United States v. Alston

• Court: Court of Appeals for the Third Circuit
• Decided: February 26, 1996
• Docket: 94-2195
• Status: Unknown

Opinion

Opinions of the United 1996 Decisions States Court of Appeals for the Third Circuit

2-26-1996

United States v. Alston Precedential or Non-Precedential:

Docket 94-2195

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No. 94-2195

UNITED STATES OF AMERICA,

Appellee

v.

MICHAEL DAVID ALSTON,

Appellant

----------

On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Criminal No. 93-cr-00445-1)

Argued Monday, December 11, 19950

BEFORE: ROTH, McKEE and GARTH, Circuit Judges

(Opinion filed February 26, l996)

Joel P. Trigiani (Argued) 1411 Walnut Street, Suite 700 Philadelphia, PA 19102

Attorney for Appellant

0 This matter was originally heard on June 27, 1995 before Judges Hutchinson, Roth, and Garth. Because Judge Hutchinson died prior to an opinion being rendered, the Panel was reconstituted to include Judge McKee, and the appeal was reargued.

1 Michael R. Stiles United States Attorney Walter S. Batty, Jr. Assistant United States Attorney, Chief of Appeals Joel D. Goldstein (Argued) Assistant United States Attorney United States Attorney's Office Eastern District of Pennsylvania 615 Chestnut Street, Room 1250 Philadelphia, PA 19106-4476

Attorneys for Appellee

OPINION OF THE COURT

GARTH, Circuit Judge: On September 30, 1993, defendant Michael David Alston

("Alston") was indicted on two counts. Count I charged him with

conspiracy under 18 U.S.C. § 371: (i) to defraud the United

States and the Treasury and (ii) to structure to avoid the

reporting requirements of 31 U.S.C. § 5313(a), in violation of

the anti-structuring provisions of 31 U.S.C. § 5324(a)(3) and

§ 5322. Count II charged him with structuring in violation of 31

U.S.C. § 5324(a)(3), § 5322(b); 31 C.F.R. § 103.11, § 103.22; and

18 U.S.C. § 2(b). Following a non-jury trial, Alston was

convicted on both counts.

After Alston was convicted, the Supreme Court rendered

its opinion in United States v. Ratzlaf, -- U.S. --, 114 S. Ct. 655 (1994), in which it held that, in order to obtain a

structuring conviction, the government must prove that the

2 defendant "willfully" structured. "Willfulness" was defined as

the defendant's knowledge that structuring was illegal. The

government conceded that it had not proven the mens rea

(knowledge of illegality) that Ratzlaf required in order to

sustain Count II, the substantive count of structuring and that

portion of Count I that charged conspiracy to structure. The

district court therefore vacated those portions of Alston's

conviction. However, the district court refused to set aside

Alston's conviction under Count I which charged a § 371

conspiracy to defraud, reasoning that Ratzlaf's mens rea

requirement did not apply.

We have jurisdiction over this appeal pursuant to 28

U.S.C. § 1291. We will reverse because the indictment, in

charging under the "defraud" clause of § 371, (Indictment ¶7(a)),

alleges no more than a conspiracy to defraud the United States by

structuring, a far different conspiracy than the genre of "Klein

conspiracies"0 relied on by the government. In addition, we have

such substantial difficulty in understanding how Alston can be

convicted of a conspiracy to defraud by structuring when he

cannot be guilty of a conspiracy to structure or of structuring

itself,0 that we reverse Alston's conviction.

0 A "Klein conspiracy" is discussed at note 13, infra. 0 In this opinion, we discuss only Alston's argument that his §371 conspiracy must be vacated, as we find no merit in Alston's other ground for appeal, i.e., that the district court abused its discretion in admitting evidence of Alston's failure to file tax returns in 1987 and 1988. Alston had also originally raised a third ground for appeal: that the district court had erred in enhancing his offense level by two levels for obstruction of justice. However, by letter filed February 16, 1995, Alston abandoned this ground for appeal.

3 I.

On July 28, 1988, Alston, operator of an unprofitable

convenience store, and his brother Henry each arranged to

purchase top-of-the-line BMW automobiles from West German Motor

Imports for approximately $70,000 apiece.0 The sales contract on

each car provided that a down payment of $41,000 would be paid

toward the purchase price of the car on or before the date of

delivery, and that the remainder of the purchase price would be

financed. The salesman was co-defendant Richard Rosa. Alston

and his brother each left a personal check for $500 toward their

respective down payments.

Alston's car became available on September 12, 1988.

Alston made cash remittals to Motor Imports of $5,000 on

September 30, 1988, $2,500 on October 4, 1988, and $1,500 on

October 5, 1988, for a total of $9,000 within that week. A

single $10,000 cash payment would have triggered Motor Imports's

obligation to file an IRS Form 8300 for cash payments over

$10,000.0 0 After factoring in all costs, each vehicle cost approximately $83,000. 0 Internal Revenue Code section 6050I requires "[a]ny person . . . who is engaged in a trade or business, and who, in the course of such trade or business, receives more than $10,000 in cash in 1 transaction (or 2 or more related transactions)" to file a return identifying the person from whom the cash was received, the amount of the cash received, and the date and nature of the transaction. 26 U.S.C. § 6050I(a), (b). Structuring transactions to evade the reporting requirements of § 6050I is prohibited. 26 U.S.C. § 6050I(f). Because the statute of limitations for structuring under section 6050I had run, Alston was not charged with such a violation.

4 On October 5, 1988, Alston paid cash for a $9,000 money

order payable to Motor Imports from Therese Drew, the head bank

teller at Stenton Avenue Branch of Meridian Bank and a close

personal friend of Alston's, who also kept the books for Alston's

convenience store. At trial, Drew testified that she knew about

the currency transaction report ("CTR") filing requirements

imposed by law and had discussed the CTR filing requirements with

Alston. On October 7, 1988, Alston purchased with cash another

$8,000 money order payable to Motor Imports from the Stenton

Avenue Branch of Meridian Bank.

A similar pattern was followed for the purchase of

Henry Alston's BMW, and on December 9, 1988, both Michael and

Henry Alston took delivery of their new cars.

On September 30, 1993, Alston was charged in two counts

of a three count indictment. Count I charged Alston with

reporting requirements of 31 U.S.C. § 5313(a),0 in violation of

the anti-structuring provisions of 31 U.S.C. § 5324(a)(3)0 and

0 In 1970, Congress enacted 31 U.S.C. § 5313(a), which provided that financial institutions such as banks are obligated to file CTR's for cash transactions in excess of $10,000. See 31 U.S.C. § 5313(a) (reporting requirement); 31 C.F.R. § 103.22(a)(1) ($10,000 floor). 0 In 1986, Congress enacted an "antistructuring" provision, 31 U.S.C. § 5324, which provides that no person shall, "for the purpose of evading the reporting requirements of section 5313(a) . . . structure . . . any transaction with one or more financial institutions." 31 U.S.C. § 5324(a)(3).

5 § 5322.0 Count II charged Alston with the substantive offense

of structuring, that is, evasion of the reporting requirements of

31 U.S.C. § 5313(a), in violation of the anti-structuring

provisions of 31 U.S.C. § 5324(a)(3), § 5322(b); 31 C.F.R.

§103.110, § 103.22;0 and 18 U.S.C. § 2(b).0

0 At all times relevant to this appeal, 31 U.S.C. § 5322(a) provided criminal penalties only for "willful" violations of § 5313 or 5324. Prior to its amendment in 1994, § 5322 read as follows:

A person willfully violating this subchapter [31 U.S.C. § 5311 et seq.] or a regulation prescribed under this subchapter (except section 5315 of this title or a regulation prescribed under section 5315) shall be fined not more than $250,000, or imprisoned for not more than five years, or both.

31 U.S.C. § 5322(a). Section 5324 was subsequently amended in 1994 to provide its own penalty provision. The 1994 amendment did not impose a "willfulness" requirement. See n. 12, infra. 0 Section 103.11(gg) of the C.F.R. defines "structuring" as follows:

Structure (structuring). [A] person structures a transaction if that person, acting alone, or in conjunction with, or on behalf of, other persons, conducts or attempts to conduct one or more transactions in currency, in any amount, at one or more financial institutions, on one or more days, in any manner, for the purpose of evading the reporting requirements under section 103.22 of this part. "In any manner" includes, but is not limited to, the breaking down of a single sum of currency exceeding $10,000 into smaller sums, including sums at or below $10,000, or the conduct of a transaction, or series of currency transactions, including transactions at or below $10,000.

31 C.F.R. § 103.11(gg). 0 Section 103.22(a)(1) of the C.F.R. provides that "[e]ach 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

6 On November 17, 1993, a non-jury trial was held. On

November 18, 1993, Alston was convicted of all counts. The

district court sustained Alston's conviction relying on the Third

Circuit law in effect at that time. Our jurisprudence then

provided that to obtain a structuring conviction, the government

need only prove that the defendant knew of the financial

institution's obligation to report financial transactions of over

$10,000, and that the defendant structured his transactions in

order to avoid triggering such reports. See United States v.

Shirk, 981 F.2d 1382 (3d Cir. 1992), cert. denied, 114 S. Ct. 873

(1994). The district court concluded that Alston knew of the

bank's reporting requirements from his conversations with Drew,

and that he had intentionally structured his transactions to

avoid having CTR's filed with the IRS.

On January 11, 1994, after the trial, but before the

district court ruled on Alston's post-trial motions, the Supreme

Court held that in order to obtain a structuring conviction the

government must prove that the defendant knew that structuring

itself was illegal. United States v. Ratzlaf, -- U.S. --, 114 S.

Ct. 655 (1994).

Alston moved to set aside the verdict and sought the

entry of a judgment of acquittal under Rule 29 of the Federal

financial institution which involves a transaction in currency of more than $10,000." 31 C.F.R. § 103.22(a)(1). 0 Under 18 U.S.C. § 2(b), a person who causes an act to be done which if directly performed by himself would be an offense against the United States, is punishable as if he had committed the act himself. 18 U.S.C. § 2(b). In this case, Count II of the indictment charged Alston under § 2(b) with causing the bank to fail in its statutory duty to file CTR's.

7 Rules of Criminal Procedure. The government conceded that it had

not proven knowledge of illegality. It therefore conceded that

Alston's convictions for structuring and conspiracy to structure

under § 5324 and § 5322 could not stand.

By order filed April 6, 1994, the district court

granted Alston's post-trial motion to set aside the verdict with

respect to the substantive count of structuring and so much of

Count I that had charged conspiracy to structure (Indictment

¶ 7(b)). The district court entered a judgment of acquittal on

those charges. The district court refused, however, to set aside

Alston's conviction under that portion of Count I that had

charged conspiracy to defraud, (Indictment ¶ 7(a)). It did so on

the ground that Ratzlaf's mens rea requirement did not apply to

§ 371 conspiracies to defraud.

On November 29, 1994, Alston was sentenced to a term of

imprisonment of one year and one day for conspiracy to defraud

the United States, as charged in Count I of the indictment.

II.

Section 5313 of title 31 of the United States Code, and

31 C.F.R. § 103.22(a)(1) promulgated thereunder, provide that

banks and other "financial institutions" must file CTR's for cash

transactions of $10,000 or more. In 1986, Congress enacted 31

U.S.C. § 5324 and § 5322 as part of the Anti-Drug Abuse Act of

1986. Section 5324 provides that it is illegal for an individual

to "structure," that is, to conduct one or more cash transactions

at one or more financial institutions, for purposes of evading

8 the financial institution's reporting requirements under 31

C.F.R. § 103.22. Structuring includes reducing a sum of cash

exceeding $10,000 into smaller sums. Because, prior to 1994,

section 5324 did not itself contain a penalty provision, its

penalty provision was supplied by section 5322(a), which provided

that "a person willfully violating" section 5324 was subject to

criminal penalties.

We originally interpreted the term "willful" in

§ 5322(a) to mean knowledge of the bank's reporting requirements

under § 5313 coupled with the intent to evade those requirements.

United States v. Shirk, 981 F.2d 1382, 1390-92 (3d Cir. 1992).

However, in Ratzlaf v. United States, -- U.S. --, 114 S. Ct. 655

(1994), the Supreme Court held that the term "willful" in

§ 5322(a) required proof beyond knowledge of a bank's reporting

duties and intent to evade them. Ratzlaf for the first time

required that the government prove that the defendant "knew the

structuring in which he engaged was unlawful." Ratzlaf, -- U.S.

at --, 114 S. Ct. at 663 (emphasis added). Thus, at all times

relevant to this appeal, structuring was one of the few crimes

for which the government had to prove knowledge of illegality.

See United States v. Zehrbach, 47 F.3d 1252, 1261 (3d Cir. 1995),

cert. denied, 115 S. Ct. 1699 (1995).0

0 After the Supreme Court decided Ratzlaf, Congress eliminated the willfulness requirement for structuring convictions by amending 18 U.S.C. § 5324 to contain its own criminal penalty provision. The penalty provision of § 5324, unlike § 5322, does not require willfulness. 1994 Riegle Community Development and Regulation Improvement Act, Pub. L. No. 103-325, § 411, 108 Stat. 2253 (1994). Thus, following the 1994 amendment, the mens rea requirement for a structuring conviction is met if the government

9 As earlier noted, the government conceded following

trial that it had failed to prove that Alston knew it was illegal

to avoid CTR's, and agreed that Alston's convictions for the

substantive offense of structuring and conspiracy to structure

should be vacated. However, the government maintained that

Alston's structuring may nonetheless be punished as the object of

a "Klein conspiracy"0 under the "defraud" clause of 18 U.S.C.

§ 371. The district court agreed and declined to vacate the

charge against Alston for conspiracy to defraud the United States

under § 371.

III.

Section 371, the general federal conspiracy statute,

provides as follows: If two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any matter for any purpose, and one or more of such persons do any act to effect the object of the conspiracy each shall be [subject to criminal penalties].

merely establishes that the defendant had the purpose of causing a financial institution to not file a required report. In light of the 1994 amendment to § 5324, we observe that the instant situation is unlikely to occur again. 0 The term "Klein conspiracy" comes from the Second Circuit case of United States v. Klein, 247 F.2d 908 (2d Cir. 1957), and has become the generic term for a conspiracy to frustrate the government (particularly the IRS) in its lawful information gathering functions. See, e.g. United States v. Montalvo, 820 F.2d 686 (5th Cir. 1987) (defendant convicted under the defraud clause of § 371 for conspiracy to impede the IRS in the ascertainment and collection of revenue by laundering money in order to disguise the true source of United States currency).

10 18 U.S.C. § 371. Section 371 refers to two types of

conspiracies: (1) conspiracy to commit a substantive offense

proscribed by another statute (the ""offense" clause"); and (2)

conspiracy to defraud the United States (the ""defraud" clause").

See United States v. Vazquez, 319 F.2d 381, 384 (3d Cir. 1963).

While the "offense" clause requires reference to another part of

the criminal code, the "defraud" clause does not, simply because

the substantive offense (fraud) is contained in the statute

itself.

It is well settled that to convict a defendant of

conspiracy under the "offense" clause, the government must prove

whatever level of mens rea is required for conviction of the

underlying substantive offense. The Supreme Court has made clear

that "in order to sustain a judgment of conviction on a charge of

conspiracy to violate a federal statute [under the "offense"

clause of § 371], the Government must prove at least the degree

of criminal intent necessary for the substantive offense itself."

United States v. Feola, 420 U.S. 671, 685-86 (1975) (citing

Anderson v. United States, 417 U.S. 211, 226 (1974)).0

In order to convict a pre-1994 structuring defendant,

the government must prove "willful" violation of the anti-

structuring statute, that is, knowledge of the illegality of

structuring, Ratzlaf v. United States, -- U.S. --, 114 S. Ct. 655

(1994). A pre-1994 conspiracy to structure must also be

0 As Justice Jackson once stated, conspiracy, "chameleon-like, takes on a special coloration from each of the many independent offenses on which it may be overlaid." Krulewitch v. United States, 336 U.S. 440, 447 (1940).

11 dismissed absent a showing of a "willful" violation. Thus, "it

is necessary to establish knowledge of the illegality of

structuring in order to convict a defendant for conspiracy to

structure financial transactions." United States v. Kim, 65 F.3d

123, 126 (9th Cir. 1995) (reversing conviction for conspiracy to

structure where the jury was not instructed to find that the

defendant had knowledge of the illegality of structuring). It

was obviously for these reasons that the district court in the

instant pre-1994 case dismissed the substantive charge of

structuring as well as the charge of § 371 conspiracy to

structure.

After the district court dismissed all but the charge

of § 371 conspiracy to defraud, of which Alston was convicted,

the issue then remaining before us was whether Alston, in light

of Ratzlaf's pre-1994 standard of willfulness -- a standard since

amended (see footnote 12, supra) -- could be convicted of a

conspiracy to defraud by structuring without proof of knowledge

of illegality. In United States v. Curran, 20 F.3d 560 (3d Cir.

1994), we answered that question in connection with the Federal

Election Campaign Act. We held that the standard that applied to

the substantive offense also applied to § 371 conspiracy to

defraud. Here, we answer that question consistent with Curran's

principle and holding and require that a conviction to defraud

the United States by pre-1994 structuring must also be supported

by proof that the defendant knew that structuring was illegal.0

0 Judge Roth, writing in dissent (dissent typescript page 24) claims that we have misread United States v. Curran, 20 F.3d 560

12 The defendant in Curran had asked his employees to make

individual contributions to the election campaigns of certain

candidates for federal office. He then reimbursed them in cash,

thereby circumventing the maximum campaign contributions

permitted to any individual under federal law. Following trial,

Curran was convicted on charges of causing election campaign

treasurers to submit false reports to the Federal Election

Commission (the "FEC"), in violation of 18 U.S.C. § 2(b) and

§ 1001,0 and of conspiracy to defraud the United States under

§ 371.

Like the antistructuring statutes, § 1001 punishes only

"willful" conduct. We held that "willfully" causing a violation

of the disclosure obligations under the Federal Campaign Act, was

no different than "willfully" causing the failure by a bank to

(3d Cir. 1994). She charges that our reading of Curran would lead to a conflict with United States v. Vasquez, 319 F.2d 381 (3d Cir. 1963). Vasquez, however, said no more than: "[t]he latter conspiracy [to defraud the United States] is itself the substantive offense, and a count of an indictment drawn under it need refer to no other statute than § 371" -- a statement to which we have referred in text, supra, at page 11. Curran, therefore, cannot conflict with Vasquez: first, because the Vasquez statement is dicta and second, because each of the two cases deals with vastly different subject matters and with vastly different principles. Hence, neither Vasquez nor any other authority cited by the dissent trenches upon the principle that where the Supreme Court or Congress has identified and specifically considered particular conduct and has ruled specifically with respect to that conduct, as the Supreme Court has ruled in Ratzlaf, effect must be given to the ruling and standard prescribed not only for the specific offense but also for the conspiracy to commit that offense. 0 Section 1001 prohibits the making of a false statement or the concealment of a material fact within the jurisdiction of a department or agency of the United States. 18 U.S.C. § 1001.

13 file a CTR under the Bank Secrecy Act. Curran, 20 F.3d at 568-

69. Thus, applying Ratzlaf, we defined "willfulness" in cases

brought under § 2(b) and § 1001 in the Federal Election law

context to require the prosecution to prove "that defendant knew

of the treasurers's reporting obligations, that he attempted to

frustrate those obligations, and that he knew his conduct was

unlawful." Curran, 20 F.3d at 569.

Because the Curran court's "willfulness" instruction

was legally deficient in that it did not charge the jury that

Curran had to have knowledge of the illegality of his actions, we

vacated Curran's convictions on the substantive counts, 18 U.S.C.

§ 2(b) and 18 U.S.C. § 1001. Most significantly, however, we

vacated Curran's § 371 "conspiracy to defraud" conviction because

critical aspects of Curran's mens rea were lacking, including

proof that he knew his actions to be illegal. We held that the

district court's misstatement of the legal standard for

"willfulness" "undermined not only the substantive counts, but

the conspiracy [to defraud] one as well. The essence of

conspiracy is an agreement to commit an act that is illegal."

Curran, 20 F.3d at 571. "The comments we have previously made

about the failings of the instruction on intent apply to the

conspiracy [to defraud] count as well." Id. "On retrial, the

instruction on intent as to the conspiracy count must track those

applicable to the substantive counts." Id. (quoting United

States v. American Investors of Pittsburgh, Inc., 879 F.2d 1087,

1100 (3d Cir.), cert. denied, 493 U.S. 955 (1989)).

14 Both logic and our decision in Curran dictate our

holding here. The government in this case has conceded that it

has failed to prove that Alston "willfully" structured under

Ratzlaf. Therefore, the charge against Alston for conspiracy to

defraud, which was premised exclusively on Alston's structuring

activity, must be vacated for failure to prove the mens rea

(knowledge of illegality) required not only by the underlying

substantive offense of structuring, but also by the conspiracy to

defraud by structuring.

In the present case, the indictment, in charging Alston

with conspiracy to defraud, relied exclusively on allegations of

his structuring activity. The indictment reads in relevant part: From on or about July 28, 1988 to on or about December 9, 1988 in the Eastern District of Pennsylvania, defendants

MICHAEL DAVID ALSTON, and RICHARD ROSA

did knowingly, willfully and unlawfully conspire, combine, confederate, and agree together with an unindicted co-conspirator, and others unknown to the grand jury:

a. to defraud the United States and the Department of the Treasury, an agency of the United States, by impairing, obstructing, and defeating its lawful governmental function of collecting data and reports of currency transactions in excess of $10,000; and

b. to knowingly and willfully structure, and attempt, aid, abet and cause the structuring of, financial transactions with a domestic financial institution for the purpose of evading the reporting requirements of 31 U.S.C. § 5313(a), in violation of 31 U.S.C. § 5324(a)(3).

15 "Structuring" entails the breaking down of large amounts of U.S. currency into smaller amounts of less than $10,000 preliminary to transacting business with a financial institution in an attempt to avoid the CTR reporting requirements.

Indictment ¶ 7 (emphasis added).

The indictment, in charging conspiracy to defraud,

asserts only that Alston impaired the United States and Treasury

"in its lawful governmental function of collecting data and

reports of currency transactions in excess of $10,000," language

that sounds in structuring. Indeed, the entire indictment speaks

only to structuring activities and contains no allegations that

Alston defrauded the government in any other respect. Because

the indictment is narrowly drawn to rest solely on the alleged

facts of structuring, and because it is conceded that Alston

lacked the requisite mental state to be guilty of structuring,

Alston's conviction on unspecified broader grounds cannot be

sustained. See United States v. Murphy, 809 F.2d 1427, 1432 (9th Cir. 1987) (where indictment was narrowly drawn to state that

defendants conspired to defraud the IRS in its collection of information with regard to currency transactions, the defendant

could not be convicted of conspiracy to defraud based on his

money laundering operations).

Moreover, the government has conceded that its theory

against Alston for fraud against the United States is nothing

more than structuring. See Gov't Supp. Mem, June 30, 1995 at 2

("[T]he basis for our definition of the underlying legal

obligation/legal prohibition to make out a case of an agreement

16 to defraud the government is found at 31 U.S.C. § 5324(a)(3).").

As a consequence, the government offered the same body of

evidence at trial to support both the charge against Alston for

"conspiracy to defraud" and the charge against him for

"conspiracy to structure." The government neither charged, nor

attempted to prove at trial, that Alston engaged in any

fraudulent activity separate from, or in addition to, what can

only be characterized as "structuring."

Despite this concession and the proof at trial, and

even though the only charges found in the indictment describe the

act of structuring, the government argues that Alston's

"conspiracy to defraud" conviction did not require proof of the

"willfulness" required for a structuring conviction. The

government contends instead that Alston was guilty of

participating in a so-called "Klein conspiracy" "to defraud the

United States by obstructing or impeding the IRS in its functions

and duties under the Bank Secrecy Act to collect analyze, and

disseminate information contained in CTR reports." (Appellee's

Brief at 11).0 Because establishing a true Klein conspiracy 0 As previously explained, supra at 10 n.13, the term "Klein conspiracy" is derived from United States v. Klein, 247 F.2d 908 (2d Cir. 1957), cert. denied, 355 U.S. 924 (1958). A Klein conspiracy is comprised of three elements: "(1) the existence of an agreement, (2) an overt act by one of the conspirators in furtherance of the [agreement's] objectives, and (3) an intent on the part of the conspirators to agree, as well as to defraud the United States." United States v. Shoup, 608 F.2d 950, 956 (3d Cir. 1979). Several courts have sustained Klein convictions when the evidence sufficed to prove an accompanying "intent and purpose of impeding and obstructing the IRS in the collection of revenue and the performance of its duties." U.S. v. Vogt, 910 F.2d 1184, 1203 (4th Cir. 1990), cert. denied, 498 U.S. 1083 (1991). See United States v. Montalvo, 820 F.2d 686, 690 (5th

17 under the "defraud" clause does not generally require proof of

knowledge of illegality, the government contends that its proof

that Alston knew of the bank's CTR filing requirements is a

sufficient showing of mens rea to sustain his conviction for

conspiracy to defraud.

We cannot discern any difference between the

government's "defraud" scenario and the "structuring" scenario of

which Alston was acquitted. Both conspiracies involve

structuring prior to the 1994 amendment to § 5324. Therefore,

given the indictment and the proofs at trial, we conclude that to

obtain a conviction under either the "defraud" or "offense"

clause of § 371, the government had to prove that Alston knew

that his structuring activities were illegal. See Ratzlaf,

supra. Although we do not foreclose the possibility of

convicting a defendant under § 371's "defraud" clause based on

charges in addition to or different from pre-1994 acts of

structuring, as we have just discussed, the present indictment,

under paragraph 7(a), charged no more or less than a straight-out

structuring conspiracy.

Notably, the cases that have upheld convictions for

conspiracy to defraud under § 371 have all involved additional

charges in the indictment and additional evidence produced at

trial, over and beyond that required for a conviction for pre-

1994 structuring. For instance, in United States v. Jackson, 33

F.3d 866 (7th Cir. 1994), cert. denied, 115 S. Ct. 1316 (1995),

Cir. 1987); United States v. Browning, 723 F.2d 1544 (11th Cir. 1984).

18 the Seventh Circuit affirmed the defendants' convictions for

conspiracy to defraud under § 371 despite reversing their

antistructuring convictions.

In Jackson, however, the indictment, in charging the

§ 371 "defraud" count, "never mentions a structuring violation or

the relevant antistructuring statutes." Id. at 870. Furthermore,

Jackson involved extensive "other evidence" beyond structuring

activity demonstrating a conspiracy to defraud the United States,

id. at 868, including record evidence that the defendants had no

wage or other income, id. at 869, and yet had spent over $300,000

to purchase homes and exotic automobiles. Id. at 869.

Because, in the present case, the charge against Alston

for "conspiracy to defraud" was nothing more than a charge of

conspiracy to structure, we will reverse Alston's conviction

where his conviction was not based on proof that he had

"willfully" structured, as required under Ratzlaf. Where either

Congress or the Supreme Court has spoken on the required level of

mens rea required to obtain a conviction for structuring, the

government may not subvert that mandate by juggling the "defraud"

and "offense" clauses of § 371 so as to substitute one for the

other.

If the "offense" clause of § 371 specifically covers an

act or offense and the indictment charges only that act or

offense as having been committed, and the proofs at trial reveal

no more than such acts of offense, a defendant not guilty under

the "offense" clause cannot alternatively be convicted under the

broad "defraud" clause of § 371.

19 IV.

Because the indictment here charged no more than a

conspiracy to defraud the United States by structuring and the

proofs at trial established no more than a conspiracy to defraud

the United States by structuring, we will reverse Alston's

conviction.

ALSTON 94-2195

Roth, Circuit Judge: Dissenting

Appellant Michael David Alston appeals his conviction

of conspiracy to defraud the United States and the Department of

the Treasury in violation of 18 U.S.C. § 371. The district court

found that Alston engaged in a Klein conspiracy with the intent

to "impair, obstruct and defeat the lawful government function of

collecting data and reports of currency transactions" by

20 arranging his bank transactions to avoid the reporting

requirements of 31 U.S.C. § 5313(a) and 31 C.F.R. § 103.22(a)(1).

United States v. Alston, Crim. No. 93-445-1 at 11 (Apr. 6, 1994);

Appellant's App. at 41. Because I believe that the evidence is

sufficient to support a conviction for violation of 18 U.S.C.

§371, I would affirm the district court. Therefore, I dissent.

The majority believes that because the conviction for

conspiracy to defraud the United States is "premised exclusively

on Alston's structuring activity," the government must

demonstrate the same mens rea for a conviction under 18 U.S.C.

§371 as is necessary for a conviction under 31 U.S.C. § 5322.

Majority Op. at ___ [slip op. at 15]. I disagree.

Section 5322 requires that a defendant "willfully"

commit a violation. The Supreme Court has interpreted this

"willfulness" requirement to mean that a defendant who

intentionally commits unlawful acts must also have known that his

actions were unlawful. Ratzlaf v. United States, ___ U.S. ___,

114 S.Ct. 655, 657, 663 (1994). Section 371, in contrast,

imposes no such "willfulness" requirement, and we should not

create one. As we stated in United States v. Vazquez, a § 371

conspiracy to defraud "is itself a substantive offense, and a

count of an indictment drawn under it need refer to no other

statute than § 371." 319 F.2d 381, 384 (3d Cir. 1963). Thus

there is no logical reason to apply the willfulness requirement

contained in § 5322 when § 371 encompasses the entire statutory

charge against Alston.

21 The government, having failed to prove the requisite

mens rea for conviction under one statute, 31 U.S.C. § 5322, has

obtained a conviction under another more general statute, 18

U.S.C. § 371. Section 371 requires only a showing that Alston

intentionally committed unlawful acts -- not a showing that he

knew his actions to be unlawful. The fact that the two charges

are premised on the same factual scenario is of no legal

significance in this case. There is nothing unusual or improper

in the government's alternative characterization of the same

facts, so long as both theories are alleged in the indictment, as

they were here. Indictment, Count I at ¶ 7(a)-(b); App. at 12a;

Id. at Count II, ¶ 2; App. at 17a.

I

Alston was originally convicted on two counts of a

three count indictment. Count I charged Alston in two subparts

with conspiracy to defraud the United States and the Department

of the Treasury in violation of 18 U.S.C. § 371 and with

conspiracy to structure for the purpose of evading the reporting

requirements of 31 U.S.C. § 5313(a).0 Alston, Crim. No. 93-445-1 0 Count I reads in pertinent part:

7. From on or about July 28, 1988 to on or about December 9, 1988 in the Eastern District of Pennsylvania, defendants

did knowingly, willfully and unlawfully conspire, combine, confederate, and agree together with an unindicted co-conspirator, and others unknown to the grand jury:

22 at 1; Appellant's App. at 31; Indictment, Count I at ¶7(a)-(b);

App. at 12a. Count II charged Alston with "structuring" a

financial transaction in violation of 31 U.S.C. §5324(a)(3).

Alston, Crim. No. 93-445-1 at 1; Appellant's App. at 31;

Indictment, Count II at ¶ 2; App. at 17a.

The structuring and conspiracy to structure charges

were prosecuted pursuant to 31 U.S.C. § 5322, which provided that

defendants must be convicted of "willfully violating" the anti-

structuring laws.0 At the time of Alston's indictment and trial,

we interpreted the "willfulness" mens rea requirement in §5322 to mean that a defendant had to have "knowledge of the legal

reporting requirements and the intent to prevent the bank from

furnishing the required information." United States v. Shirk, 981

F.2d 1382, 1391-92 (3d Cir. 1992) (footnote omitted), vacated,

___ U.S. ___, 114 S.Ct. 873 (1994) (citing Ratzlaf v. United

a. to defraud the United States and the Department of the Treasury, an agency of the United States, by impairing, obstructing, and defeating its lawful governmental function of collecting data and reports of currency transactions in excess of $10,000 . . ..

b. to knowingly and willfully structure, and attempt, aid, abet and cause the structuring of, financial transactions with a domestic financial institution for the purpose of evading the reporting requirements of 31 U.S.C. § 5313(a), in violation of 31 U.S.C. § 5324(a)(3).

Indictment, Count I at ¶ 7; App. at 12a. 0 Section 5324 has since been amended to add a criminal penalty provision so that a prosecution can now be brought directly under that statute without reference to § 5322. See United States v. Zehrbach, 47 F.3d 1252, 1262 n.7 (3d Cir. 1995) (citing 1994 Riegle Community Development and Regulation Improvement Act, Pub.L. No. 103-325, § 411, 108 Stat. 2253 (1994)).

23 States. ___ U.S. ___, 114 S.Ct. 655 (1994)). The government did

not have to prove that the defendant knew that he was violating

the law by structuring his transactions.

After the conclusion of Alston's bench trial, the

Supreme Court decided Ratzlaf v. United States. ___ U.S. ___,

114 S.Ct. 655 (1994). Ratzlaf interpreted the word "willfully"

as it then appeared in 31 U.S.C. § 5322 to require that the

government show not only that a defendant intended to circumvent

a bank's obligation to report currency transactions but that the

defendant knew that his efforts to circumvent those requirements

were unlawful. Id. at 657, 663. In light of Ratzlaf, Alston

filed post-trial motions to set aside his convictions. The

district court, with the government's acquiescence, vacated the

structuring charge in Count II and the conspiracy to structure

charge in Count I and acquitted Alston of these crimes.

Despite Ratzlaf, the district court affirmed Alston's

conviction for conspiracy to defraud the United States and the

Treasury Department in violation of 18 U.S.C. § 371. The court

held that Alston was "a co-conspirator in a scheme to prevent the

United States from receiving information to which it is entitled

when a bank files a CTR . . .." Alston, Crim. No. 93-445-1 at

14; Appellant's App. at 44. The court distinguished Ratzlaf "on

the basis that its analysis of the willfulness element centers on

the use of the term 'willfully' in the antistructuring statute

found at 31 U.S.C. §§ 5322(b) and 5324(a)(3)." Id.0 Because

0 As the majority notes, 31 U.S.C. § 5322 imposed criminal penalties only for "willful" violations of §§ 5313 or 5324 at all

24 §371 does not contain an analogous willfulness element, the court

did not require proof that Alston knew that his actions were

unlawful.

The district court's analysis is clearly correct. At

the time Alston was charged and convicted, the relevant portion

of § 371 provided as follows: If two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any matter for any purpose, and one or more of such persons do any act to effect the object of the conspiracy, each shall be fined not more than $10,000 or imprisoned not more than five years, or both.

18 U.S.C. § 371. In United States v. Vazquez, we explained that this general conspiracy statute

condemns two types of conspiracies: One, to commit substantive offenses against the United States specified under other statutes. The other to defraud the United States. The latter conspiracy is itself the substantive offense, and a count of an indictment drawn under it need refer to no other statute than § 371.

319 F.2d at 384 (emphasis added) (citing Glasser v. United

States, 315 U.S. 60, 67 (1942)); see also United States v. Jackson, 33 F.3d 866, 870 (7th Cir. 1994) (citing United States

v. Caldwell, 989 F.2d 1056, 1059 (9th Cir. 1993); United States

times relevant to this appeal. Prior to its amendment in 1994, §5322 read as follows:

A person willfully violating this subchapter [31 U.S.C. § 5311 et seq.] or a regulation prescribed under this subchapter (except section 5315 of this title or a regulation prescribed under section 5315) shall be fined not more than $250,000, or imprisoned for not more than five years, or both.

31 U.S.C. § 5322(a).

25 v. Bucey, 876 F.2d 1297, 1312 (7th Cir. 1989), cert. denied, 493

U.S. 1004 (1989); United States v. Rosengarten, 857 F.2d 76, 78

(2d Cir. 1988), cert. denied, 488 U.S. 1011, (1989)); United

States v. Vogt, 910 F.2d 1184, 1200 (3d Cir. 1990), cert. denied,

498 U.S. 1083 (1991).

Section 371 "reaches 'any conspiracy for the purpose of

impairing, obstructing or defeating the lawful function of any

department of Government.'" Dennis v. United States, 384 U.S.

855, 861 (1966) (citations omitted). Klein conspiracies, for

example, may be prosecuted under the "defraud" clause of § 371.

See United States v. Tarnopol, 561 F.2d 466, 474-75 (3d Cir.

1977) (acquitting defendants of Klein conspiracy because there

was no basis for jury finding of intent "to impede and obstruct

the functions of the Internal Revenue Service"); United States v.

Klein, 247 F.2d 908 (2d Cir. 1957), cert. denied, 355 U.S. 924

(1958), and cert. denied sub nom., Haas v. United States, 355

U.S. 924 (1958), and cert. denied sub nom., Alprin v. United

States, 355 U.S. 924 (1958); see also United States v.

Derezinski, 945 F.2d 1006, 1010 (8th Cir. 1991); United States v.

Farm & Home Savings Assoc., 932 F.2d 1256, 1260 (8th Cir. 1991),

cert. denied sub nom., Meyer v. United States, 502 U.S. 860

(1991), and cert. denied sub nom., Williams v. United States, 502

U.S. 860 (1991); United States v. Cambara, 902 F.2d 144, 145-47

(1st Cir. 1990).

Klein conspiracies are conspiracies to defraud the

United States by obstructing or impeding the Internal Revenue

Service in the collection of taxes or in its lawful functions and

26 duties to collect, analyze, and disseminate information contained

in CTRs. Derezinski, 945 F.2d at 1010; Farm & Home Savings

Assoc., 932 F.2d at 1260; Cambara, 902 F.2d at 145-47. A Klein

conspiracy consists of three elements: "(1) the existence of an

agreement, (2) an overt act by one of the conspirators in

furtherance of the [agreement's] objectives, and (3) an intent on

the part of the conspirators to agree, as well as to defraud the

United States." United States v. Shoup, 608 F.2d 950, 956 (3d

Cir. 1979). Knowledge of illegality is not an element of a Klein

conspiracy. As the majority concedes, a conviction under the

"defraud" clause of 18 U.S.C. § 371 requires a lesser showing of

intent than does a conviction under 31 U.S.C. § 5322. Majority

Op. at ___ [slip op. at 17-18] ("establishing a true Klein

conspiracy under the 'defraud' clause does not generally require

proof of knowledge of illegality . . ..").

The district court convicted Alston of a Klein

conspiracy based upon several transactions conducted by or on

behalf of Alston between October 5 and October 7, 1988. On

October 5, Alston purchased from Meridian Bank a $9,000 money

order payable to West German Motor Imports to be used toward the

purchase of a new BMW. On October 6, 1988, Alston had co-

conspirator Rosa purchase from Provident National Bank a $6,000

cashiers check payable to West German. The following day,

October 7, 1988, Alston purchased with cash an $8,000 money order

payable to West German from Meridian Bank. That same day, Alston

purchased a second money order at Meridian Bank for $6,500 with a

cash advance from a credit card. All of these negotiable

27 instruments were delivered to West German and credited toward

Alston's purchase of the BMW.0

Alston conducted three of these four transactions

through Terese Drew, a bank teller at Meridian Bank. Drew, who

became head teller at Meridian in 1986 or 1987, described herself

as a "very close friend" of Alston. Drew knew about the CTR

reporting requirements imposed by law. The district court

concluded that Drew discussed the CTR requirements with Alston

some time before the events that led to the indictment. The

court discounted Drew's statement that she did not believe that

Alston knew of the CTR requirements because "it appeared to be

part of her attempt to protect the defendant and it was asking

her to speculate as to the defendant's state of mind." Alston,

Crim. No. 93-445-1 at 10 n.5; Appellant's App. at 40.

Furthermore, the parties stipulated that Alston failed

to file income tax returns for the calendar years 1987 and 1988.

Based upon this evidence, the district court concluded that

Alston arranged his transactions because "he did not want his

name called to the attention of the Internal Revenue Service as

someone who was financially capable of making large cash payments

but nevertheless had failed to file income tax returns." Id. at

11; Appellant's App. at 41.

0 Alston presumably paid West German in negotiable instruments in order to avoid triggering West German's duty to file an IRS Form 8300 reporting a series of cash transactions in excess of $10,000. No criminal indictment was brought for failure to file 8300 forms because the applicable three year statute of limitations for this offense had already run.

28 The district court summarized its understanding of

these facts as follows: The circumstantial evidence presented at trial shows that the overt acts were done willfully and resulted in the bank failing to file CTRs because the transactions occurred on separate days and at separate banks in amounts less than $10,000 and were done with the purpose of preventing CTRs from being filed.

Id. at 14; Appellant's App. at 44. Thus the district court found

all three elements necessary for conviction of a Klein conspiracy

under 18 U.S.C. § 371: (1) an agreement between Alston and Rosa,

(2) "overt acts" in furtherance of that agreement, and (3) an

intent to defraud the United States of the CTRs to which it was

entitled under 31 U.S.C. § 5313(a) and 31 C.F.R. § 103.22(a)(1).

Alston possessed the requisite mens rea for a § 371

conviction because these overt acts were done "with the purpose

of preventing CTRs from being filed." No other mens rea is

necessary for conviction. As the majority itself acknowledges,

"[s]everal courts have sustained Klein convictions when the

evidence sufficed to prove an accompanying 'intent and purpose of

impeding and obstructing the IRS in the collection of revenue and

the performance of its duties.'" Majority Op. at ___ [slip op.

at 18 n.16] (citing United States v. Vogt, 910 F.2d at 1203; United States v. Montalvo, 820 F.2d 686, 690 (5th Cir. 1987);

United States v. Browning, 723 F.2d 1544 (11th Cir. 1984)).

Ratzlaf is inapposite because it discusses a different

statute with a different mens rea requirement. The Supreme Court

stressed in Ratzlaf itself that it did not discard "the venerable

principle that ignorance of the law generally is no defense to a

29 criminal charge." Ratzlaf, 114 S.Ct. 655, 663 (1994). The Court

simply made an exception in one instance pursuant to a specific

decree from Congress. Id. Because there is no "willfulness"

requirement in § 371, Ratzlaf does not apply, and the government

is not required to prove that Alston knew that his actions were

illegal. The majority should not graft an additional mens rea

requirement onto § 371 when it is warranted by neither the words

of the statute nor Supreme Court precedent.

II

To understand how the majority came to impose this

additional mens rea requirement on a § 371 conspiracy to defraud

case, it is helpful to examine the majority's general approach to

the issue. The majority reverses Alston's conviction for

conspiracy to defraud the United States because it has

"substantial difficulty in understanding how Alston can be

cannot be guilty of a conspiracy to structure or of structuring

itself . . .." Majority Op. at ___ [slip op. at 3-4] (footnote

omitted). The majority never lays the facts of this case and the

elements of a Klein conspiracy side by side to determine whether

the facts satisfy the elements necessary for conviction under 18

U.S.C. § 371.0 Instead, the majority emphasizes the similarity

between the factual scenario supporting the structuring and

conspiracy to structure charges and the factual scenario

0 When the majority does address the government's Klein conspiracy theory, it does so in a perfunctory manner, dismissing it as "a far different conspiracy" than the one alleged in the indictment. Majority Op. at ___ [slip op. at 3].

30 supporting the conspiracy to defraud charge -- a consideration

that I believe is irrelevant.

The majority opinion proceeds along two closely linked

lines of reasoning. First, the majority identifies a perceived

deficiency in the indictment. According to the majority, the

indictment does not adequately allege a Klein conspiracy

independently of the structuring and conspiracy to structure

charges. See Majority Op. at ___ [slip op. at 3]; see also Id.

at ___ [slip op. at 16]. Second, the majority argues that Alston

cannot be convicted of a conspiracy to defraud the United States

based upon the same factual scenario used to support the

unsuccessful structuring and conspiracy to structure charges.

Majority Op. at ___ [slip op. at 3-4, 15, 17-20]. I will address

these contentions in turn.

The Indictment

Count I of the indictment clearly indicates the

government's intention to seek a conviction of Alston under 18

U.S.C. § 371. The language in the indictment mirrors relevant

statutory and judicial pronouncements on § 371 and Klein

conspiracies. The indictment alleges in pertinent part that

Alston and Rosa conspired a. to defraud the United States and the Department of the Treasury, an agency of the United States, by impairing, obstructing, and defeating its lawful governmental function of collecting data and reports of currency transactions in excess of $10,000 . . ..

Indictment, Count I at ¶ 7(a); App. at 12a.

Section 371 penalizes individuals who "conspire . . .

to defraud the United States, or any agency thereof . . .." 18

31 U.S.C. § 371. In Dennis v. United States, the Supreme Court

elaborated on this statutory language, noting that § 371 covers

not only fraud but any conspiracy for the purpose of "impairing,

obstructing, or defeating the lawful function of any department

of government . . .." 384 U.S. at 861 (citations omitted). The

language of paragraph 7(a) of the indictment closely tracks the

language of § 371 and Dennis. It is therefore clear that the

government intended to charge Alston with a violation of § 371

for obstructing lawful governmental functions.

A Klein conspiracy, which may be prosecuted under §371,

is a conspiracy "to interfere with or obstruct one of [the

government's] lawful governmental functions . . .." Klein, 247

F.2d at 916. Obstruction of lawful government functions is

exactly what was alleged in paragraph 7(a) of the Alston

indictment. Alston was accused of impairing and obstructing the

government's lawful function of "collecting data and reports of

currency transactions in excess of $10,000 . . .." The

indictment in Klein was "framed to make a general charge of

impeding and obstructing the Treasury Department in the

collection of income taxes . . .." Id. at 916. Likewise, the

indictment in this case was framed to make a general charge of

collection of CTRs. See Derezinski, 945 F.2d at 1010; Farm &

Home Savings Assoc., 932 F.2d at 1260; Cambara, 902 F.2d at 145-

47.

The district court understood the indictment to allege

a Klein conspiracy, and Alston has not disputed that the

32 indictment charges a crime under 18 U.S.C. § 371 that is separate

from the structuring and conspiracy to structure charges.

Paragraph 7(a) clearly alleges a Klein conspiracy to thwart the

government's lawful purpose in collecting information from CTRs.0

The majority argues that United States v. Murphy

supports its argument concerning the insufficiency of the Alston

indictment. Majority Op. at ___ [slip op. at 16]. The

indictment in Murphy was narrowly drawn to state that defendants

conspired to defraud the IRS in its collection of information

with regard to currency transactions. 809 F.2d 1427, 1431-32

(9th Cir. 1987). Specifically, the § 371 conspiracy to defraud

charge rested "solely on the alleged falsehoods in the CTR

[defendant] filed." Id. The court found, however, that

defendant had in fact filed an accurate CTR. Id. at 1429-32.

Therefore, the § 371 charge alleged in the indictment was

manifestly unsupported by the evidence.

The government argued that although the CTR alone could

not support a conviction on the § 371 charge, the court should 0 The majority argues that "the entire indictment speaks only to structuring activities and contains no allegations that Alston defrauded the government in any other respect." Majority Op. at ___ [slip op. at 16]. The majority's characterization of the activities in the indictment as "structuring activities" begs the question. Whether Alston engaged in "structuring" activities is a legal question, not a factual matter. We could assume a different result just as easily by insisting that the indictment alleges only "Klein-conspiracy activities" and that the language in indictment paragraph 7(a) "sounds in Klein-conspiracy." The "Overt Acts" section of the indictment alleges a series of activities by Alston and Rosa. Indictment, Overt Acts at ¶¶ 1-14; App. at 13a-16a. The majority's repeated characterization of these activities as "structuring activities" ignores Count I paragraph 7(a), which proffers an alternative characterization of the facts.

33 nevertheless entertain a charge of conspiracy to defraud based

upon broader allegations of money laundering. Id. at 1432. The

government argued that the CTR was a thread in a larger web of

transactions designed to thwart the IRS in the performance of its

duties. The court refused to consider these broader allegations

because "[t]he indictment d[id] not allege a conspiracy to

defraud premised upon the defendants' entire laundering

operations. It is far more narrowly drawn . . .. Therefore, the

indictment before us does not properly allege a conspiracy to

defraud." Id. (citing United States v. Dela Espriella, 781 F.2d

1432, 1435 (9th Cir. 1986)).

This case is clearly distinguishable from Murphy. In

Murphy, the government attempted to switch the factual basis and

legal theory of its case from defendants' currency transactions

to a broader charge encompassing the whole of defendants' money

laundering operations, even though this broader charge was not

alleged in the indictment. In this case, however, the government

has not attempted to switch either its factual allegations or its

legal theories. The indictment clearly alleged a § 371

conspiracy to defraud in Count I, paragraph 7(a), based upon the

"Overt Acts" alleged in the indictment. The government has

alleged the same Klein conspiracy to defraud based upon the same

facts throughout the proceedings. Where the government attempted

in Murphy to switch factual scenarios and legal theories

midstream, the government in this case merely seeks affirmation

of the conspiracy to defraud that it alleged in the district

court. Murphy is completely inapposite.

34 Mens Rea Necessary for Conviction

The majority's second major contention is that Alston

cannot be convicted of a § 371 conspiracy to defraud the United

States unless he possesses the requisite mens rea for conviction

of structuring or conspiracy to structure as set out in Ratzlaf.

The majority states that "the charge against Alston for

conspiracy to defraud, which was premised exclusively on Alston's

structuring activity, must be vacated for failure to prove the

mens rea (knowledge of illegality) required not only by the

underlying substantive offense of structuring, but also by the

conspiracy to defraud by structuring." Majority Op. at ___ [slip

op. at 15].

The majority refers to the crime of which Alston was

convicted as "conspiracy to defraud by structuring" at least four

times in its opinion. Majority Op. at ___ [slip op. at 3-4, 13,

15, 20]. This formulation is indicative of what I believe to be

a fundamental flaw in the majority's conception of this case. See

supra note 6. The crime for which Alston was actually convicted,

of course, is a § 371 conspiracy to defraud the United States.

The indictment alleges this conspiracy to defraud in a separate

paragraph that does not include any reference to structuring.

Indictment, Count I at ¶ 7(a); App. at 12a. Section 371 does not

refer to "structuring" or conspiracy to defraud "by structuring."

Congress included nothing in § 371 to indicate that the

requirements for a § 5322 structuring conviction should be

grafted onto a prosecution for a § 371 conspiracy to defraud the

United States. Without aid of close statutory interpretation or

35 legislative history, the majority unilaterally amends § 371 to

add the words "by structuring" and thereby allows all of the

requirements for a § 5322 conviction to slip into a § 371 case

where they do not belong.0

The gravamen of the majority's argument seems to be

that there is something improper about basing the case for a §371

violation on the same so-called "structuring" behavior for which

the government failed to obtain a conviction under § 5322. See,

e.g., Majority Op. at ___ [slip op. at 15]. The majority

observes that there is no difference between "the government's

'defraud' scenario and the 'structuring' scenario of which Alston

was acquitted." Majority Op. at ___ [slip op. at 18]. Neither

the government, nor the district court, nor I have ever argued

that there is a difference between the factual scenarios

supporting each charge. There simply are two alternative

charges, brought pursuant to two different statutes, based upon

the same factual scenario. Because 18 U.S.C. § 371 has a lower

mens rea requirement than 31 U.S.C. § 5322, Alston's behavior is

culpable under § 371, even though he lacked the mens rea to be

convicted under § 5322.

It has long been recognized "that when an act violates

more than one criminal statute, the Government may prosecute

under either so long as it does not discriminate against any

class of defendants." United States v. Batchelder, 442 U.S. 114,

0 As we have already noted, the "defraud" clause of § 371 is an independent offense requiring no reference to any other statute in the U.S. Code. Vazquez, 319 F.2d at 384.

36 123-24 (1979). It does not matter that the government decides to

invoke a general statute when a more specific criminal statute is

available. United States v. Curran, 20 F.3d 560, 565-66 (3d Cir.

1994) (citing United States v. Woodward, 469 U.S. 105, 108 (1985)

(per curiam); United States v. Beacon Brass Co., 344 U.S. 43, 46

(1952); United States v. Parsons, 967 F.2d 452, 456 (10th Cir.

1992); United States v. Hopkins, 916 F.2d 207, 218 (5th Cir.

1990); United States v. Hansen, 772 F.2d 940 (D.C. Cir. 1985);

United States v. Gordon, 548 F.2d 743, 745 (8th Cir. 1977);

United States v. Carter, 526 F.2d 1276, 1278 (5th Cir. 1976));

United States v. Derezinski, 945 F.2d 1006, 1010 (8th Cir. 1991).

Thus, the government could have pursued a conviction in

this case under the "defraud" clause of 18 U.S.C. § 371 alone,

without ever bringing a charge for the more specific offenses of

structuring or conspiracy to structure and without ever

referencing 31 U.S.C. § 5322. In that case, there would be no

question of characterizing the facts as "structuring" or of

imposing the Ratzlaf mens rea on a § 371 case. We would simply

examine the facts and compare them with the elements and mens rea

necessary for conviction of a § 371 violation to determine

whether Alston is guilty of a Klein conspiracy to defraud the

United States. See supra Part I. I submit that this is

essentially the case we now have before us. If Alston's actions

satisfied the requirements for a § 371 conspiracy to defraud the

United States, it should not matter that he was acquitted of

independent, narrower charges in a multiple-count indictment.

Unless the majority can explain precisely which element of a §371

37 conspiracy to defraud the United States is lacking, we should

affirm the district court.

The Seventh Circuit's opinion in United States v.

Jackson is indistinguishable from this case. 33 F.3d 866 (7th

Cir. 1994). In Jackson, defendants were originally convicted of

structuring, conspiracy to structure, and conspiracy to defraud

the United States--the exact same charges of which Alston was

originally convicted. Id. at 867. Pursuant to Ratzlaf, the

court reversed the structuring and conspiracy to structure

convictions, but affirmed the § 371 conspiracy to defraud. Id.

at 868.

The majority argues that Jackson is distinguishable

because it "involved additional charges in the indictment and

additional evidence produced at trial, over and beyond that

required for a conviction for pre-1994 structuring." Majority

Op. at ___ [slip op. at 19]. Contrary to the majority's

assertion, however, the Jackson court never said that additional

charges or evidence were necessary for a conviction on the § 371

count. The court's reasoning was quite clear: [Defendant's] first contention--that Ratzlaf requires reversal of the § 371 conviction--is misplaced because the government did not have to demonstrate that the defendants violated the antistructuring laws. Ratzlaf's holding concerning the meaning of "willfully violating" in the antistructuring laws, therefore, has no bearing on the defendants' § 371 convictions; § 371 contains no such language.

Jackson, 33 F.3d at 871 (emphasis added).

The majority's attempts to distinguish Jackson miss the

mark. First, the majority argues that it is significant that the

38 Jackson indictment, in charging the § 371 count, "never mentions

a structuring violation or the relevant antistructuring

statutes." Majority Op. at ___ [slip op. at 19] (quoting

Jackson, 33 F.3d at 870). An examination of this sentence in

context shows that it does not deserve the prominence that the

majority gives it: [T]he government argues that a § 371 conspiracy to defraud the United States is an independent violation that need not be based on the violation of another substantive statute. The government points out that count one of the indictment in this case, which sets forth the § 371 charge, never mentions a structuring violation or the relevant antistructuring statutes. Count one charges a conspiracy "to defraud the United States"; it does not allege a conspiracy "to commit any offense against the United States."

Jackson, 33 F.3d at 870. The Jackson court was merely

emphasizing that the government alleged an independent conspiracy

to defraud count and that that count is not dependent upon the

other structuring counts--a point that I have emphasized and that

supports a conviction on the independent § 371 count. The court

meant nothing more by this statement, and it set out no general

rule.

The majority's selected quotation from Jackson also

fails to distinguish the language in the Jackson indictment from

the language in the Alston indictment. Paragraph 7(a) of the

Alston indictment, like Count I in Jackson, "never mentions a

structuring violation or the relevant antistructuring statutes."

Even though the § 371 conspiracy to defraud charge is based upon

the same facts as the structuring charges, it is framed as an

39 independent allegation in paragraph 7(a). Thus any perceived

"distinction" based upon this language is entirely illusory.

The majority's second "distinction" is equally futile.

The majority argues that it is significant that Jackson involved

other "extensive evidence" beyond structuring activity to

demonstrate the conspiracy to defraud. As examples of such

extensive evidence, the majority cites the fact that defendants

had no wage or income and that they spent over $300,000 to

purchase homes and exotic automobiles. Majority Op. at ___ [slip

op. at 19].

The Jackson court, however, never indicated that these

additional facts were necessary for a conviction under § 371. The

court "set[s] forth in detail the structuring activity of the

defendants--as well as other evidence--that demonstrates a

conspiracy to defraud the United States under § 371." Jackson,

33 F.3d at 868. It does not mention or even allude to this

"other evidence" when it explains its reasoning, however, and it

never implies that such "other evidence" is essential for a

conviction. Id. at 870-71.

The majority not only fails to explain why other

evidence of a conspiracy to defraud the United States is

necessary for a conviction; it ignores the existence of

additional evidence in this case. There was evidence that

Alston, like the defendants in Jackson, failed to file income tax

returns. Compare Alston, Crim. No. 93-445-1 at 10; Appellant's

App. at 40 with Jackson, 33 F.3d at 869. The majority offers no

guidance as to how much "other evidence" is sufficient to support

40 a § 371 conviction. Surely a failure to file income taxes is an

indication that defendants had a motive to defraud the United

States of information about large cash purchases that would

otherwise appear in CTRs. Again, the majority finds a

"distinction" when there is no significant difference between the

factual scenarios.

United States v. Derezinski, a case very similar to the

case at bar,0 also supports the district court's reasoning.

Derezinski was prosecuted under the "defraud" clause of § 371,

even though he might have been prosecuted under the more specific

"offense" clause. 945 F.2d at 1010. Since specific statutes

existed, Derezinski argued, "it is no longer appropriate for the

Government to prosecute conspiracies to commit acts governed by

those statutes under the general defraud clause." Id. The

Eighth Circuit firmly rejected this argument: [Defendant's] arguments attempt to draw our attention away from the true issue in this case. His claim that the Government is really charging him with conspiring to violate [specific substantive statutes] is simply not true. The Government has steadfastly persisted in proving that [the defendant] participated in a Klein conspiracy to defraud the United States. While it may be true that the Government could have also charged [the defendant] under the specific offense clause of section 371, it is well settled that when conduct violates more than one criminal statute, the Government may choose which statute it will apply. [citing Batchelder]. The Government was within its discretion when it decided to prosecute [the defendant] under the general defraud clause of section 371.

0 Like the defendant in this case, Derezinski was prosecuted under the defraud clause of § 371 for a Klein conspiracy that consisted, inter alia, of circumventing the financial reporting requirements of a financial institution. Derezinski, 945 F.2d at 1009-10.

41 Id. It should make no difference to the § 371 prosecution in

this case that the government failed to obtain convictions under

the substantive statutes.

Most importantly, the Eighth Circuit denied

Derezinski's challenge to the district court's jury charge

regarding intent. Derezinski argued that because the criminal

tax statute defining the specific offense required a showing of

"willfulness" (as defined by Cheek v. United States), the

government should bear the burden of demonstrating the same level

of willfulness when pursuing a conviction under the "defraud"

clause of § 371. Id. at 1012 (citing Cheek v. United States, 498

U.S. 604 (1991)). The Eighth Circuit flatly rejected this

contention: "Cheek does not apply to this case because the

Government prosecuted Derezinski under a general conspiracy

statute, not a criminal tax statute, and because 'willfulness' is

not an express element of section 371." Likewise, Ratzlaf does

not apply to this case. The government prosecution at issue is

pursuant to § 371, not § 5322. "Willfulness" is not an express

element of § 371.

The majority offers United States v. Curran as

authority to support its argument concerning mens rea. Majority

Op. at ___ [slip op. at 13-14] (citing United States v. Curran,

20 F.3d 560 (3d Cir. 1994)). The majority's reading of Curran

would make § 371 dependent upon the level of mens rea necessary

for a conviction under § 5322. Thus the majority's analysis of

Curran conflicts directly with Vazquez's statement that the

"defraud" clause of § 371 is an independent charge that need be

42 based on no other part of the U.S. Code. It also conflicts with

the analysis of § 371 in Derezinski and Jackson. I do not

believe that we intended in Curran to overrule Vazquez or to

change radically our reading of the defraud clause of § 371. I

also do not believe that the majority's interpretation of

Curran's holding comports with a close reading of that case.

The defendant in Curran was prosecuted for causing

campaign treasurers to make false statements to the Federal

Election Commission (FEC). The defendant could not be prosecuted

directly under 18 U.S.C. § 1001 for concealing material facts and

making false representations, however, because it was the

campaign treasurers, rather than the defendant, who prepared the

false reports and submitted them to the Commission. Curran, 20

F.3d at 567. The government therefore used 18 U.S.C. § 2(b) in

conjunction with § 1001 to charge defendant with causing campaign

treasurers to file false reports. Section 2(b), like 31 U.S.C.

§5322, requires "willfulness" on the part of the defendant in

order to sustain a conviction. Relying on Ratzlaf, we

interpreted § 2(b) "willfulness" in cases brought under §§ 2(b)

and 1001 in the federal election law context to mean that the

prosecution must prove that "defendant knew of the treasurers'

reporting obligations, that he attempted to frustrate those

obligations, and that he knew his conduct was unlawful." Id. at

569 (emphasis added).

The indictment in Curran alleged that defendant caused

treasurers of various campaign committees to make incorrect

reports to the FEC. Id. Nevertheless, the trial judge

43 erroneously charged the jury that "as a matter of law, . . .

defendant had a legal duty to disclose the facts in question to

the agency in question, the Federal Election Commission or to

make certain that [the] information would have gotten to them."

Id. (emphasis added). In regard to intent, the trial judge

erroneously failed to instruct the jury that it must find that

the defendant knew that his conduct was unlawful. Id. We

therefore overturned the district court on two grounds: (1) its

charge erroneously placed the reporting duty directly on the

defendant and (2) the instruction on § 2(b) and § 1001

willfulness did not communicate the proper mens rea.

The majority's discussion of Curran begins with the

definition of "willfulness" as it appears in §§ 1001 and 2(b).

Majority Op. at ___ [slip op. at 14]. Because there is no

"willfulness" requirement in § 371, this part of the Curran

opinion is not directly applicable to this case. See discussion

Part I, supra. The majority then addresses the section of the

Curran opinion dealing with the "defraud" clause of § 371. The

majority quotes Curran as holding that the district court's

misstatement of the legal standard for "willfulness" "undermined

not only the substantive counts, but the conspiracy [to defraud]

one as well. The essence of conspiracy is an agreement to commit

an act that is illegal." Majority Op. at ___ [slip op. at 14]

(citing Curran, 20 F.3d at 571).

A careful reading of Curran demonstrates that the

majority's interpretation of this dictum is plainly incorrect.

The paragraph from which the majority quotes reads in full:

44 As stated earlier, the misstatement of the law applicable to the defendant's legal duty to disclose facts to the Commission amounted to plain error. This misstatement undermined not only the substantive counts, but the conspiracy one as well. The essence of conspiracy is an agreement to commit an act that is illegal. If a jury is misled into considering as unlawful the omission of an act that the defendant is under no duty to perform, then a finding of conspiracy based on such conduct cannot stand. It follows that the conspiracy count must therefore be vacated.

Curran, 20 F.3d at 571 (citations omitted). Reading these

sentences in context, it is clear that we refer not to the

"willfulness," as the majority contends, but to its misstatement

of the defendant's duty to report to the FEC. This portion of

Curran, like most of the opinion, discusses the duty of defendant

relative to that of the campaign treasurers, not the mens rea

requirement for a § 371 conspiracy to defraud.

The majority's argument that Curran makes the defraud

clause of § 371 dependent on the intent necessary for conviction

of another offense, therefore, hinges entirely on one paragraph

of dictum. That paragraph says in pertinent part that: The comments we have previously made about the failings of the instruction on intent apply to the conspiracy count as well. As noted in American Investors, 879 F.2d at 1100, '[i]n order to prove a conspiracy, the government must show an agreement to commit an unlawful act combined with intent to commit the underlying offense.' On retrial, the instructions on intent as to the conspiracy count must track those applicable to the substantive counts.

Id.

Curran's restatement of the general rule for conspiracy

does nothing to change the outcome in this case. If the

majority insists on reading this dictum to make § 371 dependent

45 upon §5322, Curran conflicts with Vazquez's holding that a count

drawn under the defraud clause "need refer to no other statute

than §371." Vazquez, 319 F.2d at 384; see also Jackson, 33 F.3d

at 870; Derezinski, 945 F.2d at 1010. In case of a conflict, I

believe that our decision is controlled by Vazquez.

Moreover, the quote from American Investors, upon which

the Curran dictum relies, was taken from a general discussion of

conspiracy, without specific reference to the "defraud" clause of

§ 371 or to Vazquez. Vazquez, on the other hand, explicitly

stated a general rule for the "defraud" clause of § 371, 319 F.2d

at 384; see Glasser v. United States, 315 U.S. 60, 67 (1942); a

rule followed by this court and other courts in similar cases.

See, e.g., Vogt, 910 F.2d 1184 (3d Cir. 1990); Jackson, 33 F.3d

866 (7th Cir. 1994); Derezinski, 945 F.2d 1006 (8th Cir. 1991).

Three sentences of dictum in a case almost entirely concerned

with another legal issue should not serve to subvert our

precedent as well as Congress' expression of the mens rea

necessary for conviction under 18 U.S.C. § 371. The Curran

language is simply too slender a reed to support the weight that

the majority wishes it to bear.

For the above reasons, I conclude that Alston satisfies

all of the elements necessary for conviction of a Klein

conspiracy to defraud the United States under 18 U.S.C. § 371.

Nothing in Ratzlaf or in the structuring statutes themselves

changes this fact, and the majority barely addresses it. I

therefore respectfully dissent.