The opinion of the court was delivered by: WILLIAM T. HART
MEMORANDUM OPINION AND ORDER
WILLIAM T. HART, UNITED STATES DISTRICT JUDGE
Before the court are a number of pretrial motions of the defendants.
They are discussed below.
Motions to Dismiss or Strike The Indictment
Defendants have moved to dismiss or strike various portions of the indictment. A sufficient indictment should state all the elements of the offense, inform the defendant of the charges so he or she may prepare a defense, and enable the defendant to plead the judgment as a bar to a later prosecution. United States v. Gironda, 758 F.2d 1201, 1209 (7th Cir.), cert. denied, 474 U.S. 1004 (1985).
Defendants argue Count One, which claims a RICO conspiracy in violation of 18 U.S.C. § 1962(d), "is impermissibly vague and duplicitous in that it fails to allege how the defendants were engaged in a single conspiracy." It is alleged that an enterprise (referred to as the "Keller Currency Exchanges") existed and that it consisted of 67 currency exchanges located in 13 states. Each exchange is owned in part by defendant Keller and three other defendants have partial interests in some of the exchanges. The defendants are owners, managers, and/or employees of various Keller Currency Exchanges. The alleged predicate acts are violations of certain laws governing currency transactions, see 31 U.S.C. §§ 5322(a), 5322(b), 5324, and violations of the Travel Act, 18 U.S.C. § 1952, which defines the currency violations as unlawful activity under the Travel Act. See also 18 U.S.C. §§ 1961(1)(B) & (E). The alleged currency law violations consisted of failing to file required currency transaction reports ("CTR") for cash transactions with an individual exceeding $ 10,000 in a single day. See 31 U.S.C. § 5313; 31 C.F.R. §§ 103.22(a)(1), 103.26(a)(1). These transactions were with two undercover agents using the aliases Dick Jones and Terrance Jordan.
Cash transactions exceeding $ 10,000 were allegedly divided into several smaller transactions and money orders were sold that were not consecutive in number and with different dates. Thirty currency transactions of over $ 10,000 each resulted in the issuance of 1214 money orders, each under $ 10,000 and totalling about two million dollars. The money orders were issued from 40 of the Keller Currency Exchanges. Cash taken to one currency exchange sometimes resulted in the issuance of money orders from one or more other exchanges. No defendant is alleged to be directly involved in more than one transaction except Weisbaum who is alleged to be involved in two and Keller who is alleged to be involved in most of the 30. It is further alleged that Keller agreed to make all the exchanges available to the agents and that he charged fees in excess of the normal charge in exchange for not filing CTR's. It is also alleged that defendants "agreed to conduct the enterprise through a pattern of racketeering" which consisted of the above described structuring of transactions and failure to file the CTR's. Furthermore, it is alleged that defendants Keller, Carl Franco, Brotman, Singer, Urwin, and Sonshine provided false and misleading information to government agents regarding the currency transactions with Jones and Jordan in order to cover up acts committed pursuant to the conspiracy.
Defendants contend this is a classic example of trying to tie together into a single conspiracy the various "spokes" that surround a single "hub" (Keller) even though there is no "rim" forming the "spokes" into a "wheel." See Kotteakos v. United States, 328 U.S. 750, 755, 90 L. Ed. 1557, 66 S. Ct. 1239 (1946). As with most of the cases cited by the parties, Kotteakos involved the question of whether convictions were improper because, although a single conspiracy was alleged in the indictment, the proof at trial was of multiple and separate conspiracies. As regards the issue now before this court, the question is whether a single conspiracy is alleged in Count One, not whether the government's proof at trial will only show multiple conspiracies. See United States v. Antonucci, 663 F. Supp. 245, 246 (N.D. Ill. 1987). The indictment in this case alleges all defendants agreed to work together, not simply that each of the other defendants agreed to perform certain activity with Keller. This allegation is further supported by allegations that most of the alleged transactions involved issuing money orders from more than one currency exchange, not just the one a particular defendant worked at. A single conspiracy is alleged in Count One. Whether the evidence at trial will prove a single conspiracy is a separate question that is not addressed.
Defendants seek to strike the allegations in paragraphs 13(A) through 13(E) of Count One regarding alleged false and misleading statements on the ground that they refer to "overt acts and statements outside the scope of and not 'in furtherance' of the conspiracy." It is alleged in P 5 of the indictment that defendants conspired to "disguise and conceal large currency transactions over $ 10,000." Denying that they engaged in transactions exceeding $ 10,000, denying that they knew the undercover agents, and claiming that necessary reports were filed could contribute to disguising and concealing the large currency transactions. For example, telling investigators that Jones had only made six or seven transactions and that Jones had not made any transactions in the past six months could mislead investigators into limiting their search of exchange records and thereby help to conceal the large currency transactions. Claiming that necessary CTR's had been filed could lead investigators to discontinue the investigation at that exchange. Most of P 13 will not be stricken. Certain allegations, however, whether or not admissible as evidence, are not acts that could have furthered the alleged conspiratorial purpose of concealment by providing false information. Paragraphs 13(A) (vii),
13(A) (viii), and 13(B)
of Count One shall be stricken from the indictment.
Defendants also argue the paragraphs should be stricken because of the manner in which the statements were obtained, i.e., without informing defendants Jones and Jordan were undercover agents. Defendants cite no authority in support of this proposition. Absent a showing that the statements should be suppressed because involuntary or otherwise improperly obtained, the paragraphs will not be stricken based upon how the information was obtained.
The indictment sufficiently alleges the elements of a RICO claim and defendants have sufficient information in order to prepare a defense. There is no basis for dismissing Counts One and Two on the ground the RICO enterprise and its relationship to the predicate acts are not adequately alleged. There are also adequate allegations of a pattern of racketeering activity. Furthermore, the RICO counts will not be dismissed on the ground that any portion of the RICO statute is unconstitutionally vague.
Defendants argue that most of the currency transaction counts must be dismissed because the currency transactions involved government money being used by the undercover agents. Section 5313 of Title 31 provides that the Secretary of the Treasury shall prescribe regulations as to what currency transactions must be reported. Those regulations exempt "deposits, or withdrawals, exchanges of currency or other payments and transfers by local or state governments, or the United States or any of its agencies or instrumentalities." 31 C.F.R. § 103.22(b)(2)(iii). A number of courts have held that exemption applies only to transactions by government agencies in their normal course of government business, not transactions by undercover government agents. United States v. Hernando Ospina, 798 F.2d 1570, 1579-80 (11th Cir. 1986); United States v. Richter, 610 F. Supp. 480, 490-91 (N.D. Ill. 1985), affirmed sub nom. by unpublished orders, United States v. Mangovski, 785 F.2d 312 (7th Cir.), & United States v. Konstantinov, 793 F.2d 1296 (7th Cir.), cert. denied, 479 U.S. 855, 93 L. Ed. 2d 124, 107 S. Ct. 191 (1986); United States v. Bucey, 691 F. Supp. 1077, 1086-87 (N.D. Ill. 1988), aff'd in part rev'd in part, 876 F.2d 1297 (7th Cir.), cert. denied, 110 S. Ct. 565 (1989). Defendants cite no contrary cases. They argue, however, that, in order for there to be a violation, Congress must expressly state that transactions by undercover agents can violate the statute. They cite as an example 18 U.S.C. § 1956(a)(3). But an element of the offense under that statute is that the money involved in the transaction represent the proceeds of unlawful activity. Money of undercover agents would not satisfy that requirement absent an exception. As regards the statute defendants are charged under, however, the question is whether the Secretary has defined the transactions involved in this case as ones for which CTR's must be filed, not whether Congress has stated transactions of undercover agents are covered by the statute.
accord with the above-cited cases, defendants were required to file CTR's for the transactions alleged in the indictment.
Defendants also argue that the reporting requirements of the statute violate their Fifth Amendment protection from self-incrimination. The reporting requirements do not violate the Fifth Amendment. Bucey, 691 F. Supp. at 1085; Richter, 610 F. Supp. at 491-92.
Defendants move to strike from certain counts the allegation that the currency violations were committed while violating RICO, 18 U.S.C. § 1962(d). A willful violation of the currency reporting laws or regulations is a felony punishable by a fine of up to $ 250,000 and up to five years' imprisonment. See 31 U.S.C. § 5322(a). A willful violation of the currency reporting laws or regulations "while violating another law of the United States" is a felony punishable by a fine of up to $ 500,000 and up to ten years' imprisonment. See 31 U.S.C. § 5322(b). Defendants argue a RICO violation with currency reporting violations as the predicate acts does not constitute "violating another law" under § 5322(b).
Section 5322(b) was originally enacted in 1970 as § 210 of the Currency and Foreign Transactions Reporting Act and was codified as 31 U.S.C. § 1059. The statute originally referred to currency violations "committed in furtherance of the commission of any other violation of federal law." The legislative history does not clarify what is meant by "any other violation of federal law," but the purpose of the law was stated as follows: "It should be noted that serious violations under this title may involve very large sums of money, and fines of as much as $ 10,000 or more might be shrugged off as a mere cost of doing business. To have any real deterrent effect, the potential fine must be large enough to have some real economic impact on potential violators." H.R. Rep. No. 975, 91st Cong., 2d Sess., reprinted in 1970 U.S. Code Cong. & Admin. News 4394, 4406. In 1982, the statute was recodified to its present numbering. Some language changes were made to be consistent with the new statute, but no substantive change was intended. See H.R. Rep. No. 651, 97th Cong., 2d Sess. 177-78, reprinted in 1982 U.S. Code Cong. & Admin. News 1895, 2071-72. In 1984, § 5322(a) was amended to change the maximum penalties from the former amounts of $ 1,000 and one year's imprisonment to the present level. The House stated: "While the full scope of these provisions is broad, it is important to recognize that they are primarily directed at persons who make a lucrative career in the illicit drug trade and organized crime. As such, the penalties are far too low to deter and punish such activity. Indeed the modest penalties now applicable may simply be written off as a basic cost of doing business." See Sen. Rep. No. 1030, 98th Cong., 2d Sess. 302, reprinted in 1984 U.S. Code Cong. & Admin. News 3182, 3482. At the same time, RICO was amended to make currency reporting violations predicate RICO acts. That amendment was "made in recognition that major currency transaction violations are inherently a part of all major drug racketeering schemes and organized crime money laundering activities." Id. at 303, Admin. News at 3483.
The reported cases as to what is meant by "another law" as used in § 5322(b) do not involve any issues similar to the question now before the court. See United States v. Benson, 640 F.2d 136, 140 (8th Cir. 1981) (no requirement that primary purpose of currency violation be the violation of another law); United States v. Thompson, 603 F.2d 1200 (5th Cir. 1979) (sufficient evidence that currency violation was committed in furtherance of a drug violation); Bucey, 691 F. Supp. at 1082-83 (violation of 18 U.S.C. § 1001 is a violation of another law).
As the government argues, it is clear that a person may be convicted of, and consecutive sentences imposed for, both a RICO conspiracy and the predicate offenses. United States v. Aleman, 609 F.2d 298, 306-07 (7th Cir. 1979), cert. denied, 445 U.S. 946, 63 L. Ed. 2d 780, 100 S. Ct. 1345 (1980); United States v. Hawkins, 658 F.2d 279, 286-88 (5th Cir. 1981); United States v. Scotto, 641 F.2d 47, 56 (2d Cir. 1980), cert. denied, 452 U.S. 961, 69 L. Ed. 2d 971, 101 S. Ct. 3109 (1981); United States v. Boylan, 620 F.2d 359, 361 (2d Cir.), cert. denied, 449 U.S. 883 (1980). Those decisions, however, are based on the legislative purpose of RICO. The question here is whether RICO should be considered the violation of another law as that term is used in § 5322(b). The Seventh Circuit has stated that, "The provisions of section 1962 do not create 'new crimes' but serve as the prerequisites for the invocation of increased sanctions for conduct which is proscribed elsewhere in both federal and state criminal codes." United States v. Neapolitan, 791 F.2d 489, 495 (7th Cir.), cert. denied, 479 U.S. 939, 940 (1986).
Construing RICO as another law under § 5322(b) would result in a doubly enhanced penalty; proof of a RICO pattern and enterprise would turn a § 5322(a) violation into both a § 5322(b) violation and a RICO violation. Double enhancements by the same elements are not favored. See, e.g., Busic v. United States, 446 U.S. 398, 64 L. Ed. 2d 381, 100 S. Ct. 1747 (1980); Simpson v. United States, 435 U.S. 6, 55 L. Ed. 2d 70, 98 S. Ct. 909 (1978); People v. Haron, 85 Ill. 2d 261, 422 N.E.2d 627, 52 Ill. Dec. 625 (1981). Also where the statutory language and legislative history are unclear, the rule of lenity should be applied in construing the statute. Busic, 446 U.S. at 406; Simpson, 435 U.S. at 14. As recited above, the legislative history in this case is not particularly helpful. To the extent it indicates anything, it indicates that the primary purpose of the § 5322(b) enhancement was to increase the punishment in cases involving drug offenses also. The challenged counts do not allege defendants were involved in drug crimes. Another portion of the statute seems to indicate § 5322(b) enhancement is not appropriate in the present circumstances. Another means of satisfying § 5322(b) is by showing the currency violation was "part of a pattern of any illegal activity involving more than $ 100,000 in a 12-month period." If a RICO violation based on currency violations constitutes violation of "another law" and such offense involved amounts of less than $ 100,000, then a pattern of illegal activity of less than $ 100,000 could still enhance the statute. This would seem to be inconsistent with the intent of the statute. Still proof of a RICO violation involves proof of elements in addition to those necessary for a § 5322(a) violation. In addition to a violation of currency reporting laws, the existence of an enterprise and a pattern of activity must be shown.
As the government argues, § 5322(b) is essentially a sentencing enhancement. Therefore it is unnecessary to decide this issue at the present time. This aspect of defendant's motion to dismiss is denied without prejudice to raising it after trial if any defendant is found guilty of a § 5322 violation.
Defendants also argue that each defendant can only be charged with one count of violating § 5322(b) based on a pattern involving transactions in excess of $ 100,000. The law is to the contrary. See Bucey, 691 F. Supp. at 1083-84. Each transaction that is part of the pattern may be charged as a § 5322(b) offense.
Keller argues Count 61, which alleges a violation of 18 U.S.C. § 1001, should be stricken because materiality is not alleged and because of the "exculpatory no" doctrine. Defendant argues materiality cannot be satisfied because the government already knew the answer to all the questions to which Keller allegedly provided false answers and therefore he could not have misled the government agents.
Whether a statement is material is a question of law for the court, not a question for the jury. United States v. Brantley, 786 F.2d 1322, 1327 (7th Cir.), cert. denied, 477 U.S. 908, 91 L. Ed. 2d 572, 106 S. Ct. 3284 (1986). "The test for materiality is whether the false statement has a tendency to influence or is capable of influencing a federal agency." Brantley, 786 F.2d at 1326 (quoting United States v. Brack, 747 F.2d 1142, 1147 (7th Cir. 1984), cert. denied, 469 U.S. 1216, 84 L. Ed. 2d 339, 105 S. Ct. 1193 (1985)). It is clear that the government employee does not have to be actually deceived. See United States v. Di Fonzo, 603 F.2d 1260, 1266 (7th Cir. 1979), cert. denied, 444 U.S. 1018, 62 L. Ed. 2d 648, 100 S. Ct. 672 (1980) (quoting United States v. Beer, 518 F.2d 168, 172 (11th Cir. 1975)); United States v. Chandler, 752 F.2d 1148, 1151 (6th Cir. 1985); United States v. Fern, 696 F.2d 1269, 1273 (11th Cir. 1983) (quoting United States v. Lichenstein, 610 F.2d 1272, 1278 (5th Cir.), cert. denied, 447 U.S. 907 (1980)).
Two circuits have held that the materiality requirement can be satisfied even when the government employee already knew the answers to the questions that produced false responses from the defendant. In United States v. ...