Court Opinion

ID: 9483828
Source: CourtListenerOpinion
Date Created: 2023-08-05 09:32:35.481568+00
Date Added: 2024-06-11T17:49:51.206060
License: Public Domain

TORRUELLA, Circuit Judge
(Dissenting).
Although I agree with much of what is stated by the majority, and even more with Chief Judge Breyer’s concurrence, I write separately because I believe neither opinion goes far enough. In my view the prosecution of these cases is defective on two grounds: (1) As clearly reflected in the legislative history of these statutes, appellants are improper targets of money laundering accusations, and (2) even if the charges are within statutory scope, the standard of scienter in Cheek v. United States, 498 U.S. 192, 111 S.Ct. 604, 112 L.Ed.2d 617 (1991), is applicable to them.
I. ACTIVITY TARGETED BY THE BANK SECRECY ACT, AS AMENDED BY THE MONEY LAUNDERING CONTROL ACT
I need not repeat the facts as stated by the majority. I will only emphasize that appellants are neither the recipients of illegal drug funds or engaged in laundering money proceeds from criminal ventures, nor are they income tax evaders. In fact, particularly in the case of appellants Aver-sa and Mentó, they did nothing prior to the alleged “structuring” actions that even approximates the commission of a criminal offense. I focus on the Bank Secrecy Act and its more recent amendment, the Money Laundering Control Act, to determine whether appellants’ actions are within the purview of the conduct that Congress intended to criminalize by this legislation.
The Bank Secrecy Act, enacted in 1970, was part of the Bank Records and Foreign Transaction Act.13 The unequivocal concern of this complex legislation was to prohibit the use of foreign banks to “launder” the proceeds of illegal activity or evade *504federal income taxes.14 It became apparent, however, that these enactments had little impact on large-scale money laundering related to illegal drug transactions, and that illicit funds were flowing in ever-increasing amounts into financial institutions in the United States.15 As a result, Congress enacted the Anti-Drug Abuse Act of 1986,16 Title I, subtitle H of which was the Money Laundering Control Act of 1986. This subtitle included an anti-structuring provision.17
One thing clearly emerges from the legislative history of this statute: Congress wished to attack money laundering associated with organized crime or related criminal activity, particularly the illicit drug trade. See S.Rep. No. 433, 99th Cong., 2d Sess. (1986) (accompanying S. 2683). A casual review of the Senate Report accompanying this Act reveals that the term “money laundering,” or its equivalent, is used more than 100 times, and that it refers to organized crime and criminal activity on no less than 53 occasions. Id. The House Report displays a similar preoccupation. See H.R.Rep. No. 746, 99th Cong., 2d Sess. (1986) (accompanying H.R. 5176). The first major heading of this report is “Drug Trafficking and Money Laundering.” Id. at p. 16. The report refers to “money laundering” approximately 73 times, and to organized crime and illegal drug trafficking 53 times.
Given the congressional preoccupation with money laundering it is surprising that neither the term “money laundering,” nor the new crime created by the Money Laundering Control Act, “structuring,” are defined by the statute. Nevertheless, the House Report states the following:
Money Laundering Defined. — The President’s Commission on Organized Crime has defined money laundering as the “process by which one conceals the existence, illegal source, or illegal application of income, and then disguises that income to make it appear legitimate.” . In other words, laundering involves the hiding of the paper trail that connects income or money with a person in order for such person to evade the payment of taxes, avoid prosecution, or obviate any forfeiture of his illegal drug income or assets....
Id. at 16 (emphasis supplied).
I derive additional guidance from the Senate Report that discusses what later became 18 U.S.C. § 1956(a)(1), which is entitled Laundering of Monetary Instruments. See S.Rep. No. 433 at 9. The report calls section 1956 “the basic money laundering offense.” Id. That section, which in effect defines “laundering,” provides:
Whoever knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, conducts or attempts to conduct such a financial transaction which in fact involves the proceeds of specified unlawful activity — (B) knowing that the transaction is designed in whole or in part — (i) to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity; or (ii) to avoid a transaction reporting requirement under State or Federal law.... [will be liable for conviction under this section].
18 U.S.C. § 1956(a)(1) (emphasis supplied).
On the other hand, “structuring” is only defined by regulation. 31 C.F.R. § 103.53, entitled “Structured Transactions,” provides that:
No person shall for the purpose of evading the reporting requirement of § 103.22 with respect to such transaction: *505(e) Structure (as that term is defined in § 103.11(n) of this part) or assist in structuring, or attempt to structure or assist in structuring, any transaction with one or more domestic financial institutions.
31 C.F.R. § 103.53.
Regulation 31 C.F.R. § 103.11(n) (1989) defines “structure” or “structuring” as:
(n) Structure (structuring). For purposes of section 103.53, a person structures a transaction if that person, acting alone, or in conjunction with, or on behalf of, other persons, conducts or attempts to conduct one or more transactions in currency, in any amount, at one or more financial institutions, on one or more days, in any manner, for the purpose of evading the reporting requirements under section 103.22 of this Part. “In any manner” includes, but is not limited to, the breaking down of a single sum of currency exceeding $10,000 into smaller sums, including sums at or below $10,-000, or the conduct of a transaction, or series of currency transactions, including transactions at or below $10,000. The transaction or transactions need not exceed the $10,000 reporting threshold at any single financial institution on any single day in order to constitute structuring within the meaning of this definition.
31 C.F.R. § 103.11(n) (1989); see also S.Rep. No. 433 at 22, 25 (“structuring” is “breaking up of what is really one financial transaction into several smaller ones to evade reporting requirements”).
During the hearings preceding enactment of this legislation concern was expressed that this maze of interwoven regulations and statutes, although aimed at crippling organized crime, “could lead to prosecution of people who were not in any way involved in money laundering.” See S.Rep. No. 433 at 12; see also John K. Villa, A Critical View of Bank Secrecy Act Enforcement and the Money Laundering Statute, 37 Cath.U.L.Rev. 489 (1988). The present appeals are living proof of that prophecy. Appellants are being prosecuted for violation of the money laundering statutes notwithstanding that they are not in any way involved in such activities.
The situation presented by these charges is not unlike that in McNally v. United States, 483 U.S. 350, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987), in which the Supreme Court reversed a unanimous litany of circuit court decisions18 condoning the extension of the federal mail fraud statute19 beyond the scope of Congress’ intended coverage. In charging appellants under the money laundering statutes the government similarly overlooked that “[i]n considering the scope of [a] statute it is essential to remember Congress’ purpose in enacting it.” Id. at 365, 107 S.Ct. at 2885 (Stevens, J., dissenting).
In prosecuting appellants under the Bank Secrecy Act as amended by the Money Laundering Control Act, the government has transgressed Congress’ purpose in the enactment of these statutes, which was to detect and punish “financial transaction^] representing] the proceeds of some form of unlawful activity,” 18 U.S.C. § 1956(a)(1). We should not stand idly while this overreaching transforms common citizens into criminals.
II. THE CHEEK STANDARD
While it could have been possible to leave Cheek v. United States, 498 U.S. 192, 111 S.Ct. 604, 112 L.Ed.2d 617 (1991), out of this appeal altogether, the majority opinion seeks to restrict its present and future use by preemptive action. I believe it would be more appropriate to consider one case at a time. Furthermore, lest there be any doubt, I certainly am not of the view that the Cheek standard should apply in blanket fashion “to virtually all white collar crimes that require a mens rea of willfulness as an element of the offense.” Ante at 500. In my view each legislative scheme must be separately pondered to determine whether Cheek applies. But I cannot agree that because Cheek was an income *506tax case that the principle espoused therein regarding mens rea is necessarily limited to such tax cases. I can find nothing in Cheek to justify such a conclusion or limitation. Logic and fundamental fairness dictate that some traditional legal maxims, up to now blindly accepted, make little sense in the context of some of today’s complex regulatory environments. Ultimately Cheek stands for the proposition that at some point a legal fiction may so depart from reality as to be untenable as a basis for criminal responsibility.
In Cheek, the Supreme Court examined the meaning of “willfully” as used in the income tax statutes. Defendant Cheek, a commercial airline pilot, refused to file income tax returns after 1979. As a result, Cheek was indicted and charged with willfully violating 26 U.S.C. §§ 7203 & 7201.20
At trial, Cheek presented as his defense that “he sincerely believed that the tax laws were being unconstitutionally enforced and that his actions during 1980-1986 period were lawful.” Cheek, 498 U.S. at 196, 111 S.Ct. at 607. During deliberations, the jury was divided on whether Cheek honestly and reasonably believed that he was not required to pay income taxes. However, the district court instructed the jury “that a good-faith misunderstanding of the law or a good faith belief that one is not violating the law, if it is to negate willfulness, must be objectively reasonable.” 498 U.S. at 201, 111 S.Ct. at 610. With this instruction in hand, the jury found Cheek guilty on all counts. Cheek appealed on the ground that this instruction was erroneous. The Seventh Circuit affirmed.
The Supreme Court, relying on its prior criminal tax precedents interpreting the word “willfully,” reversed Cheek’s conviction. It held that no matter how unreasonable a judge might deem Cheek’s beliefs, the jury must have the opportunity to hear them and make the final determination as to whether he had a good faith misunderstanding of the law or a good faith belief that he was not violating the law, thus negating the element of willfulness. 498 U.S. at 201, 111 S.Ct. at 610.21
Cheek establishes that the government must prove in a criminal tax case a “willful” violation, which requires proof that a defendant voluntarily and intentionally violated a known legal duty. 498 U.S. at 201, 111 S.Ct. at 611. More in point with the present appeals, however, the Court stressed that
[t]he proliferation of statutes and regulations has sometimes made it difficult for the average citizen to know and comprehend the extent of the duties and obligations imposed by the tax laws. Congress has accordingly softened the impact of the common-law presumption by making specific intent to violate the law an element of certain federal criminal tax offenses.
498 U.S. at 199-200, 111 S.Ct. at 609. The Court could well have been talking about the arcane money laundering regulatory scheme presented by these appeals.
It is pointed out that the application of Cheek to the anti-structuring statute was rejected by the Tenth Circuit in United States v. Dashney, 937 F.2d 532 (10th Cir.), cert. denied, — U.S. -, 112 S.Ct. 402, 116 L.Ed.2d 351 (1991), and that other courts have followed Dashney's s analysis. See United States v. Brown, 954 F.2d 1563 (11th Cir.1992); United States v. Rogers, 962 F.2d 342 (4th Cir.1992).
In Dashney, the court concluded that the anti-structuring act did not require, as an element of the offense, proof of a specific intent to violate the act because, the provisions of the anti-structuring act are “straightforward” when compared to the *507criminal tax statutes at issue in Cheek. Dashney, 937 F.2d at 540. After spending a considerable amount of time studying these statutes and regulations, as well as their legislative history, I must confess to a different view.
The conclusion that engaging in a currency transaction is more “straightforward” than filing an income tax return is at best, unconvincing. The legal duty at issue here — the illegality of structuring a transaction in order to prevent a bank from filing a currency transaction report — does not even approximate the general knowledge of the duty of taxpayers to file an income tax return.22 The statutes criminalizing the conduct of failing to file an income tax return have been around for more than 70 years whereas the antistructuring act did not clearly criminalize the conduct of structuring transactions until 1986, when Congress enacted 31 U.S.C. §§ 5324 and 5522.23 If nothing else emerges from a study of this byzantine labyrinth of legislation and regulation, it is that an unsuspecting common citizen can easily fall prey to this uncommon area of the law. Apparently, with this in mind the Treasury Department proposed, but failed to adopt, regulations aimed at publicizing the criminal offense underlying § 5324. See 54 Fed. Reg. 20,398 (1989). It is obvious that our Anzalone opinion had little effect on bureaucratic thinking. See Anzalone, 766 F.2d at 681-82.
I recognize, as has the majority, that not all appellants are in the same legal position on this last issue. In my opinion, in case No. 91-1574, appellant Donovan received substantially the jury charge that he was entitled to under Cheek. Appellants Aver-sa and Mentó in cases Nos. 91-1363 and 91-1364 did not. The problem is, nevertheless, that in my view none of the appellants should have been charged because, as previously explained, the government overstretched its anti-moneylaundering net. Consequently, I must dissent.

. Pub.L. No. 91-508, 84 Stat. 1114 (1970) (codified as amended in scattered sections of 12 U.S.C., 15 U.S.C. and 31 U.S.C.).

. S.Rep. No. 433, 99th Cong., 2d Sess. 2-3 (1986).

. See The President’s Commission on Organized Crime, Interim Report to the President and the Attorney General, The Cash Connection:
Organized Crime, Financial Institutions, and Money Laundering (1984); S.Rep. No. 433 (1986).

. Pub.L. No. 99-570, 100 Stat. 3207.

. 31 U.S.C.A. § 5324 (West Supp.1992).

. Including some from this circuit. See, e.g., United States v. Silvano, 812 F.2d 754 (1st Cir.1987).

. 18 U.S.C. § 1341.

. Section 7201 criminalizes the "willful[ ] attempt! 1 in any manner to evade or defeat any tax imposed by this title or the payment thereof.” 26 U.S.C. § 7201. Section 7203 criminalizes the willful failure to file a return as required under Title 26.

. The Court therefore held that the district court erred when it instructed the jury that Cheek's "asserted beliefs that wages are not income and that he was not a taxpayer within the meaning of the Internal Revenue Code should not be considered by the jury in determining whether Cheek has acted willfully.” 498 U.S. at 207, 111 S.Ct. at 613.

. In Cheek, Justice Blackmun, with whom Justice Marshall joined in dissent, stated that:
[I]t is incomprehensible to me how, in this day, more than 70 years after the institution of our present federal income tax system ... any taxpayer of competent mentality can assert as his defense to charges of statutory willfulness the proposition that the wage he receives for his labor is not income....
498 U.S. at 209-10, 111 S.Ct. at 615.

. In fact, until the enactment of the Money Laundering Act, a conflict among the circuits existed as to whether it was a crime to structure deposits for the purpose of preventing the bank from reporting. Compare United States v. Larson, 796 F.2d 244, 246-47 (8th Cir.1986); United States v. Varbel, 780 F.2d 758, 760-63 (9th Cir.1986); United States v. Denemark, 779 F.2d 1559, 1561-64 (11th Cir.1986); United States v. Anzalone, 766 F.2d 676, 679-83 (1st Cir.1985) with United States v. Heyman, 794 F.2d 788, 790-93 (2d Cir.), cert. denied, 479 U.S. 989, 107 S.Ct. 585, 93 L.Ed.2d 587 (1986); United States v. Cook, 745 F.2d 1311, 1314-16 (10th Cir.1984), cert. denied, 469 U.S. 1220, 105 S.Ct. 1205, 84 L.Ed.2d 347 (1985); United States v. Tobon-Builes, 706 F.2d 1092, 1096-1101 (11th Cir.1983).