U.S. v. Goldberg, 261

• Decision Date: 06 March 1985
• Docket Number: No. 261,D,261
• Citation: 756 F.2d 949
• Parties: UNITED STATES of America, Appellant, v. David GOLDBERG, Kenneth S. Dreifus, Joseph Yorizzo, Defendants-Appellees. ocket 84-1226.
• Court: U.S. Court of Appeals — Second Circuit

Page 949

756 F.2d 949

UNITED STATES of America, Appellant, v. David GOLDBERG, Kenneth S. Dreifus, Joseph Yorizzo,

Defendants-Appellees.

No. 261, Docket 84-1226.

United States Court of Appeals, Second Circuit.

Argued Nov. 15, 1984.

Decided March 6, 1985.

Stacey J. Moritz, Asst. U.S. Atty., New York City (Rudolph W. Giuliani, U.S. Atty., S.D.N.Y., Marc J. Gottridge, Asst. U.S. Atty., New York City, on brief), for appellant.

Barry Ivan Slotnick, New York City (Jill G. Okun, Slotnick & Cutler, P.C., New York City, on brief), for defendant-appellee David Goldberg.

Patrick H. Barth, New York City (Peter D. Sudler, Alan Winkler, Sudler & Barth, New York City, on brief), for defendant-appellee Kenneth S. Dreifus.

Robert Polstein, New York City (Austin V. Campriello, Polstein, Ferrara & Campriello, New York City, on the brief), for defendant-appellee Joseph Yorizzo.

Before OAKES and KEARSE, Circuit Judges, and POLLACK, District Judge. ^*

KEARSE, Circuit Judge:

The United States of America appeals, pursuant to 18 U.S.C. Sec. 3731 (1982), from an order of the United States District Court for the Southern District of New York, Whitman Knapp, Judge, dismissing several counts of an indictment charging defendants David Goldberg, Kenneth S. Dreifus, and Joseph Yorizzo with, inter alia, conspiring to violate certain reporting requirements of the Bank Secrecy Act, 31 U.S.C. Sec. 5311 et seq. (1982) (the "Act"), in violation of 18 U.S.C. Sec. 371 (1982). In an opinion reported at 587 F.Supp. 302 (1984), the court concluded that, as a matter of law, the defendants' acts as set forth in count 1 of the indictment and elaborated on in the government's response to defendants' challenges to the indictment could not reflect the conspiracy charges because none of the defendants was required to file any of the reports required by the Act or the regulations promulgated thereunder. On appeal, the government contends that the district court both misinterpreted the indictment and construed unduly narrowly the Act and the regulations implementing it. For the reasons below, we agree and conclude that the indictment adequately alleged that defendants conspired to violate the Act. We vacate the dismissal of counts 1 and 3 and remand the case for further proceedings.

I.BACKGROUND

In response to the defense motions attacking the indictment, the government submitted to the district court the affidavit of Assistant United States Attorney Stacey J. Moritz ("Moritz Affidavit"), which was based principally on an examination of tapes of conversations between and among the defendants and others in the presence of an undercover Special Agent of the Internal Revenue Service ("IRS") wearing a recording device. In reviewing the district court's dismissal of the indictment, we accept as true all of the allegations of the indictment, as amplified by the Moritz Affidavit. See, e.g., United States v. Von Barta, 635 F.2d 999, 1002 (2d Cir.1980), cert. denied, 450 U.S. 998, 101 S.Ct. 1703, 68 L.Ed.2d 199 (1981). Contrary assertions of fact by the defendants will not be considered. Id.

A. The Government's Allegations

The indictment set forth a scheme in which the defendants conspired to aid an undercover agent in transferring out of the United States large amounts of United States currency and in opening a foreign interest-bearing bank account, all without disclosures to the United States Government, in violation of 31 U.S.C. Secs. 5313, 5314, 5315, and 5322(b). It charged, inter The government described the defendants' overt acts as follows. On October 19, 1983, IRS Special Agent Marc Lotz, acting undercover, met with Goldberg at United Mizrahi Bank and Trust Co. ("UMB"), where Goldberg was a bank officer. Lotz stated that he had hundreds of thousands of dollars in cash that he wished to move from safe deposit boxes to interest-bearing accounts outside the United States without disclosing those transactions. Later that day, Goldberg informed him that UMB could not accommodate him, and took Lotz to the North American Bank, Ltd. ("NAB") to meet Dreifus, whom Goldberg introduced as manager and United States representative of NAB. Goldberg and Dreifus suggested ways in which Lotz could move his money out of the United States without notifying the United States Government.

alia, that defendants (1) "were engaged as a business in dealing in currency"; (2) agreed to provide a money laundering service for cash transfers in the United States that would conceal the true source and holder of the funds, and agreed, as part of that scheme, "to accept in excess of $3 million in cash transfers in the United States in the period October to December 1983"; (3) agreed to open and assist in the opening of foreign bank accounts on the behalf of United States residents and to transfer currency to those accounts, using false documentation to conceal the true identities of the account holders; and (4) agreed they would not file currency transaction reports with respect to any of the transfers.

On October 20, Lotz and Goldberg spoke by telephone several times. Lotz told Goldberg that he wanted to move two or three million dollars out of the United States. Goldberg informed Lotz of the plan Goldberg and his colleagues had devised for the laundering and transfer of those funds. Lotz would give the defendants currency; he would receive in exchange a UMB bank check drawn on a UMB customer's account made payable to NAB; the NAB check would then be used to open Lotz's foreign bank account and would not be traceable to Lotz.

Goldberg at first demanded thirty percent of any money thus laundered as the defendants' fees for the laundering. Subsequently, however, he agreed, subject to checking with his partners, to accept $25,000 to launder the first $200,000, on the understanding that this would be a test run for the eventual laundering of a total of $3,000,000. Goldberg stressed that the federal government would never learn of the transactions nor learn that Lotz was earning interest abroad.

On October 21, Lotz arrived at NAB with $200,000 in currency. He met with Goldberg and Dreifus and was introduced to Yorizzo, a retired policeman. In exchange for his $200,000, Lotz was given a UMB bank check for $175,000, drawn on Yorizzo's account. Upon Lotz's arrival at the meeting, Goldberg displayed a handgun and he and Yorizzo demanded to frisk Lotz for a body wire. Goldberg overrode Lotz's protests against the search, stating that precautions were necessary because they were engaged in an illegal transaction.

During this meeting, Goldberg and Yorizzo began counting Lotz's cash on a machine brought to the bank by Yorizzo, and Dreifus prepared documents to open an Israeli bank account for Lotz. Two sets of papers were prepared: one under the "real" name Lotz was using in his undercover capacity and one under a new fictitious name. Dreifus repeatedly assured Lotz that the papers bearing his "real" name would be locked away. After Dreifus had prepared the two documents, and just before Goldberg and Yorizzo had finished counting the $200,000, a team of IRS agents entered the room and arrested the three defendants. The present indictment followed.

B. The Proceedings Below

Count 1 of the indictment charged the defendants with conspiracy, in violation of 18 U.S.C. Sec. 371, to violate 31 U.S.C. Sec. 5313 and the regulations thereunder (which require the reporting of transactions involving more than $10,000 in currency) by causing The court held that Sec. 5313 was not implicated because the defendants were not financial institutions nor had they caused a financial institution to fail to file a required report. It rejected what it characterized as the government's "main contention," i.e., that "each defendant himself [was] a 'financial institution'," finding that such a contention was inconsistent with the plain meaning of the Act. 587 F.Supp. at 306-07. Finding misplaced the government's reliance on the definition of "financial institution" in 31 C.F.R. Sec. 103.11 (1984) as "[a] person who engages as a business in dealing in or exchanging currency as, for example, a dealer in foreign exchange or a person engaged primarily in the cashing of checks," the court concluded that

"various financial institutions" to fail to file the mandated currency transaction reports, "as part of a pattern of illegal activity involving transactions exceeding $100,000 in a twelve month period." Count 1 also alleged that defendants had conspired, in violation of 18 U.S.C. Sec. 371, to violate 31 U.S.C. Sec. 5314, which requires the reporting of transactions with foreign financial agencies. In pretrial motions the defendants challenged the sufficiency of count 1 on the ground that the conduct alleged did not constitute a federal offense because none of the transactions engaged in by the defendants triggered a requirement under the Act for the filing of reports. The district court agreed, stating that "[a]lthough defendants' actions might indicate a ready willingness to engage in criminal conduct," 587 F.Supp. at 304, the allegations of the indictment failed to describe a conspiracy to violate 31 U.S.C. Secs. 5313 or 5314.

[a] single transaction between individuals involving the exchange of a check for currency--even if some future transactions are contemplated--cannot bring one within the definition of "engaging as a business" in exchanging currency. The example given by the regulation, "a person engaged primarily in the cashing of checks," makes it clear that it does not apply to an individual whose primary occupation is something else but who embarks upon an isolated--or even a series of isolated--transactions involving the exchanging of a check for currency.

587 F.Supp. at 307.

The court also concluded that the indictment did not show a conspiracy to violate Sec. 5314 because there was no suggestion that any of the defendants had an interest in a foreign interest-bearing account:

The Government offers...