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United States v. Donahue

filed: September 6, 1989.

UNITED STATES OF AMERICA
v.
DONAHUE, JOSEPH P., APPELLANT



On Appeal from the United States District Court for the Middle District of Pennsylvania (D.C. Criminal Action No. 88-00074-02).

Sloviter and Greenberg, Circuit Judges, and Fisher, District Judge*fn*

Author: Greenberg

GREENBERG, Circuit Judge

On April 19, 1988, a three-count indictment was returned against appellant, Joseph Donahue, and his co-defendant Michael Coffey, in the Middle District of Pennsylvania. Count I charged both defendants, along with unindicted co-conspirator Frederick Luytjes, with conspiring in violation of 18 U.S.C. § 371*fn1 (1) to willfully and knowingly avoid filing Currency Transaction Reports (CTRs), relating to domestic currency transactions, as required by 31 U.S.C. §§ 5313 and 5322; (2) to willfully and knowingly avoid filing Currency and Monetary Instrument Reports (CMIRs), relating to international transfer of currency and monetary (negotiable) instruments, as required by 31 U.S.C. §§ 5316 and 5322; and (3) to defraud the United States of lawful revenue in violation of the foregoing currency transaction reporting laws, as well as 26 U.S.C. §§ 7201 and 7206. Count II charged Donahue and Coffey, as well as Luytjes, with a substantive and aiding and abetting violation, 18 U.S.C. § 2, of 31 U.S.C. §§ 5316 and 5322, by transporting, causing to be transported, or aiding and abetting the transportation of approximately $1,000,000 in currency from Lackawanna County, Pennsylvania, to the Grand Cayman Island, British West Indies, without filing the CMIRs.*fn2 Count III of the indictment charged Coffey alone with a substantive violation of 31 U.S.C. §§ 5313 and 5322.*fn3 On motion by the government the defendants' trials were severed and, on November 16, 1988, Donahue was convicted at a jury trial on Counts I and II. He appeals his conviction on both counts. For the reasons that follow we will affirm.

I.

Donahue's conviction stems from his participation in a money laundering scheme with Coffey, branch manager of United Penn Bank in Scranton, Pennsylvania, and Luytjes, a drug trafficker. Luytjes, who had entered into a plea agreement with the government and was its primary witness at Donahue's trial, testified that in 1984, he was tried in Florida for drug trafficking and ultimately was acquitted. During the course of his trial, however, he managed to earn between $10 and $13 million from drug smuggling, which he planned to stash away in the event he was convicted.*fn4 He and his agents deposited $10 million of these proceeds into accounts at United Penn Bank. Luytjes testified that he told Coffey, the officer with whom he dealt at United Penn, that the money had come from the sale of his business, Air America, and that he had written up a fictitious agreement to sell the company and represented that the buyer had paid him in cash.*fn5 He further testified that Coffey asked him if he would be interested in smuggling money to the Cayman Islands in order to avoid paying taxes on it, and that they agreed that Coffey would launder $4 million in exchange for a fee of $100,000. Pursuant to this agreement, Luytjes on various occasions delivered cash to Coffey. Although Coffey refused to disclose to Luytjes how he was transporting the money to the Cayman Islands, he introduced Luytjes to Donahue, suggesting that Luytjes might want to invest in Donahue's scuba diving business in the Cayman Islands. According to Luytjes, Donahue revealed to him that he was working with Coffey in moving Luytjes' money to the Cayman Islands.

Donahue and Coffey dealt with the cash Coffey received from Luytjes in a number of different ways. On one occasion, Coffey converted a million dollars in cash received from Luytjes into five cashier's checks of $200,000 each. Coffey filled out a CTR upon receipt of the cash, but never filed it. Coffey gave the cashier's checks to Donahue, who transported them to Grand Cayman Island. On other occasions Coffey gave Donahue cash, which Donahue took to various banks in Pennsylvania and New York for conversion into cashier's checks under $10,000 which he then transported to Grand Cayman Island.*fn6 Finally, from time to time Donahue would transport cash given to him by Coffey, apparently in $200,000 allotments, from Pennsylvania to Grand Cayman Island. Coffey did not file CTRs for the cash he gave to Donahue. Donahue never filed a CMIR when he left this country.

Upon arrival at Grand Cayman Island, Donahue would deposit the cash and cashier's checks into his own bank accounts, from which it was transferred into Luytjes' accounts there. Donahue told Luytjes that he was being paid $50,000 for his role in the money laundering scheme.

As part of his plea agreement with the government, Luytjes taped a number of his conversations with Donahue. Various statements made by Donahue on these tapes indicate his knowing participation in the above-described money laundering scheme.*fn7

II.

Donahue's primary challenge to his conviction on Count I of the indictment relates to the charge that he, Coffey and Luytjes conspired, in violation of 18 U.S.C. § 371, to willfully and knowingly avoid filing CTRs in violation of 31 U.S.C. §§ 5313 and 5322. The essence of his argument is that he was held criminally liable for "structuring" currency transactions, conduct which, during the relevant time period, was not unlawful.

31 U.S.C. § 5313(a) authorizes the Secretary of the Treasury to require both financial institutions and other participants in a currency transaction to file a report on the transaction. During the time period relevant to this case, the Secretary required only financial institutions to file reports on transactions of more than $10,000. 31 C.F.R. § 103.22(a) (1983). Nothing in the Act or regulations expressly prohibited a bank customer from "structuring" transactions to keep each transaction under $10,000, in order to avoid triggering, or in an attempt to conceal, the bank's obligation to file.

In United States v. Mastronardo, 849 F.2d 799 (3d Cir. 1988), we held that prior to the Act's 1986 amendment,*fn8 a customer could not be held criminally liable for structuring transactions to avoid the reporting requirements. The defendants in Mastronardo, all bank customers, had been convicted of participating in a conspiracy to defraud the United States in violation of 18 U.S.C. § 371, and participating in a scheme to conceal material facts from the United States in violation of 18 U.S.C. § 1001. We noted that "while this appeal does not involve a specific conviction for the act of 'structuring' transactions, both the § 1001 convictions and the § 371 conspiracy convictions rely upon the purported illegality of 'structuring' in order to impose criminal liability upon these defendants." Id. at 803-04. We went on to reverse these convictions, reasoning that the statute and regulations "did not give a reasonable bank customer fair notice that 'structuring' cash transactions to avoid the reporting requirement is criminal." Id. at 804.

Although Donahue maintains that our decision in Mastronardo mandates reversal of his conviction, we fully agree with the district court's contrary determination.*fn9 As the district court recognized, the theory of the government's case on the conspiracy charge was not that Donahue conspired to violate section 5313 by structuring transactions, but rather that he did so by agreeing with Coffey to willfully conceal United Penn's duty to file CTRs or by aiding and abetting that violation. When Luytjes delivered quantities of cash exceeding $10,000 to Coffey, Coffey should have but did not file reports of the transactions, and Donahue collaborated in Coffey's efforts to conceal that the cash had ever been received. Donahue was convicted, then, not in the capacity as a bank customer or for conduct involving structuring, but rather as a ...


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