United States v. Phipps ( 1996 )

United States Court of Appeals,
Eleventh Circuit.
No. 94-8778.
UNITED STATES of America, Plaintiff-Appellee,
v.
C. Wayne PHIPPS, Defendant-Appellant.
April 25, 1996.
Appeal from the United States District Court for the Northern
District of Georgia. (No. 4:93-CR-033-01-HLM), Harold L. Murphy,
Judge.
Before TJOFLAT, Chief Judge, CARNES, Circuit Judge, and FAY, Senior
Circuit Judge.
CARNES, 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
1
Having reviewed the record, we reject without further
discussion Phipps' contentions concerning the district court's
imposition of a two-point sentence enhancement for obstruction of
justice, the district court's entrapment instruction, and several
of the district court's evidentiary rulings.
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.
I. FACTS AND PROCEDURAL HISTORY
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.
II. DISCUSSION
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).
A. The Currency Transaction Reporting Requirements
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).
B. Section 5324(a)—The 1986 Amendments to the Bank Secrecy Act
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).
C. The Competing Interpretations of § 5324(a)(1)
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) unless
and until a CTR is required to be filed, and that cannot happen
when no currency is deposited or exchanged with the financial
institution.
The government would have us read § 5324(a)(1) differently.
Under the government's interpretation, the provision would cover a
defendant's actions causing or attempting to cause the bank not to
have to file the report in the first place. In other words, the
government urges us to extend § 5324(a)(1) to structuring
activities that are designed to cause a bank not to have to file a
CTR that would have been required but for the structuring.
D. The Proper Interpretation of § 5324(a)(1)
There are three obstacles to the government's expansive
interpretation of § 5324(a)(1), which taken together are
insurmountable. The first obstacle is the plain language of the
provision itself. That language clearly says that what is
proscribed is causing or attempting to cause the bank not to file
"a report required" under the applicable CTR statutes and
regulations. It does not say that what is proscribed is
structuring transactions so that the bank is not required to file
a CTR to begin with.
"[I]n determining the scope of a statute, one is to look
first at its language. If the language is unambiguous, ... it is
to be regarded as conclusive unless there is a clearly expressed
legislative intent to the contrary." Dickerson v. New Banner
Inst., Inc., 460 U.S. 103, 110, 103 S.Ct. 986, 990, 74 L.Ed.2d 845(1983) (citations and quotation marks omitted). Moreover, it is
well settled that criminal laws are to be strictly construed.
United States v. Enmons, 410 U.S. 396, 411, 93 S.Ct. 1007, 1015, 35
L.Ed.2d 279 (1973); United States v. Campos-Serrano, 404 U.S. 293,
297, 92 S.Ct. 471, 474, 30 L.Ed.2d 457 (1971); United States v.
Bass, 404 U.S. 336, 347, 92 S.Ct. 515, 522, 30 L.Ed.2d 488 (1971).
Because there is no qualification in the language of the statute
itself, we should read "a report required" to mean what it says.
That is, we should read "a report required" in § 5324(a)(1) to mean
a report that the financial institution is obligated to file, which
is what "required" means, not a report that it would have been
obligated to file had circumstances been different.
The second obstacle to the government's expansive
interpretation of § 5324(a)(1) is that it would render § 5324(a)(3)
entirely superfluous. If we adopted the government's view, every
violation of the antistructuring provision in the third subdivision
of § 5324(a) would also be a violation of the first subdivision;
there would be no need for § 5324(a)(3). It is a basic tenet of
statutory construction that courts should refrain from construing
a statutory provision in a way that renders meaningless another
provision within the same statute. See Ratzlaf v. United States,
--- U.S. ----, ----, 114 S.Ct. 655, 659, 126 L.Ed.2d 615 (1994);
Pennsylvania Dep't of Pub. Welfare v. Davenport, 495 U.S. 552, 562,
110 S.Ct. 2126, 2133, 109 L.Ed.2d 588 (1990); Lohr v. Medtronic,
Inc., 56 F.3d 1335, 1344 (11th Cir.1995), cert. granted, --- U.S.
----, 116 S.Ct. 806, 133 L.Ed.2d 752 (1996).
The third obstacle to the government's interpretation is the
legislative history of § 5324, which clearly shows that §
5324(a)(1) was aimed only at non-structuring situations.
Prior to the enactment of § 5324, a number of federal courts
of appeals' decisions addressed whether and under what
circumstances individuals unaffiliated with the financial
institution that was involved in a currency transaction could be
held criminally liable for causing the institution not to file a
CTR. Some decisions had held that an individual could be held
criminally liable for causing a financial institution to fail to
file a CTR that it had a legal duty to file, see United States v.
Lafaurie, 833 F.2d 1468, 1470-71 (11th Cir.1987), cert. denied, 486
U.S. 1032, 108 S.Ct. 2015, 100 L.Ed.2d 602 (1988); United States
v. Hayes, 827 F.2d 469, 472 (9th Cir.1987); United States v. Cure,
804 F.2d 625, 629 (11th Cir.1986); United States v. Tobon-Builes,
706 F.2d 1092, 1100-01 (11th Cir.1983), but other decisions also
had held that an individual could not be held criminally liable for
structuring transactions to avoid triggering the bank's duty to
file a CTR in the first place, see United States v. Gimbel, 830
F.2d 621, 625-26 (7th Cir.1987); United States v. Larson, 796 F.2d
244, 247 (8th Cir.1986); United States v. Dela Espriella, 781 F.2d
1432, 1435 (9th Cir.1986); United States v. Denemark, 779 F.2d
1559, 1563 (11th Cir.1986); United States v. Varbel, 780 F.2d 758,
762 (9th Cir.1986); United States v. Anzalone, 766 F.2d 676, 683
(1st Cir.1985); but see United States v. Richeson, 825 F.2d 17, 20
(4th Cir.1987) (holding individual criminally liable for
structuring to avoid reporting requirements).
Congress enacted § 5324 to ensure that individuals would be
held criminally liable in both situations. As the Senate report
accompanying the legislation made clear, one subdivision of the
provision (which would become § 5324(a)(1)) was aimed at efforts to
prevent a CTR which was required from being filed while another
(which would become § 5324(a)(3)) was aimed at structuring to avoid
the CTR requirements from being applicable. The Senate report
explained:
[The proposed amendment to 31 U.S.C. § 5313(a) ] would
codify Tobon-Builes and like cases and would negate the effect
of Anzalone, Varbel and Denemark. It would expressly subject
to potential liability a person who causes or attempts to
cause a financial institution to fail to file a required
report.... In addition, the proposed amendment would create
the offense of structuring a transaction to evade the
reporting requirements, without regard for whether an
individual transaction is, itself, reportable under the Bank
Secrecy Act.
S.Rep. No. 433, 99th Cong., 2d Sess. 22 (1986). A Justice
Department official explained to Congress:
[The amendment] addresses the problem of "structured"
currency transactions. That is, currency transactions which
are intentionally broken down into a series of smaller
transactions, each under $10,000, for the purpose of evading
the reporting requirements of the Bank Secrecy Act. This
process, commonly known as "smurfing," is undertaken by
individuals or groups of individuals who, intending to prevent
banks from reporting their currency transactions, engage in a
series of cash transactions each under $10,000 at different
banks on different days, different banks on the same day, or
at the same bank, or its branches, on different days.
The Drug Money Seizure Act and the Bank Secrecy Act Amendments:
Hearing on S. 571 and S. 2306 Before the Senate Comm. on Banking,
Housing, and Urban Affairs, 99th Cong., 2d Sess. 66-67 (1986)
(statement of James Knapp, Deputy Asst. Attorney General). That
was what the part of the legislation that would become § 5324(a)(3)
was designed to do. As to the part that would become § 5324(a)(1),
the Justice Department official explained that:
[The amendment] would also prohibit persons from ...
causing or attempting to cause the institution to fail
entirely in its duty to report currency transactions.... This
new language is, in part, a restatement of the law of
causation found in 18 U.S.C. § 2(b) and 31 U.S.C. § 5313....
This restatement of the applicability of 18 U.S.C. § 2(b) and
1001 to the Bank Secrecy Act was believed necessary following
the decision of the First Circuit in Anzalone.... Certain
language in that opinion and other cases ... may be read as
questioning whether an individual having no duty to report
currency transactions may be held criminally liable for
causing a domestic financial institution, which has such a
duty, to fail to file reports of currency transactions.
Id. at 67 (emphasis added).
A bank's duty to file a CTR only arises when a person engages
in a cash transaction of more than $10,000.00 in a single day.
Anzalone, Varbel, and Denemark all involved situations where the
defendant had structured currency transactions with the bank so
that the bank never had a duty to report the transactions. To
negate the effect of those cases, Congress created the crime of
structuring, codified in § 5324(a)(3), which operates "without
regard for whether an individual transaction is, itself reportable
under the Bank Secrecy Act." S.Rep. No. 433, 99th Cong., 2d Sess.
22 (1986). In contrast, the above quoted passages from the
legislative history make it clear that the crime of "causing a
financial institution to fail to file a CTR" is a restatement of
existing criminal causation liability, which prior to the addition
of § 5324(a) had been prosecuted under 18 U.S.C. § 2(b). Tobon-
Builes, the Eleventh Circuit case that Congress sought to codify in
§ 5324(a)(1), involved transactions that did trigger the bank's
obligation to file a CTR, thus subjecting the defendant to criminal
liability under 18 U.S.C. § 2(b) for causing the bank's failure to
do so. 706 F.2d at 1098, 1101.
As this Court made clear in Tobon-Builes, causation liability
under 18 U.S.C. § 2(b) depends on the defendant's causing another
to commit a crime. Id. at 1099 ("it is well established that §
2(b) was designed to impose criminal liability on one who causes an
intermediary to commit a criminal act"); see also Cure, 804 F.2d
at 629 (noting that courts holding individuals not liable for
causing a bank to fail to file CTR did so the because bank never
had an obligation to file a CTR, whereas in that case the bank did
have such an obligation, so the defendant was criminally liable
under 18 U.S.C. § 2(b)). Thus, the legislative history of § 5324
makes it clear that an individual must engage in a currency
transaction with the bank that triggers the bank's legal duty to
file a CTR before that individual may be held criminally liable
under § 5324(a)(1) for causing the bank's failure to file. Because
the bank in this case never had a legal duty to file a CTR, Phipps
may not be held criminally liable under § 5324(a)(1).
In summary, the plain language of the provision, principles of
statutory construction, and legislative history all compel the
conclusion that § 5324(a)(1) is violated only when an individual
causes a financial institution not to file a CTR that it had a
legal duty to file. The government concedes that the bank in this
case was never obligated to file a CTR. We hold, therefore, that
the evidence presented by the government was insufficient as a
matter of law to establish a violation of 31 U.S.C. § 5324(a)(1).
Accordingly, the district court erred in not granting Phipps' Rule
29 motion for judgment of acquittal on the two counts charging
Phipps with violating that statutory provision. However, because
the conduct Phipps engaged in does constitute money laundering in
violation of 18 U.S.C. § 1956(a)(3)(B), we affirm Phipps'
conviction on the counts charging him with a violation of that
statutory provision.
III. CONCLUSION
For the foregoing reasons, we REVERSE Phipps' convictions
under 31 U.S.C. § 5324(a)(1) for causing a financial institution to
fail to file a CTR, AFFIRM Phipps' convictions under 18 U.S.C. §
1956(a)(3)(B) for money laundering, VACATE Phipps' sentence, and
REMAND to the district court for resentencing.