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U.S. v. Phipps

April 25, 1996

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE,
v.
C. WAYNE PHIPPS, DEFENDANT-APPELLANT.



Appeal from the United States District Court for the Northern District of Georgia. (No. 4:93-CR-033-01-HLM). Harold L. Murphy, Judge.

Before Tjoflat, Chief Judge, Carnes, Circuit Judge, and Fay, Senior Circuit Judge.

Author: Carnes

CARNES, Circuit Judge:

This appeal arises out of the conviction of C. Wayne Phipps for three counts of money laundering in violation of 18 U.S.C. § 1956(a)(3)(B), and for two counts of causing a financial institution to fail to file a Currency Transaction Report ("CTR") in violation of 31 U.S.C. § 5324(a)(1). Phipps attacks his convictions on several grounds; however, the only issue that merits discussion is one involving the § 5324(a)(1) counts.*fn1 The parties phrase the issue as one of sufficiency of the evidence to convict on the two § 5324(a)(1) counts, but the facts the jury could find from the evidence are not really in dispute. The real issue is whether 31 U.S.C. § 5324(a)(1), which prohibits any person from "causing or attempting to cause a domestic financial institution to fail to file a report required" under applicable currency transaction reporting statutes and regulations is violated by structuring activities designed to avoid a CTR being required in the first place. 31 U.S.C.A. § 5324(a)(1) (West 1995).

For the reasons that follow, we answer that question in the negative and hold that § 5324(a)(1), unlike certain other statutory provisions, is violated only when the financial institution is required to file a report that the defendant causes or attempts to cause it not to file. As a result, Phipps' conviction is due to be reversed insofar as the § 5324(a)(1) counts are concerned.

I. FACTS AND PROCEDURAL HISTORY

On four occasions in the spring of 1992, Phipps exchanged cash supplied by a government informant, James McMillan, for checks drawn on Phipps' bank account and for cashier's checks that Phipps purchased with money from his bank account. Phipps never deposited or exchanged McMillan's cash directly with his bank. Instead, Phipps would give the cash to Charles Prater, a friend who operated Carpet Transport, Inc. ("CTI"), and Prater would give Phipps checks made out to CTI which Prater had endorsed and signed over to Phipps. Phipps would then take these third-party checks to his bank, deposit them in his account, and write checks to McMillan, or purchase cashier's checks, for an amount ten percent less than the amount of cash that McMillan had supplied to Phipps. That ten percent deduction represented Phipps' "commission" for handling the transaction.

Pursuant to this scheme, there were four separate sets of transactions in which Phipps exchanged currency totaling $40,000.00 for CTI checks totaling approximately $39,000.00. Phipps then deposited those CTI checks into the bank and wrote checks (or purchased cashier's checks) totaling $36,000.00 payable to McMillan. While the details varied somewhat, the pattern was the same each time. The reason the transactions were structured in this manner was to launder or disguise the source of the currency, which supposedly was from illegal drug activities, and to do it in a way that would avoid the bank being required to file any CTRs. The bank was never required as a result of these transactions to file any CTRs, because only checks were deposited in the bank, no currency.

For his involvement in these transactions, Phipps was charged with four counts of money laundering in violation of 18 U.S.C. § 1956(a)(3)(B), and two counts of causing a financial institution to fail to file a CTR as required by 31 U.S.C. § 5313(a), in violation of 31 U.S.C. § 5324(a)(1). In addition, the government sought forfeiture of Phipps' proceeds from the transactions pursuant to 18 U.S.C. § 982. A jury found Phipps guilty of three of the four counts of money laundering, and of the two counts of causing a financial institution to fail to file a CTR. After his conviction, Phipps moved pursuant to Fed.R.Crim.P. 29(c) for a judgment of acquittal, and the district court denied the motion. Thereafter Phipps consented to forfeiting $3,500.00 to the government.

II. DISCUSSION

Phipps argues that the district court erred in denying his Rule 29(c) motion for judgment of acquittal because there was insufficient evidence as a matter of law to support his conviction for causing a financial institution to fail to file a CTR. Phipps does not dispute the facts that the government proved at trial concerning his involvement in the money laundering transactions; instead, he contends that those facts do not establish a violation of 31 U.S.C. § 5324(a)(1). We review the district court's interpretation of the relevant statutory provision and its application of law to facts de novo. E.g., United States v. Thomas, 62 F.3d 1332, 1336 (11th Cir. 1995); Rodriguez v. Lamer, 60 F.3d 745, 747 (11th Cir. 1995).

A. The Currency Transaction Reporting Requirements

In 1970, in an effort to facilitate the investigation of criminal activity, Congress passed legislation requiring banks to report to the government certain large currency transactions. Section 5313(a) of the Bank Secrecy Act, 31 U.S.C. § 101 et seq., provides, in pertinent part:

When a domestic financial institution is involved in a transaction for the payment, receipt, or transfer of United States coins or currency (or other monetary instruments the Secretary of the Treasury prescribes), in an amount, denomination, or amount and denomination ... the Secretary prescribes by regulation, the institution and any other participant in the transaction the Secretary may ...


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