United States v. Leak

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
CURTIS JAMES LEAK; TKC, INC.,
Claimants-Appellants,
and
5709 HILLINGDON ROAD, CHARLOTTE,
No. 93-2302
NORTH CAROLINA, (Deed Book 5062,
Page 119, Mecklenburg County
Register of Deeds); A 1989 FORD
TAURUS, VIN 1FABP52DOKG172210,
Defendants,
KAREN TINSLEY LEAK;
CHARLOTTE-MECKLENBURG COUNTY TAX
COLLECTOR,
Claimants.
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
KAREN TINSLEY LEAK; CURTIS JAMES
LEAK,
Claimants-Appellants,
and
No. 96-1873
5709 HILLINGDON ROAD, CHARLOTTE,
NORTH CAROLINA, (Deed Book 5062,
Page 119, Mecklenburg County
Register of Deeds); A 1989 FORD
TAURUS, VIN 1FABP52DOKG172210,
Defendants,
TKC, INC.; CHARLOTTE-MECKLENBURG
COUNTY TAX COLLECTOR,
Claimants.
Appeals from the United States District Court
for the Western District of North Carolina, at Charlotte.
Robert D. Potter, Senior District Judge.
(CA-91-190-C-C-P)
Argued: March 3, 1997
Decided: August 26, 1997
Before WILLIAMS and MICHAEL, Circuit Judges, and
GOODWIN, United States District Judge for the
Southern District of West Virginia, sitting by designation.
_________________________________________________________________
Reversed and remanded by published opinion. Judge Michael wrote
the opinion in which Judge Williams and Judge Goodwin joined.
_________________________________________________________________
2
COUNSEL
ARGUED: Michael Smith Scofield, Charlotte, North Carolina; James
Frank Wyatt, III, Charlotte, North Carolina, for Appellants. Frank
DeArmon Whitney, Assistant United States Attorney, Charlotte,
North Carolina, for Appellee. ON BRIEF: Mark T. Calloway, United
States Attorney, Charlotte, North Carolina, for Appellee.
_________________________________________________________________
OPINION
MICHAEL, Circuit Judge:
Claimants-appellants Curtis Leak and Karen Leak lost their home
and car on summary judgment in this forfeiture action. The govern-
ment contends that the Leaks intentionally structured a series of bank
deposits to avoid the reporting requirements of 31 U.S.C. § 5313(a).
Because the Leaks used the money deposited to pay off their home
mortgage and used their car to make some of the deposits, the govern-
ment brought a civil forfeiture action against the home and car under
18 U.S.C. § 981(a)(1)(A). This statute allows the government to for-
feit property that has been "involved in a transaction . . . in violation
of section 5313(a) or 5324(a) of title 31 . . . or any property traceable
to such property." After the magistrate judge made a finding of proba-
ble cause for forfeiture, the government moved for summary judg-
ment. The Leaks, in affidavits filed in opposition, offered
explanations and claimed they did not know of the reporting require-
ments and therefore did not intentionally try to evade them. The dis-
trict court, finding the Leaks' claims to be "incredible," granted
summary judgment for the government. Because we believe there is
a genuine issue of material fact about whether the Leaks knew of the
reporting requirements, we reverse and remand for trial.
I.
Curtis and Karen Leak are a married couple with five children who
live in Charlotte, North Carolina. Mr. Leak (through TKC, Inc.) owns
and operates a nightclub known as "Side Effects." Mrs. Leak is an
accountant at Duke Power Corporation, and she is listed as the corpo-
3
rate secretary for TKC. Defendant property 5709 Hillingdon Road is
the Leaks' family home, and defendant 1989 Ford Taurus is the
Leaks' car.
On January 17 and 18, 1991, the Leaks made a series of deposits
into checking accounts at three banks, Wachovia Bank & Trust Com-
pany, Southern National Bank, and First Citizens Bank. Eleven cash
deposits ranging from $2,900 to $5,200 were made into Mr. Leak's
personal account at Wachovia; these deposits were made at ten differ-
ent Wachovia branches and totaled $51,100. Eleven cash deposits
ranging from $2,500 to $5,000 were made into Mr. Leak's personal
account at Southern National; these deposits were made at five differ-
ent branches and totaled $50,700. Finally, eleven cash deposits rang-
ing from $2,500 to $5,000 were made into Mrs. Leak's personal
account at First Citizens; these deposits were made at seven different
branches and totaled $50,500. The day before these deposits were
made, the Leaks had drafted a check for $50,684.54 from each
account. The Leaks used the three checks to pay off the mortgage on
their home. The Ford Taurus was used to make at least two of the
deposits.
A couple of months later, on March 20, 21, 29, and 30 and April
1 and 16, 1991, the Leaks made fourteen cash deposits ranging from
$1,100 to $5,000 to Mr. Leak's Wachovia account. These deposits,
totaling $54,110, were timed to cover six checks ranging from $4,275
to $12,325 made to a contractor who was building an addition onto
the Leaks' home. The checks to the contractor totaled $52,647.
On June 21, 1991, the United States filed a complaint seeking in
rem forfeiture of the Leaks' home and car pursuant to 18 U.S.C.
§ 981. That same day the government obtained a warrant enabling the
United States Marshal to take the properties into his possession. The
magistrate judge who issued the warrant found probable cause based
on the affidavit of IRS Special Agent Michael J. Toomey, Jr., who
discussed the deposits made by the Leaks, the apparent use of the
deposited funds to pay off the mortgage and to pay for the addition
to the house, and the use of the car to make the deposits.
The Leaks and TKC filed claims to the properties. On February 26,
1993, the United States moved for summary judgment on the claims
4
of Curtis Leak and TKC. The government relied on the earlier
Toomey affidavit and submitted the deposition testimony and affida-
vit of a Wachovia Bank service representative who had cashed a
$15,000 check for Curtis Leak in 1989. The representative said that
pursuant to her routine practice she would have told Mr. Leak, "Due
to the large amount of this check, we [the bank] would need to file
a currency transaction report [CTR] with the IRS." J.A. 58. She said
Mr. Leak seemed to be in a rush and became agitated when told about
the CTR requirement.
Curtis Leak and TKC opposed the motion for summary judgment.
In an affidavit Mr. Leak insisted that he had "absolutely no knowl-
edge whatsoever of any requirement of the bank to file a special form
with the IRS if I made a deposit of more than $10,000 in cash." J.A.
93. He claimed that he had broken down his deposits into increments
of $5,000 or less because "I did not want people inside the bank or
people entering the bank to see me with large sums of cash, nothing
in excess of $5,000." J.A. 93. Noting that he was"the owner of a pop-
ular night club located in a section of the black community which is
a high-crime area," Mr. Leak said that he has"always been concerned
about my personal security" and in the past had"overheard bank tell-
ers discussing other people's accounts." J.A. 93. His method of mak-
ing the deposits was therefore chosen "for security reasons, [and he]
felt this was the safest thing to do." J.A. 93. Mr. Leak claimed that
he had no desire to conceal his deposits; in fact, he had notified the
trustee in the Leaks' bankruptcy case of his intention to pay off his
mortgage with the deposited funds.1 In response to the testimony of
the bank representative, Mr. Leak said he did not remember any men-
tion of reporting requirements. At the time he felt he was being has-
sled "because I had a $15,000 check and I was black." J.A. 93.
Despite Mr. Leak's statement denying knowledge of the reporting
requirements and offering an explanation about the deposits, the dis-
trict court granted summary judgment against him and TKC. The
court said that to survive summary judgment, Mr. Leak had to "show
[that] the [magistrate judge's] probable cause finding was factually or
legally baseless." J.A. 127. The court found (based on its reading of
the summary judgment papers) that Mr. Leak's lack of knowledge
_________________________________________________________________
1 The Leaks filed for Chapter 13 bankruptcy in 1986.
5
claim was "an incredible assertion" and that the "perplexing series of
deposits renders a claim of outright ignorance of such reporting
requirements at least improbable." J.A. 129 (emphasis in original).
The court concluded that Mr. Leak had failed to rebut the showing of
probable cause and therefore had forfeited his claim to the properties.
On February 27, 1996, the United States filed a motion for sum-
mary judgment against the claim of Karen Leak. Mrs. Leak opposed
the motion and filed her own affidavit. She began by saying that she
made "only a couple" of the deposits. J.A. 209. She claimed that she
too "had no knowledge of any cash transaction reporting requirements
under the law during the time of the deposits." J.A. 210. She said that
the deposits represented "legitimate income derived from my hus-
band's night club, a cash intensive business, and were not the result
of any illegal activity to my knowledge." J.A. 210. The government
submitted a supplemental affidavit from Agent Toomey that alleged
additional circumstantial evidence concerning the Leaks' knowledge
of the reporting requirements. Mrs. Leak filed a motion to strike por-
tions of this affidavit as inadmissible for purposes of summary judg-
ment. The district court did not rule on this motion but did not rely
on any of the additional information. The court determined that Mrs.
Leak had to meet the requirements of an "innocent owner" and con-
cluded that she failed to do so. The court restated its earlier finding
that "there is no doubt that [Mrs. Leak's] husband knew about the
reporting requirement" and concluded that her"claim that she was
unaware of her husband's structuring scheme is untenable." J.A. 350,
351. The district court found that she was aware of the deposits and
that her explanation for the manner of the deposits was "incredible as
a matter of law." J.A. 351. The court therefore granted summary judg-
ment against Mrs. Leak's claim and issued a final judgment of forfei-
ture against the defendant properties. The Leaks and TKC appeal. We
review the district court's grant of summary judgment de novo. See
United States v. Jefferson-Pilot Life Ins. Co., 49 F.3d 1020, 1021 (4th
Cir. 1995).
II.
The United States brought this forfeiture action under 18 U.S.C.
§ 981. That statute provides that "[a]ny property, real or personal,
involved in a transaction . . . in violation of section 5313(a) or 5324(a)
6
of title 31 . . . or any property traceable to such property" is subject
to forfeiture to the United States. 18 U.S.C. § 981(a)(1)(A). Pursuant
to 31 U.S.C. § 5313(a) and 31 C.F.R. § 103.22(a)(1), financial institu-
tions are required to file a Currency Transaction Report for every
transaction involving over $10,000 in currency. The government con-
tends that the Leaks violated 31 U.S.C. § 5324(a)(3), which states that
"[n]o person shall for the purpose of evading the reporting require-
ments of section 5313(a) . . . structure or assist in structuring . . . any
transaction with one or more domestic financial institutions."2
According to the government, the Leaks structured their deposits to
fall under the $10,000 limit so as to avoid the filing of a CTR.
In order to hold the property forfeited under 18 U.S.C. § 981, the
government must show that the Leaks' home and car were "involved
in" an illegal structuring or are "traceable" to property that was
involved in such structuring. The government need not prove that
both Curtis and Karen Leak were involved in the structuring; a trans-
gression by one of the owners is sufficient to forfeit the property.
However, the statute does provide some protection for "innocent own-
ers." Section 981(a)(2) provides that "[n]o property shall be forfeited
under this section to the extent of the interest of an owner or lien-
holder by reason of any act or omission established by that owner or
lienholder to have been committed without the knowledge of that
owner or lienholder." Thus, if one owner did commit an act that war-
rants forfeiture of the property, the other owner can retain his or her
interest if he or she had no knowledge of the underlying act.
The procedure used in civil forfeiture is different from that used in
a standard civil action. When the government brings a forfeiture
action against a property, it must first show probable cause that the
property is liable for forfeiture. In order to meet this burden, it must
"show probable cause that a substantial connection exists between the
property forfeited and the criminal activity defined by the statute."
United States v. $95,945.18, United States Currency , 913 F.2d 1106,
_________________________________________________________________
2 At the time the government filed its complaint, this section was desig-
nated 31 U.S.C. § 5324(3). It was redesignated as § 5324(a)(3) in 1992.
See Pub. L. No. 102-550, § 1525(a)(1), 106 Stat. 3672, 4064 (1992). Sec-
tion 5324 was originally enacted into law in 1986. See Pub. L. No. 99-
570, § 1354(a), 100 Stat. 3207, 3207-22 (1986).
7
1110 (4th Cir. 1990). The applicable definition of probable cause "is
the same as that which applies elsewhere: ``reasonable ground for
belief of guilt, supported by less than prima facie proof but more than
mere suspicion.'" Id. (quoting United States v. $364,960 In U.S.
Currency, 661 F.2d 319, 323 (5th Cir. Unit B Nov. 1981)). Once the
government makes the showing of probable cause,"the burden of
proof shifts to the claimant to establish, by a preponderance of the
evidence, that the property was not used in violation of the law or was
not intended to be used unlawfully." Boas v. Smith, 786 F.2d 605, 609
(4th Cir. 1986); see 19 U.S.C. § 1615, as incorporated by 18 U.S.C.
§ 981(d).
Agent Toomey's affidavit about the Leaks' deposits was sufficient
to meet the government's burden of probable cause. Cf. United States
v. Dollar Bank Money Market Account No. 1591768456 , 980 F.2d
233, 237 (3d Cir. 1992) (concluding that evidence of twenty-six
deposits, most just under $10,000, at seven different banks within a
nineteen-day period justified the district court's finding of probable
cause). It is clear, however, that the district court here used the wrong
standard in determining whether Curtis Leak's and TKC's claims
could survive summary judgment. According to the district court, Mr.
Leak had to "show the probable cause finding was factually or legally
baseless." J.A. 127. The court described the standard as follows:
In considering whether a probable cause finding has been
rebutted, this Court must give "[g]reat deference . . . to . . .
a magistrate's assessment of the facts. . . ." United States v.
Williams, 974 F.2d [480,] 481 [4th Cir. 1992].3 This Court
need only ask "whether the magistrate had a substantial
basis for his conclusion that probable cause existed." Id. In
other words, Claimant must show the magistrate wrongly
assessed the facts before him because there was no substan-
tial basis for concluding that the law had been violated and
that the property at stake was linked to the violation.
_________________________________________________________________
3 United States v. Williams, 974 F.2d 480 (4th Cir. 1992), concerns
whether a magistrate had correctly found probable cause to issue a search
warrant; it has nothing to do with civil forfeiture.
8
J.A. 128. Thus, in order to survive summary judgment under the dis-
trict court's standard, the Leaks would have had to"rebut" the proba-
ble cause finding by showing that the magistrate"wrongly assessed
the facts" in concluding that probable cause existed. Under this stan-
dard, property could be forfeited on just a showing of probable cause,
that is, on facts amounting to less than prima facie proof but more
than mere suspicion. Cf. United States v. One Parcel of Real
Property, 904 F.2d 487, 492 (9th Cir. 1990) (Kozinski, J.) (noting that
to adjudge "property . . . forfeitable on probable cause alone [is]
something the statute does not provide for and might well be constitu-
tionally suspect").
The district court seems to have mistaken the meaning of "rebut the
showing of probable cause" as used in cases such as $95,945.18. See
$95,945.18, 913 F.2d at 1111 ("[Claimant] has not set forth any facts
to rebut the showing of probable cause."). This phrase only means
that once probable cause is established, the burden of proof shifts to
the claimant, who bears the ultimate burden of persuasion. Here, how-
ever, after the magistrate judge found probable cause, the government
did not simply wait for trial; it instead moved for summary judgment.
The question, then, is what did the Leaks have to do to avoid sum-
mary judgment. They did not have to show that the magistrate judge
was wrong in deciding probable cause. Rather, they only needed to
show, as normal opponents of summary judgment, that a genuine
issue of material fact existed as to whether their property was subject
to forfeiture. See United States v. 717 S. Woodward St., 2 F.3d 529,
532 (3d Cir. 1993) ("[W]e know of no basis for concluding that the
precepts governing resolution of summary judgment motions gener-
ally are not equally applicable to summary judgment motions in for-
feiture proceedings."). What the Leaks knew of the reporting
requirements is a "material" fact in this§ 981 forfeiture case. Of
course, the question of whether that material fact creates a genuine
issue must be evaluated in light of the substantive standard of proof
that would apply at a trial on the merits. See Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 252 (1986) (holding that a summary judg-
ment motion must be considered in light of the evidentiary burden the
substantive law places on the non-moving party).
As we noted above, once the government establishes probable
cause that the Leaks' property is subject to forfeiture, the burden
9
shifts to the Leaks to show by a preponderance of the evidence that
forfeiture is not warranted. Despite this shift in the burden of proof,
the government, if it chooses to move for summary judgment, has the
responsibility to show that there is no genuine issue of material fact.
See United States v. Four Parcels of Real Property, 941 F.2d 1428,
1439 (11th Cir. 1991) (noting that when seeking summary judgment
in a forfeiture action, the government has the "initial responsibility of
demonstrating the absence of a genuine issue of material fact" (quota-
tions omitted)); cf. 10A Charles Alan Wright, Arthur R. Miller &
Mary Kay Kane, Federal Practice and Procedure § 2727, at 121 (2d
ed. 1983) ("It is well-settled that the party moving for summary judg-
ment has the burden of demonstrating that the Rule 56(c) test -- ``no
genuine issue as to any material fact' -- is satisfied and that he is
entitled to judgment as a matter of law."). As a result, "the govern-
ment cannot prevail on summary judgment if the [Leaks] offer[ ] a
reasonable and legitimate explanation for the organizing of transac-
tions in amounts under $10,000, and the explanation is verified by
facts and circumstances which, if believed, would enable a rational
jury to conclude by a preponderance of the evidence that [the Leaks
did not have knowledge of the] reporting requirements." Dollar Bank,
980 F.2d at 241.
The district court's decision to grant summary judgment was
clearly influenced by its use of the wrong standard-- namely,
whether the original probable cause determination was correct. After
dismissing as "improbable" Curtis Leak's statement that he did not
know about the CTR reporting requirements, the district court added:
"In any case, this ``evidence' does not make it more likely than not
that the magistrates' [sic] finding of probable cause lacked a substan-
tial basis." J.A. 129-30. In response to Mr. Leak's claim that his state
of mind was an issue of credibility, the court found that "Claimant's
conduct alone . . . speaks for itself and supports a finding of probable
cause." J.A. 132. See also J.A. 132 (noting that "the magistrate had
a substantial factual basis for concluding there was probable cause to
believe Claimant violated the law"). Finally, in summing up its analy-
sis, the court said:
The material facts are not in dispute. Claimant's depositing
practices on January 17 and 18, 1991, permit the inference
that he knew the transaction reporting requirements existed.
10
Those facts also demonstrate enough evidence for a finding
of probable cause to believe Claimant structured those trans-
actions to avoid the filing of CTR's. That is all the law
requires. The Court finds that Claimant has not successfully
rebutted, to a preponderance of the evidence, the magis-
trate's finding of probable cause in this case.
J.A. 132.
The district court evaluated the evidence forecast under the wrong
standard. We will now analyze the evidence under the correct stan-
dard and determine whether there is a genuine issue of material fact.
III.
Summary judgment is only appropriate "if the pleadings, deposi-
tions, answers to interrogatories, and admissions on file, together with
the affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment as a
matter of law." Fed. R. Civ. P. 56(c). In evaluating the evidence, we
must construe "the facts and inferences in the light most favorable to
the non-moving party." Donmar Enters., Inc. v. Southern Nat'l Bank
of N.C., 64 F.3d 944, 946 (4th Cir. 1995). The Supreme Court cau-
tioned in Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986),
that "at the summary judgment stage the judge's function is not him-
self to weigh the evidence and determine the truth of the matter but
to determine whether there is a genuine issue for trial."
The Leaks do not contest that they made the thirty-three deposits
in question on January 17 and 18, 1991, and the fourteen deposits
from March to April 1991. However, both Leaks have sworn in affi-
davits that they had no knowledge of the reporting requirements. A
violation of 31 U.S.C. § 5324(a)(3) only occurs when "the violating
party had knowledge of the reporting requirements and acted to avoid
them." United States v. Wollman, 945 F.2d 79, 81 (4th Cir. 1991)
(quotations omitted). As the moving party the government must dem-
onstrate that there is no genuine issue of material fact as to knowl-
edge, even though the Leaks have said in affidavits that they did not
know of the reporting requirements. Of course, whether the Leaks'
affidavits create a genuine issue of material fact as to knowledge must
11
be evaluated in light of their evidentiary burden under the forfeiture
statute. See Anderson, 477 U.S. at 252.
We note at the outset "the general rule that summary judgment is
seldom appropriate in cases wherein particular states of mind are
decisive elements of a claim or defense." Miller v. Federal Deposit
Ins. Corp., 906 F.2d 972, 974 (4th Cir. 1990). This is so because "a
party's mental state is inherently a question of fact which turns on
credibility." Dollar Bank, 980 F.2d at 240. See also United States v.
717 S. Woodward St., 2 F.3d 529, 534 (3d Cir. 1993) ("When the state
of mind of a person is at issue and the record contains direct evidence
of that state of mind in the form of that person's sworn statement,
conflicting circumstantial evidence normally creates only an issue of
credibility for trial and summary judgment is inappropriate."). As we
recognized in American Mfg. Assoc., Inc. v. N.L.R.B., 594 F.2d 30(4th Cir. 1979), "it can be well-nigh impossible to prove that one did
not know something in the past by any other means than sworn deni-
als." Id. at 35 (quoting N.L.R.B. v. Whitfield Pickle Co., 374 F.2d 576,
581 (5th Cir. 1967)). These expressions all serve to remind us of the
context in which we consider the Leaks' affidavits denying knowl-
edge of the reporting requirements.
The government claims that the evidence as to the Leaks' knowl-
edge and intent to evade is "so substantial that no reasonable fact
finder could conclude that [they] did not know." Brief for Appellee
at 33. The government first points to the deposit structuring itself as
proof of the Leaks' knowledge. The large number of deposits, most
around $5,000, at multiple bank branches certainly could permit the
inference that the Leaks knew of the requirements and were trying to
evade them. This series of transactions, however, cannot by itself
foreclose all issues of material fact in the face of the Leaks' sworn
denials. As the court said in Dollar Bank, a civil forfeiture case in
which the government's summary judgment motion was denied:
Proof that the accused structured transactions in amounts
under $10,000 is not enough. It must also be proven that he
structured for the specific purpose of evading the federal
reporting requirements. If a person were ignorant of the
requirements and deposited a large amount of cash in $9,000
installments, he would not violate section 5324. A jury
12
might infer from such conduct that he knew of the law's
requirements and tried to evade them, but proof of the con-
duct does not automatically prove, as a matter of law, the
intent to avoid reporting.
Dollar Bank, 980 F.2d at 237.
The government argues that the testimony of Susan Renckens, a
service representative for Wachovia Bank, provides direct evidence of
Mr. Leak's knowledge. On September 13, 1989, Ms. Renckens
assisted Mr. Leak in cashing a check for $15,000. The government
claims that during the transaction Ms. Renckens told Mr. Leak that
the reporting requirements applied not only to check cashing but also
to cash depositing. In particular, the government points to the follow-
ing answers its lawyer drew from Ms. Renckens in her deposition:
Q. By the end of your interaction with Mr. Leak, do you
feel that he understood that CTR's were a requirement when
you were either depositing or withdrawing --
A. I believe he did.
Q. -- in excess of $10,000?
A. (Witness nods head affirmatively.)
J.A. 67. Ms. Renckens also says in her affidavit, which was prepared
by Agent Toomey, see J.A. 72, that she "informed Mr. LEAK that
since the amount of cash exceeded $10,000, I was required by law to
prepare a CTR." J.A. 36.
However, upon closer examination Ms. Renckens' testimony does
not provide the solid proof of knowledge that the government claims.
Earlier in Ms. Renckens' testimony, Mr. Leak's lawyer questioned
her about what she remembered telling Mr. Leak. The exchange went
as follows:
Q. Now, do you recall what you said to him about the
CTR?
13
A. I couldn't tell you exactly. What I -- I can tell you
what I would probably have said. It's been so --
Q. All right. Is there a routine that you --
A. Just routinely, we say, "Due to the large amount of this
check, we would need to file a currency transaction report
with the IRS and the North Carolina Department of Reve-
nue," who we also report to.
Q. Do you recall if he asked you any questions at that
point?
A. I don't believe he did, if I can remember.
Q. And would you go into any more detail than just the
statement you just gave? That would be your routine thing
to say to customers?
A. Right. . . .
J.A. 58-59 (emphasis added).
The above testimony makes clear that Ms. Renckens only claims
to have told Mr. Leak about the reporting requirements in the context
of cashing a check. Ms. Renckens never claims that she told Mr. Leak
that CTRs were also required for cash deposits. Since it is certainly
riskier for a bank to cash a check than to accept a cash deposit, it is
reasonable for Mr. Leak to have assumed that CTRs were required
only for check cashing. Ms. Renckens did respond affirmatively when
asked whether she felt that Mr. Leak "understood" that CTRs were
required for both withdrawals and deposits. But again, her testimony
about what she "probably" told Mr. Leak does not mention anything
about deposits. Because Ms. Renckens did not offer any specific fac-
tual support for her belief that Mr. Leak understood the reporting
requirement for deposits, we cannot credit Ms. Renckens' belief as
proof of Mr. Leak's knowledge. See Fed. R. Evid. 701 (lay witness's
"testimony in the form of opinions or inferences is limited to those
opinions or inferences which are . . . rationally based on the percep-
14
tion of the witness"). It would be especially inappropriate at this point
to accept Ms. Renckens' inference that Mr. Leak had full knowledge
because on summary judgment "all justifiable inferences are to be
drawn in [the nonmovant's] favor." Anderson, 477 U.S. at 255.
Moreover, Curtis Leak says in his affidavit that his exchange with
Ms. Renckens did not enlighten him about the reporting requirements.
Mr. Leak "do[es]n't remember [Ms. Renckens] saying anything about
CTRs or any form required by the IRS." J.A. 93. At the time he
cashed the check, Mr. Leak "felt I was being hassled because I had
a $15,000 check and I was black." J.A. 93. As a consequence, Mr.
Leak claims that he "wasn't paying attention and I don't remember
what was said because I was so irritated that I was being treated like
I was." J.A. 93. In any event, Mr. Leak alleges that when he made the
deposits to pay off his mortgage he "neither thought of nor saw any
relationship between cashing the $15,000 check and the manner in
which I made my deposits." J.A. 93.
The rest of the government's evidence is substantially less compel-
ling. The government does not have any direct evidence that Mrs.
Leak knew of the reporting requirements, but it does go to great
lengths in discussing her accounting and financial background. Her
experience in these areas may have some relevance for the ultimate
fact-finder, but there is no evidence that the reporting requirements at
issue here were part of her experience. The government also attempts
to introduce a wide-ranging collection of evidence through a second
affidavit from Agent Toomey. In this second affidavit, however,
Agent Toomey makes broad assertions, relying on his personal opin-
ions and information from others unknown. We have serious doubts
as to whether these assertions could survive Fed. R. Civ. P. 56(e)'s
requirement that summary judgment affidavits "be made on personal
knowledge" and be "admissible in evidence."4 Even if this material
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4 The government claims that "[b]ecause [it] is entitled to use hearsay
in a probable cause finding, every affidavit and document which the gov-
ernment has filed is properly in the record." Brief for Appellee at 28.
Although hearsay evidence can be used to support a finding of probable
cause, the government cannot continue to rely on that evidence in the
summary judgment context. See Evans v. Technologies Applications &
Serv. Co., 80 F.3d 954, 962 (4th Cir. 1996) ("[S]ummary judgment affi-
15
could meet the standards of admissibility, it is not sufficient to sup-
port summary judgment. For example, Agent Toomey claims that the
Leaks bought a Porsche in 1989 using $13,000 in cash. He also claims
that an incomplete Form 8300, which is similar to a CTR, was discov-
ered in the dealership's files under Karen Leak's name. Toomey fails
to discuss how he learned of this information; more importantly, he
presents no evidence that the Leaks actually knew about the Form
8300 or the requirement to fill one out. Similarly, Toomey says that
the Leaks prepared a fraudulent college financial aid form, that the
Leaks failed to file tax returns, and that Karen Leak intentionally tried
to deceive him about the timing of the filing of certain returns. If sub-
mitted in admissible form, this additional evidence might be useful to
the ultimate fact-finder as support for the government's theory about
the Leaks' motive. However, the evidence is too indirect and underde-
veloped, even when combined with the government's other evidence,
to show that no genuine issue of material fact remains.
The government contends that our decision in United States v.
Wollman, 945 F.2d 79 (4th Cir. 1991), requires summary judgment
against the Leaks. In Wollman, however, there was no issue as to the
claimants' knowledge of the reporting requirements. The claimants
there offered "no evidence suggesting that they did not know of the
reporting requirement" and failed to offer any affidavits claiming a
lack of knowledge. Wollman, 945 F.2d at 81. In fact, the claimants
conceded that a bank teller had informed them of the requirements
and that "a motivating factor in their deposit transaction was to avoid
entanglement with the IRS." Id. at 81-82. Since the claimants never
alleged ignorance of the requirements, there was"no question that the
[claimants] knew of the reporting requirements and that they were
imposed by the government." Id. at 82. In this case, however, whether
the Leaks had knowledge of the requirements is very much in dispute.
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davits cannot be conclusory or based on hearsay." (citations omitted));
United States v. 1012 Germantown Road, 963 F.2d 1496, 1501 (11th Cir.
1992) (noting that in a civil forfeiture action"the judge as factfinder
[must] sort out the hearsay evidence from the admissible evidence before
making a factual determination").
16
Although we conclude that the government's evidence in this case
is insufficient to support summary judgment in light of the Leaks'
affidavits, we do not mean to imply that the Leaks could have
defeated summary judgment with only the bare, unexplained claim
that they were not aware of the reporting requirements. The evidence
put forward by a claimant must be "evidence on which the jury could
reasonably find for the plaintiff." Anderson , 477 U.S. at 252. In this
case, we believe that the Leaks have proffered evidence that, if
believed, would enable a rational jury to find by a preponderance of
the evidence that they did not have knowledge of the reporting
requirements. Mr. Leak claims that he made small deposits in order
to protect his personal security. Although the district court may be
correct that this method of depositing does not afford the best means
of protection, we do not find Mr. Leak's explanation so "incredible"
that it can be dismissed out of hand. As the owner of a business (a
night club) that generated large sums of cash in a high crime area, Mr.
Leak had an important reason to be concerned for his personal secur-
ity. Mr. Leak believed that his method of making smaller deposits
"was the safest thing to do," noting that"in the past, [he had] over-
heard bank tellers discussing other people's accounts." J.A. 93. Courts
have recognized that an individual's attempt to protect his personal
security may offer a legitimate explanation for a series of smaller
deposits. See Ratzlaf v. United States, 510 U.S. 135, 145 (1994) (not-
ing that individuals may "mak[e] cash deposits in small doses, fearful
that the bank's reports would increase the likelihood of burglary");
Dollar Bank, 980 F.2d at 241 (finding that a jury could rationally
believe a claimant structured deposits in order to avoid publicity
about his wealth that would increase the likelihood of theft). Given
the lack of direct proof that the Leaks knew or were informed of the
reporting requirements for cash deposits, we cannot say that their
explanation lacks so completely in credibility that summary judgment
for the government is warranted.5
We recognize that the Leaks' complicated series of deposits, along
with the testimony of Ms. Renckens, might be sufficient to convince
a jury that the Leaks violated 31 U.S.C. § 5324(a)(3). However, we
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5 The Leaks also note that they did not hide what the staggered cash
deposits would be used for. Mr. Leak told the bankruptcy trustee he
would be paying off the Leaks' mortgage, an act that would obviously
require a large amount of cash.
17
would invade the province of the jury if we were to find that the
Leaks' claims of ignorance were too "incredible" to be believed. The
district court made such a finding in the course of applying the wrong
standard, and it drew the ultimate inference in favor of the govern-
ment (and against the nonmovants). See J.A. 132 ("Claimant's depos-
iting practices . . . permit the inference that he knew the transaction
reporting requirements existed."). In inferring from the underlying
circumstances that the Leaks had knowledge of the reporting require-
ments, the district court completely rejected as unbelievable the
Leaks' sworn denials and explanations. The evidence proffered in this
case does not permit such a credibility determination at the summary
judgment stage. There is a genuine issue of material fact. Accord-
ingly, the award of summary judgment is reversed, and the case is
remanded for trial.6
REVERSED AND REMANDED
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6 Because we reverse the final judgment of forfeiture as to both of the
Leaks, we do not need to reach Mrs. Leak's innocent owner defense or
the Leaks' proportionality argument.
18