United States v. Oreira ( 1994 )

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
___________________
No. 93-1079
___________________
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
SERGIO EDUARDO OREIRA and CARLOS HUMBERTO POSTIZZI,
Defendants-Appellants.
_________________________________________________________________
Appeals from the United States District Court
for the Northern District of Texas
_________________________________________________________________
(August 4, 1994)
Before KING and SMITH Circuit Judges, and KAZEN,1 District Judge.
KAZEN, District Judge:
Sergio Eduardo Oreira (Oreira) and Carlos Humberto Postizzi
(Postizzi) appeal from their convictions on three counts of
structuring in order to evade the reporting requirements and one
count of conspiracy. We reverse and remand.
Background
Federal law requires financial institutions to file a currency
transaction report (CTR) with the Secretary of the Treasury for
1
District Judge of the Southern District of Texas, sitting
by designation.
cash transactions greater than $10,000. 31 U.S.C. § 5313; 31
C.F.R. § 103.22(a)(1). It is illegal to structure, assist in
structuring, or attempt to structure any transaction for the
purpose of evading the filing of a CTR. 31 U.S.C. §5324(a)(3). A
person "willfully violating" the antistructuring section is subject
to criminal penalties. 31 U.S.C. §5322.
Defendants Oreira and Postizzi worked for Continental Transfer
Services d/b/a Servicios Continental ("Continental") in Houston.2
Continental was a "giro" house which wired money for its customers
in the United States to individuals or companies in other
countries. Oreira was an employee of Continental and Postizzi was
its vice-president. From late 1989 to March 1991, Continental did
business in Houston. Oreira and Postizzi would accept money from
customers, allegedly manufacture customer records in amounts under
$10,000, and wire the money to different locations outside the
United States, mostly to Colombia.
One business associate of the Defendants was Patricia Gomez.
Gomez was also a government informant. In the fall of 1990, Gomez
met with the Defendants. On two of these occasions, Postizzi
instructed Gomez how to prepare fictitious receipts while Oreira
was present. Based in part on the information she gathered from
these meetings, IRS Agents executed a search warrant on
Continental's premises on March 22, 1991. A few days later, the
2
Two other members of Continental were indicted with Oreira
and Postizzi. Jorge Somoza, the President of the company, was
convicted with Oreira and Postizzi but is not a party to this
appeal. Lilliana Gamba, an employee of the company, pleaded
guilty to a reduced offense during the trial.
2
Secretary of the Treasury issued a geographic targeting order
requiring Continental to file CTRs for any amount of money over
$100 during the next six months.
In April 1991, Postizzi and Oreira assisted in changing
Continental's name to Exprotur and executed a new lease in a Fort
Worth strip mall. In early June 1991, Oreira and Gamba opened new
bank accounts in Fort Worth. The Fort Worth bank accounts were not
subject to the geographical targeting order. From June 4 to June
21, 1991, Oreira, Gamba and Postizzi accepted money from customers,
and on the same day, would deposit money in amounts greater than
$100 but less than $10,000 into different bank accounts at various
banks in Fort Worth. The money was wired to different locations
outside the United States, again mostly to Colombia.
Oreira and Postizzi were convicted of three counts of
structuring transactions with domestic financial institutions in
order to evade the filing of CTRs under 31 U.S.C. §§ 5313, 5322 and
5324, and one count of conspiracy to commit those acts under 18
U.S.C. § 371. The Defendants were sentenced to imprisonment for 70
months, plus three years of supervised release. Oreira and
Postizzi challenge their conviction and sentence.3
3
The Defendants challenge the enhancement of their sentences
under U.S.S.G. 1B1.3(a)(1)(B), U.S.S.G. 2S1.1(b)(2), and U.S.S.G.
2S1.3(b)(1). In view of the remand for a new trial, we do not
reach this question.
3
Analysis
Jury Instructions
The Defendants contend that the district court erred by
refusing to submit Defendants' requested definition of the term
"willfully". 31 U.S.C. §§ 5324, 5322. The proposed instruction
read:
The word "willfully," as that term has been used from
time to time in these instructions, means that the act
was committed voluntarily and purposely, with the
specific intent to do something the law forbids; that is
to say, with bad purpose either to disobey or disregard
the law.
Instead, the relevant portion of the jury charge read:
It is not necessary for the Government to prove that a
defendant knew that structuring or assisting in
structuring a transaction to avoid triggering the filing
requirements was itself illegal. The Government need
only prove beyond a reasonable doubt that a defendant
structured or assisted in structuring currency
transactions with specific intent to avoid said reporting
requirements. In other words, a defendant's ignorance of
the law prohibiting structuring is no defense if he knew
about filing requirements and intentionally acted to
evade or assisted in evading them.
Generally, failure to instruct the jury on an essential element of
the offense is error. United States v. Williams, 985 F.2d 749, 755
(5th Cir. 1993), cert. denied, ___ U.S. ___, 114 S. Ct. 148, 126
L. Ed. 2d 110 (1993). Although the district court's instruction was
a correct statement of Fifth Circuit law at the time of trial,4 the
Supreme Court has since reached a contrary result. In Ratzlaf v.
United States, the Supreme Court held that in order to convict a
4
United States v. Beaumont, 972 F.2d 91, 94 (5th Cir. 1992).
4
defendant under 31 U.S.C. §§ 5322 and 5324, it does not suffice for
the government to prove that the defendant knew of the bank's
reporting obligation and attempted to evade it. Ratzlaf, ___ U.S.
___, ___, 114 S. Ct. 655, 657, 126 L. Ed. 2d 615 (1994). The
government must now also prove that a person, when structuring a
currency transaction, knew that his conduct was unlawful. Id. The
Defendants' requested instruction was therefore correct under
Ratzlaf. Because Ratzlaf was issued while this case was still on
direct appeal, the Defendants may invoke Ratzlaf as controlling.
Griffith v. Kentucky, 479 U.S. 314, 328, 107 S. Ct. 708, 716, 93
L. Ed. 2d 649 (1987). It was therefore error to fail to instruct the
jury on willfulness.
The Government contends that the error was harmless because
the Defendants at trial did not argue or claim that the Government
failed to show they knew their conduct was unlawful. This argument
is disingenuous, since our existing precedent and the trial court's
ruling foreclosed any such argument. Moreover, as noted in
Ratzlaf, "currency structuring is not inevitably nefarious." 114
S. Ct. 660-61. The Government directs our attention to the
considerable evidence of intentional structuring, but this is not
necessarily equivalent to an intent to do something illegal. The
trial court here did not merely give an incomplete definition of
"willfully," as in United States v. Malone, 837 F.2d 670 (5th Cir.
1988). Instead, through no fault of his own, the trial judge
expressly but incorrectly told the jury that the Government need
not prove the Defendants knew their conduct was illegal. We
5
decline to conclude that the jury, if properly instructed, would
perforce convict these defendants of willfully violating the
structuring laws.5
Two circuits have now held that failure to instruct on
willfulness in a structuring case is plain error. United States v.
Jones, 21 F.3d 165, 173 (7th Cir. 1994); United States v. Rogers,
18 F.3d 265, 268 (4th Cir. 1994). We need not find plain error
here, since both Defendants requested the proper instruction and
objected to its omission at trial. We conclude that the error was
harmful.6 The convictions must be reversed and the case remanded
for new trial.
5
Although there was not overwhelming evidence that the
Defendants knowingly violated the law, there nevertheless was
sufficient evidence to support a finding of guilt had the jury
been properly charged. Accordingly a remand for new trial does
not pose a double jeopardy problem.
6
We recognize the apparent inconsistency in some of our
opinions concerning the proper standard of appellate review in
instances where the trial court fails to instruct the jury on all
elements of a crime. For example, in United States v. Ojebode,
957 F.2d 1218, 1227 (5th Cir. 1992), cert. denied, ___ U.S. ___,
113 S. Ct. 1291, 122 L. Ed. 2d 683 (1993), we said that a jury's
verdict cannot stand if the instructions do not require it to
find each element of the crime under the proper standard of
proof, citing Cabana v. Bullock, 474 U.S. 376, 384, 106 S. Ct.
689, 696, 88 L. Ed. 2d 704 (1986). To the same effect is dicta in
United States v. Ortega, 859 F.2d 327, 333 (5th Cir. 1988), 489
U.S. 1027, 109 S. Ct. 1157, 103 L. Ed. 2d 216 (1989). On the other
hand, we have used a harmless error analysis in cases such as
Williams, supra, 985 F.2d at 756, and United States v. Bolin, 876
F.2d 370 (5th Cir. 1989). See United States v. Brown, 616 F.2d
844, 846 (5th Cir. 1980), eschewing a per se plain error rule.
The United States Supreme Court also appears to have rejected the
per se rule suggested in Cabana. Pope v. Illinois, ___ U.S. ___,
___ 107 S. Ct. 1918, 1922 n.7, 95 L. Ed. 2d 439 (1987). For these
reasons, we use a harmless error analysis here.
6
Having determined that the case must be retried, it is
appropriate to discuss other claims which are likely to arise in
the new trial.
Evidentiary Rulings
The Defendants object to the testimony of IRS Special Agent
Michael Balas, who testified as an expert on currency structuring.
The Defendants contend that this testimony expressed an opinion on
the essential element of their intent, which is solely a jury
question under Fed. R. Evid. 704(b). They further argue that this
testimony was "profile" testimony, which has been criticized by
this and other circuits. The Government responds that the evidence
is admissible under Rule 702 (Testimony by Experts) and 704(a)
(Opinion on ultimate issue allowed), and should not be classified
as profile evidence.
Balas described his experience with 60 different cases
involving structuring or money laundering and his recent
investigations of giro houses in the Houston area. He described
the operation of illegal giro houses and how they structure
transactions. Balas also presented a summary chart of all the wire
transfers made by Continental between January 1990 and March 1991.
Balas divided up the transferred funds into three categories based
upon their destination, and observed that 95 percent of the wire
transfers were to Colombia.
We agree with the Government that Balas' testimony as to how
giro houses in Houston operated was helpful to the jury's
understanding of the structuring charge. The giro house business
7
is specialized and most citizens are unaware of how a giro house
works. This expert testimony assisted the jury in understanding
the mode of operation of the Defendants. See, e.g., United States
v. McCollum, 802 F.2d 344, 346 (9th Cir. 1986) ("Expert testimony
regarding the typical structure of mail fraud schemes could help
the jury to understand the operation of the scheme and to assess
[the defendant]'s claim of non-involvement.") These parts of
Balas' testimony were properly admitted by the trial judge.
We are, however, concerned about this portion of Balas'
testimony:
MR. ROPER: Based on your training and experience, have you found
that giro houses that are engaged in the circumvention of the CTR
laws have a spread such as this with 95 percent going to Colombia
and only 5 percent going to other countries?
AGENT BALAS: That is correct.
. . . .
MR. ROPER: Giros that are not attempting to circumvent the CTR
laws, would they have the spread of 95.1 percent going to Colombia
and 5 percent going to other countries?
AGENT BALAS: No, they wouldn't.
Nothing in Balas' testimony established a foundation for the
proposition that because most customers of a giro house wire money
to one country, the giro house is engaging in illegal structuring.
For example, there was no evidence as to the national origin of the
customers of the giro house or of the geographic area in which it
was located. Moreover, there is no apparent logical connection
between the destination of the money and the structuring laws of
this country. The government disclaims -- and rightly so -- any
argument that the particular country in question, Colombia, can be
8
the basis for an inference of illegality. On retrial, a specific
objection to these questions should be sustained.7
The Defendants also contend that the trial court violated Fed.
R. Evid. 404(b) and 403 by admitting testimony of an expert witness
that a narcotics-detecting dog alerted on one deposit of cash made
by the Defendants into one of Exprotur's bank accounts. The dog's
handler was qualified as an expert and testified that the dog's
alert indicated there was a detectable amount of drugs on the
money. The Government contends that the evidence shows the
Defendants knew the money was drug money and thus had a motive to
avoid the CTR requirements.
This circuit has established a two-part test for determining
whether acts not alleged in the indictment are admissible under
404(b). United States v. Beechum, 582 F.2d 898, 911 (5th Cir.
1978) (en banc), cert. denied, 440 U.S. 920, 99 S. Ct. 1244, 59
L. Ed. 2d 472 (1979); United States v. Dula, 989 F.2d 772, 777 (5th
Cir.), cert. denied, ___ U.S. ___, 114 S. Ct. 172, 126 L. Ed. 2d 131
(1993). First, the extrinsic evidence must be relevant to an issue
other than the defendant's character. Id. Second, the probative
value of the evidence must not be substantially outweighed by its
undue prejudice. Id.
The contested evidence should have been excluded. The dog's
alert to the presence of narcotics on the money does little to
7
We do not reach the difficult issue of line-drawing between
Federal Rule of Evidence 704(a) and (b). Nor do we express an
opinion as to whether Balas' testimony constituted profile
evidence.
9
prove the Defendants knew that the money was connected to drugs.
At best, it indicates that the money, somewhere in its chain of
custody, was in contact with narcotics. Contrary to the
Government's assertion, United States v. Hernando Ospina8
acknowledges this crucial distinction. There, the court condoned
evidence of a dog alert on the Defendant's money to show that "the
laundered money was drug proceeds," an element of the statute
involved in that case, 18 U.S.C. §1952(a)(1). Id. at 1583. In
the instant case, the money being drug proceeds was not an element
of the offense, and the dog alert was not used for that purpose.
Instead it was used to show that the Defendants knew the money was
drug proceeds. As such, its probative value was minimal and was
substantially outweighed by the prejudicial impact of injecting the
specter of narcotics trafficking into the case.
Oreira next challenges the admission of evidence relating to
Continental's transactions in Houston. This evidence described
Continental's alleged money structuring prior to its move to Fort
Worth. Oreira contends that it was character evidence. We
disagree. Oreira was charged in part with conspiracy to structure
transactions. The time period alleged in the indictment
encompassed the Houston activity, although the overt acts described
only the activity occurring in Fort Worth. The Government
introduced evidence of the Houston activities to show Defendants'
motivation for the peremptory move to Fort Worth and the subsequent
change in their methods of structuring.
8
798 F.2d 1570 (11th Cir. 1986).
10
Oreira further contends that this evidence was unfairly
prejudicial and that he was more prejudiced by its admission than
his co-defendants, who directly ordered Continental's illegal
transactions in Houston. Oreira claims that while in Houston, he
was just a six-month employee of Continental and had no knowledge
of his superiors' illegal activity. Although the admission of this
evidence may have prejudiced Oreira, its probative value was not
substantially outweighed by unfair prejudice. The evidence was
highly probative because it showed that the Defendants had an
interest in continuing their business in Fort Worth once the IRS
had issued a targeting order in Houston. It also demonstrated a
connection between the Defendants' business practices in Houston
and Fort Worth. The fact that Oreira was arguably less involved in
the Houston activities than Postizzi or others does not render the
evidence inadmissible as to him.
Written Jury Instructions
Oreira argues that because the case was extremely complicated,
the trial judge should have provided the jury with a written copy
of the instructions in addition to the oral instructions. The
weight of our precedent has, in fact, disapproved of the practice
of providing written copies of the instructions to the jury in
certain circumstances. United States v. Perez, 648 F.2d 219, 222
(5th Cir. Unit B), cert. denied, 454 U.S. 970, 102 S. Ct. 516, 70
L. Ed. 2d 388 (1981); United States v. Hooper, 575 F.2d 496, 498-99
(5th Cir.) cert. denied, 439 U.S. 895, 99 S. Ct. 256, 58 L. Ed. 2d 242
11
(1978); United States v. Schilleci, 545 F.2d 519, 526 (5th Cir.
1977). The trial court's refusal to do so here was well within its
discretion.
Conclusion
The CONVICTIONS on all four counts against Oreira and Postizzi
are REVERSED, their sentences are VACATED, and the case is REMANDED
for a new trial.
12