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United States v. Mastronardo

argued: May 2, 1988.

UNITED STATES OF AMERICA
v.
JOSEPH VITO MASTRONARDO, JR., APPELLANT; UNITED STATES OF AMERICA V. JOSEPH VITO MASTRONARDO, SR., APPELLANT; UNITED STATES OF AMERICA V. JOHN VITO MASTRONARDO, APPELLANT; UNITED STATES OF AMERICA V. HERBERT L. CANTLEY, APPELLANT; UNITED STATES OF AMERICA V. JOHN HECTOR, APPELLANT



On Appeal from the United States District Court for the Eastern District of Pennsylvania, D.C. Criminal No. 86-00293-02/03/04/05/06.

Gibbons, Chief Judge, Mansmann and Cowen, Circuit Judges.

Author: Cowen

Opinion OF THE COURT

COWEN, Circuit Judge.

Joseph Vito Mastronardo, Jr., Joseph Vito Mastronardo, Sr., John Vito Mastronardo, Herbert Cantley and John Hector each appeal to this Court to overturn their convictions for conducting an illegal gambling business in violation of 18 U.S.C. § 1955, using interstate telephone service in aid of an illegal gambling business, in violation of 18 U.S.C. § 1952, participating in a conspiracy to defraud the United States, in violation of 18 U.S.C. § 371, and concealing material facts from the United States, in violation of 18 U.S.C. § 1001.*fn1

Because we agree with Mastronardo, Jr., Mastronardo, Sr. and Cantley's argument that their convictions for conspiracy to defraud the United States and concealing material facts from the United States are based, at least in part, on allegations that they "structured" currency transactions so as to induce banks to fail to file Currency Transaction Reports ("CTRs"), and that the statutes and regulations then in force did not give them fair notice that such "structuring" was criminal, we will reverse these convictions. We find the remainder of the appellants' arguments to be without merit and affirm the remaining convictions.

I.

On June 26, 1986, a federal grand jury returned a 63 count indictment against eight defendants. The indictment named the five appellants -- Joseph Vito Mastronardo, Jr., Joseph Vito Mastronardo, Sr., John Vito Mastronardo, Herbert L. Cantley, and John Hector -- and three co-defendants not parties to this appeal -- Shearson Lehman Brothers, Inc. ("Shearson"), Mario Scinicariello, and Sheldon Shore. Each of the defendants was indicted for crimes arising out of an alleged multi-million dollar bookmaking and money laundering operation.*fn2

All defendants, except Scinicariello, were tried together before a jury. At the close of the government's case, the district court entertained defendants' motions for directed verdicts of acquittal, and granted those motions as to all of counts four to six, fifteen to seventeen, and twenty to twenty-two. The district court also granted Mastronardo, Sr.'s motion for directed verdicts on counts twenty-five to thirty-eight, and forty-eight to fifty-four. Finally, the district court granted John Mastronardo's motion for directed verdicts on counts twenty-five to thirty-nine, forty-eight to fifty-five, and sixty-one.

The jury returned the following guilty verdicts on February 25, 1987. Mastronardo, Jr. was convicted of conspiracy to defraud the United States (count one), conducting an illegal gambling business (count three), eight counts of using interstate telephone service in aid of a gambling business (counts eight to thirteen, eighteen, and nineteen), and concealing material facts from the United States (count sixty-one). Mastronardo Sr. was convicted of conspiracy to defraud the United States (count one), conducting an illegal gambling business (count three), two counts of using interstate telephone service in aid of a gambling business (counts eighteen and nineteen), and concealing material facts from the United States (count sixty-one). John Mastronardo was convicted of conducting an illegal gambling business (count three), and one count of using interstate telephone service in aid of a gambling business (count twenty-three). Cantley was convicted of two counts of conspiracy to defraud the United States (counts one and two), conducting an illegal gambling business (count three), and three counts of concealing material facts from the United States (counts sixty-one through sixty-three). Hector was convicted of conducting an illegal gambling business (count three), and two counts of using interstate telephone service (counts eleven and twenty-four).

These defendants were acquitted of the remaining charges against them, and defendants Shore and Shearson were acquitted of all charges.*fn3 Mastronardo, Sr., Mastronardo, Jr., John Mastronardo, Cantley and Hector appeal their convictions to this Court.

II.

The principal contention raised in this appeal is whether the above named defendants can be held criminally liable for "structuring" currency transactions to avoid having financial institutions report the transactions to the government.*fn4 As originally enacted, the Currency Transaction Reporting Act, 31 U.S.C. § 5311 et seq. (1982), authorized the Secretary of the Treasury to require the reporting of currency transactions.*fn5 Although the statute permitted the Secretary to adopt regulations requiring both "financial institutions"*fn6 and other "participants" in transactions to file CTRs, the Secretary, during the time period relevant to this case, issued regulations which required only financial institutions to file CTRs.*fn7 Such institutions were required to file CTRs when participating in a transaction involving more than $10,000 in currency. Failure to file a CTR when required by the Secretary's regulations subjected the offending institution to civil and criminal penalties. However, no provision of the Currency Transaction Reporting Act made it a crime for an individual to "structure" his transactions so as to keep each transaction under the $10,000 floor, thus inducing a financial institution not to file a CTR in instances where it might be required to file a CTR were the person's transactions aggregated.*fn8

The issue presented by this case is whether a person can be held criminally liable for "structuring" transactions during the relevant time period in such a way that a bank or other financial institution would not be aware that the person is making a number of transactions which, if aggregated, involve more than $10,000 in currency.*fn9 The United States asserts that such criminal liability exists under a number of statutes, and it charged the defendants in this case with violations of each. First, the United States charged the defendants with violating 18 U.S.C. § 2(b) ("§ 2(b)"),*fn10 which establishes that a person who causes another to commit an offense against the United States is chargeable ...


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