U.S. v. Anzalone, 84-1628

• Citation: 766 F.2d 676
• Decision Date: 01 July 1985
• Docket Number: No. 84-1628,84-1628
• Parties: UNITED STATES of America, Appellee, v. Theodore V. ANZALONE, Defendant, Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

Page 676

766 F.2d 676

UNITED STATES of America, Appellee, v. Theodore V. ANZALONE, Defendant, Appellant.

No. 84-1628.

United States Court of Appeals First Circuit.

Argued Feb. 5, 1985.

July 1, 1985.

Nancy Gertner, Boston, Mass., with whom Harvey A. Silverglate, Judith H. Mizner, and Silverglate, Gertner, Baker & Fine, Boston, Mass., were on brief, for defendant, appellant.

Daniel I. Small, Asst. U.S. Atty., Boston, Mass., with whom William F. Weld, U.S. Atty., Boston, Mass., was on brief, for appellee.

Before TORRUELLA and ALDRICH, Circuit Judges, and PETTINE, ^* Senior District Judge.

TORRUELLA, Circuit Judge.

In contrast to what is permitted under other legal systems, ¹ the Constitution of the United States mandates that, before any person is held responsible for violation of the criminal laws of this country, the conduct for which he is held accountable be prohibited with sufficient specificity to forewarn of the proscription of said conduct. U.S. Const. amend. V ("No person shall ... be deprived of life, liberty, or property, without due process of law"); Kolender v. Lawson, 461 U.S. 352, 357, 103 S.Ct. 1855, 1858, 75 L.Ed.2d 903 (1983) ("[A] penal statute [must] define the criminal offense with sufficient definiteness that ordinary people can understand what conduct is prohibited and in a manner that does not encourage arbitrary and discriminatory enforcement."); Grayned v. City of Rockford, 408 U.S. 104, 108, 92 S.Ct. 2294, 2298, 33 L.Ed.2d 222 (1972) ("[L]aws [must] give the person of ordinary intelligence a reasonable opportunity to know what is prohibited, so that he may act accordingly."); Lanzetta v. New Jersey, 306 U.S. 451, 453, 59 S.Ct. 618, 619, 83 L.Ed. 888 (1939) ("No one may be required at peril of life, liberty or property to speculate as to the meaning of penal statutes."); Balthazar v. Superior Court of Mass., 573 F.2d 698 (1st Cir.1978). It is this principle that is at stake in the issues presented by this appeal.

The Currency Transaction Reporting Act ("Reporting Act"), 31 U.S.C. Sec. 5311 et seq., 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 said transactions to the Secretary. ² The Secretary has issued regulations requiring only financial institutions to file these reports. ³ Pursuant to these regulations, as well as Sec. 5322(b) of the Reporting Act, ⁴ financial institutions ⁵ must report transactions in excess of $10,000, ⁶ and transactions totalling more than $100,000 in a 12-month period.

On November 13, 1980 appellant purchased three checks from the Haymarket Cooperative Bank ("Bank"), all of which totaled more than $25,000 but none of which exceeded $10,000 individually. Thereafter, on separate dates commencing November 18, 1980 and ending December 1, 1980, appellant purchased nine additional checks totalling $75,000, again none of which individually exceeded $10,000. All the checks were payable to the same stock brokerage firm to pay for bonds purchased to the account of the wife and mother of a public official. The Bank did not file any reports concerning any of those transactions.

The government, labelling these dealings a "structured" transaction, concluded they were part of the same event and thus came within the purview of the Reporting Act as involving transfers of currency in excess of $10,000 and $100,000, respectively. No charges were brought against the financial institution, however.

Instead, the government decided to test the limits of statutory interpretation by charging appellant with a panoply of criminal violations. The government brought a five-count indictment, only two of which counts survived the two juries that heard the evidence. ⁷ This appeal is thus concerned only with matters related to Counts III and V.

In Count III appellant was charged with violation of 18 U.S.C. Sec. 1001 (which proscribes schemes to conceal, or to cause to be concealed, from the federal government a material fact), ⁸ and 18 U.S.C. Sec. 2 (which proscribes aiding, abetting or causing a crime by another). ⁹ The essence of this charge is that appellant's failure to inform the Bank of the "structured" nature of his transfers constituted an illegal scheme to avoid detection of these payments by causing the Bank to fail in its duty to report them.

Count V is based on the same underlying facts as Count III, but in addition to charging appellant with violation of 18 U.S.C. Sec. 2 for having caused the Bank to fail to file the reports, it is also alleged that appellant violated the Reporting Act, 31 U.S.C. Secs. 5313, 5322 (imposing penalties for failure to file reports under the Reporting Act) and its regulations, 31 C.F.R. 22.

Appellant challenged the application of these statutes and regulations through appropriate motions before the district court. He claimed unconstitutional vagueness and lack of due notice to him that his actions were proscribed by these provisions. The court, citing United States v. Tobon-Builes, 706 F.2d 1092 (11th Cir.1983), United States v. Thompson, 603 F.2d 1200 (5th Cir.1979), and United States v. Konefal, 566 F.Supp. 698 (N.D.N.Y.1983), ruled in effect that "structured" transactions were considered a single transaction within the requirements of the Reporting Act and regulations. It concluded that the application of criminal sanctions to appellant for engaging in the conduct described in the indictment did not run contrary to the fair warning elements of the due process clause. These matters are now raised on appeal.

We are required to determine whether the Reporting Act and its regulations gave appellant sufficient advance warning that, if he engaged in "structured" transactions exceeding the established amounts, he was obligated to disclose this to the Bank so that it would report the transaction to the Secretary of the Treasury. Otherwise stated, we must determine whether appellant had fair warning that his actions and non-disclosure subjected him to criminal sanctions under 18 U.S.C. Secs. 2, 1001 and 31 U.S.C. Secs. 5312, 5322.

Irrespective of how we phrase this issue, the answer is in the negative.

We start with the proposition, correlative to the one with which we commenced this opinion, 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 379 (1973) (Hobbs Act); United States v. Campos-Serrano, 404 U.S. 293, 297, 92 S.Ct. 471, 474, 30 L.Ed.2d 457 (1971) (Immigration and Naturalization Act); United States v. Bass, 404 U.S. 336, 347, 92 S.Ct. 515, 522, 30 L.Ed.2d 488 (1971) (Omnibus Crime Control and Safe Streets Act); United States v. Boston & Me. R.R., 380 U.S. 157, 160, 85 S.Ct. 868, 870, 13 L.Ed.2d 728 (1965) (Clayton Act). In the later case, which arose from this circuit, the Court cited Chief Justice Marshall who said:

The rule that penal laws are to be construed strictly, is, perhaps, not much less old than construction itself. It is founded on the tenderness of the law for the rights of individuals; and on the plain principal that the power of punishment is vested in the legislative, not in the judicial department. ¹⁰

More on point, the Court in Boston & Me. R.R. went on to say that "[t]he fact that a particular activity may be within the same general classification and policy of those covered does not necessarily bring it within the ambit of the criminal prohibition." United States v. Boston & Me. R.R., 380 U.S. 157, 160, 85 S.Ct. 868, 870, 13 L.Ed.2d 728 (1965). See also supra note 1 (discussing "crimes by analogy").

The Court in United States v. Bass, supra, indicated the rationale of this rule, which, as stated, dovetails with the prior notice requirements of the fifth amendment:

This principal is founded on two policies that have long been part of our tradition. First, "a fair warning should be given to the world in language that the common world will understand, of what the law intends to do if a certain line is passed. To make the warning fair, so far as possible the line should be clear." Second, because of the seriousness of criminal penalties, and because criminal punishment usually represents the moral condemnation of the community, legislatures and not courts should define criminal activity. This policy embodies "the distinctive distaste against men languishing in prison unless the lawmaker has clearly said they should." Thus, where there is ambiguity in a criminal statute, doubts are resolved in favor of the defendant.

United States v. Bass, 404 U.S. 336, 348, 92 S.Ct. 515, 522, 30 L.Ed.2d 488 (1971) (citations and footnotes omitted).

The present ambiguity regarding coverage of the Reporting Act and its regulations has been created by the government itself. To begin with, the statute, 31 U.S.C. Sec. 5313(a), extended its coverage to the financial institution and any other participant in the transaction. This means that the Secretary could have required not only the Bank to file a report, but also appellant, the stock brokerage firm, and even the beneficiaries of the transaction. But for reasons known only to the Treasury Department, the regulation enacted by the Secretary, 31 C.F.R. 103.22, limited the reporting requirement to the financial institution only. See California Bankers Ass'n v. Shultz, 416 U.S. 21, 58, 69-70 & n. 29, 94 S.Ct. 1494, 1516, 1521 & n. 29, 39 L.Ed.2d 812 (1974). This would indicate to any objective viewer that the Secretary was looking to the Bank, not to the "other participants in the transaction," as the source of the information required by the Reporting Act. Should such a regulation have alerted or put on notice "other participants in the transaction" that something was required of them vis-a-vis the filing of the report? We think not. Such a regulation, in the face of the self-imposed limitation made upon the original power granted to the Secretary by ...