U.S. v. Mastronardo, 87-1525
| Decision Date | 13 June 1988 |
| Docket Number | 87-1526,No. 87-1525,87-1561 and 87-1644,No. 87-1526,No. 87-1561,No. 87-1644,Nos. 87-1525,87-1541,No. 87-1541,87-1525,87-1644,87-1561,s. 87-1525 |
| Citation | 849 F.2d 799 |
| Parties | UNITED STATES of America v. Joseph Vito MASTRONARDO, Jr., AppellantUNITED STATES of America v. Joseph Vito MASTRONARDO, Sr., AppellantUNITED STATES of America v. John Vito MASTRONARDO, AppellantUNITED STATES of America v. Herbert L. CANTLEY, AppellantUNITED STATES of America v. John HECTOR, Appellant |
| Court | U.S. Court of Appeals — Third Circuit |
Dennis J. Cogan, Abramson, Cogan, Kogan, Freedman & Thall, P.C., Philadelphia, Pa., for appellant Joseph Vito Mastronardo, Jr.
John Rogers Carroll, Thomas Colas Carroll (argued), Carroll & Carroll, Philadelphia, Pa., for appellant Joseph Vito Mastronardo, Sr.
Peter Goldberger, Philadelphia, Pa., for appellant John Vito Mastronardo.
James D. Crawford (argued), Sherry J. Hanley, Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., for appellant Herbert L. Cantley.
Norris E. Gelman, Philadelphia, Pa., for appellant John Hector.
Edward S.G. Dennis, Jr., U.S. Atty., Walter S. Batty, Jr., Asst. U.S. Atty., Chief of Appeals, Glenn B. Bronson (argued), Asst. U.S. Atty., Philadelphia, Pa., for U.S.
Before GIBBONS, Chief Judge, MANSMANN and COWEN, Circuit Judges.
Joseph Vito Mastronardo, Jr., Joseph Vito Mastronardo, Sr., John Vito Mastronardo, Herbert Cantley and John Hector each appeal to this Court to overturn their convictions for conducting an illegal gambling business in violation of 18 U.S.C. Sec. 1955, using interstate telephone service in aid of an illegal gambling business, in violation of 18 U.S.C. Sec. 1952, participating in a conspiracy to defraud the United States, in violation of 18 U.S.C. Sec. 371, and concealing material facts from the United States, in violation of 18 U.S.C. Sec. 1001. 1
Because we agree with Mastronardo, Jr., Mastronardo, Sr. and Cantley's argument that their convictions for conspiracy to defraud the United States and concealing material facts from the United States are based, at least in part, on allegations that they "structured" currency transactions so as to induce banks to fail to file Currency Transaction Reports ("CTRs"), and that the statutes and regulations then in force did not give them fair notice that such "structuring" was criminal, we will reverse these convictions. We find the remainder of the appellants' arguments to be without merit and affirm the remaining convictions.
On June 26, 1986, a federal grand jury returned a 63 count indictment against eight defendants. The indictment named the five appellants--Joseph Vito Mastronardo, Jr., Joseph Vito Mastronardo, Sr., John Vito Mastronardo, Herbert L. Cantley, and John Hector--and three co-defendants not parties to this appeal--Shearson Lehman Brothers, Inc. ("Shearson"), Mario Scinicariello, and Sheldon Shore. Each of the defendants was indicted for crimes arising out of an alleged multi-million dollar bookmaking and money laundering operation. 2
All defendants, except Scinicariello, were tried together before a jury. At the close of the government's case, the district court entertained defendants' motions for directed verdicts of acquittal, and granted those motions as to all of counts four to six, fifteen to seventeen, and twenty to twenty-two. The district court also granted Mastronardo, Sr.'s motion for directed verdicts on counts twenty-five to thirty-eight, and forty-eight to fifty-four. Finally, the district court granted John Mastronardo's motion for directed verdicts on counts twenty-five to thirty-nine, forty-eight to fifty-five, and sixty-one.
The jury returned the following guilty verdicts on February 25, 1987. Mastronardo, Jr. was convicted of conspiracy to defraud the United States (count one), conducting an illegal gambling business (count three), eight counts of using interstate telephone service in aid of a gambling business (counts eight to thirteen, eighteen, and nineteen), and concealing material facts from the United States (count sixty-one). Mastronardo Sr. was convicted of conspiracy to defraud the United States (count one), conducting an illegal gambling business (count three), two counts of using interstate telephone service in aid of a gambling business (counts eighteen and nineteen), and concealing material facts from the United States (count sixty-one). John Mastronardo was convicted of conducting an illegal gambling business (count three), and one count of using interstate telephone service in aid of a gambling business (count twenty-three). Cantley was convicted of two counts of conspiracy to defraud the United States (counts one and two), conducting an illegal gambling business (count three), and three counts of concealing material facts from the United States (counts sixty-one through sixty-three). Hector was convicted of conducting an illegal gambling business (count three), and two counts of using interstate telephone service (counts eleven and twenty-four).
These defendants were acquitted of the remaining charges against them, and defendants Shore and Shearson were acquitted of all charges. 3 Mastronardo Sr., Mastronardo, Jr., John Mastronardo, Cantley and Hector appeal their convictions to this Court.
The principal contention raised in this appeal is whether the above named defendants can be held criminally liable for "structuring" currency transactions to avoid having financial institutions report the transactions to the government. 4 As originally enacted, the Currency Transaction Reporting Act, 31 U.S.C. Sec. 5311 et seq. (1982), authorized the Secretary of the Treasury to require the reporting of currency transactions. 5 Although the statute permitted the Secretary to adopt regulations requiring both "financial institutions" 6 and other "participants" in transactions to file CTRs, the Secretary, during the time period relevant to this case, issued regulations which required only financial institutions to file CTRs. 7 Such institutions were required to file CTRs when participating in a transaction involving more than $10,000 in currency. Failure to file a CTR when required by the Secretary's regulations subjected the offending institution to civil and criminal penalties. However, no provision of the Currency Transaction Reporting Act made it a crime for an individual to "structure" his transactions so as to keep each transaction under the $10,000 floor, thus inducing a financial institution not to file a CTR in instances where it might be required to file a CTR were the person's transactions aggregated. 8
The issue presented by this case is whether a person can be held criminally liable for "structuring" transactions during the relevant time period in such a way that a bank or other financial institution would not be aware that the person is making a number of transactions which, if aggregated, involve more than $10,000 in currency. 9 The United States asserts that such criminal liability exists under a number of statutes, and it charged the defendants in this case with violations of each. First, the United States charged the defendants with violating 18 U.S.C. Sec. 2(b) ("Sec. 2(b)"), 10 which establishes that a person who causes another to commit an offense against the United States is chargeable as a principal. The government alleged that the defendants willfully caused bank officials to fail to file CTRs. The defendants, however, were acquitted of these Sec. 2(b) charges.
The defendants were also charged, and convicted of violating 18 U.S.C. Sec. 1001 ("Sec. 1001"), 11 which proscribes schemes to conceal, or cause to be concealed a material fact from the United States. Allegedly, the defendants' structuring of transactions in an attempt to induce banks not to file CTRs constituted an illegal deceptive scheme designed to deprive the Treasury Department of the information contained in the CTRs.
Finally, the defendants were charged, and convicted of violating 18 U.S.C. Sec. 371 ("Sec. 371"), 12 by participating in two conspiracies to defraud the United States. The government charged that the defendants conspired to conceal income illegally produced by their gambling operation. Inducing banks to fail to file CTRs was referred to by the district court as an "object" of this conspiracy. App. 222-23. The government also individually charged Cantley with conspiring to conceal income earned by Mario Scinicariello. The indictment, in counts one and two, charged that the defendants conspired to defraud the United States by impairing its ability to collect data and reports on currency transactions, to enforce laws requiring the reporting of currency transactions, and to determine and collect income taxes. App. at 97, 112. Thus, while this appeal does not involve a specific conviction for the act of "structuring" transactions, both the Sec. 1001 convictions and the Sec. 371 conspiracy convictions rely upon the purported illegality of "structuring" in order to impose criminal liability upon these defendants.
The issue of whether the United States can impose criminal liability on persons for structuring currency transactions to avoid inducing financial institutions to file CTRs has been addressed by a number of circuit and district courts. The decisions have produced a severe split among the circuits. A number of circuits, including the First, Seventh, Eighth, Ninth and Eleventh, have reversed Sec. 2(b) "willful causing", Sec. 1001 "scheme to conceal" and Sec. 371 conspiracy convictions, generally because they found either (1) that the statutes and regulations discussed above did not appear to proscribe such acts, or (2) that these convictions did not pass constitutional muster because the statutes and regulations failed to give fair warning...
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