U.S. v. Bank of New England, N.A., 86-1334

Decision Date10 June 1987
Docket NumberNo. 86-1334,86-1334
Citation821 F.2d 844
Parties, 23 Fed. R. Evid. Serv. 417 UNITED STATES of America, Plaintiff, Appellee, v. BANK OF NEW ENGLAND, N.A., Defendant, Appellant.
CourtU.S. Court of Appeals — First Circuit

Laurence H. Tribe with whom Susan Estrich, Cambridge, Mass., Kathleen M. Sullivan, Laurence, Mass., Mark A. Michelson, Amos Hugh Scott, and Choate, Hall & Stewart, Boston, Mass., were on brief, for defendant, appellant.

Sara Criscitelli, Dept. of Justice, Washington, D.C., with whom Robert S. Mueller, III, U.S. Atty. and John J.E. Markham, II, Asst. U.S. Atty., Boston, Mass., for the D. of Mass., were on brief, for plaintiff, appellee.

Before BOWNES and SELYA, Circuit Judges, and PETTINE, * Senior District Judge.

BOWNES, Circuit Judge.

The Bank of New England appeals a jury verdict convicting it of thirty-one violations of the Currency Transaction Reporting Act (the Act). 1 31 U.S.C. Secs. 5311-22 (1982). 2 Department of Treasury regulations promulgated under the Act require banks to file Currency Transaction Reports (CTRs) within fifteen days of customer currency transactions exceeding $10,000. 31 C.F.R. Sec. 103.22 (1986). 3 The Act imposes felony liability when a bank willfully fails to file such reports "as part of a pattern of illegal activity involving transactions of more than $100,000 in a twelve-month period...." 31 U.S.C. Sec. 5322(b).

I. THE ISSUES

The Bank was found guilty of having failed to file CTRs on cash withdrawals made by James McDonough. It is undisputed that on thirty-one separate occasions between May 1983 and July 1984, McDonough withdrew from the Prudential Branch of the Bank more than $10,000 in cash by using multiple checks--each one individually under $10,000--presented simultaneously to a single bank teller. The Bank contends that such conduct did not trigger the Act's reporting requirements. It also urges that felony liability should not have been imposed because it did not engage in a pattern of illegal activity. In addition, the Bank avers that, if it did commit a felony violation, it did not commit thirty-one of them. The Bank also argues that the trial judge's instructions on willfulness were fatally flawed, and that, in any event, the evidence did not suffice to show that it willfully failed to file CTRs on McDonough's transactions. Finally, the Bank submits that during her charge to the jury, the trial judge erroneously alluded to evidence of the Bank's conduct after the dates specified in the indictment.

The Bank had been named in a federal grand jury indictment which was returned on October 15, 1985. Count One of the indictment alleged that between May 1983 and May 1985, James McDonough, the Bank, and Carol Orlandella and Patricia Murphy--both of whom were former head tellers with the Bank's Prudential Branch--unlawfully conspired to conceal from the IRS thirty-six of McDonough's currency transactions. The trial court directed a verdict of acquittal on this count. Defendants Murphy and Orlandella were found not guilty of charges that they individually aided and abetted the failure to file CTRs on McDonough's transactions.

The bulk of the indictment alleged that the Bank, as principal, and McDonough, as an aider and abettor, willfully failed to file CTRs on thirty-six occasions between May 1983 and July 1984. Five counts were dismissed because, on those occasions, McDonough received cashier's checks from the Bank, rather than currency. McDonough was acquitted of all charges against him. The Bank was found guilty on the thirty-one remaining counts. We affirm.

II. THE REPORTABILITY OF McDONOUGH'S TRANSACTIONS

The evidence at trial revealed that from 1978 through September 1984, McDonough was a regular customer at the Prudential Branch of the Bank of New England. McDonough visited that branch several times a month to withdraw large sums of cash from various corporate accounts. On thirty-one occasions from May 1983 through July 1984, McDonough requested a number of counter checks--blank checks which a teller encodes with the customer's account number--which he would then make payable to cash for sums varying between $5,000 and $9,000. On each of the charged occasions, McDonough simultaneously presented to a teller between two and four counter checks, none of which individually amounted to $10,000. Each check was recorded separately as an "item" on the Bank's settlement sheets. Once the checks were processed, McDonough would receive in a single transfer from the teller, one lump sum of cash which always amounted to over $10,000. On each of the charged occasions, the cash was withdrawn from one account. The Bank did not file CTRs on any of these transactions until May 1985, shortly after it received a grand jury subpoena.

The Bank contends that its conviction must be overturned because it did not engage in conduct that can be construed as violative of the Currency Transaction Reporting Act. It argues that the Act and its implementing regulations do not provide fair warning that a violation occurs if a financial institution fails to report a cash withdrawal in excess of $10,000 effected by a customer's use of multiple checks, each of which is less than $10,000. The Bank submits that since the Act fails to give sufficient notice that such conduct triggers the reporting requirements, its conviction violates fundamental norms of due process. It points out that the Constitution forbids the conviction of a defendant for conduct not clearly proscribed by penal statutes. United States v. Bass, 404 U.S. 336, 348, 92 S.Ct. 515, 522, 30 L.Ed.2d 488 (1971); Lanzetta v. New Jersey, 306 U.S. 451, 453, 59 S.Ct. 618, 619, 83 L.Ed. 888 (1939); United States v. Anzalone, 766 F.2d 676 (1st Cir.1985). The Bank asserts that to convict it for conduct not expressly prohibited by the Currency Transaction Reporting Act offends the basic constitutional canon that "the power of punishment is vested in the legislative, not in the judicial[,] department." United States v. Boston & Me. R.R., 380 U.S. 157, 160, 85 S.Ct. 868, 870, 13 L.Ed.2d 728 (1965) (quoting United States v. Wiltberger, 5 U.S. (5 Wheat.) 76, 5 L.Ed. 37 (1820)).

The Currency Transaction Reporting Act instructs the Treasury Department to promulgate regulations specifying the circumstances and currency amounts which trigger the Act's reporting requirements. 31 U.S.C. Sec. 5313 (1982). The Treasury regulations, promulgated in 1972, provide: "Each financial institution ... shall file a report of each deposit, withdrawal, exchange of currency or other payment or transfer ... to such financial institution, which involves a transaction in currency of more than $10,000." 31 C.F.R. Sec. 103.22 (1986). The question is whether the due process requirement of fair warning forbids us from reading this regulation as imposing a duty on banks to file reports on customers who withdraw more than $10,000 in cash at one time by using two to four checks instead of only one check.

The Treasury regulations define "transaction in currency" to mean a "transaction involving the physical transfer of currency from one person to another." 31 C.F.R. Sec. 103.11 (1986). In the instant case, McDonough's practice was to visit the same branch of the same bank on only one occasion in a single day. He simultaneously would present to a single bank teller two to four checks, all made payable to cash, for varying amounts under $10,000 which, when added together, equalled a sum greater than $10,000. In return, the same bank teller would transfer to him in a single motion a wad of cash totalling more than $10,000.

We have no trouble categorizing such conduct as a single physical transfer of currency in excess of $10,000 from the Bank to McDonough. We, therefore, conclude that the language of the regulations itself gave the Bank fair warning that McDonough's transactions were reportable. This case does not, as the Bank suggests, involve a bank customer engaging in multiple currency transactions. McDonough engaged in thirty-one separate transactions, each exceeding $10,000, which were effected by the use of multiple checks. The use of multiple checks during a single transfer of currency is not the same as multiple currency transactions. Thus, the Bank's citation to comments from agency officials, such as the IRS Assistant Commissioner for Criminal Investigation, about the reportability of multiple transactions is irrelevant. These comments have no bearing on the resolution of this case, but, instead, are addressed to situations in which a customer obtains over $10,000 via more than one physical transfer of currency. 4 E.g., United States v. Reinis, 794 F.2d 506 (9th Cir.1986) (cash withdrawal exceeding $10,000 effected by defendant's and his agents' purchase of several cashier's checks from the same bank in a single day but at different times, held not reportable since there was no single transfer of currency exceeding $10,000 to either defendant personally or any one of his agents); United States v. Dela Espriella, 781 F.2d 1432 (9th Cir.1986) (defendant who obtained more than $100,000 currency a day by sending several agents to 19 different bank locations to purchase cashier's checks for less than $10,000 each did not engage in a reportable transaction); United States v. Varbel, 780 F.2d 758 (9th Cir.1986) (no CTRs required to be filed on defendant who obtained $50,000 in three days by purchasing six cashier's checks, each under $10,000, from six different banks); United States v. Denemark, 779 F.2d 1559 (11th Cir.1986) (CTR need not be filed on defendant who purchased 14 checks for approximately $9,900 each from 14 different financial institutions); United States v. Cogswell, 637 F.Supp. 295 (N.D.Cal.1985) (no CTR required to be filed on defendant who purchased three different cashier's checks each slightly less than $10,000 at three different banks in a single day). Indeed, the IRS Assistant...

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