Court Opinion

ID: 70811
Source: CourtListenerOpinion
Date Created: 2010-04-26 07:08:06+00
Date Added: 2024-06-11T09:03:32.325882
License: Public Domain

United States Court of Appeals,

                           Eleventh Circuit.

                                No. 94-8778.

          UNITED STATES of America, Plaintiff-Appellee,

                                      v.

                 C. Wayne PHIPPS, Defendant-Appellant.

                               April 25, 1996.

Appeal from the United States District Court for the Northern
District of Georgia. (No. 4:93-CR-033-01-HLM), Harold L. Murphy,
Judge.

Before TJOFLAT, Chief Judge, CARNES, Circuit Judge, and FAY, Senior
Circuit Judge.

     CARNES, Circuit Judge:

     This appeal arises out of the conviction of C. Wayne Phipps

for three counts of money laundering in violation of 18 U.S.C. §

1956(a)(3)(B),     and   for    two   counts   of   causing   a   financial

institution to fail to file a Currency Transaction Report ("CTR")

in violation of 31 U.S.C. § 5324(a)(1).               Phipps attacks his

convictions on several grounds;            however, the only issue that

merits discussion is one involving the § 5324(a)(1) counts. 1           The

parties phrase the issue as one of sufficiency of the evidence to

convict on the two § 5324(a)(1) counts, but the facts the jury

could find from the evidence are not really in dispute.           The real

issue is whether 31 U.S.C. § 5324(a)(1), which prohibits any person

from "caus[ing] or attempt[ing] to cause a domestic financial

     1
      Having reviewed the record, we reject without further
discussion Phipps' contentions concerning the district court's
imposition of a two-point sentence enhancement for obstruction of
justice, the district court's entrapment instruction, and several
of the district court's evidentiary rulings.
institution to fail to file a report required" under applicable

currency transaction reporting statutes and regulations is violated

by structuring activities designed to avoid a CTR being required in

the first place.    31 U.S.C.A. § 5324(a)(1) (West 1995).

     For the reasons that follow, we answer that question in the

negative and hold that § 5324(a)(1), unlike certain other statutory

provisions, is violated only when the financial institution is

required to file a report that the defendant causes or attempts to

cause it not to file.    As a result, Phipps' conviction is due to be

reversed insofar as the § 5324(a)(1) counts are concerned.
                    I. FACTS AND PROCEDURAL HISTORY

     On four occasions in the spring of 1992, Phipps exchanged cash

supplied by a government informant, James McMillan, for checks

drawn on Phipps' bank account and for cashier's checks that Phipps

purchased with money from his bank account. Phipps never deposited

or exchanged McMillan's cash directly with his bank.         Instead,

Phipps would give the cash to Charles Prater, a friend who operated

Carpet Transport, Inc. ("CTI"), and Prater would give Phipps checks

made out to CTI which Prater had endorsed and signed over to

Phipps.   Phipps would then take these third-party checks to his

bank, deposit them in his account, and write checks to McMillan, or

purchase cashier's checks, for an amount ten percent less than the

amount of cash that McMillan had supplied to Phipps.         That ten

percent deduction represented Phipps' "commission" for handling the

transaction.

     Pursuant to this scheme, there were four separate sets of

transactions   in    which   Phipps   exchanged   currency   totalling
$40,000.00   for   CTI   checks   totalling   approximately   $39,000.00.

Phipps then deposited those CTI checks into the bank and wrote

checks (or purchased cashier's checks) totalling $36,000.00 payable

to McMillan.    While the details varied somewhat, the pattern was

the same each time. The reason the transactions were structured in

this manner was to launder or disguise the source of the currency,

which supposedly was from illegal drug activities, and to do it in

a way that would avoid the bank being required to file any CTRs.

The bank was never required as a result of these transactions to

file any CTRs, because only checks were deposited in the bank, no

currency.

     For his involvement in these transactions, Phipps was charged

with four counts of money laundering in violation of 18 U.S.C. §

1956(a)(3)(B), and two counts of causing a financial institution to

fail to file a CTR as required by 31 U.S.C. § 5313(a), in violation

of 31 U.S.C. § 5324(a)(1).         In addition, the government sought

forfeiture of Phipps' proceeds from the transactions pursuant to 18

U.S.C. § 982.      A jury found Phipps guilty of three of the four

counts of money laundering, and of the two counts of causing a

financial institution to fail to file a CTR. After his conviction,

Phipps moved pursuant to Fed.R.Crim.P. 29(c) for a judgment of

acquittal, and the district court denied the motion.          Thereafter

Phipps consented to forfeiting $3,500.00 to the government.
                             II. DISCUSSION

     Phipps argues that the district court erred in denying his

Rule 29(c) motion for judgment of acquittal because there was

insufficient evidence as a matter of law to support his conviction
for causing a financial institution to fail to file a CTR.                  Phipps

does not dispute the facts that the government proved at trial

concerning his involvement in the money laundering transactions;

instead, he contends that those facts do not establish a violation

of   31   U.S.C.   §    5324(a)(1).     We   review    the     district    court's

interpretation      of    the    relevant    statutory    provision       and   its

application of law to facts de novo.                  E.g., United States v.

Thomas, 62 F.3d 1332, 1336 (11th Cir.1995); Rodriguez v. Lamer, 60

F.3d 745, 747 (11th Cir.1995).

          A. The Currency Transaction Reporting Requirements

      In 1970, in an effort to facilitate the investigation of

criminal activity, Congress passed legislation requiring banks to

report to the government certain large currency transactions.

Section 5313(a) of the Bank Secrecy Act, 31 U.S.C. § 101 et seq.,

provides, in pertinent part:

      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 ... 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.

31 U.S.C.A. § 5313(a) (West 1983).            If the financial institution

fails to file a CTR when the obligation arises, the institution is

subject to criminal penalties.          31 U.S.C. § 5322.

      Pursuant     to    the    authority   granted    under    §   5313(a),    the

Secretary of the Treasury promulgated regulations specifying the

kinds of transactions that must be reported to the government:

      Each financial institution other than a casino or the Postal
      Service 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.

31 C.F.R. § 103.22 (1995).             Thus, although under § 5313(a) the

Secretary     could    have   required    "any      other    participant      in    the

transaction" to file a report, 31 U.S.C.A. § 5313(a) (West 1983),

the   Secretary    imposed     that    obligation      only    on   the   financial

institution.      In addition, although under § 5313(a) the Secretary

could    have    required     transactions         involving    "other     monetary

instruments"      to    be    reported,    the      Secretary       required       only

transactions in currency to be reported.

      The regulations define "a transaction in currency" as "[a]

transaction involving the physical transfer of currency from one

person   to     another."      31     C.F.R.   §    103.11(ii)      (1995).         The

regulations further provide: "A transaction which is a transfer of

funds by means of bank check, bank draft, wire transfer, or other

written order, and which does not include the physical transfer of

currency is not a transaction in currency within the meaning of

this part."     31 C.F.R. § 103.11(ii) (1995).              "Currency" is defined

in the regulations as "[t]he coin and paper money of the United

States or of any other country that is designated as legal tender

and that circulates and is customarily used and accepted as a

medium of exchange in the country of issuance."                       31 C.F.R. §

103.11(h) (1995).

 B. Section 5324(a)—The 1986 Amendments to the Bank Secrecy Act

      Congress amended the Bank Secrecy Act in 1986 to impose

criminal liability on any person who:                  (1) causes a financial

institution to fail to file a CTR;             (2) causes it to report false
information on a CTR; or (3) structures transactions in an attempt

to evade the CTR reporting requirement.    That 1986 legislation is

codified as 31 U.S.C. § 5324(a), which provides in its entirety, as

follows:

     No person shall for the purpose of evading the reporting
     requirements of section 5313(a) or 5325 or any regulation
     prescribed under any such section—

            (1) cause or attempt to cause a domestic financial
            institution to fail to file a report required under
            section 5313(a) or 5325 or any regulation prescribed
            under such section [;]

            (2) cause or attempt to cause a domestic financial
            institution to file a report required under section
            5313(a) or 5325 or any regulation prescribed under any
            such section that contains a material omission or
            misstatement of fact; or

            (3) structure or assist in structuring, or attempt to
            structure or assist in structuring, any transaction with
            one or more domestic financial institutions.

31 U.S.C.A § 5324(a) (West Supp.1995). Phipps was not charged with

violating the third subdivision of § 5324(a), only the first

subdivision.    Therefore, we need not address whether the evidence

in this case could establish a violation of the antistructuring

provision in § 5324(a)(3).

           C. The Competing Interpretations of § 5324(a)(1)

     There are two competing interpretations of the key language in

§ 5324(a)(1) about "caus[ing] a domestic financial institution to

fail to file a report required" under the applicable statutory and

regulatory provisions.     Phipps would have us interpret that key

language in § 5324(a)(1) as applying only when a bank is required

to file a currency transaction report.     In other words, it would

prohibit a defendant from causing or attempting to cause—through

cajolery, bribery, intimidation, or whatever means—a bank from
complying with its legal duty to file a CTR.                                Under Phipps'

interpretation, there can be no violation of § 5324(a)(1) unless

and until a CTR is required to be filed, and that cannot happen

when no currency is deposited or exchanged with the financial

institution.

     The government would have us read § 5324(a)(1) differently.

Under the government's interpretation, the provision would cover a

defendant's actions causing or attempting to cause the bank not to

have to file the report in the first place.                         In other words, the

government     urges      us    to     extend      §    5324(a)(1)         to   structuring

activities that are designed to cause a bank not to have to file a

CTR that would have been required but for the structuring.

              D. The Proper Interpretation of § 5324(a)(1)

     There     are   three      obstacles         to   the     government's        expansive

interpretation       of    §     5324(a)(1),           which     taken      together       are

insurmountable.        The first obstacle is the plain language of the

provision     itself.          That    language        clearly      says    that    what   is

proscribed is causing or attempting to cause the bank not to file

"a   report    required"        under       the    applicable        CTR    statutes       and

regulations.         It   does        not   say    that      what    is     proscribed      is

structuring transactions so that the bank is not required to file

a CTR to begin with.

       "[I]n determining the scope of a statute, one is to look

first at its language.           If the language is unambiguous, ... it is

to be regarded as conclusive unless there is a clearly expressed

legislative intent to the contrary."                         Dickerson v. New Banner

Inst., Inc., 460 U.S. 103, 110, 103 S.Ct. 986, 990, 74 L.Ed.2d 845
(1983) (citations and quotation marks omitted).       Moreover, it is

well settled that criminal laws are to be strictly construed.

United States v. Enmons, 410 U.S. 396, 411, 93 S.Ct. 1007, 1015, 35

L.Ed.2d 279 (1973); United States v. Campos-Serrano, 404 U.S. 293,

297, 92 S.Ct. 471, 474, 30 L.Ed.2d 457 (1971);       United States v.

Bass, 404 U.S. 336, 347, 92 S.Ct. 515, 522, 30 L.Ed.2d 488 (1971).

Because there is no qualification in the language of the statute

itself, we should read "a report required" to mean what it says.

That is, we should read "a report required" in § 5324(a)(1) to mean

a report that the financial institution is obligated to file, which

is what "required" means, not a report that it would have been

obligated to file had circumstances been different.

       The   second     obstacle   to   the   government's   expansive

interpretation of § 5324(a)(1) is that it would render § 5324(a)(3)

entirely superfluous.    If we adopted the government's view, every

violation of the antistructuring provision in the third subdivision

of § 5324(a) would also be a violation of the first subdivision;

there would be no need for § 5324(a)(3).       It is a basic tenet of

statutory construction that courts should refrain from construing

a statutory provision in a way that renders meaningless another

provision within the same statute.      See Ratzlaf v. United States,

--- U.S. ----, ----, 114 S.Ct. 655, 659, 126 L.Ed.2d 615 (1994);

Pennsylvania Dep't of Pub. Welfare v. Davenport, 495 U.S. 552, 562,

110 S.Ct. 2126, 2133, 109 L.Ed.2d 588 (1990);      Lohr v. Medtronic,

Inc., 56 F.3d 1335, 1344 (11th Cir.1995), cert. granted, --- U.S.

----, 116 S.Ct. 806, 133 L.Ed.2d 752 (1996).

     The third obstacle to the government's interpretation is the
legislative       history   of   §    5324,   which    clearly       shows   that   §

5324(a)(1) was aimed only at non-structuring situations.

       Prior to the enactment of § 5324, a number of federal courts

of     appeals'     decisions        addressed   whether       and     under    what

circumstances       individuals        unaffiliated     with     the     financial

institution that was involved in a currency transaction could be

held criminally liable for causing the institution not to file a

CTR.    Some decisions had held that an individual could be held

criminally liable for causing a financial institution to fail to

file a CTR that it had a legal duty to file, see United States v.

Lafaurie, 833 F.2d 1468, 1470-71 (11th Cir.1987), cert. denied, 486

U.S. 1032, 108 S.Ct. 2015, 100 L.Ed.2d 602 (1988);                   United States

v. Hayes, 827 F.2d 469, 472 (9th Cir.1987);             United States v. Cure,

804 F.2d 625, 629 (11th Cir.1986);            United States v. Tobon-Builes,

706 F.2d 1092, 1100-01 (11th Cir.1983), but other decisions also

had held that an individual could not be held criminally liable for

structuring transactions to avoid triggering the bank's duty to

file a CTR in the first place, see United States v. Gimbel, 830

F.2d 621, 625-26 (7th Cir.1987); United States v. Larson, 796 F.2d

244, 247 (8th Cir.1986); United States v. Dela Espriella, 781 F.2d

1432, 1435 (9th Cir.1986);             United States v. Denemark, 779 F.2d

1559, 1563 (11th Cir.1986); United States v. Varbel, 780 F.2d 758,

762 (9th Cir.1986);         United States v. Anzalone, 766 F.2d 676, 683

(1st Cir.1985);      but see United States v. Richeson, 825 F.2d 17, 20

(4th    Cir.1987)      (holding       individual      criminally       liable    for

structuring to avoid reporting requirements).

       Congress enacted § 5324 to ensure that individuals would be
held criminally liable in both situations.     As the Senate report

accompanying the legislation made clear, one subdivision of the

provision (which would become § 5324(a)(1)) was aimed at efforts to

prevent a CTR which was required from being filed while another

(which would become § 5324(a)(3)) was aimed at structuring to avoid

the CTR requirements from being applicable.       The Senate report

explained:

          [The proposed amendment to 31 U.S.C. § 5313(a) ] would
     codify Tobon-Builes and like cases and would negate the effect
     of Anzalone, Varbel and Denemark. It would expressly subject
     to potential liability a person who causes or attempts to
     cause a financial institution to fail to file a required
     report.... In addition, the proposed amendment would create
     the offense of structuring a transaction to evade the
     reporting requirements, without regard for whether an
     individual transaction is, itself, reportable under the Bank
     Secrecy Act.

S.Rep. No. 433, 99th Cong., 2d Sess. 22 (1986).           A Justice

Department official explained to Congress:

          [The amendment] addresses the problem of "structured"
     currency transactions. That is, currency transactions which
     are intentionally broken down into a series of smaller
     transactions, each under $10,000, for the purpose of evading
     the reporting requirements of the Bank Secrecy Act.       This
     process, commonly known as "smurfing," is undertaken by
     individuals or groups of individuals who, intending to prevent
     banks from reporting their currency transactions, engage in a
     series of cash transactions each under $10,000 at different
     banks on different days, different banks on the same day, or
     at the same bank, or its branches, on different days.

The Drug Money Seizure Act and the Bank Secrecy Act Amendments:

Hearing on S. 571 and S. 2306 Before the Senate Comm. on Banking,

Housing, and Urban Affairs, 99th Cong., 2d Sess. 66-67 (1986)

(statement of James Knapp, Deputy Asst. Attorney General).     That

was what the part of the legislation that would become § 5324(a)(3)

was designed to do.   As to the part that would become § 5324(a)(1),

the Justice Department official explained that:
          [The amendment] would also prohibit persons from ...
     causing or attempting to cause the institution to fail
     entirely in its duty to report currency transactions.... This
     new language is, in part, a restatement of the law of
     causation found in 18 U.S.C. § 2(b) and 31 U.S.C. § 5313....
     This restatement of the applicability of 18 U.S.C. § 2(b) and
     1001 to the Bank Secrecy Act was believed necessary following
     the decision of the First Circuit in Anzalone.... Certain
     language in that opinion and other cases ... may be read as
     questioning whether an individual having no duty to report
     currency transactions may be held criminally liable for
     causing a domestic financial institution, which has such a
     duty, to fail to file reports of currency transactions.

Id. at 67 (emphasis added).

      A bank's duty to file a CTR only arises when a person engages

in a cash transaction of more than $10,000.00 in a single day.

Anzalone, Varbel, and Denemark all involved situations where the

defendant had structured currency transactions with the bank so

that the bank never had a duty to report the transactions.      To

negate the effect of those cases, Congress created the crime of

structuring, codified in § 5324(a)(3), which operates "without

regard for whether an individual transaction is, itself reportable

under the Bank Secrecy Act."   S.Rep. No. 433, 99th Cong., 2d Sess.

22 (1986).    In contrast, the above quoted passages from the

legislative history make it clear that the crime of "causing a

financial institution to fail to file a CTR" is a restatement of

existing criminal causation liability, which prior to the addition

of § 5324(a) had been prosecuted under 18 U.S.C. § 2(b).    Tobon-

Builes, the Eleventh Circuit case that Congress sought to codify in

§ 5324(a)(1), involved transactions that did trigger the bank's

obligation to file a CTR, thus subjecting the defendant to criminal

liability under 18 U.S.C. § 2(b) for causing the bank's failure to

do so.   706 F.2d at 1098, 1101.
     As this Court made clear in Tobon-Builes, causation liability

under 18 U.S.C. § 2(b) depends on the defendant's causing another

to commit a crime.    Id. at 1099 ("it is well established that §

2(b) was designed to impose criminal liability on one who causes an

intermediary to commit a criminal act");    see also Cure, 804 F.2d

at 629 (noting that courts holding individuals not liable for

causing a bank to fail to file CTR did so the because bank never

had an obligation to file a CTR, whereas in that case the bank did

have such an obligation, so the defendant was criminally liable

under 18 U.S.C. § 2(b)).   Thus, the legislative history of § 5324

makes it clear that an individual must engage in a currency

transaction with the bank that triggers the bank's legal duty to

file a CTR before that individual may be held criminally liable

under § 5324(a)(1) for causing the bank's failure to file. Because

the bank in this case never had a legal duty to file a CTR, Phipps

may not be held criminally liable under § 5324(a)(1).

     In summary, the plain language of the provision, principles of

statutory construction, and legislative history all compel the

conclusion that § 5324(a)(1) is violated only when an individual

causes a financial institution not to file a CTR that it had a

legal duty to file.   The government concedes that the bank in this

case was never obligated to file a CTR.    We hold, therefore, that

the evidence presented by the government was insufficient as a

matter of law to establish a violation of 31 U.S.C. § 5324(a)(1).

Accordingly, the district court erred in not granting Phipps' Rule

29 motion for judgment of acquittal on the two counts charging

Phipps with violating that statutory provision.   However, because
the conduct Phipps engaged in does constitute money laundering in

violation   of   18   U.S.C.    §   1956(a)(3)(B),   we   affirm   Phipps'

conviction on the counts charging him with a violation of that

statutory provision.
                               III. CONCLUSION

     For the foregoing reasons, we REVERSE Phipps' convictions

under 31 U.S.C. § 5324(a)(1) for causing a financial institution to

fail to file a CTR, AFFIRM Phipps' convictions under 18 U.S.C. §

1956(a)(3)(B) for money laundering, VACATE Phipps' sentence, and

REMAND to the district court for resentencing.