U.S. v. St. Michael's Credit Union

• Decision Date: 28 February 1989
• Docket Number: Nos. 88-1848,88-1986,s. 88-1848
• Parties: , 28 Fed. R. Evid. Serv. 840 UNITED STATES of America, Appellee, v. ST. MICHAEL'S CREDIT UNION and Janice Sacharczyk, Defendants, Appellants. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 579

880 F.2d 579

58 USLW 2114, 28 Fed. R. Evid. Serv. 840

UNITED STATES of America, Appellee, v. ST. MICHAEL'S CREDIT UNION and Janice Sacharczyk,

Defendants, Appellants.

Nos. 88-1848, 88-1986.

United States Court of Appeals, First Circuit.

Heard Feb. 28, 1989.

Decided July 7, 1989.

Kathy B. Weinman and Harvey Weiner with whom Thomas E. Dwyer, Jr., Boston, Mass., D. Anthony Parks, Dwyer & Collora, Allen N. David and Peabody & Arnold, Boston, Mass., were on joint brief, for appellants.

Martha M. Coakley, Sp. Atty., Dept. of Justice, with whom Frank L. McNamara, Jr., U.S. Atty., Pittsburgh, Pa., and Jeremiah T. O'Sullivan, Sp. Atty., Dept. of Justice, Boston, Mass., were on brief, for U.S.

Before BOWNES, Circuit Judge, COFFIN, Senior Circuit Judge, and FUSTE, ^* District Judge.

BOWNES, Circuit Judge.

This case arises out of the alleged illegal activities of St. Michael's Credit Union and one of its employees, Janice Sacharczyk. St. Michael's was convicted of failing to file Currency Transaction Reports with the Internal Revenue Service on thirty-nine occasions during the period from September, 1983 to September, 1984 in violation of the Currency Transactions Reporting Act, 31 U.S.C. Secs. 5313 & 5322(b). Sacharczyk was convicted of knowingly and willfully aiding and abetting St. Michael's failure to file. These omissions formed the basis for additional convictions of both defendants for concealing, by trick, scheme and device, material facts from the IRS under 18 U.S.C. Sec. 1001. Defendants appeal their convictions citing numerous errors.

I. STATUTORY FRAMEWORK

As this case involves the interpretation of an intricate statute, a brief overview of the legislation is necessary to understand the issues presented.

The Currency Transactions Reporting Act, also known as the Bank Secrecy Act, 31 U.S.C. Sec. 5313 provides:

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, or under circumstances 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.

The Act's implementing regulations flesh out this statutory language. The regulations in effect during the indictment period mandated that: "Each financial institution By forcing financial institutions to keep such records, Congress hoped to maximize the information available to federal regulatory and criminal investigators. The overall goal of the statute was to interdict the laundering of illegally obtained and untaxed monies in legitimate financial institutions. See generally, California Bankers Ass'n v. Schultz, 416 U.S. 21, 26-30, 94 S.Ct. 1494, 1500-02, 39 L.Ed.2d 812 (1974) (noting purposes of Act).

                ... 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. Sec. 103.22(a).  A "transaction in currency" was defined as "[a] transaction involving the physical transfer of currency from one person to another."    31 C.F.R. 103.21.    Reports of these transactions must be made on Internal Revenue Service Form 4789, known commonly as a Currency Transaction Report (CTR).  A failure to file a CTR may be prosecuted as a felony when the omission occurs "while [the defendant is] violating another law of the United States, or as part of a pattern of illegal activity involving transactions of more than $100,000 in a 12-month period...." 31 U.S.C. Sec. 5322(b)
                

II. FACTS

We review the facts in the light most favorable to the government. See Jackson v. Virginia, 443 U.S. 307, 318-19, 99 S.Ct. 2781, 2788-89, 61 L.Ed.2d 560 (1979); Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 469, 86 L.Ed. 680 (1942); United States v. Campbell, 874 F.2d 838, 839 (1st Cir.1989).

St. Michael's was a small financial institution that catered to the people who lived in and around Lynn, Massachusetts. A great deal of its operation was devoted to serving the needs of the ethnic Polish community in Lynn. The organization and management of St. Michael's was, by all accounts, unprofessional and deficient. Due in part to this mismanagement, it was taken over by Massachusetts Share Insurance Corporation in September, 1984.

Janice Sacharczyk was employed at the credit union and served as its bookkeeper, computer operator, clerk, and treasurer. On December 13, 1983, she resigned her position as treasurer but continued to work at the credit union until September 6, 1984, despite bearing a child in the spring of 1984. Her main responsibility at the credit union was "to prove" its books to ensure that all of the money that went in or out was accounted for in the records. She also ran the computers and accessed information contained therein for others. Occasionally, she approved checks and obtained more money for tellers who had used up their initial allotment of cash.

For eight weeks between September and November 1983, St. Michael's was audited by John DiPerna, the Banking Examiner for the Credit Union Division of the Banking Commission of Massachusetts. DiPerna testified at trial that the audit was to "evaluate the assets and ascertain that all the liabilities in the institution[ ] are shown on the balance sheet" and to ensure the institution's compliance with state and federal laws and regulations.

During the audit, a member of DiPerna's staff discovered that on two occasions, St. Michael's had failed to file CTRs with the IRS. Although the law requiring the filing of CTRs had been passed in the 1970's, it was only in 1982 or 1983 that DiPerna was instructed by the federal government to enforce the law's provisions against state institutions. DiPerna met with Sacharczyk to discuss the CTRs. He told her that CTRs must be filled out and filed with the IRS whenever there are withdrawals or deposits of currency exceeding $10,000. DiPerna testified that "it was evident that they [defendants] were unaware of the law....." As was his custom at the time, DiPerna told Sacharczyk that if St. Michael's filed the CTRs for the two transactions, he would not report the omissions as violations. He also gave Sacharczyk an outdated and incomplete copy of the regulations that govern CTRs. Omitted from the regulations were the sections that dealt with civil and criminal penalties for the failure to file. DiPerna left the credit union In February, 1984, DiPerna returned to St. Michael's for a "bring-up exam." At that time, Sacharczyk showed him xerox copies (showing only the fronts) of the CTRs he had told her to file with the IRS (the French and Perry CTRs). She stated that they had been sent to the IRS and, therefore, DiPerna did not mention them in his audit report. These CTR forms detailed both the reasons for requiring CTRs and the civil and criminal penalties for failing to file.

telling "them to start keeping track of currency transactions over $10,000."

Contrary to the averment of Sacharczyk that the CTRs were sent to the IRS, Yvonne Covington, the IRS official in charge of keeping records on CTR filings, testified that no CTRs were filed by St. Michael's between September 1983 and October 1984. Covington acknowledged that records for that period had only recently been moved from Ogden, Utah to Detroit, Michigan, but asserted that "to our knowledge all documents were received...."

In September, 1984, agents of the IRS' Financial Task Force began an investigation of St. Michael's. Special Agent DeAngelis questioned Sacharczyk concerning her knowledge of CTRs. She stated that DiPerna had discussed them with her and that she had filed CTRs for the two currency transactions that DiPerna had brought to her attention. She then searched the basement and produced xeroxed copies of the CTRs she claimed to have sent to the IRS. Sacharczyk told the agents that St. Michael's had no official policy regarding CTRs. When the agents asked her whether there was a CTR compliance officer at St. Michael's, she responded "no." When asked whose responsibility it would be to file CTRs, she stated that either the Manager, Barbara Szczawinski, or herself would be responsible.

The Task Force investigation of St. Michael's uncovered a number of $10,000 transactions for which no CTRs had been filed. These formed the basis for the indictment in this case. The indictment charged Sacharczyk and Barbara Szczawinski with knowingly and willfully aiding and abetting St. Michael's failure to file CTRs in violation of 31 U.S.C. Secs. 5313, 5322(b) & 18 U.S.C. Sec. 2(b), and of aiding and abetting St. Michael's concealment by trick, scheme or device of material facts from the IRS in violation of 18 U.S.C. Secs. 1001 & 2(b). A conspiracy count was also part of the indictment. All three defendants were tried together. The jury found Szczawinski not guilty on all charges. Sacharczyk and St. Michael's were convicted on thirty-nine counts of felonious failure to file CTRS and on one count of concealing material facts from the IRS. Sacharczyk was acquitted on the conspiracy count. She received a one-year suspended sentence with probation and a $1,000 fine. St. Michael's was fined $10,000. Defendants moved for acquittal or in the alternative for a new trial under Fed.R.Crim.P. 29. The motion was denied. Sacharczyk and St. Michael's duly filed their notice of appeal.

The district court found that St. Michael's could be bound only by the actions, conduct and statements of Sacharczyk (and Szczawinski). The liability of the credit union is thus measured by the liability of Sacharczyk. We refer to St. Michael's and Sacharczyk as defendants rather than as principal and aider and abettor...