U.S. v. Davenport, s. 90-2500

• Decision Date: 09 April 1991
• Docket Number: Nos. 90-2500,90-2501,s. 90-2500
• Citation: 929 F.2d 1169
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Ronald L. DAVENPORT and Betty L. Davenport, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1169

929 F.2d 1169

UNITED STATES of America, Plaintiff-Appellee, v. Ronald L. DAVENPORT and Betty L. Davenport, Defendants-Appellants.

Nos. 90-2500, 90-2501.

United States Court of Appeals, Seventh Circuit.

Argued Feb. 19, 1991.

Decided April 9, 1991.

Larry A. Mackey, James M. Warden, Asst. U.S. Atty., Office of the U.S. Atty., Indianapolis, Ind., for plaintiff-appellee.

Richard L. Darst, Mantel, Cohen, Garelick, Reiswerg & Fishman, Kevin McShane, Indianapolis, Ind., for defendants-appellants.

Before WOOD, Jr., POSNER and MANION, Circuit Judges.

POSNER, Circuit Judge.

A jury convicted Mr. and Mrs. Davenport of having violated 31 U.S.C. Sec. 5324(3), a statute enacted in 1986 to deter people from "structuring" their cash transactions with banks and other financial institutions (we shall, to simplify discussion, call all such institutions "banks") in such a way as to prevent the banks from filing currency transaction reports. The judge sentenced each of them to twelve months in prison.

Sometime before November 5, 1987, the Davenports obtained possession of some $100,000 in cash--how, we do not know. Between November 5 and November 19 they made ten separate cash deposits, each of less than $10,000, totaling $81,500, in multiple branches of two banks in which they had accounts. Banks must report to the Internal Revenue Service any cash deposit above $10,000, and if multiple deposits are made on the same day must aggregate them to determine whether the $10,000 threshold has been crossed. Several of the Davenports' deposits were made in one bank--albeit different branches--on the same day, and therefore crossed the threshold. These deposits were duly reported to the Internal Revenue Service, which sent an agent to question the Davenports. Mrs. Davenport, after being warned that she had a right to remain silent and that anything she said could be used against her, told the agent that the deposits were part of a $100,000 inheritance that her husband had received from his father, who had died three months before the deposits were made. She readily admitted that the, or at least one, purpose of making separate deposits had been to avoid triggering the banks' obligation to report a cash transaction to the Internal Revenue Service. She was herself a bank teller and before making the deposits had inquired about the bank's practice with regard to reporting cash transactions. Mr. Davenport, when questioned (and similarly warned), repeated his wife's story about the inheritance. But whereas she had claimed that he had received the inheritance by check (and then cashed it before being deposited? How very unlikely! ) he claimed that the inheritance had been discovered, in the form of cash, in a safe at the house where his father was living at the time of his death. Yet at trial there was evidence that the father had spent the last six months of his life living in a car, had died in poverty, had been buried at public expense, and, as far as anyone knew, had left no inheritance. And nineteen months before the deposits at issue in this case the Davenports had made two other large cash deposits, of $9,000 and of $16,000, on the same day. Mr. Davenport also told the agent that he still had some of the cash from the "inheritance" in the trunk of his car.

The indictment was in twelve counts, and the first issue on appeal is whether this multiplication of counts was proper. Count one charged a conspiracy to violate section 5324(3) and count two charged a violation of the statute itself, a violation consisting of the making of the ten deposits, viewed as an effort to "structure" an $81,500 transaction. The only problem with these two counts is that the Davenports were trying to structure a transaction of $100,000, not $81,500. They just hadn't deposited the last $18,500 when they were caught. But that is a detail of no significance.

The last ten counts charge each of the ten deposits as a separate violation of the statute. These counts should have been thrown out. The statute does not forbid the making of deposits. It forbids the structuring of a transaction. The Davenports received $100,000 in cash, which they wanted to deposit. The receipt and deposit of the $100,000 were the transaction that the Davenports structured by breaking it up into multiple deposits, of which ten had been made when they were caught. There was one structuring, one violation. The government's position leads to the weird result that if a defendant receives $10,000 and splits it up into 100 deposits he is ten times guiltier than a defendant who splits up the same amount into ten deposits. It could, we suppose, be argued--though the government does not in fact argue--that the more deposits a defendant makes, the smaller each one is likely to be, and that the smaller the individual deposit the less likely the bank is to aggregate them. But against this it can be argued with equal plausibility that a proliferation of deposits increases the probability of apprehension and punishment, by creating a thicker paper trail and reinforcing an inference of evil intent. Unable as we are to say that a defendant's conduct is more dangerous the greater the number of deposits, we are unable to construct any rationale for the government's position.

We can find no case in which the issue of the unit of violation of section 5324(3) has been discussed; but our impression is that until this case the practice was to charge a single count of structuring. United States v. Scanio, 900 F.2d 485, 487 (2d Cir.1990). We conclude that the structuring itself, and not the individual deposit, is the unit of crime.

Although the judge imposed concurrent sentences, our practice in vacating a conviction underlying a concurrent sentence is to remand for resentencing on the valid counts. The idea behind the practice is that the judge may have sentenced the defendant more heavily on those counts thinking erroneously that he was guilty of additional crimes. United States v. Boulahanis, 677 F.2d 586, 591 (7th Cir.1982). Whether the practice makes sense in the age of the Sentencing Guidelines may be questioned, but need not be decided here since the judge made clear that the sentences on the first two counts were independent of the sentences on the remaining ten counts, which she viewed as an alternative way of conceptualizing the defendants' offenses rather than as additional crimes committed by them.

But all this assumes that the convictions on counts one and two are valid, and this issue we must now examine. The Davenports' opening shot is that they committed no offense because they avoided, rather than evaded, the reporting requirement. Evaluating this argument requires a closer look at the statute. It provides that "no person shall for the purpose of evading the reporting requirement of section 5313(a) [of Title 31] with respect to such transaction--(1) cause or attempt to cause a domestic financial institution to fail to file a report required under section 5313(a) ... [or] (3) structure ... any transaction with one or more domestic financial institutions." 31 U.S.C. Sec. 5324. Section 5313(a) in turn requires banks and the other covered financial institutions to comply with such reporting requirements for cash transactions as the Secretary of the Treasury shall establish. In November 1987, as today, the Secretary's regulations, in addition to the basic requirement that banks report any cash transaction (usually a deposit) in excess of $10,000, only required a bank to aggregate the cash deposits made by a person "during any one business day," for purposes of determining whether the $10,000 threshold had been crossed. 31 C.F.R. Sec. 103.22(a)(1). Except for the slip up in which the Davenports made deposits in a bank and its branches on the same day, the banks were not required to file currency transaction reports. From this the Davenports infer that they were not (except for that embarrassing slip) evading the reporting requirement, but merely avoiding it. They draw an analogy to the distinction between tax avoidance ("tax planning" is the euphemism), which is lawful, and tax evasion, which is not. They point out that it was not till later that a regulation was added stating that "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." 31 C.F.R. Sec. 103.11(p); Amendment to the Bank Secrecy Act Regulations Relating to Domestic Currency Transactions, 54 Fed.Reg. 3023 (Jan. 23, 1989).

They misunderstand section 5324(3), the specific provision under which they were charged. It is not a statute for punishing the cash depositor as an aider and abettor of a bank's violation of the reporting requirement. The target of the statute was not banks, or cash transactors viewed as the accomplices of banks in violating the requirements that the Treasury Department imposes on banks. The target was the transactors--the "money launderers," a term we use broadly to denote persons desiring to convert "hot," suspiciously large, or easily traced cash sums into more discreet media of exchange--themselves. The statute's aim was to prevent people from either causing the (usually innocent) bank to fail to file a required report or defeating the goal of the requirement that large cash deposits be reported to the Internal Revenue Service by breaking their cash hoard into enough separate deposits to avoid activating the requirement. S.Rep. No. 433, 99th Cong., 2d Sess. 22 (1986); United States v. Scanio, supra, 900 F.2d at 488. The first subsection of the statute strikes at the first abuse and might have been violated by the Davenports' splitting up a deposit of $10,000 or more between branches of the same bank--an attempt to cause the bank not to file a required report. The third subsection strikes at the dominant form of the Davenports' misconduct by forbidding the structuring of a...