Search Results for ‘structuring’

Update: South Mountain Creamery settles structuring charges

In news that reached me after my Baltimore Sun op-ed yesterday was already in print, owners Randy and Karen Sowers of Middletown, Md. have settled the federal charges against their South Mountain Creamery over “structuring” of bank deposits. They “will get back a little more than half of $62,936 seized by the government earlier this year, according to court documents filed late Tuesday. … ‘I didn’t do anything wrong, but we had to settle because we had no other choice,’ Sowers said.” [Courtney Mabeus, Frederick News-Post; earlier here, etc.]

P.S. And welcome Don Boudreaux/Cafe Hayek readers (no, I’m not related to Mancur Olson); Coyote.

“Structuring”: who can get away with it, and who can’t

“Structuring,” as readers may recall, is the federal criminal offense of splitting up bank deposits so as to keep them under a threshold such as $10,000 above which banks have to report transactions to the government. Structuring is unlawful whether or not it occurs in conjunction with any other legal offense, as opposed to being motivated by, say, a desire to keep a low profile in general or a sentiment that the government already keeps tabs on too many innocent activities. Nor is there any requirement that the person be aware that there is a law banning structuring; someone who gets wind that transactions over $10,000 are reportable, and decides “What’s up with that? I’ll just make $9,000 deposits”), has broken the Bank Secrecy Act. Indeed, the federal government instructs banks to report suspicious patterns of sub-threshold deposits, and not to warn customers that it is doing so.

So who can engage in structuring and get by with it? Well, it might have a bit to do with who you are:

* On the one hand, as Courtney Mabeus reports in today’s edition of the Frederick News-Post, federal prosecutors yesterday filed a six-page complaint against dairy farmers Randy and Karen Sowers, who own the successful South Mountain Creamery in Middletown, Md. On February 29 Treasury officials showed up at their farm to question them about bank deposits; 45 minutes into that interview, according to the Sowerses, they learned that the federal government had just seized their bank account and the $70,000 in it. The family does a lot of business at farmer’s markets and its cash receipts over a ten-month period exceeded $320,000, the feds say. The News-Post account includes no mention of the family being under suspicion of any offenses other than what U.S. Attorney Rod Rosenstein describes as follows: “The holding back of cash receipts in excess of $10,000 indicates a knowledge of the Currency Transaction Reporting requirement and an attempt to evade it.” The couple is now speaking out about their plight to a wider public; they have hired attorney David Watt, though how they intend to pay him given the seizure of their bank account is not clear from the article. (Update Apr. 21: see also Apr. 18 coverage in Baltimore City Paper; & welcome Radley Balko readers)

* On the other hand, if you are former New York Attorney General Eliot Spitzer, you might not find the federal structuring laws so intimidating. Spitzer had good reason to be intimately familiar with the bank reports system since he had relied on its output in conducting white-collar investigations, and he was “smurfing” deposits in furtherance of conduct that was itself illegal, as he knew well, having crusaded in favor of longer sentences for “johns” as part of his appeal to New York City feminist and legal-services groups. But as Harvey Silverglate points out, “Spitzer, with the help of a high-powered legal team, was able to convince the Justice Department’s lawyers to drop the charges.” Now he goes on TV to denounce the federal government’s failure to prosecute persons in high places.

Maybe they’re too busy going after the dairy farmers.

P.S. The Supreme Court, in a majority opinion by Justice Ruth Ginsburg [Ratslaf v. U.S., 1994], admirably “interpreted the ‘willfully’ element for a currency structuring violation under 31 U.S.C. Sec. 5324 to require proof that the defendant knew the structuring was illegal. Congress responded rather promptly to the Court’s holding by dropping willfulness from the statute.” [White Collar Crime Prof, h/t Sam Bagenstos] (& welcome Prof. Bainbridge, Amy Alkon, Hans Bader readers; & see update.)

Little guys and “structuring” law

To read Alan Dershowitz on the Spitzer affair, you might think the criminal laws against “money laundering, structuring and related financial crimes” mostly go unenforced when sums are in the “thousands, not millions, of dollars” and do not arise from “organized crime, drug dealing, terrorism and large-scale financial manipulation”. Alas, plenty of targets of these laws could tell you otherwise, as Forbes found when it went collecting examples from proprietors of cash businesses like restaurants and motels and even a couple who says their legal troubles arose after they divided up for deposit $40,000 they’d received in gifts at their big wedding. (Janet Novack, “My Big Fat IRS case”, Forbes, Apr. 7; earlier; similar from Dershowitz on CNN transcript).

Spitzer and “structuring”

A helpful reader sends along the following information about the offense of “structuring”, which federal investigators are reportedly looking at closely in connection with the Spitzer affair:

If Spitzer structured cash transactions to evade reporting requirements, he may be guilty of a felony. 31 U.S.C. 5324 prohibits certain actions by any person who acts with the purpose of evading the reporting requirements of Section 5313 (Currency Transaction Reports). The definition of structuring for purposes of currency transaction reporting is found at 31 C.F.R. 103.11(gg). The elements of the structuring regulations are:

A person acting alone, in conjunction with others, or on behalf of others,
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,

For the purpose of evading the reporting requirements of 31 C.F.R. 103.22 (requiring CTRs).

The definition is specifically written to include those transactions which occur beyond a single business day and transactions which are conducted through more than one financial institution, but only if the purpose of the transaction(s) is to evade the reporting requirements.

The reader adds: “The IRS Manual on the BSA structuring provisions is here.”

More: Kerr @ Volokh, WLS @ Patterico, Daniel Gross @ Slate , Mark Steyn (“Almost every white-collar federal offense – wire fraud, mail fraud – boils down to ‘paying for the train ticket'”), American Lawyer, ABC News, as well as my new piece @ NRO.

Yet more, from Eric Turkewitz: “It seems likely that an amount in excess of $10,000 must be at issue if this is what was being investigated, which means more of a mess than Eliot already has. And to tickle the bank to act, it may be a sum well in excess of that amount, because I wouldn’t think an investigation would be opened if they simply saw two transactions of, say, $6,000 each a few days apart. There could be substantially more at play here.”

Schumer backtracks on SCOTUS diatribe, but not far enough

On Wednesday, at a rally on the Supreme Court steps, Senate Minority Leader Chuck Schumer (D-N.Y.) cut loose with a truly amazing diatribe against Justices Neil Gorsuch and Brett Kavanaugh, declaring that the two would “pay the price” and “won’t know what hit you if you go forward with these awful decisions.” Schumer’s menacing if vague comments drew prompt disapproval from a broad range of legal figures, such as the heads of the American Bar Association and New York City Bar Association as well as Democratic SCOTUS shortlister Neal Katyal and Harvard’s Larry Tribe. Chief Justice John Roberts weighed in with a rare public rebuke: “threatening statements of this sort from the highest levels of government are not only inappropriate, they are dangerous.”

Schumer proceeded to dig in and even blast Roberts personally for the criticism. By Thursday, he was ready to concede grudgingly that he “should not have used the words I used. They didn’t come out the way I intended to,” while still staying on the offensive in every other respect and accusing his adversaries of “manufacturing” the uproar.

I’ve got a new post at Ricochet reviewing the controversy, including its much-echoed “what about…?” dimension:

Defenders of Schumer assailed the chief justice for not having weighed on some other inappropriate Trump sallies, including his ill-grounded speculation recently (never filed as an actual motion) that Justices Ruth Ginsburg and Sonia Sotomayor should recuse themselves from Trump matters, and his aspersions on the judge in the Roger Stone case. Those are part of a frequent and blatant Trump habit of trash-talking judges, both as a candidate (calling the judge in the Trump University case “Mexican” and “a hater”) and as President (“so-called judge” among numerous others). Some — I’m one — would say that this is among Trump’s very worst and most damaging patterns of behavior.

But as cooler heads noted, including Ruth Marcus of the Washington Post, the chief justice is not a playground proctor who can step in to write up every demerit; he needs to save his efforts for the instances that are most dangerous, as he in fact has done.

The wider picture, it might be noted, is one in which nasty swipes at judges have been routinized for years, from a range of public figures and also from former President Barack Obama, both in his 2010 State of the Union speech and also repeatedly during the court review of ObamaCare. Still, none of these have gone as far to suggest personal threat as did Schumer — not even the extraordinarily inappropriate amicus brief filed by Sens. Sheldon Whitehouse and four other Senate Democrats last August, assailing the Court’s legitimacy and warning that “restructuring” at the hands of political branches lies ahead if it does not mend its ways.

I conclude that Schumer needs to go back and apologize, seriously this time. And it’s time for all who’ve fallen short of defending judicial independence — Republicans and Democrats alike — to do so. [cross-posted from Cato at Liberty]

“Congress Passes Bill To Protect Small-Business Owners from IRS Seizures”

On June 13 “the U.S. Senate unanimously approved legislation that stops the Internal Revenue Service from raiding the bank accounts of small-business owners. The Clyde-Hirsch-Sowers RESPECT Act, passed as part of the Taxpayer First Act (H.R. 3151), is named after Institute for Justice clients Jeff Hirsch and Randy Sowers, two victims of the IRS’s aggressive seizures for so-called ‘structuring.’ Through structuring laws, the IRS has routinely confiscated cash from ordinary Americans simply because they frequently deposited or withdrew cash in amounts under $10,000. And by using civil forfeiture, the IRS can keep that money without ever filing criminal charges.” [Nick Sibilla, Institute for Justice] We’ve covered the problems with structuring law, as well as asset forfeiture, for many years.

Supreme Court roundup

  • Will the liberal wing’s success at piecing together 5-4 majorities survive Justice Kennedy’s departure? [Kimberly Strawbridge Robinson, Bloomberg] Fundamental restructuring of Supreme Court becomes a popular campaign issue with Democrats, and the dangers in that [Ilya Shapiro, Washington Examiner] More: Gorsuch, Kavanaugh differ often, we can see clearly now [Jonathan Adler and update]
  • Federalist Society video on stare decisis with Roger Pilon, and related by Pilon on constitutional stare decisis;
  • The high court decides relatively few admiralty/maritime cases but has heard more than one of them this term; one artist’s whimsical illustration [@CourtArtist on Twitter]
  • In writing opinions, “the justices should be careful about naming politicians, especially when they name in order to make a point about the political process.” [Josh Blackman, The Atlantic]
  • A constitutional right to religious exemptions from otherwise applicable laws? Eugene Volokh still backs Scalia’s logic on that, but it’s looking as if Court’s conservative wing may not. Cleanup in the Lemon aisle: Michael McConnell on Maryland Peace Cross case [Volokh Conspiracy]
  • New resource: database of all Supreme Court nomination hearing transcripts that are yet available (with Kavanaugh’s still to come) [Shoshana Weissmann and Anthony Marcum, R Street]

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Eric Schneiderman resigns after assault allegations

Within hours of a New Yorker investigation reporting on the stories of several women who accused him of assault, New York Attorney General Eric Schneiderman has resigned. “Women’s issues had been a focal point for Mr. Schneiderman.” In particular, among other domestic violence laws, Schneiderman had backed the toughening of penalties for choking and interference with a victim’s breathing. [Danny Hakim and Vivian Wang, New York Times] My City Journal piece three years ago detailed how Schneiderman had become one of the nation’s most powerful and consequential progressive politicos. We previously covered disgraced former New York Attorney General Eliot Spitzer’s involvement as a law enforcer with laws he was later to trip over.

Banking and finance roundup

  • The Department of Justice cuts a settlement deal with Bank of America under which the bank agrees to give millions to liberal groups [Sean Higgins/Washington Examiner, Federalist Society blog rounding up criticisms]
  • Seizures under bank structuring law have hit small business owners who deposited cash in under-$10,000 amounts because their insurance policies wouldn’t cover cash-on-hand holdings above that amount [Ali Meyer/Free Beacon, earlier and generally]
  • “It is hereby enacted that Smith wins his lawsuit” statutes and the Bank Markazi (Iran funds) case [Michael Greve, Liberty and Law]
  • Second Circuit panel throws out $1.2 billion verdict against B of A over Countrywide mortgage lending, saying government didn’t prove fraud [Daniel Fisher, more]
  • “The crowdfunding catch: government regulations” [Thaya Brook Knight, Newsweek/Cato]
  • Too left-wing to get tenure at Harvard Law in era of the Crits. Now, to banks, “he’s judge and jury and everything else.” [Wall Street Journal profile of Fed governor Daniel Tarullo]