U.S. v. Khalife

• Decision Date: 24 April 1997
• Docket Number: No. 95-1901,95-1901
• Citation: U.S. v. Khalife, 106 F.3d 1300 (6th Cir. 1997)
• Parties: -1026 UNITED STATES of America, Plaintiff-Appellant, v. Walid KHALIFE; Fred Abdenour; Goldcorp, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1300

106 F.3d 1300

79 A.F.T.R.2d 97-1026

UNITED STATES of America, Plaintiff-Appellant, v.Walid KHALIFE; Fred Abdenour; Goldcorp, Inc., Defendants-Appellees.

No. 95-1901.

United States Court of Appeals Sixth Circuit.

Argued May 9, 1996.

Decided Feb. 14, 1997.

As Corrected March 19, 1997.

Rehearing and Suggestion for Rehearing En Banc Denied April

24, 1997.

David Debold(argued and briefed), Office of the U.S. Attorney, Detroit, MI, for Plaintiff-Appellant.

Robert E. Forrest(briefed), Jeffrey J. Mayer(briefed), Raymond & Prokop, Southfield, MI, Neil H. Fink, David A. Koelzer

(argued), Law Offices of Neil H. Fink, Birmingham, MI, and Mayer Morganroth, Morganroth & Morganroth, Southfield, MI, for Defendants-Appellees.

Before: SILER and BATCHELDER, Circuit Judges; CARR, District Judge.^*

SILER, Circuit Judge.

The United States ("the government") appeals the district court's pre-trial dismissal of Count 2 of the second superseding indictment which charged Walid Khalife, Fred Abdenour, and Goldcorp, Inc.(collectively, "the defendants") with conspiring to defraud the United States in violation of 18 U.S.C. § 371.The district court held that the defendants could not be charged with a conspiracy to defraud the United States when the conduct charged is prohibited by a specific statute involving structuring, 31 U.S.C. §§ 5322and5324.We reverse.

I.FACTS

The defendants were involved in a jewelry business that dealt largely in cash.On January 12, 1995, the defendants, along with Rashid Elia, Jamal Khalife, and Khalife Bros., were charged in a twenty-eight count superseding indictment.The various counts in the indictment included conspiracy under § 371, causing the concealment and covering up of material facts, money laundering involving the alleged proceeds of drug trafficking, mail fraud, making and subscribing a false tax return, and firearms violations.On January 12, 1995, the district court dismissed Counts 26 and 28.In February, the defendants and Elia filed a joint motion to dismiss Counts 1 through 16 and Count 27 pursuant to Federal Rule of Criminal Procedure 12(b).Count 1 charged the defendants with conspiracy to cause the concealment of material facts in violation of 18 U.S.C. §§ 371,2(b), and1001.Count 2 charged the defendants with conspiracy to defraud the United States in violation of 18 U.S.C. § 371.Counts 3 through 16 charged the substantive offenses of concealment of material facts in violation of 18 U.S.C. §§ 2(b)and1001.Count 27 charged Walid Khalife with making and subscribing a false tax return in violation of 26 U.S.C. § 7206(1).A second superseding indictment was subsequently issued.

Based on plea agreements subsequently entered into by the government and the defendants, dismissal of Count 2 was the sole issue before the district court.Walid Khalife and Fred Abdenour agreed to plead guilty to Count 2 but reserved their motion to dismiss that count.¹Prior to taking the guilty pleas, the district court analyzed both Counts 1 and 2 before dismissing Count 2.Count 1 charged the defendants under the "offense" clause of § 371, while Count 2 charged an offense under the "defraud" clause of § 371.Count 1 alleged that from February 1, 1988 through December 28, 1990, the defendants conspired to cause to be concealed and covered up by scheme, trick, and device material facts in a matter within the jurisdiction of the IRS in violation of 18 U.S.C. §§ 371,2(b), and1001.²The material facts in question were required to be reported under the structuring statute, 21 U.S.C. § 5313(a).When a domestic financial institution is involved in a currency transaction over $10,000, § 5313(a) compels the institution to file a currency transaction report ("CTR") with the Secretary of the Treasury.

Count 2 alleged that from January 4, 1988 to November 5, 1991, the defendants conspired to defraud the United States and the IRS, pursuant to § 371, by obstructing the governmental function of collecting data and CTRs. Count 2 referenced the overt acts outlined in Count 1 in addition to the defendants' currency deposits in less than $10,000 amounts at three different Michigan banks on the same dates.The alleged overt acts of the conspiracy consisted of hundreds of cash deposits into various Goldcorp bank accounts.During the course of the conspiracy, the defendants deposited $12,044,249 in cash.

The government did not charge the defendants with violations of the anti-structuring laws, 31 U.S.C. §§ 5322and5324(3), because it conceded that it could not prove the defendants knew that it was illegal to structure transactions to evade the banks' reporting requirements.³However, the government argued that a § 371 conspiracy to defraud the United States did not require proof that the defendants knew their conduct was illegal.The district court agreed with the government and found that such knowledge was not an element of a § 371 conspiracy to defraud.Nevertheless, relying upon United States v. Minarik, 875 F.2d 1186(6th Cir.1989), the district court dismissed Count 2.It determined that Count 2 was simply a conspiracy to violate a specific statute, either the structuring statute or the false statements statute.Those specific statutes required proof of Ratzlaf intent, i.e., the defendants knew they were violating the law.The district court interpreted Minarik to preclude the government's use of the "defraud" clause of § 371 where the defendants' conduct violated a specific statute.It concluded that the government should have charged Count 2 under the "offense" clause of § 371, and because the government admittedly could not prove Ratzlaf intent, Count 2 could not stand.

II.LAW

In dismissing Count 2, the district court interpreted 18 U.S.C. § 371.The interpretation of a statute is a question of law which this court reviews de novo.United States v. Honaker, 5 F.3d 160, 161(6th Cir.1993)(reviewing de novo the dismissal of a charge under § 922(j)), cert. denied, 510 U.S. 1180, 114 S.Ct. 1226, 127 L.Ed.2d 571(1994).To determine the meaning of a statute, this court looks to the text and legislative history of the law.Id.("If, after reference to the language, structure and legislative history of a statute, the intended scope of the statute remains ambiguous, the rule of lenity will apply.")(citations omitted).

A.Mens rea under a § 371

conspiracy to defraud

The district court first analyzed the intent element of a conspiracy to defraud under § 371 which provides:

§ 371.Conspiracy to commit offense or to defraud United States

If two or more persons conspire either to commit any offense against the United States ["offense" clause], or to defraud the United States, or any agency thereof in any manner or for any purpose ["defraud" clause], and one or more such persons do any act to effect the object of the conspiracy, each shall be fined under this title or imprisoned not more than five years, or both.

The defendants argue, as they did before the district court, that the Ratzlaf intent requirement applies to a § 371 conspiracy to defraud based upon structuring activities.They cite United States v. Curran, 20 F.3d 560, 571(3d Cir.1994), andUnited States v. Alston, 77 F.3d 713, 718(3d Cir.1996), for the specific proposition that a § 371 conspiracy to defraud requires proof of the same intent as the substantive charge connected to the conduct.In response, the government cites United States v. Jackson, 33 F.3d 866, 871-72(7th Cir.1994), cert. denied, 514 U.S. 1005, 115 S.Ct. 1316, 131 L.Ed.2d 197(1995), which held that a § 371 conspiracy to defraud did not require proof that the defendant violated the anti-structuring laws: "[T]he 'overall scheme to circumvent the currency reporting laws and to prevent the IRS from collecting accurate data, reports and income taxes supports a conspiracy conviction regardless of the absence of substantive currency law violations.' "Id. at 871(quotingUnited States v. Bucey, 876 F.2d 1297, 1313(7th Cir.1989)).

In Jackson, the defendants conspired to defraud the United States by impeding the lawful functions of the IRS.Id. at 867.The Jackson court acknowledged that the Ratzlaf decision involved the interpretation of the term, "willfully," found in 31 U.S.C. § 5322(a).Because § 371 contained no language connoting "willfully,"the Jackson court held that Ratzlaf intent was not an element of a § 371 conspiracy to defraud.Id. at 871.The Jackson court then set forth the elements of a § 371 conspiracy to defraud including the proper mens rea:

(1) an agreement to accomplish an illegal objective against the United States;

(2) one or more overt acts in furtherance of the illegal purpose; and

(3) the intent to commit the substantive offense, i.e., to defraud the United States.

Id. at 872.Ultimately, the Jackson court held:

A conviction under § 371, therefore, does not require that the government prove a violation of a separate substantive statute.Id. at 1312;accordUnited States v. Caldwell, 989 F.2d 1056, 1059(9th Cir.1993)(stating that under § 371"[n]either the conspiracy's goal nor the means used to achieve it need to be independently illegal");United States v. Rosengarten, 857 F.2d 76, 78(2d Cir.1988)(stating that "section 371's ban on conspiracies to defraud need not involve the violation of a separate statute"), cert. denied, 488 U.S. 1011, 109 S.Ct. 799, 102 L.Ed.2d 790(1989).

Id. at 870.The Jackson court's holding is logical because there is no "substantive" offense underlying a § 371 conspiracy to defraud.Thus, it is unnecessary to refer to any substantive offense when charging a § 371 conspiracy to defraud, and it is also unnecessary to prove the elements of a related substantive offense.Agreeing with the government and noting the Jackson decision, the district court stated:

While this Court agrees with the Curran holding that the Ratzlaf intent requirement, i.e. knowledge that the conduct was unlawful, must be...