U.S. v. Dimitrov

• Decision Date: 03 October 2008
• Docket Number: No. 07-2759.,07-2759.
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Stefan DIMITROV, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

546 F.3d 409

UNITED STATES of America, Plaintiff-Appellee, v. Stefan DIMITROV, Defendant-Appellant.

No. 07-2759.

United States Court of Appeals, Seventh Circuit.

Argued February 12, 2008.

Decided October 3, 2008.

Meghan Morrissey (argued), Office of the United States Attorney, Chicago, IL, for Plaintiff-Appellee.

Bart Beals (argued), Chicago, IL, for Defendant-Appellant.

Before EASTERBROOK, Chief Judge, and RIPPLE and ROVNER, Circuit Judges.

ROVNER, Circuit Judge.

Stefan Dimitrov entered a conditional guilty plea to one count of operating an unlicensed money transmitting business in violation of 18 U.S.C. § 1960(a). He was sentenced to three months' imprisonment to be followed by three years of supervised release. Dimitrov now appeals, challenging the constitutionality of § 1960 and the district court's ruling on a motion in limine decided before his guilty plea. For the reasons explained herein, we affirm.

I.

In 1998 Dimitrov, a Bulgarian immigrant, began operating an institution known as the Bulgarian Cultural Center on Irving Park road in Chicago. Dimitrov and his wife at the time, Tatiana Dimitrova,¹ offered a number of services to the Bulgarian community through the Cultural Center, including document translation and assistance with everything from green card applications to locating employment. The Cultural Center also contained a library of Bulgarian books and videos, jewelry from Bulgaria for sale, and a small kitchen. According to Dimitrov, people began asking for assistance transferring money to Bulgaria. Initially he assisted others by translating the money transmitting forms into English and using his personal checking account to transfer the funds. As the number of requests for help transferring money increased, he opened a separate account at TCF Bank to transmit money to Bulgaria.

The money transmitting service supplied the bulk of any income that Stefan and Tatiana made running the Cultural Center. The Dimitrovs charged a flat $20 fee for the service in addition to a small (usually .5%) percentage of the total amount transferred. The Department of Immigration and Customs Enforcement began investigating the Dimitrovs' business after reviewing bank records from TCF Bank suggesting that the Dimitrovs may not have a required license to operate a money transmitting business. The bank records revealed deposits into an account named "B Connection," which Dimitrov used to wire money to the Bulgarian Post Bank in Sofia, Bulgaria. Investigating agents then used the bank records to identify Bulgarians who had used Dimitrov's money transmitting business. One of these individuals agreed to cooperate with the agents and explained that he had wired money to Bulgaria using B Connection on multiple occasions. He would give one of the Dimitrovs the cash for wiring, the name of the intended recipient of the money, and the Bulgarian equivalent of the Social Security number of the recipient. The cooperating individual recounted that his family members later retrieved the money from the Bulgarian Post National Bank. In later transactions, Dimitrov made the process more secure by having customers deposit their funds for transfer directly into the account at TCF Bank. Between January 2003 and April 2005 the Dimitrovs transmitted approximately $3,000,000 to Bulgaria on behalf of their customers.

Although the Dimitrovs' money transmitting business was by all accounts a legitimate one, it lacked the license required by Illinois for money transmitting. 205 ILCS 657/10. That oversight amounted to a felony by virtue of 18 U.S.C. § 1960(a), which prohibits operating an "unlicensed money transmitting business." Such a business is defined by reference to state law, making it a violation of § 1960(a) to operate without an appropriate money transmitting license where the failure to have a license is punishable "as a misdemeanor or felony under State law, whether or not the defendant knew that the operation was required to be licensed or that the operation was so punishable." § 1960(b)(1)(A). Under Illinois law, the failure to obtain the required money transmitting license is a Class 3 felony. 205 ILCS 657/90(h).

Instead of the required money transmitting license, Dimitrov obtained a Limited Business License from the City of Chicago "for general sales, service and office operations/or businesses that do not fall under another license category and are not exempt from City licenses," see Chicago, Ill., Mun.Code § 4-4-020, which he believed discharged his licensing obligations. That belief, if genuine, became less tenable in September 2004, when TCF Bank sent him the first of several letters requesting verification of the registration and licensing status of his money transmitting business. The letter included a form entitled "Verification of Licensing and Registration for Money Service Business" which Dimitrov was instructed to complete and sign. When it received no response from Dimitrov, TCF Bank sent him a second letter in November 2004 requesting that he verify his licensing status and warning him that failure to do so would result in closure of his account. In December, TCF Bank sent Dimitrov a third letter informing him that it had reviewed his account and determined that he was operating a business that provided money services. That letter requested a current copy of B Connection's state license and its anti-money laundering policy and procedures as well as the IRS acknowledgment that B Connection was registered with the Financial Crimes Enforcement Network. The letter warned that failure to respond with the requested verifications within 30 days would result in closure of his accounts.

Presumably prompted by the letters from TCF Bank, Dimitrov looked into obtaining a money transmitting license in late 2004 or early 2005. Dimitrov and a business associate, Hamid Rusef, traveled to Springfield and met with Phil Sanson, a senior examiner for Illinois in the Department of Financial and Professional Regulation. Sanson explained to Dimitrov and Rusef the process for obtaining a money transmitting license and also gave them the application packet, which contains a checklist of the required materials. Dimitrov, however, never completed the application materials. When Dimitrov failed to respond to its warnings, TCF Bank ultimately closed the accounts associated with his money transmitting business. He then transferred the accounts to Bank One, where he continued transmitting money through April 2005.

Dimitrov and his wife Tatiana were charged in July 2005 with one count of violating § 1960(a). Tatiana pleaded guilty pursuant to a written plea agreement, but Dimitrov initially intended to proceed to trial. On the day Dimitrov's trial was scheduled to begin, he elected to enter a conditional guilty plea. Dimitrov's decision came as a result of the district court's ruling on the government's motion in limine to prevent Dimitrov from presenting evidence that he lacked knowledge of the Illinois licensing law. Dimitrov planned to testify at trial about his Limited Business License and his belief that the license relieved his duty to obtain the required money transmitting license. Before trial, the district court concluded that Dimitrov's belief that the Limited Business License was sufficient would be irrelevant, because § 1960(a) does not require knowledge of state licensing requirements. Faced with this ruling, Dimitrov chose to plead guilty, but reserved his right to challenge the constitutionality of § 1960(a) to the extent that it does not require the defendant to know that his conduct is illegal.

II.

On appeal, Dimitrov argues that § 1960(a) is unconstitutionally vague. Specifically, Dimitrov claims that the statute lacks a mens rea element and so fails to give fair notice of prohibited conduct. To understand Dimitrov's argument, a brief history of § 1960 is in order.

A. 18 U.S.C. § 1960(a)

Congress enacted § 1960(a) in 1992 in response to concerns that nonbank financial institutions (money transmitters, check cashers, and foreign exchange dealers) were increasingly being used to transfer the proceeds of illegal activity. See S.Rep. No. 101-460 (September 12, 1990); United States v. Velastegui, 199 F.3d 590, 593 (2d Cir.1999). The original version of § 1960 provided in pertinent part as follows:

(a) Whoever conducts, controls, manages, supervises, directs, or owns all or part of a business, knowing the business is an illegal money transmitting business, shall be fined in accordance with this title or imprisoned not more than 5 years, or both.

(b) As used in this section—

(1) the term "illegal money transmitting business" means a money transmitting business which affects interstate or foreign commerce in any manner or degree and—

(A) is intentionally operated without an appropriate money transmitting license in a State where such operation is punishable as a misdemeanor or felony under State law; or

(B) fails to comply with the money transmitting business registration requirements under [31 U.S.C. § 5330], or regulations prescribed under such section. ...

18 U.S.C. § 1960 (1992) (amended 2001) (emphasis supplied).

As part of the Patriot Act, Congress amended § 1960 on October 26, 2001, in an attempt to make it easier to prosecute those responsible for funneling money to terrorism. See Report from the Field: The USA PATRIOT Act at Work, at 10, http://www.usdoj.gov/olp/pdf/patriot_report_from_the_field0704.pdf. The amended version reads in pertinent part as follows:

(a) Whoever knowingly conducts, controls, manages, supervises, directs, or owns all or part of an unlicensed money transmitting business, shall be fined in accordance with this title or imprisoned not more than 5 years, or both.

(b) As used in this section—

(1) the term "unlicensed money transmitting business" means a money transmitting business which affects interstate or foreign commerce in any manner or degree and—

(A) is operated...