I cut and paste much of the opinion because, I think, I could not improve on it. After that I offer some comments.
Nguyen, the owner of a wholesale salon equipment business, was charged with aiding and assisting in the preparation of a false and fraudulent corporate tax return. He pleaded guilty pursuant to a written plea agreement and entered into a settlement agreement with the Government, wherein he agreed to forfeit $1,100,000 in seized funds. In preparing the presentence report ("PSR"), the probation officer determined that Nguyen had a total offense level of 13 and a criminal history category of I, resulting in an advisory Guidelines range of 12-18 months. However, the probation officer also noted that Nguyen appeared to be involved in unlawful structuring activities n1: IRS agents found over $4,900,000 in structured deposits made by third parties to bank accounts registered to Nguyen or his family members. Moreover, during a raid of Nguyen's business, IRS investigators found $3,215,703 in currency- most of it separated into $10,000 bundles-whose source could not be determined. In paragraph 87 of the PSR, the probation officer suggested the structuring activities could warrant an upward departure under U.S.S.G. § 4A1.3 for an underrepresented criminal history or under U.S.S.G. § 5K2.21 for uncharged conduct.
n1 A person "structures" a transaction if he, acting alone or in conjunction with others, "conducts or attempts to conduct one or more transactions in currency, in any amount, at one or more financial institutions, on one or more days, in any manner, for the purpose of evading . . . reporting requirements." 31 C.F.R. § 1010.100(xx) . Section 5324 makes it a crime to "structure or assist in structuring, or attempt to structure or assist in structuring," a transaction to avoid § 5313's requirement that financial institutions file a currency transaction report ("CTR") with the government for all cash transactions exceeding $10,000. 31 U.S.C. §§ 5313(a); 5324(a)(3); United States v. Rodriguez, 132 F.3d 208, 212 (5th Cir. 1997).
Nguyen objected to the suggestion that an upward departure may be appropriate, and the Government agreed that there was insufficient evidence to prove that he had structured or directed the structuring of deposits into his bank accounts. The district court, however, entered an order tentatively concluding that Nguyen's objections to the upward departure were without merit. The district court suggested that it would reject the plea agreement, including the forfeiture settlement, and that Nguyen should receive a sentence above the advisory Guidelines range, given the probability that he knew of the structured deposits being made into his accounts and the Government's failure to prosecute him for that crime.
At the first sentencing hearing, the district court conducted an evidentiary hearing to determine whether Nguyen had participated in illegal structuring activities. The district court questioned three witnesses. Oanh Nguyen, Defendant-Appellant's wife, testified that the new business bank accounts Nguyen had opened at Chase Bank ("Chase") and Wells Fargo were not an attempt to evade the law but rather a result of his decision to restructure the company after their son decided to leave the business. IRS Special Agent Alan Hampton and IRS Task Force Officer Alison Turner then testified about the investigation into Nguyen's financial activities. Afterwards, the district court accepted the plea agreement but expressed its belief that there was sufficient evidence to conclude that structuring activities occurred, that Nguyen was aware of the illegal transactions, and that he aided and abetted the deposits. The Government, while agreeing there was enough evidence to show that the funds were structured, expressed doubt that there was sufficient proof by a preponderance of the evidence to show that Nguyen himself assisted in the structuring.
At the second sentencing hearing, the district court sustained Nguyen's objection to an upward departure as detailed in paragraph 87 of the PSR. The district court also concluded that Nguyen was not entitled to a reduction for acceptance of responsibility, which resulted in a newly applicable Guidelines range of 21-27 months. Taking into account the 18 U.S.C. § 3553(a) factors, the district court then sentenced Nguyen to 36 months in prison, to be followed by a one-year term of supervised release and payment of a $250,000 fine. The district court acknowledged the Government's doubt as to whether Nguyen participated in structuring activities, but explained that it had reached a different conclusion based on its examination of the evidence and provided a lengthy explanation as to why "it [was] more likely than not that [Nguyen] committed the offense of structuring." In support of its decision, the district court cited, inter alia, Nguyen's dishonesty in underreporting his taxable income for multiple years; the connection between the investigation into his structuring activities and the discovery of tax fraud; and that Nguyen was able to retain "millions of dollars" that could have been subject to forfeiture had the Government pursued forfeiture proceedings. The district court rejected Ms. Nguyen's explanation for why the new bank accounts were opened and noted that Defendant-Appellant gave conflicting explanations to IRS investigators as to whether funds seized from his business were bank withdrawals. In its thirteen-page Statement of Reasons ("SOR"), the district court reiterated these conclusions and detailed the factors that influenced it to impose an above-Guidelines sentence. Nguyen timely appealed.
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Nguyen contends that the district court committed procedural error because its determination that he participated in financial structuring activities was not supported by sufficient evidence and thus could not form the basis for an upward variance. We disagree.
Generally, structuring requires proof of three elements: that (1) the defendant knew of the financial institution's legal obligation to report transactions in excess of $10,000; (2) the defendant knowingly structured (or attempted to structure, or assisted in structuring) a currency transaction; and (3) the purpose of the structured transaction was to evade that reporting obligation. Fifth Circuit Pattern Jury Instructions (Criminal Cases) § 2.104 (2015) [hereinafter Jury Instructions § 2.104]. Although the Government must prove each of these elements beyond a reasonable doubt to establish the defendant's guilt at trial, for sentencing purposes, the district court needed only to find that the elements were satisfied by a preponderance of the evidence. See Mares, 402 F.3d at 519 ("The sentencing judge is entitled to find by a preponderance of the evidence . . . all facts relevant to the determination of a non-Guidelines sentence."). Additionally, direct evidence is not required; rather, "the sentencing court is permitted to make common-sense inferences from the circumstantial evidence." United States v. Caldwell, 448 F.3d 287, 292 (5th Cir. 2006).
Given these standards, the district court did not err in inferring that Nguyen participated in currency structuring. First, the district court's conclusion that "it is more likely than not that [Nguyen] knew of the banks' reporting obligations" was not clearly erroneous. See Jury Instructions § 2.104. In support of its conclusion, the district court pointed to a June 7, 2012 letter written by Chase to Nguyen that stated in relevant part:
All banks operating in the United States are required by law to file a Currency Transaction Report (CTR) when a customer's cash transaction(s) exceed $10,000 on any business day . . . . [W]e have noted through a review of your account(s) a pattern of cash transactions that potentially give the appearance of an attempt to evade the CTR filing requirement. Attempting to evade the CTR filing requirement may be viewed as structuring and is a violation of the Bank Secrecy Act.
Therefore, Chase feels that it would be in our mutual best interest for you to change your transaction patterns. If your pattern of cash activity does not change promptly, your account, along with any related accounts, may be at risk for closure.
Although Nguyen suggests there is an absence of evidence showing that Chase actually mailed the letter or that he received it, we agree with the district court's conclusion that Nguyen received a letter that was addressed to him-particularly given that he does not explicitly assert that he never received the letter nor does he explain why he would not have received it. Moreover, Nguyen's actions following the letter's issue date support a conclusion that he received it: five days later, he filed a business name change with the Texas Secretary of State; approximately two weeks later, he opened a new account at Chase under the new business name; shortly thereafter, currency deposits into the Chase account referenced in the warning letter became infrequent while frequent deposits appeared in the newly opened account; and less than one week after that, one of Nguyen's business customers, Anh Le, changed the pattern of his currency deposits into Nguyen's accounts. The district court additionally noted that "[a]ny businessman of the years of experience [Nguyen] had in running his own business, and with the number of bank accounts he had and the number of currency transactions conducted in those accounts, would have known of the [banks' reporting] requirement." We are convinced that the Chase letter and Nguyen's resultant actions, combined with Nguyen's extensive business experience, support the district court's conclusion that "it is more likely than not that [Nguyen] knew of the banks' reporting obligations." n3
n3 Nguyen disputes the district court's reliance on cases stating that the business background of a defendant, when combined with evidence of structuring itself, is sufficient to create an inference that the defendant knew of the bank's currency reporting requirement. See United States v. Packer, No. 99-40527, 2000 WL 1568150, at *1-2 (5th Cir. Sept. 11, 2000); Rodriguez, 132 F.3d at 212-13. Nguyen argues that Packer and Rodriguez are distinguishable from the instant case because they involved defendants who had themselves engaged in structuring. We do not read those cases as creating a requirement that the defendant himself must have structured the funds. However, even assuming arguendo that Nguyen's interpretation is correct, his business background was only one factor the district court considered in concluding that he probably knew of the banks' reporting obligation. Thus, we find no error in the district court's analysis.
Next, the district court determined that "it is more likely than not" that Nguyen "was intentionally and knowingly participating in the illegal currency-structuring activities." See Jury Instructions § 2.104. For example, the district court referenced Nguyen's actions after the date of the Chase letter, as detailed above. The district court also explained that it was unpersuaded by Ms. Nguyen's explanation for why her husband opened the new bank accounts, concluding that she lacked sufficient knowledge of his business activities to be able to give informed answers "and that she was stretching to help her husband."4
n4 Likewise, the district court did not accept as credible Mr. Le's explanations for the structuring activity in Nguyen's bank accounts. The district court ultimately determined that Mr. Le's awareness that he too was at risk of prosecution for structuring activities caused him to be cautious in his comments to investigators.
Furthermore, other evidence before the district court further supports the conclusion that Nguyen knowingly and intentionally participated in structuring activities. For example, IRS investigators found at his place of business $3,215,703 in currency, most of which was separated into $10,000 bundles. Nguyen stated that he did not deposit the money in the bank "because their fees are too high and he does not trust banks." Nguyen also provided conflicting explanations as to the source of the currency. He initially told the officers that it came from his customers' cash payments and from bank withdrawals-which he made in increments of $5,000 or $10,000, and never "over $10,000 at a time." However, when officers asked why he never withdrew more than $10,000, Nguyen "hesitated and then stated that the U.S. currency [was] from only sales and the casino." Nguyen's counsel later told the Government that "the cash found in the business was from gambling proceeds." Additionally, Nguyen's bank records show that multiple $9,000 deposits were made into his various accounts either on the same day or in close proximity to one another, and because these deposits were round numbers-in contrast to the "legitimate deposits," all of which were less than $9,000 and non-round numbers-the structured deposits likely would have stood out to Nguyen on his bank statements.
This evidence, taken together, reasonably supports the district court's determination that Nguyen knowingly and intentionally participated in structuring activities. See Caldwell, 448 F.3d at 292.JAT Comments:
1. The sentencing judge was Judge McBryde. Yes, the legendary John McBryde. For flavor (and those who have time), see Christine Biederman, Temper, temper (Dallas Observer 10/2/97), here (although it is an old article and he may have tempered his temper). I never represented a case before Judge McBryde but was designated an expert witness for a trial that ultimately settled so I did not have to go before him. But, what I remember experienced counsel telling me was that he is extremely bright, quick and doesn't suffer fools lightly. (I think they particularly wanted me to take the latter to heart!)
2. Note in this case that the Government took an odd approach to departure and variance above the Guidelines range. The Government said, in effect, that it did not believe it could prove Nguyen's structuring by a preponderance of the evidence -- the standard required for it to be considered for sentencing. Yet, the Government had no problem forfeiting a significant portion of the funds it had seized. Here is the portion of the plea agreement on the forfeiture:
8. Forfeiture of property: Desiring to resolve all civil forfeiture matters related to this criminal case (including the government's seizure of approximately $3,525,883.95 in funds and U.S. currency from Nguyen's bank accounts and business in March 2013 and May 2013 that resulted in an administrative forfeiture proceeding by IRS-CI) in a global settlement, Nguyen agrees to forfeit $1,100,000 of the seized property (the property) to the government, agreeing that the property is subject to forfeiture pursuant to 31 U.S.C. § 5317(c). Nguyen agrees to no longer contest the administrative forfeiture or any subsequent judicial forfeiture proceeding against the property and consents to the entry of a final judgment of forfeiture against the funds in that case. Nguyen agrees to provide truthful information and evidence necessary for the government to effect the forfeiture of the funds; and agrees to take all steps requested by the government at any time to pass clear title to the property, including the execution of any and all documents necessary to transfer title or any other interest he holds in the property. Nguyen agrees to hold the government, its officers, agents, and employees harmless from any claims whatsoever in connection with the seizure or forfeiture of the property.3. It is not clear why the Court rejected the Probation Office recommendation for a departure under the Guidelines. I speculate that the variance route gets to the same place and, since it is based on the sentencing judge's discretion, could avoid any technical problems with the departure route. As I said, Judge McBryde is very smart and knows how to make a sentence likely to stand up on appeal when outside the Guidelines range.
4. The plea agreement on restitution is oddly worded. See par. 7 of the plea agreement. Apparently, the calculation of the restitution remained for sentencing. Normally restitution is not allowed in tax cases, but may be imposed if the defendant agrees to restitution. 18 USC 3663(a)(3), here. Although the restitution amount is not quantified in the plea agreement, the parties' expectation was that it would be quantified and agreed to prior to or at sentencing. But, apparently, the in futuro agreement by the time of sentencing did not include the civil fraud penalty (perhaps because the civil fraud penalty is not restitution per se). So, Nguyen agreed to sign the necessary forms for the immediate assessment. The agreement references only Form 8821, Tax Authorization, which is not the form for assessment. I presume that the form he would sign to permit immediate assessment would be the Form 870, Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment.