2d 812 (1974) (noting same). Congress evidently believed that to effectively fight petty criminals, members of the underworld, white collar criminals, and income tax evaders it was necessary for financial institutions to maintain adequate records. United States v. Kattan-Kassin, 696 F.2d 893, 896 (11th Cir.1983). 47 When the government proves that a financial institution has willfully failed to file CTRs for any of its reportable transactions or that it has filed for only a few out of a vast number of its reportable transactions, a sufficient relationship has been established between those acts to constitute a pattern of illegal activity and thereby trigger the Act's felony provision. Congress placed the responsibility for filing CTRs on the financial institutions. It is incongruous to believe that Congress intended that a financial institution could insulate itself from felony prosecution by showing that it had not filed CTRs for any of its reportable transactions. Such a systemic disregard of the Act's reporting requirements is an open invitation to money launderers and other criminals to use the financial institution for hiding their ill-gotten gains. Moreover, allowing only misdemeanor prosecutions of such pervasive and repeated violations may not be sufficient to deter future transgressions. As the House Report explained in discussing the felony provisions of the Act: 48 It should be noted that serious violations under this title may involve very large sums of money, and fines of as much as $10,000 or more might be shrugged off as a mere cost of doing business. To have any real deterrent effect, the potential fine must be large enough to have some real economic impact on potential violators. 49 H.R.Rep. No. 975, 91st Cong., 2d Sess. (1970), reprinted in 1970 U.S.Code Cong. & Admin.News 4394, 4406; see also Valdes-Guerra, 758 F.2d at 1414; United States v. So, 755 F.2d 1350, 1355 (9th Cir.1985); Dickinson, 706 F.2d at 92; Kattan-Kassin, 696 F.2d at 897. 50 We hold that under the standards outlined above, there was sufficient evidence for the jury to have found that St. Michael's failure to file any CTRs comprised a pattern of illegal activity.