United States v. Perlmutter

• Decision Date: 20 May 1986
• Docket Number: No. 86 Cr. 207 (RWS).,86 Cr. 207 (RWS).
• Citation: 636 F. Supp. 219
• Parties: UNITED STATES of America, v. Hermena PERLMUTTER, Defendant.
• Court: U.S. District Court — Southern District of New York

636 F. Supp. 219

UNITED STATES of America, v. Hermena PERLMUTTER, Defendant.

No. 86 Cr. 207 (RWS).

United States District Court, S.D. New York.

May 20, 1986.

Rudolph W. Giuliani, U.S. Atty., S.D. N.Y., New York City, for United States; John M. McEnany, Asst. U.S. Atty., of counsel.

Kantor, Davidoff, Wolfe, Rabbino & Kass, P.C., New York City, Kaplowitz & Wise, Linden, N.J., for defendant; Herbert C. Kantor, New York City, Leo Kaplowitz, Linden, N.J., of counsel.

SWEET, District Judge.

Defendant Hermena Perlmutter ("Perlmutter") has moved pursuant to Fed.R. Crim.P. Rule 12(b)(2) for dismissal of counts one through eight of the nine-count superseding indictment filed April 17, 1986 charging violations of the Bank Secrecy Act on the grounds that these counts are facially insufficient. For the reasons set forth below, the motion for dismissal of counts one through eight is granted.

The Indictment

The counts of the indictment challenged here relate to the financial services which Perlmutter, an attorney, performed for clients in connection with her legal representation. Four transactions are principally at issue, each giving rise to a pair of indictment counts comprising the eight counts at issue. Each pair, as it relates to a transaction, will be individually summarized as set forth in the indictment and the moving papers.

Counts one and two of the indictment relate to Perlmutter's services in connection with her purchase of real estate on behalf of a client, Daniel Washington, in March, 1981. According to the government, Perlmutter assisted Washington in "laundering" money obtained from the drug trade by making two deposits of $9,300.00 on March 11, 1981 each in different bank accounts, at the Merchants' Bank of New York followed by an additional $200.00 deposit in each account the following day. No Currency Transaction Report ("CTR") was filed for these transactions. Count One of the indictment charges that the defendant concealed from the Department of the Treasury and the Immigration and Naturalization Service the fact that "facially separate" deposits of United States currency were made in violation of 18 U.S.C. sections 1001¹ and 2(b)², which proscribe respectively concealment of material information from the federal government and aiding and abetting or causing the banks to commit a crime.

Count Two charges Perlmutter with aiding and abetting, in violation of 18 U.S.C. 2(b), the Merchants Bank to fail to file a CTR in violation of the Currency Transaction Reporting Act, 31 U.S.C. § 5311 et seq.,³ otherwise known as the Bank Secrecy Act. In essence, Counts One and Two charge Perlmutter with structuring her transactions to avoid triggering the bank's $10,000 reporting requirement.

Counts Seven and Eight involve the same pattern of transactions in furtherance of another real estate purchase on behalf of Perlmutter's clients. According to the government, on October 14, 1982, Perlmutter purchased two Emigrant Savings Bank tellers' checks for $5,000.00 and $7,000.00 in different names to avoid exceeding the $10,000.00 reporting limit. No CTR was filed for this transaction, and the government similarly has charged violations of 18 U.S.C. § 1001, 2(b) and 31 U.S.C. § 5311 et seq.

Counts Three through Six of the indictment pertain to a single real estate transaction but involve two separate currency transactions which support the related "pairs" of indictment counts. The government claims that on August 19, 1981 Perlmutter purchased tellers' checks from Emigrant Savings Bank in her own name in the amounts of $5,000.00, $3,500.00 (two) and $2,200.00, totalling $14,000.00 in a single day. While a CTR was filed for these checks, the government contends that Perlmutter withheld or concealed the person on whose behalf the transaction was made, in violation of 18 U.S.C. § 1001 and 2(b). Count Four derivatively charges that this failure to disclose the principal of the transaction caused the Emigrant Savings Bank to file a false CTR with respect to the purchase of $14,000.00 of tellers' checks in violation of the Bank Secrecy Act and 18 U.S.C. § 2(b). Counts Five and Six charge violations of the same section respectively for a November 9, 1981 purchase of a certified check in the amount of $120,000.00. A CTR was also filed for this real estate transaction, but it did not reveal that the transaction was on behalf of anyone other than Perlmutter.

Perlmutter, through each of the four transactions, is thus alleged to have violated 18 U.S.C. § 1001 by withholding or concealing from the government material information concerning the transactions, and is alleged to have violated 31 U.S.C. § 5311 et seq by causing the banks to file an inaccurate CTR or not to file a CTR at all.⁴

Statutory Scheme

Section 5313 of the Currency Transaction Reporting Act authorizes the Secretary of the Treasury to require financial institutions and other participants in certain currency transactions to file a CTR detailing the transaction for the Secretary:

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. A participant acting for another person shall make the report as the agent or bailee of the person and identify the person for whom the transaction is being made.

31 U.S.C. § 5313(a).

The Secretary chose to exercise only a subpart of this plenary power to require institutions and other participants to file CTRs. The Secretary's regulations in effect at the time of these events subjected only financial institutions (defined in 31 U.S.C. § 5312(a)(2)), and not individuals to this reporting requirement for transactions in currency of over $10,000.00:

Each financial institution 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. Such reports shall be made on forms prescribed by the Secretary and all information called for in the forms shall be furnished.

31 C.F.R. § 103.22(a) (1982).⁵

The reporting form which the Secretary issued during the relevant period was Internal Revenue Service ("IRS") Form 4789, the only IRS document to mention the problem of multiple transactions designed to avoid the $10,000.00 reporting threshold:⁶

Each financial institution must file a Form 4789 for each deposit, withdrawal, exchange of currency or other payment or transfer, by, through or to that financial institution, which involves a transaction in currency of more than $10,000. Multiple transactions by or for any person which in any one day total more than $10,000 should be treated as a single transaction if the financial institution is aware of them.

Congress has enacted, in the intervening period between these financial transactions and the present, section 60501 of the Internal Revenue Code, 26 U.S.C. § 60501 (West Dec. 1984), which places a similar reporting burden on any person who receives in excess of $10,000 in one or two or more related transactions, provides in part:

(a) Cash Receipts of more than $10,000.00 — Any person —

(1) who is engaged in a trade or business, and

(2) who, in the course of such trade or business, receives more than $10,000 in cash in 1 transaction (or 2 or more related transactions),

shall make the return described in subsection (b) with respect to such transaction (or related transactions) at such time as the Secretary may by regulations prescribe.

Therefore, this court, analyzing the indictment under statutes predating section 60501, faces a limited, but, nevertheless, important statutory ambiguity.

Discussion

This facial challenge to the Perlmutter indictment poses a question without prior Second Circuit treatment,⁷ in the context of a split of opinion among the circuit courts. Counts One through Eight of the indictment essentially charge Perlmutter with "structuring" her financial dealings for clients to avoid the $10,000.00 reporting requirements in 31 C.F.R. § 103.22. Although there is no dispute that only the bank is required to file a CTR in such an instance, the government asserts that this avoidance tactic constitutes aiding and abetting, 18 U.S.C. § 2(b), or causing the bank to violate the Bank Security Act, 31 U.S.C. §§ 5313, 5322 and causes the concealment of material facts from the federal government in violation of 18 U.S.C. §§ 1001, and 2(b).

Perlmutter, relying on the "void for vagueness" analysis in the recent opinions of the First Circuit in United States v. Anzalone, 766 F.2d 676 (1st Cir.1985) and the Ninth Circuit in United States v. Varbel, 780 F.2d 758 (9th Cir.1986) contends that the imposition of criminal sanctions under these circumstances violates her Fifth Amendment due process rights because she had no fair warning or notice that structuring her transaction to avoid reporting statutes would result in criminal penalties. According to Perlmutter, the Secretary's decision to use only a small part of the plenary power granted by 31 U.S.C. § 5313 by requiring only financial institutions to file a CTR, 31 CFR § 103.22, reinforced the impression that private persons would not incur criminal liability for apportioning transactions to avoid reporting, as they had no independent duty to consolidate those transactions or inform the bank of their existence. As the Anzalone court observed, the Comptroller General of the United States specifically noted in a Report to Congress that the Secretary's regulations "... were silent on the propriety of a customer's conducting multiple...