US v. Paris
| Decision Date | 13 May 1988 |
| Docket Number | No. 84 CR 196.,84 CR 196. |
| Citation | 706 F. Supp. 184 |
| Parties | UNITED STATES of America, Plaintiff, v. Anthony PARIS and Marie Barbieri, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
Andrew J. Maloney, U.S. Atty., Brooklyn (Julie Copeland, of counsel), for U.S.
Richard A. Rehbok, New York City, for Paris.
Maurice H. Sercarz, Sercarz, Schechter & Lopez, Brooklyn Heights, N.Y., for Barbieri.
Defendants have jointly moved to strike all seven counts of the pending indictment. Defendant Barbieri also requests release on bail. For the reasons noted below, both motions are denied.
Defendants Anthony Paris and Marie Barbieri were charged in 1984 in a seven count indictment with various violations stemming from transactions allegedly structured to avoid currency reporting requirements.1 The indictment includes the following allegations:
1. Count 1 alleges that both defendants conspired between January 1980 and December 1981 to conduct currency transactions in such a fashion as to prevent banks from complying with transaction reporting requirements administered by the Internal Revenue Service. The overt acts alleged are substantive violations of the Currency and Foreign Transactions Reporting Act, 31 U.S.C. § 1081 (1976) (), and of the false statement statute, 18 U.S.C. § 1001 (1982).
2. Count 2 alleges that both defendants caused banks to fail to file Currency Transaction Reports (CTR's) as part of a pattern of illegal activity involving transactions exceeding $100,000 in a twelve-month period;2 and,
3. Counts 3 through 7 allege that defendant Barbieri exchanged cash for travelers checks at three separate Barclays Bank branches on March 9, 1981, March 13, 1981, March 17, 1981, March 20, 1981, and March 26, 1981. On each day, she allegedly exchanged less than $10,000 at each branch, but the total amount exchanged at Barclays Bank in the New York area each day exceeded $10,000. Her conduct allegedly violated 18 U.S.C. section 1001 as fraudulent concealment of a material fact.
The statutes which defendants are charged with violating have undergone some evolution since defendants were first indicted. The indictment's core is Count 2, which alleges a violation of then-designated section 1081. See 31 U.S.C. § 1081 (1976) (currently found at 31 U.S.C. § 5313(a) (1982)). This statute was passed into law in 1970 as the Currency and Foreign Transactions Reporting Act, Pub.L. No. 91-508, §§ 221-223, 84 Stat. 1122. It was recodified with no substantive changes in 1982. See Act of Sep. 13, 1982, Pub.L. No. 97-258, 96 Stat. 996. In 1986, Congress specifically outlawed structuring transactions to avoid the reporting requirement. See 31 U.S.C.A. § 5324 (West Supp.1986). Of course, this statute is inapplicable to the charges facing defendants and does not affect prosecutions brought under the original statute.
The Currency and Foreign Transactions Reporting Act, Public Law 91-508, 31 U.S. C. § 5313 et seq., "requires reports of cash transactions involving such amounts or taking place under such circumstances as the Secretary of the Treasury shall by regulation prescribe." H.R.Rep. No. 975, 91st Cong., 2d Sess., reprinted in 1970 U.S. Code Cong & Admin.News 4394, 4396. The statute reads as follows:
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.
Thus, determining whether the facts alleged constitute a crime depends at least in part on the language of the Secretary's regulations. In pertinent part in 1980 and 1981, the regulations provided thus:
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 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 (1980 & 1981).
The Treasury regulations were not a model of clarity in 1980 and 1981. Determining the circumstances under which a bank had to file a CTR was not self-evident.3 The regulations did not specifically bar bank customers from breaking down transactions involving more than $10,000 into multiple transactions involving less than $10,000. The phrase "financial institution" did not clearly distinguish between a bank, including all of its branches, and a single branch of a bank. Although the CTR's themselves included language requiring banks to aggregate separate daily transactions totaling more than $10,000, if they were aware of such other transactions, see United States v. Heyman, 794 F.2d 788, 789 n. 2 (2d Cir.), cert. denied, 479 U.S. 989, 107 S.Ct. 585, 93 L.Ed.2d 587 (1986), the regulations themselves did not specifically require aggregation of separate transactions.
The regulations' lack of clarity and the absence of a customer's duty to file CTR's has not forestalled prosecutions in all cases. Customers may be charged with causing banks to fail to file CTR's even if they themselves have no duty to file. See id. at 791; 18 U.S.C. § 2(b) (1982). A customer's actual inability to commit the crime of failing to file a CTR is no defense to a charge of causing a bank to fail to file a CTR. See Heyman, 794 F.2d at 791.
Charges may be brought under section 2(b) if a substantive violation is alleged, even in the absence of a specific reference to section 2(b) in the indictment. See United States v. Perry, 643 F.2d 38, 45 (2d Cir.1981); United States v. Taylor, 464 F.2d 240, 241-42 n. 1 (2d Cir.1972). Since section 2(b) requires proof of willfulness, any danger that a defendant will be prejudiced by unclear regulations is cured by requiring proof of sufficient intent. See Heyman, 794 F.2d at 792.
Prosecutions directly under the currency reporting statute were not the only means in 1980 and 1981 of sanctioning violations of the reporting requirements. The false statement statute was also available. See 18 U.S.C. § 1001 (1976). United States v. Culoso, 461 F.Supp. 128, 132-33 (S.D.N.Y.1978). Reading Culoso in conjunction with section 2(b), customers' schemes which deprive the government of material information by causing banks to fail to file CTR's are actionable under this statute as well as under 31 U.S.C. section 5313(a). See United States v. Nersesian, 824 F.2d 1294, 1312-13 (2d Cir.) () (dicta), cert. denied, ___ U.S. ___, 108 S.Ct. 357, 98 L.Ed. 2d 382 (1987); United States v. Richeson, 825 F.2d 17, 20 (4th Cir.1987) ().
Because the Second Circuit's analysis of similar cases has been inconsistent, see discussion infra, a review of the applicable caselaw interpreting the statutes and regulations is helpful to understanding the issues raised by the pending indictment and defendants' motions. Prosecutions resting on two different theories of criminal liability have been upheld. Both theories have sustained prosecutions under 18 U.S.C. section 2(b) of violations of both substantive criminal statutes, 31 U.S.C. section 5313 and 18 U.S.C. section 1001. These theories differ as to a bank's duty to file CTR's in certain circumstances, and the permissibility of customers structuring transactions in certain ways.
The term "structural liability" is an invention of this Court, but it summarizes the essence of the broadest theory of criminal liability advanced by the courts in the currency reporting requirement cases. See United States v. Tobon-Builes, 706 F.2d 1092, 1098 (11th Cir.1983) (). The structural liability theory permits prosecution of any alteration by a bank's customers of a financial transaction with the intent to prevent a bank from filing a CTR. The method selected by the customer to prevent the bank from fulfilling its duty to file CTR's is irrelevant to a customer's criminal liability under this theory. Presumably, customers could be prosecuted for making a series of single daily transactions at a bank on different days, with each daily transaction totalling less than $10,000, if done with the requisite criminal intent. Although banks have no duty to aggregate daily transactions over time, structuring transactions in this fashion causes a bank to fail to file a CTR. Thus, the criminal act is the act of restructuring to avoid reporting itself, not the actual process of entering the bank and carrying out the restructured transaction in a particular manner.
Two precepts buttress the structural liability theory:
1. Since banks have a duty to file CTR's if a transaction involves more than $10,000, any modification of a financial transaction, with the intent...
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