Do Not Break Cash Deposits Into Smaller Deposits If You Have More Than $10,000: Atlanta Federal Court Upholds Conviction Against Doctor

The Federal Court of Appeals here in Atlanta yesterday upheld the convictions against a doctor who, among other things, engaged in cash transactions involving less than $10,000, in order to avoid having the bank file a “currency transaction report”, or “CTR.  The case is called United States v. Sperrazza, and can be read here.

We represent a fair number of medical professionals, but the facts of Dr. Sperazza’s case are a bit unusual.  Doctor S. and his partners operated an anesthesiology practice.   Apparently, whenever a patient paid by check (as opposed to by insurance or government program payment) the doctor would have his payment processors send the checks directly to Dr. Sperrazza.  Most of the time, the weekly bundles of checks totaled less than $10,000.  He would then cash groups of checks, always in amounts that totaled less than $9,000.  Over the course of several years the doctor apparently siphoned over $800,000 out of the anesthesiology practice in this manner.  He was then prosecuted for tax fraud, as well as the crime of “structuring” cash deposits to as to avoid the filing of a CTR.  A jury found him guilty, and he appealed his case to the Eleventh Circuit here in Atlanta. Among other things, he argued that the indictment itself was fatally flawed in the way this charging document described the “structuring” crime.

A couple of interesting things happened in the appeal.  First, the court had to figure out which version of the rules applied.  This was important in that for some unknown reason, the doctor’s legal team never challenged the indictment until after he was convicted.  The rule that talks about pretrial motions (Rule 12) was amended effective December 1, 2014, so the judges had to first figure out whether to use the new or the older version in order to decide how to handle this tardy challenge to the indictment itself.

Perhaps more importantly, Dr. Sperrazzas’s appeal led to a spirited discussion and split among the judges on an interesting question facing many business owners.  One of the newer judges on the Court, Judge Rosenbaum, dissented.  She noted that by affirming Dr. Sperrazza’s conviction the Court allowed federal prosecutors to bring a “structuring” case even if the person only starts out by having less than $10,000 in cash.  Judge Rosenbaum noted that the government’s position would permit a structuring case when “…a salaried person who earned $9,000 a week and deposited it in cash weekly, intending at least in part to evade the reporting requirement”.  The Judge went on to state that while “… most of us do not have the problem of trying to figure out what to do with our $9,000-per-week salary, but this same logic applies to any weekly salary payment under $10,000. And it does not end with weekly salary payments. As a result of today’s ruling, in this Circuit, no matter how small a sum of money a person may possess or otherwise enjoy a right to control—even if only a few dollars—he may find himself facing structuring charges if he goes to the bank often enough to create the appearance to the government of engaging in a pattern of financial transactions of $10,000 or less. I suppose that we will discover in the coming years how frequent a bank visitor one must be to imperil himself, but, in any case, it is clear today that [the structuring statute] has taken on a far broader reach than Congress ever intended.”

This case has important lessons.  Not the least of these messages is that lawyers need to scour indictments and raise challenges to indictments at the earliest feasible time.  Next, everyone needs to consult with an experienced practitioner if he or she is going to engage in a series of cash transactions in which currency is going into or out of a financial institution. Because tax cases are often the last resort when investigators want to go after a target, it is important to get an experienced federal criminal defense lawyer whenever one finds him or herself under investigation.