Thursday, September 15, 2005

Ratzlaf Redux: Intent for Structuring

In Ratzlaf v. U.S., 510 U.S. 65 (1994), the Supreme Court interpreted the "willfully" element for a currency structuring violation under 31 U.S.C. Sec. 5324 to require proof that the defendant knew the structuring was illegal.  Congress responded rather promptly to the Court's holding by dropping willfulness from the statute, so that now all the government needs to prove is that the defendant knows that the financial institution is required to file a Currency Transaction Report (CTR) for transactions over $10,000 in cash, and that the defendant intended to avoid having the report filed by structuring the transactions to keep them under $10,000.  A Second Circuit decision in U.S. v. MacPherson deals with the issue of what evidence suffices to establish this intent, particularly when the funds are not the proceeds of any unlawful activity.

MacPherson was a New York City policeman and real estate investor who held a real estate license.  To shield his assets from a tort lawsuit filed by a tenant of one of his buildings, MacPherson began to liquidate various accounts and held the funds in cash.  Once the tort case settled, MacPherson shifted his assets back into bank accounts.  For an unknown reason, he did so by engaging in a series of 32 cash deposits into various banks of amounts below $10,000, including 23 in the $9,000 range; some days, MacPherson went to three separate banks to make his deposits.  He deposited approximately $250,000 in cash over a four-month period  Charged with violating the anti-structuring statute, MacPherson argued that there was insufficient evidence of his intent to evade the bank's currency reporting requirement.  He noted that the funds were not the proceeds of any illegal activity, and the tort case had been settled so he had no motive to hide the amount of money he had.  The trial judge granted a Rule 29 judgment of acquittal after the jury returned a guilty verdict, and the Second Circuit reversed (opinion available here).

The court rejected MacPherson's argument that an inference of the defendant's intent to structure should be limited to cases in which the proceeds are known to be derived from illegal activity.  The court stated: "If a defendant structures cash transactions knowing that the financial institution involved is obligated to report transactions exceeding $10,000 and intending to evade that requirement, he is guilty of structuring without regard to whether the cash at issue represents criminal or lawful proceeds. More to the point, whether or not a ยง 5324 prosecution relates to criminal proceeds, a jury may properly consider the pattern of structuring activities and draw reasonable inferences therefrom as to whether the defendant possessed the requisite mens rea."

The court also rejected MacPherson's argument that he was unaware that banks have to file CTRs for cash transactions over $10,000.  When he first started to shield his assets, he withdrew cash from his bank accounts and the banks obtained the necessary information from him for the CTRs on that side of the transaction.  When it came to depositing the money back into banks, the court stated: "More to the point, a reasonable jury could certainly infer that it was improbable in the extreme that MacPherson, a New York City police officer, would have repeatedly gone through these identification procedures (three times on one day) without knowing their purpose. Indeed, the possibility of naive ignorance is rendered all the more unlikely by the fact that MacPherson, as a licensed real estate salesperson, would himself have been required to file CTRs in connection with cash business transactions." 

In other words, the Second Circuit has a very hard time believing that anyone involved in either real estate or law enforcement could plausibly claim not to have heard about the currency transaction reporting requirements.  The interesting aspect of the case is that, while Justice Ginsburg stated in Ratzlaf that structuring cash transactions is "not inevitably nefarious," it is a crime regardless of the reason for the structuring.  As always, be very careful with cash. (ph)

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