United States v. Oreira

• Court: Court of Appeals for the Fifth Circuit
• Decided: August 4, 1994
• Docket: 93-01079
• Status: Published

Opinion

UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

___________________

No. 93-1079 ___________________

UNITED STATES OF AMERICA, Plaintiff-Appellee,

versus

SERGIO EDUARDO OREIRA and CARLOS HUMBERTO POSTIZZI, Defendants-Appellants.

_________________________________________________________________

Appeals from the United States District Court for the Northern District of Texas _________________________________________________________________

(August 4, 1994)

Before KING and SMITH Circuit Judges, and KAZEN,1 District Judge.

KAZEN, District Judge:

Sergio Eduardo Oreira (Oreira) and Carlos Humberto Postizzi

(Postizzi) appeal from their convictions on three counts of

structuring in order to evade the reporting requirements and one

count of conspiracy. We reverse and remand.

Background

Federal law requires financial institutions to file a currency

transaction report (CTR) with the Secretary of the Treasury for

1 District Judge of the Southern District of Texas, sitting by designation. cash transactions greater than $10,000. 31 U.S.C. § 5313; 31

C.F.R. § 103.22(a)(1). It is illegal to structure, assist in

structuring, or attempt to structure any transaction for the

purpose of evading the filing of a CTR. 31 U.S.C. §5324(a)(3). A

person "willfully violating" the antistructuring section is subject

to criminal penalties. 31 U.S.C. §5322.

Defendants Oreira and Postizzi worked for Continental Transfer

Services d/b/a Servicios Continental ("Continental") in Houston.2

Continental was a "giro" house which wired money for its customers

in the United States to individuals or companies in other

countries. Oreira was an employee of Continental and Postizzi was

its vice-president. From late 1989 to March 1991, Continental did

business in Houston. Oreira and Postizzi would accept money from

customers, allegedly manufacture customer records in amounts under

$10,000, and wire the money to different locations outside the

United States, mostly to Colombia.

One business associate of the Defendants was Patricia Gomez.

Gomez was also a government informant. In the fall of 1990, Gomez

met with the Defendants. On two of these occasions, Postizzi

instructed Gomez how to prepare fictitious receipts while Oreira

was present. Based in part on the information she gathered from

these meetings, IRS Agents executed a search warrant on

Continental's premises on March 22, 1991. A few days later, the

2 Two other members of Continental were indicted with Oreira and Postizzi. Jorge Somoza, the President of the company, was convicted with Oreira and Postizzi but is not a party to this appeal. Lilliana Gamba, an employee of the company, pleaded guilty to a reduced offense during the trial.

2 Secretary of the Treasury issued a geographic targeting order

requiring Continental to file CTRs for any amount of money over

$100 during the next six months.

In April 1991, Postizzi and Oreira assisted in changing

Continental's name to Exprotur and executed a new lease in a Fort

Worth strip mall. In early June 1991, Oreira and Gamba opened new

bank accounts in Fort Worth. The Fort Worth bank accounts were not

subject to the geographical targeting order. From June 4 to June

21, 1991, Oreira, Gamba and Postizzi accepted money from customers,

and on the same day, would deposit money in amounts greater than

$100 but less than $10,000 into different bank accounts at various

banks in Fort Worth. The money was wired to different locations

outside the United States, again mostly to Colombia.

Oreira and Postizzi were convicted of three counts of

structuring transactions with domestic financial institutions in

order to evade the filing of CTRs under 31 U.S.C. §§ 5313, 5322 and

5324, and one count of conspiracy to commit those acts under 18

U.S.C. § 371. The Defendants were sentenced to imprisonment for 70

months, plus three years of supervised release. Oreira and

Postizzi challenge their conviction and sentence.3

3 The Defendants challenge the enhancement of their sentences under U.S.S.G. 1B1.3(a)(1)(B), U.S.S.G. 2S1.1(b)(2), and U.S.S.G. 2S1.3(b)(1). In view of the remand for a new trial, we do not reach this question.

3 Analysis

Jury Instructions

The Defendants contend that the district court erred by

refusing to submit Defendants' requested definition of the term

"willfully". 31 U.S.C. §§ 5324, 5322. The proposed instruction

read:

The word "willfully," as that term has been used from time to time in these instructions, means that the act was committed voluntarily and purposely, with the specific intent to do something the law forbids; that is to say, with bad purpose either to disobey or disregard the law.

Instead, the relevant portion of the jury charge read:

It is not necessary for the Government to prove that a defendant knew that structuring or assisting in structuring a transaction to avoid triggering the filing requirements was itself illegal. The Government need only prove beyond a reasonable doubt that a defendant structured or assisted in structuring currency transactions with specific intent to avoid said reporting requirements. In other words, a defendant's ignorance of the law prohibiting structuring is no defense if he knew about filing requirements and intentionally acted to evade or assisted in evading them.

Generally, failure to instruct the jury on an essential element of

the offense is error. United States v. Williams, 985 F.2d 749, 755

(5th Cir. 1993), cert. denied, ___ U.S. ___, 114 S.Ct. 148, 126

L.Ed.2d 110 (1993). Although the district court's instruction was

a correct statement of Fifth Circuit law at the time of trial,4 the

Supreme Court has since reached a contrary result. In Ratzlaf v.

United States, the Supreme Court held that in order to convict a

4 United States v. Beaumont, 972 F.2d 91, 94 (5th Cir. 1992).

4 defendant under 31 U.S.C. §§ 5322 and 5324, it does not suffice for

the government to prove that the defendant knew of the bank's

reporting obligation and attempted to evade it. Ratzlaf, ___ U.S.

___, ___, 114 S.Ct. 655, 657, 126 L.Ed.2d 615 (1994). The

government must now also prove that a person, when structuring a

currency transaction, knew that his conduct was unlawful. Id. The

Defendants' requested instruction was therefore correct under

Ratzlaf. Because Ratzlaf was issued while this case was still on

direct appeal, the Defendants may invoke Ratzlaf as controlling.

Griffith v. Kentucky, 479 U.S. 314, 328, 107 S.Ct. 708, 716, 93

L.Ed.2d 649 (1987). It was therefore error to fail to instruct the

jury on willfulness.

The Government contends that the error was harmless because

the Defendants at trial did not argue or claim that the Government

failed to show they knew their conduct was unlawful. This argument

is disingenuous, since our existing precedent and the trial court's

ruling foreclosed any such argument. Moreover, as noted in

Ratzlaf, "currency structuring is not inevitably nefarious." 114

S.Ct. 660-61. The Government directs our attention to the

considerable evidence of intentional structuring, but this is not

necessarily equivalent to an intent to do something illegal. The

trial court here did not merely give an incomplete definition of

"willfully," as in United States v. Malone, 837 F.2d 670 (5th Cir.

1988). Instead, through no fault of his own, the trial judge

expressly but incorrectly told the jury that the Government need

not prove the Defendants knew their conduct was illegal. We

5 decline to conclude that the jury, if properly instructed, would

perforce convict these defendants of willfully violating the

structuring laws.5

Two circuits have now held that failure to instruct on

willfulness in a structuring case is plain error. United States v.

Jones, 21 F.3d 165, 173 (7th Cir. 1994); United States v. Rogers,

18 F.3d 265, 268 (4th Cir. 1994). We need not find plain error

here, since both Defendants requested the proper instruction and

objected to its omission at trial. We conclude that the error was

harmful.6 The convictions must be reversed and the case remanded

for new trial.

5 Although there was not overwhelming evidence that the Defendants knowingly violated the law, there nevertheless was sufficient evidence to support a finding of guilt had the jury been properly charged. Accordingly a remand for new trial does not pose a double jeopardy problem.

6 We recognize the apparent inconsistency in some of our opinions concerning the proper standard of appellate review in instances where the trial court fails to instruct the jury on all elements of a crime. For example, in United States v. Ojebode, 957 F.2d 1218, 1227 (5th Cir. 1992), cert. denied, ___ U.S. ___, 113 S.Ct. 1291, 122 L.Ed.2d 683 (1993), we said that a jury's verdict cannot stand if the instructions do not require it to find each element of the crime under the proper standard of proof, citing Cabana v. Bullock, 474 U.S. 376, 384, 106 S.Ct. 689, 696, 88 L.Ed.2d 704 (1986). To the same effect is dicta in United States v. Ortega, 859 F.2d 327, 333 (5th Cir. 1988), 489 U.S. 1027, 109 S.Ct. 1157, 103 L.Ed.2d 216 (1989). On the other hand, we have used a harmless error analysis in cases such as Williams, supra, 985 F.2d at 756, and United States v. Bolin, 876 F.2d 370 (5th Cir. 1989). See United States v. Brown, 616 F.2d 844, 846 (5th Cir. 1980), eschewing a per se plain error rule. The United States Supreme Court also appears to have rejected the per se rule suggested in Cabana. Pope v. Illinois, ___ U.S. ___, ___ 107 S.Ct. 1918, 1922 n.7, 95 L.Ed.2d 439 (1987). For these reasons, we use a harmless error analysis here.

6 Having determined that the case must be retried, it is

appropriate to discuss other claims which are likely to arise in

the new trial.

Evidentiary Rulings

The Defendants object to the testimony of IRS Special Agent

Michael Balas, who testified as an expert on currency structuring.

The Defendants contend that this testimony expressed an opinion on

the essential element of their intent, which is solely a jury

question under Fed. R. Evid. 704(b). They further argue that this

testimony was "profile" testimony, which has been criticized by

this and other circuits. The Government responds that the evidence

is admissible under Rule 702 (Testimony by Experts) and 704(a)

(Opinion on ultimate issue allowed), and should not be classified

as profile evidence.

Balas described his experience with 60 different cases

involving structuring or money laundering and his recent

investigations of giro houses in the Houston area. He described

the operation of illegal giro houses and how they structure

transactions. Balas also presented a summary chart of all the wire

transfers made by Continental between January 1990 and March 1991.

Balas divided up the transferred funds into three categories based

upon their destination, and observed that 95 percent of the wire

transfers were to Colombia.

We agree with the Government that Balas' testimony as to how

giro houses in Houston operated was helpful to the jury's

understanding of the structuring charge. The giro house business

7 is specialized and most citizens are unaware of how a giro house

works. This expert testimony assisted the jury in understanding

the mode of operation of the Defendants. See, e.g., United States

v. McCollum, 802 F.2d 344, 346 (9th Cir. 1986) ("Expert testimony

regarding the typical structure of mail fraud schemes could help

the jury to understand the operation of the scheme and to assess

[the defendant]'s claim of non-involvement.") These parts of

Balas' testimony were properly admitted by the trial judge.

We are, however, concerned about this portion of Balas'

testimony:

MR. ROPER: Based on your training and experience, have you found that giro houses that are engaged in the circumvention of the CTR laws have a spread such as this with 95 percent going to Colombia and only 5 percent going to other countries?

AGENT BALAS: That is correct.

. . . .

MR. ROPER: Giros that are not attempting to circumvent the CTR laws, would they have the spread of 95.1 percent going to Colombia and 5 percent going to other countries?

AGENT BALAS: No, they wouldn't.

Nothing in Balas' testimony established a foundation for the

proposition that because most customers of a giro house wire money

to one country, the giro house is engaging in illegal structuring.

For example, there was no evidence as to the national origin of the

customers of the giro house or of the geographic area in which it

was located. Moreover, there is no apparent logical connection

between the destination of the money and the structuring laws of

this country. The government disclaims -- and rightly so -- any

argument that the particular country in question, Colombia, can be

8 the basis for an inference of illegality. On retrial, a specific

objection to these questions should be sustained.7

The Defendants also contend that the trial court violated Fed.

R. Evid. 404(b) and 403 by admitting testimony of an expert witness

that a narcotics-detecting dog alerted on one deposit of cash made

by the Defendants into one of Exprotur's bank accounts. The dog's

handler was qualified as an expert and testified that the dog's

alert indicated there was a detectable amount of drugs on the

money. The Government contends that the evidence shows the

Defendants knew the money was drug money and thus had a motive to

avoid the CTR requirements.

This circuit has established a two-part test for determining

whether acts not alleged in the indictment are admissible under

404(b). United States v. Beechum, 582 F.2d 898, 911 (5th Cir.

1978) (en banc), cert. denied, 440 U.S. 920, 99 S.Ct. 1244, 59

L.Ed.2d 472 (1979); United States v. Dula, 989 F.2d 772, 777 (5th

Cir.), cert. denied, ___ U.S. ___, 114 S.Ct. 172, 126 L.Ed.2d 131

(1993). First, the extrinsic evidence must be relevant to an issue

other than the defendant's character. Id. Second, the probative

value of the evidence must not be substantially outweighed by its

undue prejudice. Id.

The contested evidence should have been excluded. The dog's

alert to the presence of narcotics on the money does little to

7 We do not reach the difficult issue of line-drawing between Federal Rule of Evidence 704(a) and (b). Nor do we express an opinion as to whether Balas' testimony constituted profile evidence.

9 prove the Defendants knew that the money was connected to drugs.

At best, it indicates that the money, somewhere in its chain of

custody, was in contact with narcotics. Contrary to the

Government's assertion, United States v. Hernando Ospina8

acknowledges this crucial distinction. There, the court condoned

evidence of a dog alert on the Defendant's money to show that "the

laundered money was drug proceeds," an element of the statute

involved in that case, 18 U.S.C. §1952(a)(1). Id. at 1583. In

the instant case, the money being drug proceeds was not an element

of the offense, and the dog alert was not used for that purpose.

Instead it was used to show that the Defendants knew the money was

drug proceeds. As such, its probative value was minimal and was

substantially outweighed by the prejudicial impact of injecting the

specter of narcotics trafficking into the case.

Oreira next challenges the admission of evidence relating to

Continental's transactions in Houston. This evidence described

Continental's alleged money structuring prior to its move to Fort

Worth. Oreira contends that it was character evidence. We

disagree. Oreira was charged in part with conspiracy to structure

transactions. The time period alleged in the indictment

encompassed the Houston activity, although the overt acts described

only the activity occurring in Fort Worth. The Government

introduced evidence of the Houston activities to show Defendants'

motivation for the peremptory move to Fort Worth and the subsequent

change in their methods of structuring.

8 798 F.2d 1570 (11th Cir. 1986).

10 Oreira further contends that this evidence was unfairly

prejudicial and that he was more prejudiced by its admission than

his co-defendants, who directly ordered Continental's illegal

transactions in Houston. Oreira claims that while in Houston, he

was just a six-month employee of Continental and had no knowledge

of his superiors' illegal activity. Although the admission of this

evidence may have prejudiced Oreira, its probative value was not

substantially outweighed by unfair prejudice. The evidence was

highly probative because it showed that the Defendants had an

interest in continuing their business in Fort Worth once the IRS

had issued a targeting order in Houston. It also demonstrated a

connection between the Defendants' business practices in Houston

and Fort Worth. The fact that Oreira was arguably less involved in

the Houston activities than Postizzi or others does not render the

evidence inadmissible as to him.

Written Jury Instructions

Oreira argues that because the case was extremely complicated,

the trial judge should have provided the jury with a written copy

of the instructions in addition to the oral instructions. The

weight of our precedent has, in fact, disapproved of the practice

of providing written copies of the instructions to the jury in

certain circumstances. United States v. Perez, 648 F.2d 219, 222

(5th Cir. Unit B), cert. denied, 454 U.S. 970, 102 S.Ct. 516, 70

L.Ed.2d 388 (1981); United States v. Hooper, 575 F.2d 496, 498-99

(5th Cir.) cert. denied, 439 U.S. 895, 99 S.Ct. 256, 58 L.Ed.2d 242

11 (1978); United States v. Schilleci, 545 F.2d 519, 526 (5th Cir.

1977). The trial court's refusal to do so here was well within its

discretion.

Conclusion

The CONVICTIONS on all four counts against Oreira and Postizzi

are REVERSED, their sentences are VACATED, and the case is REMANDED

for a new trial.