Opinion ID: 492031
Heading Depth: 3
Heading Rank: 1

Heading: Existence of Crimes Charged

Text: 44 The Bank Secrecy Act (the Act), 31 U.S.C. Sec. 5311 et seq., requires the making and keeping of certain reports or records [which] have a high degree of usefulness in criminal, tax or regulatory investigations or proceedings. 31 U.S.C. Sec. 5311. Section 5313 authorizes the Secretary of the Treasury to require domestic financial institutions, and any other participants in transactions for the payment, receipt, or transfer of United States currency, to report those transactions to the Secretary. 2 Under the regulations issued by the Secretary, only financial institutions are required to file these reports for transactions involving more than $10,000. 31 C.F.R. Sec. 103.22(a). 3 The CTR itself (IRS Form 4789) calls for, among other things, the name and address of the person conducting the transaction, and the name and address of such person, if any, for whom the transaction was completed. Criminal penalties for willful violation of the statute or regulations are set forth in 31 U.S.C. Sec. 5322. 45 Initially, we note that other circuits are divided on the question whether a bank customer can be prosecuted under the substantive provisions of the Act, 31 U.S.C. Secs. 5313, 5322, 18 U.S.C. Sec. 1001 (concealment of a material fact), and 18 U.S.C. Sec. 2(b) (causing another to commit an offense against the United States), for causing a bank to fail to file a CTR by not disclosing the structured nature of currency transactions. The Eleventh Circuit has adopted a position, termed a sensible, substance-over-form approach in dealing with schemes to circumvent financial institution reporting requirements, United States v. Tobon-Builes, 706 F.2d 1092, 1098 (11th Cir.1983) (citing United States v. Thompson, 603 F.2d 1200 (5th Cir.1979)). It holds that where a person causes a financial institution not to report currency transactions that it had a duty to report, the person is guilty of the substantive offense. United States v. Puerto, 730 F.2d 627, 631 (11th Cir.) (citing Tobon-Builes), cert. denied, 469 U.S. 847, 105 S.Ct. 162, 83 L.Ed.2d 98 (1984); see also United States v. Cure, 804 F.2d 625, 627 (11th Cir.1986) (per curiam); United States v. Giancola, 783 F.2d 1549, 1552-53 (11th Cir.1986), cert. denied, --- U.S. ----, 107 S.Ct. 669, 93 L.Ed.2d 721 (1987); United States v. Denemark, 779 F.2d 1559, 1563 (11th Cir.1986); United States v. Sans, 731 F.2d 1521, 1531 (11th Cir.1984), cert. denied, 469 U.S. 1111, 105 S.Ct. 791, 83 L.Ed.2d 785 (1985). On the other hand, the First, Eighth, and Ninth Circuits have adopted the position that since the Act and regulations promulgated thereunder do not impose a duty on a bank customer to disclose his transactions to the government either directly or through the financial institution, there can be no substantive violation of the Act or violation of Secs. 2(b) or 1001 by a bank customer. United States v. Larson, 796 F.2d 244, 246 (8th Cir.1986); United States v. Varbel, 780 F.2d 758, 762 (9th Cir.1986); United States v. Anzalone, 766 F.2d 676, 682-83 (1st Cir.1985); see also United States v. Reinis, 794 F.2d 506, 508 (9th Cir.1986); United States v. Della Espriella, 781 F.2d 1432, 1435 (9th Cir.1986). 46 In this circuit, we have held that an individual, although under no legal responsibility himself to file a CTR, nevertheless, can be criminally liable under 18 U.S.C. Sec. 2(b) for causing a financial institution to fail to file a currency transaction report which it had a legal duty to file. United States v. Heyman, 794 F.2d 788 (2d Cir.1986), cert. denied, --- U.S. ----, 107 S.Ct. 585, 93 L.Ed.2d 587. Heyman involved a Merrill Lynch employee, Alan Heyman, who structured his customer's deposits so that no single transaction involved an amount greater than $10,000. By doing so, Heyman willfully caused Merrill Lynch to fail to file the appropriate CTRs. Under the facts of that case, we held that had Merrill Lynch, a financial institution, structured the transactions as Heyman did, it would have violated the federal laws requiring the filing of CTRs, namely, 31 U.S.C. Secs. 5313 and 5322. Accordingly, since 18 U.S.C. Sec. 2(b) holds liable as a principal any person (Heyman) who willfully causes an act to be done which if directly performed by another (Merrill Lynch) would be a federal offense, Heyman was criminally liable for a violation of 31 U.S.C. Secs. 5313 and 5322. 47 Heyman, however, is only applicable in this case by analogy because it involved a prosecution under the Act and 18 U.S.C. Sec. 2(b), crimes not charged here. The questions presented here are whether an individual bank customer can be charged with a violation of either Sec. 371, conspiracy to defraud the United States, or Sec. 371, conspiracy to violate Sec. 1001, concealment of a material fact. The district court charged the jury herein under both prongs of Sec. 371 and the jury returned a general verdict of guilty. We now examine each prong of Sec. 371 not only for sufficiency of evidence but also to see if they state cognizable conspiracy offenses, assuming without deciding that it is necessary for us to do so, see Stromberg v. California, 283 U.S. 359, 367-68, 51 S.Ct. 532, 535, 75 L.Ed. 1117 (1931); United States v. Peterson, 768 F.2d 64, 67-68 (2d Cir.), cert. denied, 474 U.S. 923, 106 S.Ct. 257, 88 L.Ed.2d 264 (1985); United States v. Murray, 618 F.2d 892, 898-99 (2d Cir.1980); United States v. Natelli, 527 F.2d 311, 324-25 (2d Cir.1975), cert. denied, 425 U.S. 934, 96 S.Ct. 1663, 48 L.Ed.2d 175 (1976). 48 We turn first to the legal sufficiency of that part of Count Four of the indictment which charged a conspiracy to violate Sec. 1001. Reading the pertinent statute and regulations, it seems clear from the face of each that a bank customer is not required to file a CTR for any banking transaction; only financial institutions are required to file reports. Although section 5313 extends its coverage to the financial institution and any other participant in the transaction and, thus, the Secretary of the Treasury could have required not only banks to file reports, but also, bank customers, or participants other than financial institutions, nevertheless, 31 C.F.R. Sec. 103.22 limits the reporting requirement to financial institutions only. See California Bankers Ass'n v. Shultz, 416 U.S. 21, 58, 69-70 & n. 29, 94 S.Ct. 1494, 1521, 1521-22 n. 29, 39 L.Ed.2d 812 (1974). Courts that have considered this statutory and regulatory scheme are in agreement that there is no duty on bank customers themselves to file reports with the government of any transactions. Heyman, 794 F.2d at 791; accord Larson, 796 F.2d at 246; Varbel, 780 F.2d at 761-62; Anzalone, 766 F.2d at 681; Tobon-Builes, 706 F.2d at 1097. 49 It also seems clear from the statute and regulations that the requirement to file a CTR depends on a transaction occurring at a single financial institution. The statute speaks of a domestic financial institution  being involved in a transaction for the payment, receipt, or transfer of United States coins or currency. 31 U.S.C. Sec. 5313 (emphasis added). Thus, no obligation to file a CTR arises where a customer structures his transactions, each under $10,000, at different financial institutions. See Denemark, 779 F.2d at 1562-63. Similarly, transactions occurring on different days at the same financial institution are not aggregated to constitute a single transaction so that a bank would have to file a CTR. Heyman, 794 F.2d at 792; Reinis, 794 F.2d at 508. We need not address whether transactions on the same day, each under $10,000 at different branches of the same bank totalling over $10,000, trigger a bank's CTR filing requirement. See Giancola, 783 F.2d at 1552 (CTR requirement triggered). But see id. at 1554 (dissenting opinion). In this case, at least on one day, December 13, 1984, Maktabi and his associates procured $11,000 in $1,000 money orders at the same branch of one financial institution. 50 Thus, one fundamental question that we face is whether a bank customer can be liable for a violation of Sec. 1001, concealment of a material fact, where that customer is under no duty to file a CTR with the government. Generally, a defendant cannot be prosecuted under Sec. 1001 for concealing material facts unless he had a duty to disclose the material facts at the time he was alleged to have concealed them. United States v. Irwin, 654 F.2d 671, 678 (10th Cir.1981), cert. denied, 455 U.S. 1016, 102 S.Ct. 1709, 72 L.Ed.2d 133 (1982). While it is true that Maktabi had no duty himself to file CTRs with the government, it is not disputed that a bank is required to file a CTR for a single transaction in excess of $10,000 received on a single day. Had the bank intentionally structured the transactions as Maktabi did, splitting up large sums into blocks of less than $10,000 in order to avoid the filing of a CTR, it surely would have violated the Act as well as been guilty of concealing a material fact in violation of Sec. 1001. Heyman, 794 F.2d at 791; see also Puerto, 730 F.2d at 632-33; Tobon-Builes, 706 F.2d at 1099. Under 18 U.S.C. Sec. 2(b), a bank customer has a duty not to willfully cause a bank to violate the Act or to conceal material facts from the IRS. Heyman, 794 F.2d at 791-92. Had Maktabi been charged here with a substantive violation of Sec. 1001, he could have been held liable under Sec. 1001 by application of Sec. 2(b). Id. Here Maktabi is not charged with a substantive violation of Sec. 1001, but with conspiracy to violate Sec. 1001. It a crime to conspire to cause another to commit a crime. United States v. Perry, 643 F.2d 38, 45 (2d Cir.), cert. denied, 454 U.S. 835, 102 S.Ct. 138, 70 L.Ed.2d 115 (1981). This is true, even where, as here, the indictment and the jury instructions do not spell out in so many words that the defendant could be found guilty of conspiracy to cause another to commit a crime, as long as all the elements necessary [to find a conspiracy to cause another to commit a substantive offense] were fairly put to the jury. Id. In sum, not only is it a crime to conspire to violate Sec. 1001, but it is also a crime to conspire to cause another to violate Sec. 1001. Thus, bank customers who intentionally and with knowledge of the reporting requirements structure their transactions so as to circumvent or prevent a bank from complying with those requirements commit a crime. Herein, Maktabi is charged with conspiring to divide up the total amounts involved in the subject currency exchanges so that they did not exceed $10,000, in order to cause the bank to fail to file a CTR, and thus to conceal material facts from a government agency. An agreement to divide a large transaction in excess of $10,000 into a series of smaller ones each below $10,000 can constitute an unlawful agreement to conceal or cover up by ... trick, scheme, or device the material fact that the transaction involved a sum totalling more than $10,000. In our view, Maktabi was properly charged with a conspiracy to violate Sec. 1001 by causing a bank to conceal material facts from the IRS. See Puerto, 730 F.2d at 632; Tobon-Builes, 706 F.2d at 1099; United States v. Richter, 610 F.Supp. 480, 487 (N.D.Ill.1985), aff'd without opinion, 793 F.2d 1296 (7th Cir.), cert. denied, --- U.S. ----, 107 S.Ct. 191, 93 L.Ed.2d 124 (1986). 51 We turn next to the legal sufficiency of that part of Count Four of the indictment which charged a conspiracy to defraud. A conspiracy to defraud under Sec. 371 embraces any conspiracy for the purpose of impairing, obstructing, or defeating the lawful function of any department of Government. Dennis v. United States, 384 U.S. 855, 860-61, 86 S.Ct. 1840, 1843-44, 16 L.Ed.2d 973 (1966) (quotations and citations omitted). It is well established that the term defraud as used in Sec. 371 not only reaches schemes which deprive the government of money or property, but also is designed to protect the integrity of the United States and its agencies. United States v. Johnson, 383 U.S. 169, 172, 86 S.Ct. 749, 751, 15 L.Ed.2d 681 (1966). Thus, the crime of conspiracy to defraud the United States includes acts that interfere with or obstruct one of its lawful governmental functions by deceit, craft, or trickery, or by means that are dishonest. Hammerschmidt v. United States, 265 U.S. 182, 188, 44 S.Ct. 511, 512, 68 L.Ed. 968 (1924); United States v. Turkish, 623 F.2d 769, 771 (2d Cir.1980), cert. denied, 449 U.S. 1077, 101 S.Ct. 856, 66 L.Ed.2d 800 (1981). 52 The Supreme Court has recognized the importance to the government of having financial institutions provide the Secretary of the Treasury with reports of sizeable currency transactions by their customers. See Shultz, 416 U.S. at 26-27, 94 S.Ct. at 1500. For instance, one purpose for the filing of CTRs is to ferret out criminal activity. Id. at 27, 94 S.Ct. at 1500. The regulations emphasize the important purposes behind the filing of CTRs by stating that [t]he Secretary hereby determines that the records required to be kept by this subpart have a high degree of usefulness in criminal, tax, or regulatory investigations or proceedings. 31 C.F.R. Sec. 103.31. 53 It is our view that, to be held liable under the broad sweep of the fraud prong of Sec. 371, defendants need not have agreed to commit, or have actually committed, a specific substantive offense. They merely must have agreed to interfere with or to obstruct one of the government's lawful functions. See United States v. Southland Corp., 760 F.2d 1366, 1382 (2d Cir.1985), cert. denied, 474 U.S. 825, 106 S.Ct. 82, 88 L.Ed.2d 67 (1986). Thus, the fact that Maktabi, as an individual bank customer, had no duty to report transactions over $10,000 is not the operative issue as to whether he agreed to unlawfully defraud the United States by impairing and obstructing its lawful governmental functions of collecting data and reports of currency transactions in excess of $10,000. The IRS has an interest in receiving CTRs from financial institutions when customers arrange transactions in excess of $10,000. In order for this lawful governmental function to operate, it is imperative that reports be submitted by financial institutions. If Maktabi and his associates agreed to interfere with and to obstruct this lawful function of the IRS, they could properly be charged with a violation of the defraud prong of Sec. 371. See Puerto, 730 F.2d at 630-31; Sans, 731 F.2d at 1533-35; Richter, 610 F.Supp. at 485. 54 Having concluded that Maktabi was properly charged with a crime under both prongs of Sec. 371, conspiracy to violate Sec. 1001 and conspiracy to defraud the United States, we must still determine whether there was sufficient evidence to support his conviction.