No. 95-1156 IN THE SUPREME COURT OF THE UNITED STATES OCTOBER TERM, 1995 MICHAEL B. LONDON, PETITIONER v. UNITED STATES OF AMERICA ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT BRIEF FOR THE UNITED STATES IN OPPOSITION DREW S. DAYS, III Solicitor General JOHN C. KEENEY Acting Assistant Attorney General NINA GOODMAN Attorney Department of Justice Washington, D.C. 20530 (202) 514-2217 ---------------------------------------- Page Break ---------------------------------------- QUESTION PRESENTED Whether, at petitioner's trial for failure to file a currency transaction report in violation of 31 U.S.C. 5313 and 5322, the jury was correctly instructed on the element of willfulness. (I) ---------------------------------------- Page Break ---------------------------------------- TABLE OF CONTENTS Page Opinion below . . . . 1 Jurisdiction . . . . 1 Statement . . . . 1 Argument . . . . 8 Conclusion . . . . 14 TABLE OF AUTHORITIES Cases: Cheek v. United States, 498 U. S. 192 (1991 ) . . . . 6, 9 Donovan v. United States, 114 S. Ct. 873(1994) . . . . 11 Engle v. Isaac, 456 U. S. 107 (1982) . . . . 12 Lawrence v. Chater, 116 S. Ct. 604 (1996) . . . . 11 Ratzlaf v. United States, 114 S. Ct. 655 (1994) . . . . 6, 8, 9, 11 United States v. Aversa, 984 F.2d 493 (lst Cir. 1993), vacated and remanded sub nom. Donovan v. United States, 114 S. Ct. 873(1994) . . . . 5, 6, 12 United States v. Bank of New England, 821 F.2d 844 (lst Cir.), cert. denied, 484 U. S. 943(1987) . . . . 10-11 United States v. Eisenstein, 731 F.2d 1540 (llth Cir.1984) . . . . 12 United States v. Granola, 565 F.2d 922 (5th Cir. 1978) . . . . 12 United States v. Jones, 21 F.3d 165 (7th Cir. 1994) . . . . 10 United States v. Olano, 113 S. Ct. 1770(1993) . . . . 12, 13 United States v. Retos, 25 F.3d 1220 (3d Cir. 1994) . . . . 10 United States v. Rogers, 18 F.3d 265 (4th Cir. 1994) . . . . 10 Statutes, regulations and rule: Riegle Community Development and Regulatory Improvement Act of 1994, Pub. L. No. 103-325, 411, 108 Stat. 2253 . . . . 9 (III) ---------------------------------------- Page Break ---------------------------------------- IV Statutes, regulations and rule-continued: Page 18 U.S.C. 2 . . . . 2 18 U.S.C. 1951- . . . . 2 18 U.S.C. 1956(a)(1) . . . . 2 18 U.S.C. 1962(c) . . . . 2 18 U.S.C. 1962(d) . . . . 2 26 U.S.C. 7201 . . . . 2 31 U.S.C. 5313 . . . . 2, 9, 12 31 U.S.C. 531 3(a) . . . . 3 31 U.S.C. 5322 . . . . 2,8,9 31 U.S.C. 5322(a) (1988 & Supp. V 1993) . . . . 9 31 U.S.C. 5324 (1988 & Supp. V 1993) . . . . 9 31 C.F.R.: Section 103.1(n)(3) . . . . 3 Section 103.22(a)(l) . . . . 3 Fed. R. Crim. P. 52(b) . . . . 12 Miscellaneous: H.R. Conf. Rep. No. 652, 103d Cong., 2d Sess. (1994) . . . . 9 ---------------------------------------- Page Break ---------------------------------------- In the Supreme Court of the United States OCTOBER TERM, 1995 No. 95-1156 MICHAEL B. LONDON, PETITIONER v. UNITED STATES OF AMERICA ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT BRIEF FOR THE UNITED STATES IN OPPOSITION OPINION BELOW The opinion of the court of appeals (Pet. App. 4a- 43a) is reported at 66 F.3d 1227. JURISDICTION The judgment of the court of appeals was entered on September 18, 1995. A petition for rehearing was denied on October 20, 1995. Pet. App. la-3a. The petition for a writ of certiorari was filed on January 18, 1996. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). STATEMENT Following a jury trial in the United States District Court for the District of Massachusetts, petitioner was convicted on one count of conducting the affairs (1) ---------------------------------------- Page Break ---------------------------------------- 2 of an enterprise through a pattern of racketeering activity, in violation of 18 U.S.C. 1962(c); one count of conspiring to do the same, in violation of 18 U.S.C 1962(d); twelve counts of money Laundering, in violation of 18 U.S.C. 1956(a)(l); twelve counts of failing to file currency transaction reports, in viola- tion of 31 U.S.C. 5313 and 5322 one count of con- spiring to commit extortion, in violation of 18 U.S.C. 1951; and two counts of aiding and abetting extortion, in violation of 18 U.S.C. 1951 and 2. After the jury verdict, petitioner pleaded guilty to one count of tax evasion, in violation off 26 U.S.C. 7201.1 He was sentenced to 188 months' imprisonment, to be followed by 36 months' supervised release, and was fined $500,000. Pet. App. 47a. He also agreed to forfeit $865,000. The court of appeals affirmed. 1. Petitioner operated Heller's Cafe, a bar in Chelsea, Massachusetts, and ran a check-cashing service, known as M&L Associates, in the bar. Many of the patrons who frequented Heller's Cafe were bookmakers who operated illegal gambling busi- nesses. M&L Associates cashed checks that Book- makers and their agents received from gamblers as payment for unlawful gambling debts, and it charged a commission on each check cashed. Pet, App. 5a-6a Gov't C.A. Br. 3-4. ___________________(footnotes) 1 The judgment of conviction reproduced at Pet. App. 45a- 46a does not accurately reflect the counts on which petitioner was convicted. He was convicted on Counts 1, 2, 5-18, 21, 23, 25, 26, 29, 32, 34, 35, 37, 40, 44, 45, 47, and 51 of the second superseding indictment. The government dismissed 18 addi- tional counts prior to trial, and the district court dismissed Count 48. The jury acquitted petitioner on Count 4. See Gov't C.A. Br. 2-3. The district court's docket report accurately reflects the convictions. ---------------------------------------- Page Break ---------------------------------------- 3 As the operator of a check-cashing business, peti- tioner was required by federal law to file a currency transaction report (CTR) with the Internal Revenue Service each time he transferred more than $10,000 in cash to a customer. Pet. App. 6a; see 31 U.S.C. 5312(a); 31 C.F.R. 103.11(n)(3), 103.22(a)(l). Although petitioner regularly transferred cash in amounts of more than $10,000 to his check-cashing customers, before December 1986 he never filed CTRs that re- ported the transactions. In that month, a search warrant was executed at Heller's Cafe. After the search, he began filing CTRs on behalf of hiS check- cashing business. Pet. App. 6a-7a; Gov't C.A. Br. 5-6. 2. Evidence introduced at trial showed that, during the period in which he failed to file CTRs, petitioner was aware of the reporting requirement for transfers of more than $10,000 in cash. Pet. App. 8a; Gov't C.A. Br. 6-7. In a conversation recorded during court- authorized electronic surveillance at Heller's Cafe, petitioner explained the CTR requirement to one of his check-cashing customers, stating that "[t]he form is filled out by the one who cashed [the check]." Id. at 7. In addition, an employee of a bank where petitioner opened an account for his check-cashing business told petitioner that the bank would be "reporting any transactions in excess of $10,000," and petitioner responded that he "was aware of the law." Id. at 6-7. When an employee at a second bank where petitioner maintained an account advised petitioner that the bank would be "filling out CTR[s] on all his transac- tions over $10,000," petitioner stated that he was "familiar with the [CTR] form because his other banks filed them." Id. at 7. The district court instructed the jury that, to convict petitioner on the counts charging him with ---------------------------------------- Page Break ---------------------------------------- 4 failing to file currency transaction reports, the government was required to prove that his failure to file CTRs for cash transactions involving more than $10,000 was "knowing and willful." Gov't C.A. Br. 48; 2/17/93 Tr. 67, The court explained that "[k]nowing in the context of this statute means [that] * * * [i]t has to be intentional, not by accident or mistake." 2/17/93 Tr. 67-68. The court then defined "willful" as follows: But willful, for the currency transaction re- porting laws, has a somewhat different definition than it has in the other contexts I've described. It has a separate definition. It doesn't necessarily require actual direct knowledge of what the currency transaction laws require. In this con- text, a willful action is one that is committed in violation of a known legal duty, or as a result of a defendant's reckless disregard of such a duty. Thus, a failure to file is willful, if the defendant actually knew he was required to file a CTR in connection with a particular transaction and deliberately failed to do so. A failure to file is also willful, however, if the defendant was generally aware of the currency transaction reporting re- quirements but recklessly] or intentionally failed to investigate the legality of what he was doing. Recklessness involves the conscious disregard of a substantial risk. Thus, you should on this issue first decide whether the Government has proven the defendant actually knew he was required to file a CTR for ---------------------------------------- Page Break ---------------------------------------- 5 any proven particular reportable transaction and failed to do so. If the Government has not proven this, but rather, you find the defendant actually thought, mistakenly, that the transaction was not report- able, you must then decide whether that mistake was the result of a reckless failure to determine properly how the currency transaction reporting laws apply to his conduct. And in addressing this issue of recklessness, if you reach it, you may consider the frequency with which the defendant was involved in transactions which might be reportable, among other things in evidence. So, in this sense, the definition of willful is different than it was, for example, under the money laundering statute I described a little while ago. There, the actual knowledge that the checks were the proceeds of illegal activity was required and I told you that you were permitted but not required to infer such actual knowledge, if you found what the law calls willful blindness. That's one form of willfulness permitted under the CTR statute, but there's another form and that is the state of mind requiring that the CTR statute be met, if the Government proves a violation of a known legal duty, or a reckless disregard. Gov't C.A. Br. 48-49; 2/17/93 Tr. 68-69. Petitioner did not object to that instruction, which was consistent with a recent en bane decision of the First Circuit, United States v. Aversa, 984 F.2d 493 (1993), vacated ---------------------------------------- Page Break ---------------------------------------- 6 and remanded sub nom. Donovan. v. United States, 114 S. Ct. 873 (1994). See Pet. App. 27a.2 3. In the court of appeals, petitioner contended that the district court's instruction on willfulness was inconsistent with this Court's decision in Ratzlaf v. United States, 114 S. Ct. 665 (1994), which was issued after the trial. The government agreed that the will- fulness instruction was inconsistent with Ratzlaf. Gov't C.A. Br. 50-52. The government argued, how- ever, that because petitioner had not objected to the instruction, his claim was reviewable only for plain error, and that the defective willfulness instruction did not constitute plain error. Pet. App. 27a. The court of appeals declined to apply the plain error doctrine. Pet. App. 27a-30a. It concluded that petitioner's failure to object to the willfulness instructions was excusable since those "instruct ions mirror[ed] exactly the holding" of Aversa. Id. at 29a. ___________________(footnotes) 2 Judge Torruella dissented from the en banc decision in Aversa, and argued that the element of willfulness required the government to prove an intentional violation of a known legal duty. 984 F.2d at 503-507. He relied on this Court's decision in Cheek v. United States, 498 U.S. 192 (1991), which had construed the element of willfulness in tax evasion cases. 984 F.2d at 505-506. Then-Chief Judge Breyer, in a concurring opinion, stated that, "[w]ere I writing on a blank slate," the similarity of the tax evasion and currency transaction statutes "might well lead me to conclude that the same standards should apply in both cases." He noted, however, that other circuits had distinguished currency reporting cases from Cheek, and he believed that this Court's decisions suggested that criminal tax cases were sui generis. He also concluded that a standard of recklessness that "involves the conscious disregard of a sub- stantial risk" was sufficient to "avoid using the criminal law, in this technical area, to punish those with an innocent state of mind." Id. at 502-503. ---------------------------------------- Page Break ---------------------------------------- 7 It rejected the government's argument that a conflict in the circuits at the time of petitioner's trial on the construction of willfulness made it likely that this Court would resolve the issue and therefore made it incumbent upon petitioner to lodge an objection. Id. at 28a. According to the court, the fact that the law of the circuit "was settled by nothing less than a newly- minted en bane opinion at the time the trial judge instructed [petitioner's] jury * * * goes a long way, if not the whole way, towards excusing [petitioner's] failure to object." Id. at 29a-30a. The court also noted that, at the time of petitioner's trial, decisions of other circuits were even more favorable to the gov- ernment than was Aversa, and it therefore concluded that Ratlaf was "the type of unanticipated, `out of the blue' Supreme Court ruling" that excuses a defendant's failure to object to instructions. Id. at 30a. On the merits, however, the court concluded that the reference to "reckless disregard" in the will- fulness instruction was "not error under Ratzlaf." Pet. App. 36a. It noted that, although this Court in Ratzlaf construed the element of willfulness to require "that the defendant acted with knowledge that his conduct was unlawful," the Court did not address any issue about recklessness and "neither embraced nor disavowed" the decision in Aversa. Id. at 30a-31a. The court of appeals also noted that, in numerous other contexts, willfulness embraces reckless disregard of the illegality of an act as well as intentional violation of the law. Id. at 34a-35a. And it observed that there are "practical problems of drawing too fine a line" between intentional violation of the law and reckless disregard, since a jury can generally infer knowledge "if a defendant consciously ---------------------------------------- Page Break ---------------------------------------- 8 avoided learning about the reporting requirements." Id. at 35a. That standard, the court concluded, was similar to the theory adopted in the instructions in this case, which defined recklessness as "the con- scious disregard of a substantial risk," and required "some kind of an awareness of law which [was] not casually or negligently but recklessly disregarded." Id. at 35a-36a. Petitioner filed a petition for rehearing and a suggestion of rehearing en banc; both were denied by the court of appeals. Pet. App. la-2a. Chief Judge Torruella dissented from the denial of further review. Id. at 2a. In his view, Ratzlaf precluded a conviction for violating the currency transaction reporting re- quirements "based on the `reckless disregard' theory utilized in this case." Ibid. He also noted that this Court had remanded the en bane decision in Aversa for further consideration in light of Ratzlaf, and he concluded that "[t]he most logical inference from this state of affairs is that the Court viewed our pre- Ratzlaf decision in Aversa as contrary to Ratzlaf, and wanted to give us a chance to remedy it." Ibid. ARGUMENT Petitioner renews his contention (Pet. 4-5) that the district court's instruction on willfulness is inconsis- tent with Ratzlaf v. United States, 114 S. Ct. 655 (1994). According to petitioner (Pet. 4), the instruc- tion incorrectly "equated `actual knowledge' of ille- gality with `reckless disregard' of the required legal duties." We believe that the judgment in this case is correct, and that petitioner's contention does not warrant review by this Court. In Ratzlaf this Court interpreted the element of willfulness in 31 U.S.C. 5322 to require proof that the ---------------------------------------- Page Break ---------------------------------------- 9 defendant knows that his conduct (there, structuring currency transactions) is unlawful. 114 S. Ct. at 658.3 The Court therefore disapproved the conclusion of the lower courts in that case that the government "did not have to prove defendant knew the structuring was unlawful." Id. at 657. The Court also cited with ap- proval several lower court decisions construing will- fulness to require proof of a voluntary and intentional violation of a known legal duty (id. at 659-660), including a decision that relied for that formulation on Cheek v. United States, 498 U.S. 192, 201 (1991), in which the Court had so construed willfulness for purposes of criminal liability for tax evasion. Ratzlaf did not specifically discuss whether proof of a defendant's reckless disregard for the illegality of his acts would satisfy the element of willfulness under Section 5322. Nor are we aware of any other federal appellate decision addressing the general issue of recklessness in this context since this Court's decision in Ratzlaf. Some courts have stated that, under Ratzlaf, the district court must instruct the jury that the element of willfulness requires proof that the defendant was aware that his conduct ___________________(footnotes) 3 Ratzlaf involved a violation of the provision of Title 31 that, prohibited the structuring of a transaction "for the purpose of evading the reporting requirements." 31 U.S.C. 5324 (1988 & Supp. V 1993). This case involves a violation of a separate provision, 31 U.S.C. 5313, which requires the filing of a CTR. At the time of the decision in Ratzlaf, 31 U.S.C. 5322(a) (1988 & Supp. V 1993) imposed penalties for "willfully violating" either provision. Congress has since eliminated the willfulness element from the offense of structuring currency transactions that was at issue in Ratzlaf. See Pub. L. No. 103- 325, 411, 108 Stat. 2253; H.R. Conf. Rep. No. 652, 103d Cong., 2d Sess. 194 (1994). Congress has not, however, removed the element of willfulness from the offense involved in this case. ---------------------------------------- Page Break ---------------------------------------- 10 was unlawful, but those cases did not involve any question of recklessness. See United States v. Retos, 25 F.3d 1220, 1220 (3d Cir. 1994); United States v. Jones, 21 F.3d 165 (7th Cir. 1994); United States v. Rogers, 18 F.3d 265, 268 (4th Cir. 1994). And no decision has considered the unusual blend of instruc- tions given here, in which some portions of the will- fulness charge focused on petitioner's "conscious disregard of a substantial risk," while others per- mitted conviction even if petitioner "actually" but "mistakenly" (as "the result of * * * recklessness") thought that his conduct was lawful. In our view, as we stated to the court of appeals (Gov't C.A. Br. 50-52), the instructions given by the trial court in this case, taken as a whole, are not consistent with Raztlaf The court instructed the jury that it could find that petitioner acted willfully if it determined either that he knew that he was required to file CTRs, or that he was "generally aware of the currency transaction reporting require- ments but recklessly] or intentionally failed to investigate the legality of what he was doing." The court further defined "recklessness" as involving "conscious disregard of a substantial risk." And the court also told the jury that it could convict peti- tioner if it found that he "actually thought, mis- takenly, that the transaction was not reportable," provided that his mistake was the result of his "reck- less failure to -determine properly how the currency transaction reporting laws apply to his conduct." Gov't C.A. Br. 48-49; 2/17/93 Tr. 68-69. It is, of course, proper to permit a jury to infer willfulness from a defendant's conscious avoidance of learning about the requirements of the law. See United States v. Bank of New England, 821 F.2d 844, ---------------------------------------- Page Break ---------------------------------------- 11 855 (lst Cir.), cert. denied, 484 U.S. 943 (1987); see also Ratzlaf, 114 S. Ct. at 663 n.19 ("[a] jury may, of course, find the requisite knowledge on defendant's part by drawing reasonable inferences from the evidence of defendant's conduct"). In this case, how- ever, the instructions given by the trial court- especially the instruction that permitted a finding of willfulness based on petitioner's mistaken but reckless belief that his conduct was not covered by the statute-appear inconsistent with Ratzlaf's re- quirement that "the Government must prove that the defendant acted with knowledge that his conduct was unlawful" (114 S. Ct. at 657).4 We nevertheless believe that the judgment is correct and does not warrant this Court's review. Petitioner failed to object to the jury instruction in the trial court. The court of appeals ruled that petitioner's failure to object was excusable because of its recent decision in Aversa, which supported the district court's instruction; it therefore declined to review the instruction under a plain error standard. We believe that the court of appeals' analysis is wrong, and that the court should have reviewed the ___________________(footnotes) 4 We do not agree with petitioner, however, that reversal is required because this Court vacated the judgment of the court of appeals in Aversa and remanded that case for reconsidera- tion in light of Ratzlaf. See Donovan v. United States, 114 S. Ct. 873 (1994). The Court has recently explained that an order granting a petition for a writ of certiorari, vacating the judgment below, and remanding for reconsideration merely "assists this Court by procuring the benefit of the lower court's insight before we rule on the merit s." Lawrence v. Chater, 116 S. Ct. 604, 606 (1996) (per curiam). The Court's vacatur of the judgment in Aversa did not constitute a ruling that the decision in that ease was inconsistent with Ratzlaf. ---------------------------------------- Page Break ---------------------------------------- 12 instruction only for plain error. Under a correct application of the plain error standard, it should have affirmed the convictions. At the time of petitioner's trial, an objection to the willfulness instruction would not have been futile, and petitioner did not "lack[] the tools" for making such an objection. Cf. Engle v. Isaac, 456 U.S. 107, 133 (1982). This Court had already construed willfulness in Cheek to require proof of the voluntary, intentional violation of a known legal duty, and all the opinions in Aversa acknowledged the significance of Cheek. See 984 F.2d at 497, 500-501; id. at 502-503 (Breyer, C.J., concurring); id. at 505-507 (Torruella, J., dissenting). Moreover, other circuits had construed Section 5313 to require proof that the defendant intended to disobey the law. See United States v. Eisenstein, 731 F.2d 1540, 1543 (llth Cir. 1984); United States v. Granda, 565 F.2d 922, 926 (5th Cir. 1978) (permitting defense based on "alleged ignorance of the reporting requirements"). The majority in Aversa permitted proof of willfulness through evidence of reckless disregard of the law (see 984 F.2d at 497-498) and distinguished Cheek on various grounds, but its ex- tensive discussion of the issue should have suggested to petitioner that Cheek supported an argument that the element of willfulness required proof of a voluntary and intentional violation of a known legal duty. To preserve such an argument, petitioner should have objected to the district court's instruc- tion. Accordingly, under Rule 52(b) of the Federal Rules of Criminal Procedure, petitioner's conviction may be reversed only if it was a "plain error[] * * * affecting substantial rights." See generally United States v. Olano, 113 S. Ct. 1778, 1777-1778 (1993). "It ---------------------------------------- Page Break ---------------------------------------- 13 is the defendant rather than the Government who bears the burden of persuasion with respect to prejudice." Id. at 1778. That standard requires not only error, but also, inter alia, a showing that the defendant has been prejudiced and that the conviction would result in a miscarriage of justice. Petitioner cannot make the necessary showing of prejudice in this case, for the evidence at trial demonstrated that he knew he was required to file CTRs for transfers of more than $10,000 in cash. When bank employees told petitioner that they would be filing CTRs for his transactions over $10,000, petitioner responded that he was aware of the law. Petitioner told a customer that "[t]he form is filled out by the one who cashed [the check]." He also instructed his customers to make sure that each check was for less than $10,000, and when he cashed a group of checks for the same customer, he would often deposit the checks on different days or in different bank accounts. And when petitioner learned that the authorities were "cracking down" on CTR violations, he began to stamp the back of his customers' checks with information that would have been contained in a CTR, so that, as he said, "when they come down at least I'll have some records on them." Gov't C.A. Br. 5-7,52-54. Even if the instruction were prejudicial, petitioner could not show that "a miscarriage of justice" re- sulted from his conviction, or that the instruction "seriously affect[ed] the fairness, integrity, or public reputation of judicial proceedings." See Olano, 113 S. Ct. at 1779. The evidence of petitioner's awareness of the law shows that the instruction did not result in the conviction of an actually innocent person. More- over, no blame for the instruction can be placed on the ---------------------------------------- Page Break ---------------------------------------- 14 district court or the government, since the instruc- tion was entirely consistent with the law of the circuit at the time of trial. CONCLUSION The petition for a writ of certiorari should be denied. Respectfully submitted. DREW S. DAYS, III Solicitor General JOHN C. KEENEY Acting Assistant Attorney General NINA GOODMAN Attorney