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UNITED STATES v. GOLDBERG

May 21, 1984

UNITED STATES OF AMERICA
v.
DAVID GOLDBERG, KENNETH DREIFUS and JOSEPH YORIZZO, Defendants.



The opinion of the court was delivered by: KNAPP

MEMORANDUM & ORDER

WHITMAN KNAPP, D.J.

 This case involves the activity of three defendants who schemed to aid a third party in opening a foreign bank account without triggering any reporting requirements which would alert the Government to the transaction. The Government's principal contentions are set forth in count one of the indictment. It is there charged that defendants conspired to violate Title 31, United States Code, §§ 5313, 5314, 5315, and 5322(b). Defendants assert that, even if everything the Government says is true, their actions do not constitute the crime charged and move for dismissal of the indictment. Although defendants' actions might indicate a ready willingness to engage in criminal conduct, we find they do not constitute the conspiracy charged.

 BACKGROUND

 The Government contends -- and for present purposes we assume -- that the following occurred between October 19th and 21st, 1983. On October 19th Special Agent Marc Lotz of the Internal Revenue Service, posing as a potential bank customer, met with defendant David Goldberg, an officer of the United Mizrachi Bank ("UMB"), at its New York City office. He told Goldberg that he was a Persian rug dealer and that he wanted to open a personal checking account. Later in the conversation Lotz told Goldberg that he had hundreds of thousands of dollars in cash which he wished to move from safe deposit boxes to accounts in a foreign country, and that he wanted these transactions arranged so that no one would be aware of them. Goldberg assured Lotz that the bank could accommodate his present and future needs. With respect to the personal checking account, Goldberg suggested that the account be opened with only nine thousand dollars in cash, and that the remainder be deposited later. This, he explained, would enable the bank to avoid a regulation requiring it to file a currency transaction report informing the Internal Revenue Service of the deposit. Lotz agreed to follow the advice and filled out various forms with which to open the account. It is not clear whether the first nine thousand was in fact deposited, but it is clear that the scheme was never completed. When Lotz returned later in the day Goldberg informed him that the bank had decided not to accept the account.

 To deal with this refusal, Goldberg offered to take Lotz to another bank which would be able to accommodate his needs. Goldberg walked Lotz over to the North American Bank Ltd. ("NAB"), a representative branch of an Israeli bank, where they met with defendant Kenneth Dreifus, who was introduced as manager of the branch. Dreifus, Goldberg and Lotz discussed means by which Lotz could move cash out of the country without the Government being notified.The parties' main concern was to avoid triggering any banking regulations which would require a financial institution to file a report with the Internal Revenue Service. They settled on the following plan: Lotz would purchase a cashier's check which he would deposit with NAB to open a foreign account. As will be discussed below, such a transaction would not trigger a reporting requirement. He would purchase the cashier's check for a fee of $25,000 from defendant Joseph Yorizzo or Yorizzo's employer, Future Positions, a gasoline wholesaler. The check would be drawn on Future Position's account with UMB and made payable to NAB, thus eliminating any traceable connection between the check and Lotz.

 On October 20th Lotz and Goldberg spoke by telephone several times.In the first of these conversations Goldberg indicated that he believed that Lotz's money had been derived from the sale of narcotics. In a subsequent conversation Goldberg told Lotz that to justify the withdrawal of the $175,000 from Future Position's account, Future Positions was insisting on receiving from Lotz a document showing the purchase and payment of $175,000 in Persian rugs. Lotz agreed to this condition.

 On October 21st defendant Yorizzo, in the regular course of his employment as a messenger for Future Positions, collected $298,000 in cash from various customers and deposited it with Futures Position's account at UMB. UMB filed a currency transaction report accurately reflecting the source of these funds. Yorizzo apparently then withdrew $175,000 in the form of a cashier's check made payable to NAB.

 Later in the day, as arranged, Lotz went to NAB with the $200,000 in cash. There he met with Goldberg, Yorizzo and Dreifus and exchanged the cash for the $175,000 cashier's check. While Yorizzo counted the cash, Dreifus prepared documents to enable Lotz to open a foreign account. These papers consisted of two sets of forms, one containing Lotz's supposed [undercover] identity and one containing a different fictitious name. Dreifus assured Lotz that the form containing the supposedly real identity would be locked away. At this point Lotz's back-up team entered and arrested the three defendants. It is not suggested that any defendant had formed any plan to deposit any portion of this $200,000 in any bank account.

 DISCUSSION

 Count one of the indictment charges the defendants with conspiring to violate Title 31, United States Code, §§ 5313, 5314, 5315, and 5322(b). As § 5322(b) is merely an enhancement provision, *fn1" we will address alleged violations of only the proceeding sections.

 Section 5313 provides, in relevant part:

 (a) When a domestic financial institution is involved in a transaction for the payment, receipt, or transfer of United States coin or currency (or other monetary instruments the Secretary of the Treasury prescribes), in an amount, denomination, or amount and denomination, or under circumstances the Secretary prescribes by regulation, the institution and any other participant the Secretary may prescribe shall file a report on the transaction at the time and in the way the Secretary prescribes. A participant acting for another person shall make the report as the agent or bailee of the person and identify the person for whom the transaction is being made.

 The implementing regulation requires that each financial institution file a report with the Commissioner of Internal Revenue of every transaction involving currency of more than $10,000. 31 C.F.R. § 103.22. The rport must be made on Treasury form 4789 commonly called a "currency transaction report." The completed form indicates who conducted the transaction with the financial institution as well as for whom the transaction was completed. Thus, to violate § 5313 or the regulations promulgated thereunder, one must either be a financial institution or must cause a financial institution to fail to file a required report and the transaction in question must involve more than $10,000 in currency. *fn2"

 The Government's main contention is that each defendant himself is a "financial institution" and as such was required to file a currency transaction report on receipt of the $200,000 cash. We find absolutely no support for such a contention. The term "financial institution" is defined in 31 U.S.C. § 5312 and in 31 C.F.R. § 103.11. The statute simply lists twenty-one different types of individuals or organizations, none of which could by any stretch of the imagination be said to apply to any of the instant defendants. The Government in its brief tangentially refers to the term "private banker," the third of the listed classifications. It needs no argument to demonstrate that that term ...


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