MEMORANDUM OPINION
HEYBURN, District Judge.
In this case the Court is called upon to determine the state of mind that Congress required when it enacted 31 U.S.C. § 5324 as an amendment to the Bank Records and Foreign Transactions Act.
23For the reasons set forth herein, the Court concludes that a conviction for violation of 31 U.S.C. § 5324 requires a jury finding that the defendant knew that “structuring” is unlawful. Because the Sixth Circuit, has not addressed this issue directly and because this Court’s conclusion is ’ contrary to the majority of those circuits which have considered the issue, the Court is setting forth its reasoning in this Memorandum Opinion.
I.
Defendant, Billy Logan Speer, was charged in Count 1 of the Indictment with structuring a series of currency transactions to avoid the currency transaction reporting requirements of 31 U.S.C. § 5313(a), in violation of 31 U.S.C. § 5324(a)(3).
Speer is a self-styled inventor and businessman. He obtained formal schooling only through the 8th grade. He is-now in his sixties. Speer testified that he often conducted business in cash or by cashier’s check and the evidence provided some support for that statement. Defendant also brought forward testimony that it was common practice for persons to conduct their banking activities with cash and cashier’s checks.
At trial the proof showed that between March 8-10, 1988, Speer purchased nine (9) separate $9,000 cashier’s checks at six different banks in three cities. He used the cashier’s checks, plus two other cashier's checks bought in 1985, to purchase a paid-up $250,-000 life insurance policy. There was no suggestion that the life insurance purchase was part of some unlawful scheme or that the purchase was otherwise suspicious.
Prior to trial the United States asserted that at the time of the March, 1988 transactions, Speer owed the IRS $52,000 in back taxes and that he had received a final discharge in bankruptcy less than one year before the currency transactions. However, there was no evidence whatsoever that the IRS was attempting to collect the $52,000 from Speer individually, because in fact, the IRS had previously negotiated a repayment plan with the corporate primary debtor. Pursuant to the payment plan, the corporate debtor ultimately paid its IRS assessment of taxes, penalties and interest. None of this evidence was admitted at the trial.
Moreover, the United States could not produce evidence that the $81,000 in cash came from funds which were not disclosed in the bankruptcy proceedings. Although Speer did not appear to have a sophisticated understanding of business or finance, his business ventures were successful enough that in recent years Speer regularly earned between $50,000 and $150,000 annually. In other words, absent evidence to the contrary, there was every reason to believe that regular income was the source of the cash funds used to purchase the cashier’s cheeks. Since there was no evidence that Speer had reason to hide the transactions from the bankruptcy officials, the Court found that it was not relevant and admissible evidence at trial.
At trial, the United States produced no evidence to explain why Speer might want to hide the transactions. There was no suggestion that Speer obtained the funds from drug transactions nor was there suggestion that he sought to evade payment of taxes. One witness testified about a conversation overheard between Speer and a non-testifying third person during which Speer was told about the transaction reporting requirement. While no direct evidence supported the conclusion that Speer had knowledge that it was unlawful to “structure” transactions, such knowledge could be inferred from the circumstantial evidence of the transactions themselves.
A two day trial concluded with the Court issuing jury instructions requiring proof that Speer “knew” that structuring was illegal.
Thereafter, the jury completed its deliberations and returned a verdict of not guilty on the charges contained in Count I of the Indictment.
II.
Five circuits have held that to obtain a conviction under 31 U.S.C. § 5324, the Government need not prove that a defendant specifically knew that “structuring” is unlawful.
In these circuits, therefore, mistake of law — the absence of knowledge that structuring is illegal — is not a defense. The
mens rea
requirement for a structuring violation in these circuits is twofold: the Government must prove both knowledge of the reporting requirement and an intent to evade that requirement by means of structuring. The Government need not prove knowledge of the illegality of structuring, because this knowledge may be inferred from the act of structuring itself, which “demonstrate^ an awareness of the legal framework relative to currency transactions.”
United States v. Scanio,
900 F.2d 485, 490 (2d Cir.1990).
Recently, in an
en banc
decision, the First Circuit rejected this rationale, and persuasively held that the Government must prove either knowledge that structuring is illegal or recklegs disregard of that knowledge — thus, adding another element to the
mens rea
requirement.
United States v. Aversa,
984 F.2d 493, 498 (1st Cir.1993). The
Aversa
court held that “willful,” the
mens rea
language of 31 U.S.C. § 5322, applies “in equal measure to both CTR violations and structuring offenses.”
Id.
at 499. To justify its rejection of the majority of-the circuits’ interpretation of the
mens rea
for structuring violations, the First Circuit stressed two factors: the need for uniformity in the interpretation of “willful” to allow a good faith mistake -of law defense, and the notion that the “reckless disregard” element lessens this decision’s impact on the government’s ability to obtain a conviction.
The three opinions of
Aversa
— the majority, the concurrence, and the dissent — differ mainly in their respective interpretations of
Cheek v. United States,
498 U.S. 192, 111 S.Ct. 604, 112 L.Ed.2d 617 (1991). By including the element of reckless disregard, the majority rejected the purely subjective standard of
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MEMORANDUM OPINION
HEYBURN, District Judge.
In this case the Court is called upon to determine the state of mind that Congress required when it enacted 31 U.S.C. § 5324 as an amendment to the Bank Records and Foreign Transactions Act.
23For the reasons set forth herein, the Court concludes that a conviction for violation of 31 U.S.C. § 5324 requires a jury finding that the defendant knew that “structuring” is unlawful. Because the Sixth Circuit, has not addressed this issue directly and because this Court’s conclusion is ’ contrary to the majority of those circuits which have considered the issue, the Court is setting forth its reasoning in this Memorandum Opinion.
I.
Defendant, Billy Logan Speer, was charged in Count 1 of the Indictment with structuring a series of currency transactions to avoid the currency transaction reporting requirements of 31 U.S.C. § 5313(a), in violation of 31 U.S.C. § 5324(a)(3).
Speer is a self-styled inventor and businessman. He obtained formal schooling only through the 8th grade. He is-now in his sixties. Speer testified that he often conducted business in cash or by cashier’s check and the evidence provided some support for that statement. Defendant also brought forward testimony that it was common practice for persons to conduct their banking activities with cash and cashier’s checks.
At trial the proof showed that between March 8-10, 1988, Speer purchased nine (9) separate $9,000 cashier’s checks at six different banks in three cities. He used the cashier’s checks, plus two other cashier's checks bought in 1985, to purchase a paid-up $250,-000 life insurance policy. There was no suggestion that the life insurance purchase was part of some unlawful scheme or that the purchase was otherwise suspicious.
Prior to trial the United States asserted that at the time of the March, 1988 transactions, Speer owed the IRS $52,000 in back taxes and that he had received a final discharge in bankruptcy less than one year before the currency transactions. However, there was no evidence whatsoever that the IRS was attempting to collect the $52,000 from Speer individually, because in fact, the IRS had previously negotiated a repayment plan with the corporate primary debtor. Pursuant to the payment plan, the corporate debtor ultimately paid its IRS assessment of taxes, penalties and interest. None of this evidence was admitted at the trial.
Moreover, the United States could not produce evidence that the $81,000 in cash came from funds which were not disclosed in the bankruptcy proceedings. Although Speer did not appear to have a sophisticated understanding of business or finance, his business ventures were successful enough that in recent years Speer regularly earned between $50,000 and $150,000 annually. In other words, absent evidence to the contrary, there was every reason to believe that regular income was the source of the cash funds used to purchase the cashier’s cheeks. Since there was no evidence that Speer had reason to hide the transactions from the bankruptcy officials, the Court found that it was not relevant and admissible evidence at trial.
At trial, the United States produced no evidence to explain why Speer might want to hide the transactions. There was no suggestion that Speer obtained the funds from drug transactions nor was there suggestion that he sought to evade payment of taxes. One witness testified about a conversation overheard between Speer and a non-testifying third person during which Speer was told about the transaction reporting requirement. While no direct evidence supported the conclusion that Speer had knowledge that it was unlawful to “structure” transactions, such knowledge could be inferred from the circumstantial evidence of the transactions themselves.
A two day trial concluded with the Court issuing jury instructions requiring proof that Speer “knew” that structuring was illegal.
Thereafter, the jury completed its deliberations and returned a verdict of not guilty on the charges contained in Count I of the Indictment.
II.
Five circuits have held that to obtain a conviction under 31 U.S.C. § 5324, the Government need not prove that a defendant specifically knew that “structuring” is unlawful.
In these circuits, therefore, mistake of law — the absence of knowledge that structuring is illegal — is not a defense. The
mens rea
requirement for a structuring violation in these circuits is twofold: the Government must prove both knowledge of the reporting requirement and an intent to evade that requirement by means of structuring. The Government need not prove knowledge of the illegality of structuring, because this knowledge may be inferred from the act of structuring itself, which “demonstrate^ an awareness of the legal framework relative to currency transactions.”
United States v. Scanio,
900 F.2d 485, 490 (2d Cir.1990).
Recently, in an
en banc
decision, the First Circuit rejected this rationale, and persuasively held that the Government must prove either knowledge that structuring is illegal or recklegs disregard of that knowledge — thus, adding another element to the
mens rea
requirement.
United States v. Aversa,
984 F.2d 493, 498 (1st Cir.1993). The
Aversa
court held that “willful,” the
mens rea
language of 31 U.S.C. § 5322, applies “in equal measure to both CTR violations and structuring offenses.”
Id.
at 499. To justify its rejection of the majority of-the circuits’ interpretation of the
mens rea
for structuring violations, the First Circuit stressed two factors: the need for uniformity in the interpretation of “willful” to allow a good faith mistake -of law defense, and the notion that the “reckless disregard” element lessens this decision’s impact on the government’s ability to obtain a conviction.
The three opinions of
Aversa
— the majority, the concurrence, and the dissent — differ mainly in their respective interpretations of
Cheek v. United States,
498 U.S. 192, 111 S.Ct. 604, 112 L.Ed.2d 617 (1991). By including the element of reckless disregard, the majority rejected the purely subjective standard of
mens rea
found in
Cheek.
The majority did, however, adopt the
Cheek
Court’s underlying rationale by concluding that when an act is not inherently criminal in nature, it is appropriate that knowledge of its illegality should be an element of the offense in order to avoid punishing innocent mistakes of law. 984 F.2d at.502.
Unlike the majority, the concurring opinion in
Aversa
suggested that
Cheek’s
subjective
mens rea
standard should apply to structuring violations, because, like tax law violations, 'they penalize conduct which is not inherently criminal.
' The concurrence eon-
eluded,
however,
that because the majority’s standard'protects ordinary citizens who reasonably fail to investigate or have no specific knowledge of the. structuring statute, the standard is actually quite close to that of
Cheek
The' concurrence reasoned that the “reckless disregard”- element of the mens rea standard applied to those engaged in criminal activity rather than to ordinary citizens, because structuring in furtherance of criminal activity implies knowledge of the statute. 984 F.2d at 503.
Although it did not expressly reject the majority’s standard, the dissenting opinion in
Aversa
advocated adopting
Cheek’s
sübjective and more stringent
mens rea
standard for structuring violations. The dissent focussed on the legislative history of the Bank Records and Foreign Transaction Act
and concluded that it was enacted to facilitate the prosecution of narcotics conspiracies, and to prevent income tax evasion and money laundering. 984 F.2d at 505. The dissent ultimately stated that the Government should always be required to prove specific intent when prosecuting currency violations, because “an unsuspecting common citizen can easily fall prey to this uncommon area of the law.”
Id.
at 507.
The Sixth Circuit has not addressed this issue directly.
United States v. Baydoun,
984 F.2d 175 (6th Cir.1993), stressed the intent to deprive the Government of information about criminal activity as an important element of the
mens rea
for structuring violations. The
Baydoun
court reversed the defendant’s conviction because he was neither involved in money laundering nor attempting income tax evasion.
Id.
at 180. Although
Baydoun
did not specifically address the issue at hand, the Sixth Circuit’s analysis could be read to implicitly reject the view of the other five circuits, because it in fact employed a more stringent
mens rea
standard by examining a defendant’s motive to determine his mental state.
HI.
This Court agrees with the
Aversa
majority’s statutory analysis, concluding that willfulness is an element of the offense, and with its belief that the
Cheek
logic is persuasive, though
Cheek’s
holding does not apply to currency cases directly. This Court cannot
improve
upon the majority’s research and, therefore, will confine its considerations to the fairness and logic of the conclusions which it has adopted from
Aversa.
Any deviation from the long-standing principle that ignorance of the law is no excuse evolves first from the simple proposition that due to the complexity of certain statutes, the average citizen cannot know or comprehend the extent of the duties imposed. Just as important, any such deviation may evolve from the certain knowledge that not all activities which may be unlawful are inherently criminal, and that it may be difficult' or even impossible for the average citizen to know that a certain activity is criminal. In the case of 31 U.S.C. §§ 5313 and 5324, we consider two separate provisions, néither of which prohibit conduct which the average citizen would consider inherently criminal.
The Court cannot imagine that it is even a reasonable possibility that an average citizen such as Speer might gain knowledge of the currency “structuring” prohibitions which became effective only 14 months prior to the date of Speer’s alleged acts.
This Court
concludes that it is not reasonable to assume that such knowledge could be gained, particularly in view of the general policies which banks seem to have adopted in disclosing these matters to their clients.
Each of the banking officials testifying in this case stated that bank policy prohibited advising customers of the currency transaction report requirement. Nevertheless, a customer sometimes became aware of the reporting upon being advised that additional information was necessary in connection with such a report. If the customer decided not to provide the information or to reduce the transaction below the $10,000 amount, bank policy prohibited advising the customer that “structuring” was unlawful. Consequently, the difficulty that an average citizen might have in obtaining knowledge about such an obscure statute, was compounded by the policies of local banking institutions which cast a further veil of secrecy across these statutes — not that any was needed.
The context and background of any statutory enactment is always important not to construe language differently than its unambiguous meaning, but rather to determine the scope of the statute’s application and the breadth of its coverage. Sophisticated tax dodgers, drug dealers and other trained professionals may well understand the inherent criminality of arranging transactions so as to evade the bank reporting requirements. To apply this law to this class of persons, which Congress no doubt intended, is imminently fair, within the plain meaning of the statute and within the scope of congressional intent. The same cannot be said for the application of the statute to ordinary citizens.
In this case, such an analysis produces a logical conclusion that to require proof of specific
mens rea
would not- lessen the statute’s effectiveness one iota as a weapon against drug dealers and tax dodgers, Congress’ intended targets. In fact, each of the' eases in the five-circuit majority can be distinguished from the case at hand. These cases all involved defendants who structured their transactions in furtherance of a criminal purpose. In each case, there appeared to be overwhelming evidence of criminal intent. The standard articulated today would most likely not alter these outcomes, because it allows the jury to infer knowledge of the structuring statute from the circumstances surrounding the transactions. Thus, this Court’s standard would help prevent indiscriminate use of 31 U.S.C. § 5324 against an unintended and criminally innocent class.
The
Aversa
majority concluded that the Government had the option of proving either knowledge that structuring was illegal or that a defendant recklessly disregarded that knowledge. This Court has omitted that option from its jury instructions because it has difficulty understanding how the average person could “recklessly disregard” knowh edge of such a -specialized statute. Moreover, the Court cannot imagine that proof of such reckless disregard could be different than proof educed to show the defendant’s knowledge. The_ “reckless disregard” standard is logical if applied to trained professionals or others with a reason to know of the statute, but it has questionable application to the guilt or innocence of the average person. This Court simply concludes that the better course is to require “knowledge” as an element of the offense and to allow proof of such knowledge by direct evidence as well as by circumstantial evidence or the facts and circumstances surrounding the transaction. Consequently, this Court’s instructions put all the appropriate elements “in play” for the jury to determine whether the defendant has the requisite
mens rea.
Just as the “reckless disregard” standard of
Aversa
operates to penalize those obviously engaged in criminal conduct,
the “permissible inference” element imputes knowledge of the unlawfulness of structuring to those whose actions are • patently criminal. Rather than assuming that
mens rea
shall be inferred as a matter of law from the facts
and circumstances of a transaction, this Court allows the jury to draw such a permissible inference from the evidence. Although critics of more subjective
mens rea
standards argue that they impede the Government’s case and reduce convictions,
this Court’s standard, with its “permissible inference” element, neither hinders the Government nor, more importantly, subjects innocent citizens to prosecution for honest mistakes of law.
This Court wishes to protect persons whose actions are not clearly criminal from prosecution under 31 U.S.C. § 5324(a)(3). On the other hand, those suspected of depriving the Government of financial information as part of a criminal scheme will not escape conviction under this instruction. This Court suggests that its tendered instructions, in. addition to following the best and fairest rule of law, have the virtue of coinciding with the normal jury deliberative process.’ The jury will — and this Court believes properly should — fairly consider the permissible inferences that may be drawn from the facts and circumstances of the transactions to determine whether a defendant’s conduct was a criminal act.
The Court submitted instructions to the jury consistent with this Memorandum Opinion.