7th Circuit, Crime, Department of Justice, Money

Inspector Javert Goes Smurfing In Indiana

Here’s a sentence from a recent Seventh Circuit opinion:

[T]his case shows every sign of being an overzealous prosecution for a technical violation of a criminal regulatory statute — the kind of rigid and severe exercise of law-enforcement discretion that would make Inspector Javert proud.

This was a sentence from the dissent.

Amazingly, though, the majority voted to reverse the conviction. Judge Sykes, who authored the dissent, would have affirmed the conviction — though, presumably, not because she thinks a Javert-like prosecution is a model that the Department of Justice ought to aspire to.

It’s an odd day when such strong language appears in an opinion that supports a court of appeals affirming a district court decision. And this case, United States v. Abair, is odd. (And thank you, Professor Volokh, for pointing the case out!)

Why is the case odd?

A bit of background. Yulia Abair is Russian. She lived in Indiana. She wanted to buy a house.

She had money in a bank in Russia. She withdrew money from her bank in Moscow via an ATM to buy the house (they wouldn’t release the money to her directly). Her daily maximum withdraw from the Moscow bank was in Rubles, but it wound up being about $6,400. She drove all over South Bend withdrawing money from ATMs, which she’d then deposit at her local bank.

All of her deposits to that bank were less than $10,000. And, for that, plus some really regrettable statements to the agents (why do people talk to law enforcement? Seriously?), as well as a perhaps false statement on her FAFSA, and she was convicted.

And lost her house to the federal government.

Here’s what’s interesting about this case.

First, it’s a smurfing case. As Randy Balko has written about, smurfing is an absurd crime, and this case shows why. “Smurfing” — or structuring as the U.S. Code calls it — is when you engage in a financial transaction in such a way as to knowingly get around a financial reporting requirement.

Generally, banks have to file a report if you engage in a transaction of more than $10,000. And if you deposit, say, $9,900, into your bank account knowing that there’s a reporting requirement if you deposit $10,000, and you don’t want that deposit to be reported, and you know it’s a crime to structure a transaction to get around a reporting requirement, then you’ve committed structuring.

Obviously, there’s a whole lot of riding on the knowledge of the person accused in a smurfing case (which is why statements to the law enforcement agents are maddening).

Second, the reason Abair was charged was because the money she gave to the bank in the financial transactions at issue smelled “musty” — “as if it had been kept in a basement rather than freshly drawn from an ATM.” That’s right — your bank can report you to law enforcement if your money smells funky. One wonders how stadium hot dog vendors avoid law enforcement attention.

Finally, though, is the very sad part of this case. Abair was using the money at issue to buy a house. And, for reasons that aren’t clear, she agreed that if she was convicted she wouldn’t contest forfeiture of her house (which makes one wonder how relieved her attorney’s malpractice carrier was at this opinion).

As I wrote about here before, federal forfeiture laws are broad and powerful. Because she was convicted of structuring, she was in a position of automatically losing the house.

Criminal forfeiture is very popular as law enforcement budgets get tight. Fortunately, before the Seventh Circuit remanded, the district court only imposed probation. But because of the forfeiture decision, Abair was already on track to lose her house.

Just because her money smelled bad.

Matt Kaiser is a partner at The Kaiser Law Firm PLLC, a boutique litigation firm in Washington DC, which handles government investigations, white-collar criminal cases, federal criminal appeals, and complex civil litigation. You can reach him by email at mattkaiser@thekaiserlawfirm, and you can follow him on Twitter: @mattkaiser.

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