U.S. v. Pipkin, 96-20402

• Decision Date: 02 June 1997
• Docket Number: No. 96-20402,96-20402
• Citation: 114 F.3d 528,1997 WL 291685
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Roger W. PIPKIN, III, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 528

114 F.3d 528

UNITED STATES of America, Plaintiff-Appellee, v. Roger W. PIPKIN, III, Defendant-Appellant.

No. 96-20402.

United States Court of Appeals, Fifth Circuit.

June 2, 1997.

Rehearing Denied June 27, 1997.

Cynthia C. DeGabrielle, Paul Camille Offenhauser, Assistant U.S. Attorney, James Lee Turner, Houston, TX, for Plaintiff-Appellee.

Anthony Wayne Nims, Houston, TX, for Defendant-Appellant.

Appeal from the United States District Court for the Southern District of Texas.

Before POLITZ, Chief Judge, DeMOSS, Circuit Judge, and JUSTICE, ¹ District Judge.

DeMOSS, Circuit Judge:

Defendant Roger W. Pipkin, III, was convicted of multiple counts of wire fraud, money laundering, and structuring currency transactions so as to avoid reporting requirements. Applying the Supreme Court's recent opinion in Ratzlaf v. United States, 510 U.S. 135, 114 S.Ct. 655, 126 L.Ed.2d 615 (1994), we hold that the evidence is insufficient to support a finding that Pipkin knew structuring was illegal. Accordingly, we reverse the structuring convictions. Finding no other reversible error, we affirm all other convictions.

BACKGROUND

Pipkin took part in a scam that defrauded Pioneer Commercial Funding Corporation ("Pioneer") of at least $14 million. Pioneer was a lender which financed residential real estate transactions. Pioneer loaned money to borrowers based on loan packages presented by mortgage brokers. Pioneer did not perform credit checks on the borrowers or appraise the properties itself, but instead relied on the mortgage bankers.

One of the mortgage brokers Pioneer dealt with was Mortgage Credit Corporation ("MCC"), a company Pipkin was associated with. Pipkin and Robert Cartwright, president of MCC, entered into a scheme to defraud Pioneer by submitting phony loan applications. As part of the scheme, MCC prepared loan applications for the purchase of empty lots and non-existent properties. MCC told Pioneer that the properties had great value, and Pioneer loaned money based on the inflated numbers. For example, MCC told Pioneer that a property was appraised at $227,867, when it was really a vacant lot worth $6,000. Based on this deception, Pioneer loaned $153,370 on the property. MCC also used fake buyers on the loan applications. It filled out the applications using the names of Pipkin's friends and acquaintances, paying them nominal amounts (usually $50) to sign the forms.

MCC told Pioneer that it was closing the loans itself and had Pioneer wire the money In June 1989, Pipkin purchased a cashier's check for $320,797.97, using a check drawn on an account owned by C & P Realty, a company Pipkin controlled. Pipkin used the cashier's check to buy a house at 5138 Doliver Street in Houston. This purchase forms the basis for the money laundering charges in Counts 9 and 10 of the indictment.

directly to it. Because the loans were fraudulent, MCC was not actually closing them, but just pocketing the money. Between 1988 and 1989, Pioneer funded approximately 1,400 loans for MCC totaling about $93 million. Of this amount, $14 to $17 million was fraudulent. Because of the fraudulent loans, Pioneer was forced into bankruptcy. These fraudulent loan applications form the basis for the conspiracy and wire fraud charges in Counts 1 through 8 of the indictment.

Three times between August and October 1989, Pipkin had an employee cash checks for him. Each time, Pipkin gave the employee three checks, each for slightly less than $10,000. The employee then cashed the checks at the same bank on successive days. By using checks of less than $10,000, Pipkin hoped to avoid triggering the bank's currency transaction reporting requirements. These transactions form the basis for the structuring transaction charges in Counts 11 through 13 of the indictment.

Pipkin was charged in a 13 count indictment with one count of conspiracy to commit wire fraud in violation of 18 U.S.C. § 371 (Count 1); seven counts of aiding and abetting the commission of wire fraud in violation of 18 U.S.C. §§ 2 and 1343 (Counts 2 through 8); two counts of laundering money in violation of 18 U.S.C. §§ 1956(a)(1)(B)(i) (Count 9) and 1957 (Count 10); and three counts of structuring currency transactions in violation of 31 U.S.C. §§ 5313, 5322 and 5324(3) (Counts 11 through 13). Pipkin was convicted on all counts and sentenced to 60 months as to each of Counts 1 through 8, to run concurrent with each other and 78 months as to each of Counts 9 through 13, to run concurrent with each other and concurrent with Counts 1 through 8. In lieu of a fine, Pipkin was ordered to pay $842,000 in restitution. Pipkin filed a timely notice of appeal.

DISCUSSION

Pipkin appeals his convictions, arguing that the evidence is insufficient to support his structuring and money laundering convictions, that the indictment should have been dismissed because of Speedy Trial Act violations, that the district court failed to instruct the jury on the issue of materiality in Counts 1 through 10, and that the district court erred in failing to instruct the jury about the impeachment of a prosecution witness. We will address each of these issues in turn.

Structuring

Federal law requires banks to file a currency transaction report ("CTR") with the Secretary of the Treasury for any cash transaction over $10,000. 31 U.S.C. § 5313(a); ² 31 C.F.R. § 103.22(a)(1). ³ The law also forbids structuring a transaction for the purpose of evading a bank's requirement to file a CTR. 31 U.S.C. § 5324(3). ⁴ At the time Pipkin structured the transactions, the law provided criminal penalties for anyone "willfully violating" the anti-structuring requirements.

31 U.S.C. § 5322(a). ⁵

The Supreme Court interpreted § 5322(a)'s "willfully violating" provision in Ratzlaf v. United States, 510 U.S. 135, 146, 114 S.Ct. 655, 661-62, 126 L.Ed.2d 615 (1994), holding that the defendant must know "not only of the bank's duty to report cash transactions in excess of $10,000, but also of his duty not to avoid triggering such a report." In Ratzlaf, the defendant, Ratzlaf, ran up a large debt at a casino. He returned to the casino several days later with $100,000 of cash in hand, ready to pay the debt. The casino informed him that all transactions of over $10,000 in cash had to be reported to federal authorities. The casino said that it could accept a cashier's check for the full amount without triggering any reporting requirement. The casino then packed Ratzlaf into a limousine and sent him to area banks. Informed that banks, too, are required to report cash transactions in excess of $10,000, Ratzlaf purchased multiple cashier's checks, each for less than $10,000, and each from a different bank. He then delivered the checks to the casino. See id. at 137, 114 S.Ct. at 657.

Ratzlaf was convicted of structuring transactions to evade the banks' obligations to file CTRs, in violation of 31 U.S.C. §§ 5322(a) and 5324(3). The district court instructed the jury that while the government had to prove Ratzlaf knew of the banks' reporting requirements, it did not have to prove that he knew that structuring was unlawful. See Id. at 137-38, 114 S.Ct. at 657-58.

The Supreme Court reversed the conviction, holding that "to give effect to the statutory 'willfulness' specification, the Government had to prove Ratzlaf knew the structuring he undertook was unlawful." Id. at 138, 114 S.Ct. at 658. The Court stated that, for § 5322(a) purposes, a "willful" actor is "one who violates a known legal duty." Id. at 142, 114 S.Ct. at 659 (internal quotation omitted). Because "currency structuring is not inevitably nefarious," id. at 144, 114 S.Ct. at 660-61, structuring is not "so obviously 'evil' or inherently 'bad' that the willfulness requirement is satisfied irrespective of the defendant's knowledge of structuring." Id. at 146, 114 S.Ct. at 662. The Court reaffirmed "the venerable principle that ignorance of the law generally is no defense to a criminal charge. In particular contexts, however, Congress may decree otherwise. That ... is what Congress has done with respect to 31 U.S.C. § 5322(a) and the provisions it controls." Id. at 149, 114 S.Ct. at 663. Thus, to convict a defendant of structuring, "the jury ha[s] to find he knew the structuring in which he engage[d] was unlawful." Id.

Much of the public's ignorance regarding the illegality of structuring must be laid at the feet of the government. The Secretary of the Treasury thought that ignorance of the illegality of structuring was not an element of the crime, so he deliberately avoided publicizing the change in the law. In March 1988, the Secretary considered requiring banks to take steps to inform the public of the new anti-structuring laws. See 53 Fed.Reg. 7948 (1988). For example, banks would have been required to place a notice of the requirements at every teller's window, every deposit ticket would have been imprinted with a notice regarding the illegality of structuring, and all bank customers would have received notice of the new law in their bank statement every quarter. Id. The Secretary withdrew the proposal in May 1989, stating that the notices were unnecessary because it was clear that "the government need only prove that a criminal defendant had actual knowledge of the currency reporting requirements and the specific intent to evade them; the If the Secretary had adopted the proposed rules, our task would be much simpler. See United States v. Simon, 85 F.3d 906, 911 (2d Cir.) (Winter, J., dissenting), cert. denied, --- U.S. ----, 117 S.Ct. 517, 136 L.Ed.2d 406 (1996). We would simply hold that given the ample notice provided by his bank, Pipkin knew structuring was a crime. The Secretary chose not to go that route. Mistakenly thinking the government would never have to prove knowledge of the illegality of structuring, the Secretary deliberately avoided taking steps to put the public on notice. That certainly was his prerogative. It was, however, also a gamble, as...