U.S. v. Gimbel

• Decision Date: 06 August 1987
• Docket Number: No. 86-1808,86-1808
• Citation: 830 F.2d 621
• Parties: -5462, 56 USLW 2146 UNITED STATES of America, Plaintiff-Appellee, v. Stanley P. GIMBEL, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 621

830 F.2d 621

60 A.F.T.R.2d 87-5462, 56 USLW 2146

UNITED STATES of America, Plaintiff-Appellee, v. Stanley P. GIMBEL, Defendant-Appellant.

No. 86-1808.

United States Court of Appeals,

Seventh Circuit.

Argued Jan. 27, 1987.

Decided Aug. 6, 1987.

Jeffrey Cole, Jeffrey Neal Cole, Ltd., Chicago, Ill., for defendant-appellant.

R. Roger Markley, Sp. Asst. U.S. Atty., Anton Valukas, U.S. Atty., for plaintiff-appellee.

Before POSNER, FLAUM and MANION, Circuit Judges.

FLAUM, Circuit Judge.

During 1982 and 1983, Stanley Gimbel "structured" certain bank deposits and withdrawals in a manner that circumvented the existing currency reporting requirements. Gimbel also provided legal advice to his clients regarding how to structure financial transactions so as to minimize the information available to the Internal Revenue Service. He may also have recommended to his clients that they misstate income on their tax returns. Gimbel was convicted of: causing a financial institution to conceal a material fact from the United States; mail fraud; and wire fraud. We conclude that the indictment did not allege a violation of the statutes under which Gimbel was convicted. We therefore reverse Gimbel's conviction.

I.

In April, 1982, the federal government began a narcotics investigation in Milwaukee. In the course of the investigation, Special Agent Walter Perry of the Internal Revenue Service met the appellant, Stanley Gimbel, a lawyer who represented individuals involved in narcotics trafficking. The government later broadened its investigation to include the question of whether Gimbel was violating the tax laws.

Because Gimbel is contesting his convictions, we must "take all evidence and permissible inferences in the light most favorable to the prosecution." United States v. Bentley, 825 F.2d 1104, 1107 (7th Cir.1987). The evidence indicates that between July 15, 1982 and April 15, 1983, Perry and Gimbel had forty-five separate conversations. During this period, Perry suggested that Gimbel allow him to wire $125,000 from Switzerland to the trust fund account of Gimbel's law firm. Gimbel agreed. At Perry's request, Gimbel later withdrew the money. However, rather than withdrawing the money in a lump sum, Gimbel "structured" the transaction by having his bank issue eleven cashier's checks for $9,990.00. Gimbel then disbursed the money to another undercover agent who posed as a "bagman." By structuring the transactions in this manner, Gimbel apparently hoped to avoid triggering federal currency reporting requirements, which provided that a Currency Transaction Report ("CTR") must be filed for each domestic currency transactions by a financial institution in excess of $10,000. See 31 U.S.C. Sec. 5313 (1982). However, even though Gimbel structured the transaction, the bank did in fact file a CTR with the Treasury Department.

Perry and Gimbel also had several discussions in which Perry requested advice concerning his tax returns. The jury could have concluded that, during these conversations, Gimbel recommended that Perry misstate his income on his federal tax returns. The government also alleges that Gimbel provided Perry with additional information as to how Perry could avoid triggering federal currency reporting requirements.

As part of its investigation of Gimbel, the government reviewed banking transactions that Gimbel had made on behalf of his clients. The government investigators discovered that on twelve separate days between May, 1982 and April, 1983, Gimbel had deposited clients' funds into his law firm's trust account at the First Bank-Milwaukee. On each day, the aggregate amount of the deposit into the trust fund had been in excess of $10,000. However, in each case, Gimbel had split the deposit among several deposit slips, each bearing his own name, before giving the deposit to the bank teller. As a result, the bank had not filed a Currency Transaction Report for any of these transactions. The government investigation also uncovered evidence indicating that Gimbel had assisted clients in filing tax returns that misstated their income.

Based on the information that the investigation had uncovered, a grand jury returned a sixteen-count indictment against Gimbel on January 17, 1984. The indictment was premised on the theory that the Currency and Foreign Transactions Reporting Act of 1970, 31 U.S.C. Secs. 5311-22 (1982), imposed an obligation on Gimbel's bank to submit Currency Transaction Reports listing the real parties in interest on whose behalf Gimbel had made the transactions. The indictment charged that by structuring his transactions, Gimbel had caused the First Bank-Milwaukee to fail to disclose material facts to the government, in violation of 18 U.S.C. Sec. 2(b) and Sec. 1001. Gimbel contested the indictment, arguing, inter alia, that it failed to state an offense. The district court, concluding that financial institutions had no duty to reveal the real parties in interest on whose behalf the transactions had been made, dismissed the indictment. See United States v. Gimbel ("Gimbel I" ), 632 F.Supp. 713, 727 (E.D.Wis.1984).

On July 16, 1985, a second grand jury returned a six-count indictment against Gimbel. The new indictment again charged Gimbel with violating 18 U.S.C. Sec. 2(b) and Sec. 1001. However, the second indictment was premised on the theory that the bank had a duty to disclose the aggregate amount of each transaction, rather than the parties on whose behalf Gimbel had performed them. The second indictment also charged that Gimbel had committed mail fraud and wire fraud in violation of 18 U.S.C. Sec. 1341 and Sec. 1343. The government's theory was that Gimbel's actions constituted a "scheme" to impede the Treasury Department from collecting Currency Transaction Reports and other "data to be used to determine the correct source and amount of income in the determination and assessment of ... income taxes." See United States v. Gimbel ("Gimbel II" ), 632 F.Supp. 748, 764 (E.D.Wis.1985) (reprinting indictment).

Gimbel challenged the second indictment, alleging that it failed to state an offense under 18 U.S.C. Sec. 2(b) and Sec. 1001. However, this time the district court rejected his claim, ruling that the Currency Transactions Reporting Act required an institution to report daily transactions by a customer that, in the aggregate, exceeded $10,000. See id. at 752-55. Gimbel also alleged that the indictment failed to state an offense under the mail fraud and wire fraud statute. The district court rejected this claim as well.

Gimbel's case was tried to a jury. He was convicted on Count I, which charged him with violating 18 U.S.C. Sec. 2(b) and Sec. 1001; on Counts III and IV, which charged wire fraud; and on Count V, which charged mail fraud. On appeal, he renews his claim that the indictment was legally insufficient. ¹

II.

In order to be valid, an indictment must allege that the defendant performed acts which, if proven, constituted a violation of the law that he or she is charged with violating. If the acts alleged in the indictment did not constitute a violation of the law that the defendant has been charged with violating, we must reverse any subsequent conviction based on that indictment. See McNally v. United States, --- U.S. ----, ----, 107 S.Ct. 2875, 2881, 97 L.Ed.2d 292 (1987) (quoting Fasulo v. United States, 272 U.S. 620, 629, 47 S.Ct. 200, 202, 71 L.Ed. 443 (1926)). Count I of the indictment in this case alleged that by structuring his transactions, Gimbel had violated 18 U.S.C. Sec. 2(b) and Sec. 1001 which, in combination, bar an individual from causing another individual or entity to fail to disclose a material fact to the United States government. We conclude that the fact that Gimbel caused First Bank-Milwaukee to fail to disclose his structured transactions did not constitute the crime of causing an entity to fail to disclose a material fact.

Section 2(b) of Title 18 provides that an individual who "willfully causes an act to be done which if directly performed by him or another would be an offense against the United States is punishable as a principal" for the substantive offense. 18 U.S.C. Sec. 2(b) (1982). In this case, the "offense against the United States" is the violation of 18 U.S.C. Sec. 1001, which bars an individual or entity from "knowingly and willfully ... conceal[ing] ... a material fact" that is "within the jurisdiction of any department or agency of the United States," 18 U.S.C. Sec. 1001 (1982). The allegedly "material facts" in this case were Gimbel's structured currency transactions. The government concedes that for a fact to be "material," an individual or entity must have a duty to disclose it. See 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). The dispositive question, therefore, is whether the Currency and Foreign Transactions Reporting Act of 1970, 31 U.S.C. Secs. 5311-22 (1982), imposed a duty on First Bank-Milwaukee to report Gimbel's structured transactions. We conclude that it did not. ²

The Currency Transactions Reporting Act authorized the Secretary of the Treasury to promulgate regulations requiring "a domestic financial institution ... and any other participant in [a domestic financial] transaction ... [to] file a report on the transaction." Id. at Sec. 5313(a). Pursuant to this authority, the Secretary of the Treasury promulgated regulations in 1980 directing that financial institutions "file a report of each deposit [or] withdrawal ... which involves a transaction of more than $10,000," 31 C.F.R. Sec. 103.22(a) (1986). These regulations defined a "transaction" to mean "the physical transfer of currency from one person to another." Id. at Sec. 103.11. The Department of the Treasury later issued a Form 4789, which was to be used to file Currency Transaction Reports. This form specifically stated that "[m]ultiple transactions by or for any person which...