The Case of Laura Struckman Smurfing; Questionable Government Conduct By:
Bill E. Branscum
In a prior commentary, I wrote, "Anyone
can convict the guilty, but it takes real talent to convict an innocent
man." Perhaps I should have said, "person."
Laura Struckman, the former wife of David Struckman,
was prosecuted by the Internal Revenue Service for activities in
which she was engaged related to her involvement with the Institute
of Global Prosperity, a defunct entity that I have been very critical
of on this site. During the course of my involvement in a related
case, I reviewed the documentation related to the prosecuttion of
This commentary is related to issues I have with either
the law, or the way it was applied in this case - or perhaps both.
I should probably mention that I do not know Ms. Struckman,
I have never discussed this matter (or anything else) with her,
or anyone representing her, and I have never been retained by, or
for, Ms. Struckman. I became familiar with this case while working
on a related case; all I know about this case is the information
that comes from the readily available court documents, specifically,
of the Proceedings, the Verdict,
Order, and the Docket.
I would encourage those of you who are involved in
the investigation of financial cases to read the above referenced
documents, especially the Indictment, and the Transcript of the
Proceedings, and see what you think, before reading my comments.
Laura Struckman was charged with violating Title 18,
United States Code, Section 371 (Conspiracy Statute) in that they
alleged that she conspired with an unnamed co-conspirator to violate
Title 31, United States Code, Section 5324(a)(3). The language of
the indictment says that she knowingly, deliberately and unlawfully
conspired to violate this code section by structuring financial
transactions to avoid currency transaction reporting requirements
(by making withdrawals less than $10K).
One unusual aspect of this case is the fact that Laura
Struckman was not represented by an attorney. According to the Transcript,
she demanded that some person, whose name was not specified, be
permitted to assist her in her defense. She was denied her chosen
representative because that person was not an attorney. Consequently,
Laura Struckman refused the assistance of a government appointee,
and declined to defend herself.
The evidence presented at trial clearly demonstrated
that when Laura Struckman attempted to make a cash withdrawal in
excess of $10,000, she expressed concerns related to the completion
of the Currency Transaction Report that the bank was going to fill
out. Ms. Struckman, like most people involved with IGP, does not
trust our government, she believes our government to be corrupt,
and she resents governmental intrusion into her life. Ms. Struckman
asked the bank representative if she could avoid this by withdrawing
less than $10,000. From that point forward, she regularly and routinely
withdrew cash in amounts less than, but close to, $10,000 -- on
an almost daily basis.
This is called "structuring," or "smurfing."
For those of you whose practices do not include the investigation
of financial crimes, some explanation may be in order.
Structuring financial transactions (smurfing) to avoid reporting
requirements is generally associated with Money Laundering, cognizable
under Title 18 USC 1956, because the funds involved are generally
the proceeds of certain explicitly enumerated crimes, referred to
as "Specified Unlawful Activities" (SUA), or the funds
are believed to be the proceeds of SUA by the person engaged in
the transaction, or the smurfing was undertaken for the purpose
of carrying on some SUA.
Note that Laura Struckman was not charged with that, or anything
She was charged with conspiring to violate Title 31, United States
Code, Section 5324(a)(3), which is the fall back to the above referenced
Money Laundering statute, in that it covers smurfing where there
is no SUA. Since there is no SUA implication, Title 31, United States
Code, Section 5324(a)(3) effectively criminalizes conduct that would
otherwise appear to be a perfectly legal activity -- to put this
another way, let me pose this as a question:
"In an ostensibly free Country, if I choose to
deposit (or withdraw) my perfectly legally obtained money, into
(or out of) my perfectly legal bank account, in amounts less ten
thousand dollars, in order to keep from creating red flags, just
because I don't want my government minding my business, is there
some reason why I cannot do that, and, if so, how would I know that
The answer is, "Because Title 31, United States
Code Section 5324(a)(3) says so." The relevant
code section is as follows:
Title 31, United States Code, § 5324. Structuring
transactions to evade reporting requirement prohibited
(a) Domestic coin and currency transactions involving
financial institutions. No person shall, for the purpose of evading
the reporting requirements of section 5313(a) or 5325 [31 USCS
§ 5313(a) or 5325] or any regulation prescribed under any
such section, the reporting or recordkeeping requirements imposed
by any order issued under section 5326 [31 USCS § 5326],
or the recordkeeping requirements imposed by any regulation prescribed
under section 21 of the Federal Deposit Insurance Act [12 USCS
§ 1829b] or section 123 of Public Law 91-508 [12 USCS §
(3) structure or assist in structuring, or attempt
to structure or assist in structuring, any transaction with
one or more domestic financial institutions.
So, there it is. It is most definitely against the law to structure
cash transactions to avoid the filing of Currency Transaction Reports,
but assuming the most basic understanding of our criminal justice
system, one might very well reasonably ask, where is the criminal
intent? Aside from the very few strict liability offenses, our justice
system requires that a criminal conviction be predicated on a bad
act, and a culpable mental state.
I understand that the criminal intent component is met when it is proved that the person intended to do the act, whether or not the defendant knew that the act iself violated the law - ignorance of the law is not an excuse, but Title 31, USC Section 5324(a)(3) criminalizes conduct based entirely upon the defendant's subjective intent.
Consider the businessman who operates a successful, legitimate
business where he is often paid in cash, and let's say for the sake
of argument that his cash receipts average $15,000 a week. If he
makes one trip to the bank each week, the bank will fill out a Currency
Transaction Report with each deposit, but if he elects to make two
deposits a week, the bank never will.
Suppose this perfectly honest
businessman fears that the CTRs might trigger an audit, so he deliberately
schedules his deposits to avoid that.
That would be a violation of Title 31, USC Section 5324(a)(3).
On the other hand, consider the same case where the businessman begins thinking about what he is doing and concludes that it is unreasonably dangerous to be storing, and transporting that much cash. Consequently, he publishes a memo to that effect to all his employees explaining the risk, never concerned with or worrying about Currency Transaction Reports - that is perfectly legal.
That troubles me, and I think it should be troubling to any of
us that investigate financial crime. "How can the
government put people in jail for doing something that would seem
to be perfectly legal, to an honest account holder who intended
to commit no crime, and may indeed have committed no crime, by endeavoring to prove what was in his head at the time?"
A very reasonable question indeed. The U.S. Supreme Court addressed
this issue in Ratzlaf v. United States,
510 U.S. 135, 126 L. Ed. 2d 615, 114 S. Ct. 655 (1994), a case which
happens to have come from the Ninth Circuit. For a number of well
articulated reasons, the Court essentially held that ignorance of
the law could be an excuse when the offense at issue was malum
prohibitum as opposed to mala in se.
In other words, the Court recognized the undeniable distinction
between behaviors that are obviously bad, and those behaviors that
are only bad because some obscure statute says they are prohibited,
and applied common sense. The Court reversed the conviction because
there was no evidence that Ratzlaf knew that structuring transactions
to avoid currency reporting requirements was against the law.
Unfortunately, the Court did not leave it at that, they supported
their position by citing to the fact that the criminal penalty for
violating 31 USC Section 5324(a)(3) is defined by Section 5322,
which said, in pertinent part:
"A person willfully violating this
subchapter or a regulation prescribed under this subchapter
shall be fined not more than $250,000, or imprisoned for not
more than five years, or both."
The Court concluded that the word "willfully" implied
knowledge that the behavior was against the law.
This segue from principled argument and common sense, into the
obtuse world of statutory construction, is unfortunate in that Congress
responded by changing the statutes. Title 31 USC Section 5324 now
contains its own Criminal Penalty clause that reads:
(1) In general.— Whoever violates this section shall be
fined in accordance with title 18, United States Code, imprisoned
for not more than 5 years, or both.
Moreover, Title 31 USC Section 5322 now explicitly excludes Section
5324. It now reads:
"A person willfully violating this subchapter
or a regulation prescribed or order issued under this subchapter
(except section 5315 or 5324 of this title) .
. . shall be fined not more than $250,000, or imprisoned for
not more than five years, or both."
The bottom line is this.
In 1994, the United States Supreme Court heard the Ratzlaf
case and held that conviction for structuring as defined in Title
31 USC, Section 5324(a)(3) required proof that the defendant acted
with knowledge that his conduct was unlawful. In response to Ratzlaf,
Congress enacted the Money Laundering Suppression Act
of 1994, Pub. L. No. 103-325, § 411(a) and (c)(1),
108 Stat. 2160, and thereby changed the law to explicitly except
violations of 31 USC §5324 from the penalty provisions of 31
USC §5322, and added a penalty provision to §5324 that
did not require knowledge that structuring was illegal.
Since our government separates the legislative branch from the
judicial, this creates a very interesting situation.
It could be argued that, in rewriting the statute, Congress thereby
superseded the Ratzlaf case by statute,
and eliminated the willfulness requirement imposed by the Ratzlaf
decision. Therefore, it could be further argued that, in order to
sustain a conviction for structuring in violation of 31 USC §5324(a)(3),
the prosecution needs only to prove that there was an intent to
evade the reporting requirement, but does not need to also prove
that the defendant knew that structuring was illegal.
On the other hand, that is just an argument. When there is a conflict
between the Legislative Branch and the Judicial Branch, it is my
understanding that the Judicial Branch prevails. Were it otherwise,
the US Supreme Court could not declare a law passed by Congress
to be unenforceably unConstitutional.
It would appear that the Department of Justice agrees. I would
direct your attention to the United States Attorneys Manual; specifically,
the section that discusses the elements of this particular offense,
and the relevant Jury Instructions: US
Attorney's Manual - Jury Instructions. Please note that
this document is as currently published in the Department of Justice
Reading Room as of July 2007.
In reviewing the elements of this offense, and the Jury Instructions
appertaining thereto, you will note that it specifically says:
FIRST, that the defendant had knowledge of the currency transaction
SECOND, that the defendant knowingly and willfully [structured]
or [assisted in structuring] or [attempted to structure] or
[attempted to assist in structuring] a currency transaction;
THIRD, that the purpose of the structured [or attempted] transaction
was to evade the currency transaction reporting requirements
of § 5313(a);
FOURTH, that the defendant knew that structuring
was unlawful; and (my emphasis)
FIFTH, that the structured transaction(s) involved one or more
domestic financial institutions.
The only way that this otherwise innocent behavior becomes a crime,
is when the actor knows that avoiding the reporting requirement
is against the law -- that is an essential element of the offense,
and the government must offer point specific proof accordingly.
I submit to you that every competent financial crimes investigator
knows that, and every prosecutor will see that when they research
the elements that they will be called to prove, and look up the
Jury Instructions that they must propose to the Court.
You have the Transcript of the Proceedings in the Struckman case.
Can you find anywhere within those proceedings that the government
so much as suggested that Ms. Struckman knew that structuring these
transactions was illegal? It certainly looks to me like the government
failed to allege, let alone prove, an essential element of this
case, according to their own Jury Instructions.
Look at the Jury Instructions as they were provided to the Jury
in this case, specfically the two lines at the top of page 165 of
the Transcript of the Proceedings. Prior to beginning their deliberations,
the Judge instructed the Jury that:
"The government is not required to prove that
the defendant knew that her acts or omissions were unlawful."
When I read that, I simply could not believe it.
In my humble opinion, any objective reading of the Transcript of
Proceedings would reveal that the Judge who presided over this case
made every effort to be fair, and demonstrated a great deal of concern
that Ms. Struckman was not represented by an attorney, and she refused
to defend herself. In our judicial system, Jury Instructions are
provided to the Judge by the attorneys involved, so it seems reasonable
to assume that this came from the Assistant United States Attorney
who prosecuted the case, an Officer of the Court, whose all abiding
responsibility is to serve the interests of justice - the very entity
whose manual is quoted above.
If you look at page 28 of the Jury Instructions, as submitted by
Larry J Wszalek, Mark T. Odulio, and Chnstopher J. Maletta, Trial Attorneys for the United States Department of Justlce, the origin
of this particular instruction becomes clear.
Riddle me this. Since the government proved that Laura Struckman
smurfed more than 200 transactions, why didn't they charge her with
the substantive offense? She did it, she certainly smurfed those
transactions, yet the government did not charge her with it; instead,
they deliberately chose to charge her with conspiring
to smurf the transactions.
It is clearly established law that conspiracy cannot be proved
in the absence of the culpable mental state necessary to meet the
elements of the underlying substantive offense . . . we are talking
very basic academy stuff here, but for those of you who do not involve
yourselves in these cases, I don't want you to think I am making
United States v. Kim, 65 F.3d 123, 1995 U.S. App. LEXIS 23917
(9th Cir., August 23, 1995, Filed )
OVERVIEW: Jury instructions for conspiracy were
improper in that they permitted jury to base its determination
solely on whether transactions were arranged to avoid filing
a cash transaction report, not whether appellants were aware
such avoidance was illegal.
[HN4] - It is necessary to establish knowledge
of the illegality of structuring in order to convict a defendant
for conspiracy to structure financial transactions.
United States v. Skelton, 1999 U.S. App. LEXIS 1435 (9th Cir.,
January 29, 1999, Filed )
[HN9] - To prove a conspiracy to structure transactions
the government must prove the requisite intent to commit the underlying
offense of structuring.
United States v. High, 117 F.3d 464, 1997 U.S. App. LEXIS 18155
(11th Cir., July 21, 1997, Decided )
OVERVIEW: Court reversed multiple-object conspiracy
convictions because it was unable to determine if jury's
verdict was based upon an offense other than structuring currency
transactions, which was insufficiently charged to the jury as
a matter of law.
[HN5] - A defendant may be convicted of violating 31 U.S.C.S.
§ 5324 only upon a showing that the defendant
"willfully" violated anti-structuring laws. Accordingly,
the government must prove that the defendant acted with
knowledge that his conduct was unlawful in order to prove a
"willful" violation of § 5324.
United States v. Sanchez-Cervantes, 1995 U.S. App. LEXIS 26170
(9th Cir., September 7, 1995, FILED)
[HN2] - To prove a conspiracy, the government must
show an agreement to accomplish an illegal objective and the
requisite intent necessary to commit the underlying offense.
So that leaves me with the question, "How is it that the
Jury Instructions in the case of Laura Struckman said that, "The
government is not required to prove that the defendant knew that
her acts or omissions were unlawful." Did the
government deliberately take advantage of the fact that Ms. Struckman
was defenseless, by propounding "Dream Sheet" Jury Instructions
that they knew nobody would object to?
Based upon my experience with the Institute of Global Prosperity,
it is my observation that, if nothing else, IGP proved that a great
many people - otherwise normal, professional, decent Americans -
are prepared to believe, and in many cases sincerely believe, that
our government is evil, dishonest, corrupt, and wholly unworthy
of their respect, or participation. Their cult following was driven
by a pervasive feeling of suspicion toward our governmernt, particluarly
the Internal Revenue Service, and our justice system.
Confused, wrong, irrational, misguided . . . choose whichever words
you like, but Laura Jean Marie Struckman was one such person.
If appearances are accurate, if the government took advantage of
the fact that this woman was so defiantly disgusted that she refused
to defend herself within a system that she held in complete contempt,
if the government resorted to trickery and deceit to convict her
and sentence her to prison, it makes me ashamed.
In fact, I cannot imagine what the government could have done to
better vindicate her position.
I love this Country, and I am very proud of the time that I was
allowed the privilege of service. Whereas the tax protesters and
anarchists see federal authorites as wicked, mindless minions of
some evil machine, from my experience, the vast majority of the
ones I knew were good, honest people, fair-minded ethical people
that I respected -- people that I will be forever grateful to have
That's why this bothers me, that's why this motivates me to write.
Bill E. Branscum, Investigator