U.S. v. Phipps, 94-8778
| Decision Date | 25 April 1996 |
| Docket Number | No. 94-8778,94-8778 |
| Citation | 81 F.3d 1056 |
| Parties | UNITED STATES of America, Plaintiff-Appellee, v. C. Wayne PHIPPS, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Janice A. Singer, Atlanta, GA, for appellant.
Kent Alexander, U.S. Attorney, James W. Kesler, Asst. U.S. Atty., Atlanta, GA, for appellee.
Appeal from the United States District Court for the Northern District of Georgia.
Before TJOFLAT, Chief Judge, CARNES, Circuit Judge, and FAY, Senior Circuit Judge.
This appeal arises out of the conviction of C. Wayne Phipps for three counts of money laundering in violation of 18 U.S.C. § 1956(a)(3)(B), and for two counts of causing a financial institution to fail to file a Currency Transaction Report ("CTR") in violation of 31 U.S.C. § 5324(a)(1). Phipps attacks his convictions on several grounds; however, the only issue that merits discussion is one involving the § 5324(a)(1) counts. 1 The parties phrase the issue as one of sufficiency of the evidence to convict on the two § 5324(a)(1) counts, but the facts the jury could find from the evidence are not really in dispute. The real issue is whether 31 U.S.C. § 5324(a)(1), which prohibits any person from "caus[ing] or attempt[ing] to cause a domestic financial institution to fail to file a report required" under applicable currency transaction reporting statutes and regulations is violated by structuring activities designed to avoid a CTR being required in the first place. 31 U.S.C.A. § 5324(a)(1) (West 1995).
For the reasons that follow, we answer that question in the negative and hold that § 5324(a)(1), unlike certain other statutory provisions, is violated only when the financial institution is required to file a report that the defendant causes or attempts to cause it not to file. As a result, Phipps' conviction is due to be reversed insofar as the § 5324(a)(1) counts are concerned.
On four occasions in the spring of 1992, Phipps exchanged cash supplied by a government informant, James McMillan, for checks drawn on Phipps' bank account and for cashier's checks that Phipps purchased with money from his bank account. Phipps never deposited or exchanged McMillan's cash directly with his bank. Instead, Phipps would give the cash to Charles Prater, a friend who operated Carpet Transport, Inc. ("CTI"), and Prater would give Phipps checks made out to CTI which Prater had endorsed and signed over to Phipps. Phipps would then take these third-party checks to his bank, deposit them in his account, and write checks to McMillan, or purchase cashier's checks, for an amount ten percent less than the amount of cash that McMillan had supplied to Phipps. That ten percent deduction represented Phipps' "commission" for handling the transaction.
Pursuant to this scheme, there were four separate sets of transactions in which Phipps exchanged currency totalling $40,000.00 for CTI checks totalling approximately $39,000.00. Phipps then deposited those CTI checks into the bank and wrote checks (or purchased cashier's checks) totalling $36,000.00 payable to McMillan. While the details varied somewhat, the pattern was the same each time. The reason the transactions were structured in this manner was to launder or disguise the source of the currency, which supposedly was from illegal drug activities, and to do it in a way that would avoid the bank being required to file any CTRs. The bank was never required as a result of these transactions to file any CTRs, because only checks were deposited in the bank, no currency.
For his involvement in these transactions, Phipps was charged with four counts of money laundering in violation of 18 U.S.C. § 1956(a)(3)(B), and two counts of causing a financial institution to fail to file a CTR as required by 31 U.S.C. § 5313(a), in violation of 31 U.S.C. § 5324(a)(1). In addition, the government sought forfeiture of Phipps' proceeds from the transactions pursuant to 18 U.S.C. § 982. A jury found Phipps guilty of three of the four counts of money laundering, and of the two counts of causing a financial institution to fail to file a CTR. After his conviction, Phipps moved pursuant to Fed.R.Crim.P. 29(c) for a judgment of acquittal, and the district court denied the motion. Thereafter Phipps consented to forfeiting $3,500.00 to the government.
Phipps argues that the district court erred in denying his Rule 29(c) motion for judgment of acquittal because there was insufficient evidence as a matter of law to support his conviction for causing a financial institution to fail to file a CTR. Phipps does not dispute the facts that the government proved at trial concerning his involvement in the money laundering transactions; instead, he contends that those facts do not establish a violation of 31 U.S.C. § 5324(a)(1). We review the district court's interpretation of the relevant statutory provision and its application of law to facts de novo. E.g., United States v. Thomas, 62 F.3d 1332, 1336 (11th Cir.1995); Rodriguez v. Lamer, 60 F.3d 745, 747 (11th Cir.1995).
In 1970, in an effort to facilitate the investigation of criminal activity, Congress passed legislation requiring banks to report to the government certain large currency transactions. Section 5313(a) of the Bank Secrecy Act, 31 U.S.C. § 101 et seq., provides, in pertinent part:
When a domestic financial institution is involved in a transaction for the payment, receipt, or transfer of United States coins or currency (or other monetary instruments the Secretary of the Treasury prescribes), in an amount, denomination, or amount and denomination ... the Secretary prescribes by regulation, the institution and any other participant in the transaction the Secretary may prescribe shall file a report on the transaction at the time and in the way the Secretary prescribes.
31 U.S.C.A. § 5313(a) (West 1983). If the financial institution fails to file a CTR when the obligation arises, the institution is subject to criminal penalties. 31 U.S.C. § 5322.
Pursuant to the authority granted under § 5313(a), the Secretary of the Treasury promulgated regulations specifying the kinds of transactions that must be reported to the government:
Each financial institution other than a casino or the Postal Service shall file a report of each deposit, withdrawal, exchange of currency or other payment or transfer, by, through, or to such financial institution which involves a transaction in currency of more than $10,000.
31 C.F.R. § 103.22 (1995). Thus, although under § 5313(a) the Secretary could have required "any other participant in the transaction" to file a report, 31 U.S.C.A. § 5313(a) (West 1983), the Secretary imposed that obligation only on the financial institution. In addition, although under § 5313(a) the Secretary could have required transactions involving "other monetary instruments" to be reported, the Secretary required only transactions in currency to be reported.
The regulations define "a transaction in currency" as "[a] transaction involving the physical transfer of currency from one person to another." 31 C.F.R. § 103.11(ii) (1995). The regulations further provide: "A transaction which is a transfer of funds by means of bank check, bank draft, wire transfer, or other written order, and which does not include the physical transfer of currency is not a transaction in currency within the meaning of this part." 31 C.F.R. § 103.11(ii) (1995). "Currency" is defined in the regulations as "[t]he coin and paper money of the United States or of any other country that is designated as legal tender and that circulates and is customarily used and accepted as a medium of exchange in the country of issuance." 31 C.F.R. § 103.11(h) (1995).
Congress amended the Bank Secrecy Act in 1986 to impose criminal liability on any person who: (1) causes a financial institution to fail to file a CTR; (2) causes it to report false information on a CTR; or (3) structures transactions in an attempt to evade the CTR reporting requirement. That 1986 legislation is codified as 31 U.S.C. § 5324(a), which provides in its entirety, as follows:
No person shall for the purpose of evading the reporting requirements of section 5313(a) or 5325 or any regulation prescribed under any such section--
(1) cause or attempt to cause a domestic financial institution to fail to file a report required under section 5313(a) or 5325 or any regulation prescribed under such section [;]
(2) cause or attempt to cause a domestic financial institution to file a report required under section 5313(a) or 5325 or any regulation prescribed under any such section that contains a material omission or misstatement of fact; or
(3) structure or assist in structuring, or attempt to structure or assist in structuring, any transaction with one or more domestic financial institutions.
31 U.S.C.A. § 5324(a) (West Supp.1995). Phipps was not charged with violating the third subdivision of § 5324(a), only the first subdivision. Therefore, we need not address whether the evidence in this case could establish a violation of the antistructuring provision in § 5324(a)(3).
There are two competing interpretations of the key language in § 5324(a)(1) about "caus[ing] a domestic financial institution to fail to file a report required" under the applicable statutory and regulatory provisions. Phipps would have us interpret that key language in § 5324(a)(1) as applying only when a bank is required to file a currency transaction report. In other words, it would prohibit a defendant from causing or attempting to cause--through cajolery, bribery, intimidation, or whatever means--a bank from complying with its legal duty to file a CTR. Under Phipps' interpretation, there can be no violation of § 5324(a)(1)...
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