The federal courts are countering an attempt by the Justice Department to ignore an obvious loophole in the law designed to combat money laundering. A string of rulings say that the Current Transaction Reporting Act means just what it says.
What the CTRA says is that banks must report any unexpected cash transaction involving more than $10,000 to the Treasury. That has been read by many who don't want to bring large stashes of cash to the tax authorities' attention as an open invitation to go from bank to bank, buying cashier's checks at each for $9,900 or some similar amount. Federal prosecutors have been searching for a way to bring charges against such sharpies.
Basically, the Justice Department has been arguing that such a scheme violates the provision of the criminal code banning the concealment of any fact that would be material to any government agency in the carrying out of its duties.
That approach worked in a 1983 case in which the U.S. Court of Appeals in Atlanta upheld the conviction of a bank customer who had gone from institution to institution with a partner, each buying a cashier's check for $9,000 from separate tellers at essentially the same time.
The circuit court judges were willing to treat the two virtually simultaneous purchases as a single transaction, which then was well over the $10,000 limit.
In that case, the judges found that dividing the transaction into two parts was a deliberate attempt to circumvent the required reporting, and thus was illegal.
Since then, however, the government has had less success in applying its reading of the law in cases in which there was only one transaction at each institution.
Last year, the U.S. Court of Appeals in Boston threw out such a case, saying that nothing in the CTRA obligated a patron making one transaction to tell the bank about his plans to make others.
On Jan. 10, in U.S. v. Varbel, the federal appellate court in San Francisco came to the same conclusion. And just six days later, the Atlanta court, in U.S. v. Denemark, said that its 1983 ruling applied only to the peculiar circumstance of twin purchases, and that otherwise there was nothing illegal about using the loophole written into the law.
The banks have an obligation to report to the Treasury only transactions of more than $10,000, the decisions pointed out.
If the transaction is smaller than that, there is no obligation to report. Concocting a scheme to prevent the reporting is not concealing any data that the federal regulators have a claim on, the courts reasoned. Thus, there could be no violation of the ban on coverups.
The rulings should not, however, be read as an invitation to start running from bank to bank with a large amount of cash.
In 1984, Congress amended the law to require reporting when more than $10,000 in cash comes into a bank in separate but "related" transactions. Some of the appellate judges think that might make it unlawful to break up a big amount into several smaller transactions, even if they take place at different banks.
In other cases, courts ruled that:
*There is a way to get around some promises not to compete with the buyer of a business.
The Minnesota Court of Appeals pointed the way in a dispute over a deal in which one land surveying company bought all the equipment and assets of another firm. The seller agreed, as part of the sale, not to compete within a 100-mile radius for five years. That promise, however, pertains only to the corporate entity, the ruling said. The decision opened the way for the president of the selling company to go back into business on his own, in competition with the acquiring corporation. (Otto v. Webber, Jan. 7)
*The Social Security Administration cannot take a one-dimensional approach to defining who is disabled.
The U.S. Court of Appeals in Denver struck down regulations that considered only the severity of an injury in deciding whether an applicant was entitled to disability benefits. The agency must consider "vocational factors" as well, the judges said, tailoring the assessment to each person. Federal appellate courts in Philadelphia, Chicago and San Francisco earlier had declared the regulation invalid in the states where they oversee trial court litigation. (Hansen v. Heckler, Feb. 5)
*Cities and counties can impose tougher rules on makers of hazardous chemicals than those of the Occupational Safety and Health Administration.
OSHA's requirements on what information about workplace dangers must be given to employes preempt those of states, recent rulings involving New Jersey and Pennsylvania have held.
But the U.S. District Court in Cleveland said that political subdivisions of a state still can enforce their own ordinances. Some parts of the federal occupational safety statute specifically mention political subdivisions of the states.
Judge Ann Aldrich thus reasoned that Congress, in making the preemption provisions apply only to states, meant to allow local governments to impose their own restrictions. She upheld workplace training rules and material labeling requirements imposed by Akron. (Ohio Manufacturers Association v. Akron, Feb. 7)
*Wyoming can insist that visiting hunters hire guides before venturing into the wilderness, but not that the guides be residents of the state.
In separate decisions, the Wyoming Supreme Court drew the line between the kind of favoritism a state can show to its citizens and the kind that is forbidden by the U.S. Constitution.
It is reasonable to let locals hunt without a guide while requiring those from out-of-state to hire one, the justices explained, because residents are more likely to be able to take care of themselves and to know how much they can shoot in what season. But because would-be guides must meet certain standards before they can be licensed, there is no reason to deny nonresidents the chance to qualify. (O'Brien v. Wyoming, Jan. 13, and Powell v. Daily, Jan. 8)