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U.S. v. Dollar Bank Money Market Account No. 1591768456

filed: November 25, 1992.

UNITED STATES OF AMERICA
v.
DOLLAR BANK MONEY MARKET ACCOUNT NO. 1591768456, DOLLAR BANK CERTIFICATE OF DEPOSIT NO. 60591768484, DOLLAR BANK CERTIFICATE OF DEPOSIT NO. 60591772685, DOLLAR BANK CERTIFICATE OF DEPOSIT NO. 60591778152, EQUIBANK CERTIFICATE OF DEPOSIT NO. 10410032199331, EQUIBANK MONEY MARKET ACCOUNT NO. 5783112, EQUIBANK CERTIFICATE OF DEPOSIT NO. 10410032199341, EQUIBANK CERTIFICATE OF DEPOSIT NO. 10410032199360, EQUIBANK CERTIFICATE OF DEPOSIT NO. 10410032199569, FIRST SENECA BANK MONEY MARKET ACCOUNT NO. 80273569, FIRST SENECA BANK CERTIFICATE OF DEPOSIT NO. 20054, FIRST SENECA BANK CERTIFICATE OF DEPOSIT NO. 200545, FIRST SENECA BANK CERTIFICATE OF DEPOSIT NO. 200546, GREAT AMERICAN FEDERAL SAVINGS ACCOUNT NO. 300903659, GREAT AMERICAN FEDERAL CERTIFICATE OF DEPOSIT NO. 10027818, MELLON BANK MONEY MARKET ACCOUNT NO. 3699793, MELLON BANK CERTIFICATE OF DEPOSIT NO. 28368, MELLON BANK CERTIFICATE OF DEPOSIT NO. 28430, MELLON BANK CERTIFICATE OF DEPOSIT NO. 28500, PITTSBURGH NATIONAL BANK CERTIFICATE OF DEPOSIT NO. 980354416799, PITTSBURGH NATIONAL BANK CERTIFICATE OF DEPOSIT NO. 980354416800, PITTSBURGH NATIONAL BANK CERTIFICATE OF DEPOSIT NO. 980354435829, UNION NATIONAL BANK MONEY FUND ACCOUNT NO. 124231267. APPEAL OF CLAIMANT JAMES E. STEY.



On Appeal from the United States District Court for the Western District of Pennsylvania. (D.C. Civ. No. 89-01384).

Before: Greenberg, Cowen and Weis, Circuit Judges.

Author: Cowen

Opinion OF THE COURT

COWEN, Circuit Judge.

Claimant James E. Stey appeals the grant of summary judgment ordering civil forfeiture of $66,600 in bank deposits under 18 U.S.C. § 981(a)(1)(A) (1988). The district court held that the funds were subject to forfeiture because they were deposited by Stey in violation of 31 U.S.C. § 5324(3) (1988), which prohibits structuring transactions "for the purpose of evading the reporting requirements of section 5313(a)." Under 31 U.S.C. § 5313(a) (1988), banks are required to file a currency transaction report ("CTR") for every transaction over $10,000.

In this appeal, we will examine the mens rea requirement of 31 U.S.C. § 5324. According to Stey, evidence on record shows that he believed that the filing of CTRs is required by a bank policy, instead of by law. He argues that a triable issue of material fact exists as to whether he had the mens rea required by section 5324. We agree with Stey that a person cannot violate section 5324 unless he knows that the filing of CTRs is required by law. Because we also find that a genuine issue of material fact exists regarding Stey's mental state, we will reverse the grant of summary judgment and remand the case for trial.

I.

On appeal of a grant of summary judgment, we must view all facts and inferences in the light most favorable to the nonmoving party, in this case the claimant Stey. Clement v. Consolidated Rail Corp., 963 F.2d 599, 600 (3d Cir. 1992). The funds which the government claims are forfeited originally belonged to Stey's aunt, Rose Miller. During her lifetime, Miller saved about $230,000 in cash derived entirely from legitimate sources. She had little faith in financial institutions, so she kept the money hidden in her house in Homestead, Pennsylvania. The house was located in a deteriorating neighborhood.

In July of 1989, at age 82, Miller moved into a nursing home because of declining health. Consistent with earlier promises, she gave the money hidden in her house to her three nephews, James E. Stey (the appellant), John A. Stey, and George C. Stey, in equal shares on March 29, 1989. Miller executed a gift instrument prepared by her attorney, Michael Murphy.

Shortly thereafter, James Stey removed the money from Miller's house and deposited it in safety deposit boxes at a bank in Homestead. James and John Stey intended to use the funds to pay Miller's expenses in her declining years. About $30,000 was spent to care for Miller. In March of 1989, James Stey contacted attorney Murphy for legal advice on how to deposit the money in banks. Murphy told him that it was legal to possess large amounts of cash and that Stey could make one large deposit or several smaller ones. Murphy also told Stey that if he deposited more than $10,000 at a time, he would have to fill out a report at the bank, and that he could lawfully avoid filling out reports by depositing less than $10,000 at a time. Stey allegedly verified the accuracy of this advice by consulting an accountant and a bank branch manager. According to Stey, neither Murphy nor the other professionals informed Stey that banks are required by law to file reports of transactions exceeding $10,000.

From March 31 to April 16, 1989, Stey made twenty-six deposits totalling $199,800 in seven different banks in the Homestead area. Twenty of the deposits ranged from $8,000 to $9,500; two were for $6,000; two were for $3,000; and two were for $1,000. No CTRs were filed. While making the deposits, Stey allegedly asked two other bank branch managers whether it was lawful to avoid reporting transactions by depositing amounts under $10,000. They said that it was lawful and did not inform him that reporting was required by law.

On June 26, 1989, the United States filed a complaint in the United States District Court for the Western District of Pennsylvania (Civ. No. 89-1384) against the bank accounts containing the funds. The government alleged that the funds were subject to civil forfeiture under 18 U.S.C. § 981 (a)(1)(A) because they were deposited in violation of 18 U.S.C. §§ 5324 and 5313(a), which prohibit structuring transactions to evade federal reporting requirements. The government also filed a petition for issuance of a warrant of arrest in rem on probable cause shown, which the district court granted.

James Stey, John Stey, George Stey, and Rose Miller filed a joint claim to the funds. During discovery, in his answers to interrogatories, James Stey denied that he structured the transactions to evade the reporting requirements and instead gave the following explanations for his actions: avoid publicity to protect his family's and his own privacy; respect Miller's wishes by maintaining the same high level of privacy that she always maintained regarding the funds; and protect Miller's house and any additional money and property located therein. Stey claimed that he was unaware that the filing of CTRs was required by law, and that because of the professional advice he received, he always thought the transactions were legal.

Following discovery, claimants John and George Stey filed a motion for summary judgment with respect to their two-thirds of the funds. The government filed a response in opposition and cross-moved for summary judgment against claimants James, John, and George Stey. The fourth claimant, Rose Miller, had died.

On February 18, 1992, the district court granted John and George Stey's motion for summary judgment on the grounds that they established the "innocent owner" defense under 18 U.S.C. § 981(a)(2) with respect to their two-thirds of the funds. The district court granted the government's motion for summary judgment against James Stey, concluding that his one-third of the funds was subject to forfeiture. James Stey now appeals this order.

The district court had jurisdiction under 28 U.S.C. § 1355 (1988), and we have jurisdiction over the appeal under 28 U.S.C. § 1291 (1988). We exercise plenary review over an order granting summary judgment. Clement, 963 F.2d at 600. We apply the same test as the district court under Federal Rule of Civil Procedure 56(c): whether there remains a genuine issue of material fact, and if not, whether the movant is entitled to judgment as a matter of law. Id.

II.

Federal law requires that financial institutions file a currency transaction report with the Treasury Department for every transaction involving over $10,000. 31 U.S.C. § 5313(a) (1988); 31 C.F.R. § 103.22(a)(1) (1991). The government claims that appellant structured his bank deposits to evade these reporting requirements in violation of 31 U.S.C. § 5324(3), which provides:

No person shall for the purpose of evading the reporting requirements of section 5313(a) with respect to such transaction--

(3) structure or assist in structuring, or attempt to structure or assist in structuring, any transaction with one or more domestic financial institutions.

Claimant Stey appeals on the grounds that a triable issue of material fact exists as to whether he had the mens rea required by this statute. He argues that he could not have structured transactions "for the purpose of evading the reporting the requirements of [31 U.S.C.] section 5313(a)" because he was ignorant of those requirements. He allegedly thought that reporting of transactions was required only by a private bank policy, not by law. The government argues that it was entitled to judgment as a matter of law because appellant's structuring of deposits clearly indicates that he knew that some kind of report would have to be filed, and section 5324 does not require more specific knowledge.

If the government's position is correct, then one-third of the funds deposited by Stey are subject to civil forfeiture under 18 U.S.C. ...


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